Gatenby v Gatenby

Last updated

Gatenby v Gatenby and Others [1] is an important case in South African law, heard in the Eastern Cape Division by Jones J on March 28 and April 9, 1996, with judgment handed down on April 23. IJ Smuts appeared for the applicant, and MJ Lowe for the respondents.

Contents

Section 49(2) of the Close Corporations Act [2] gives the court the power to order the sale of a corporation asset in order to enable a member who is being prejudiced, as contemplated by section 49, to be paid out for his interest and thereby to bring about a termination of his membership. [3] There is no justification, the court found, in either the wording or the spirit of section 49 for limiting the court's discretion by interpreting section 49(2) as not authorising the court to order a corporation to sell its assets. The power of the Court to "make such order as it thinks fit [...] for regulating the future conduct of the affairs of the corporation" is not restricted to an order relating to the pursuance of the objects contained in the corporation's founding statement: i.e. an order relating to the running of the business of the corporation. [4]

There were no authoritative pronouncements about the meaning and effect of section 49 of the Close Corporations Act. The section had not been considered by the court. But guidance was to be found in the authorities which interpret and apply the similarly-worded section 252 of the Companies Act, [5] dealing with oppressive or unfairly prejudicial conduct in the management of limited liability companies. [6]

The object of section 49 of the Close Corporations Act is to come to the relief of the victim of oppressive conduct. The section gives the court the power to make orders "with a view to settling the dispute" between the members of a close corporation if it is just and equitable to do so. To this end the court is given a wide discretion. It may "make such order as it thinks fit," within the framework of either "regulating the future conduct of the affairs of the corporation" or "the purchase of the interest of any member of the corporation by other members thereof or by the corporation." These, the court noted, are far-reaching powers. One member can be compelled to purchase the interest of another at a fair price, whether he wants to or not. [7]

There is no reason, the court found, why that portion of section 49 which provides for "regulating the future conduct of the affairs of the corporation" should be interpreted in such a way as to prevent the achievement of the underlying equitable principle of legislation relating to companies and close corporations as well as of the common law relating to co-ownership and partnerships, namely that no co-owner, no partner, no shareholder and no member is normally obliged to remain a co-owner, partner, shareholder or member against his will in circumstances where this is unfair or oppressive to him. The objects of section 49 of the Close Corporations Act are not advanced by limiting the Court's power to making orders relating to the day-to-day running of the ordinary business of the corporation. The court held that this section is designed for an extraordinary situation. [8]

Section 49 of the Close Corporations Act places a similar onus on a member who considers that he is being unfairly prejudiced and seeks to invoke its provisions as does section 252 of the Companies Act. The member must establish "not only that a particular act or omission of a [corporation] results in a state of affairs which is unfairly prejudicial, unjust or inequitable to him, but that the particular act or omission itself was one which was unfair or unjust or inequitable. Similarly [...] where the complaint relates to the manner of conduct of the business, it is the manner in which the affairs have been conducted as well as the result of the conduct of the business in that manner which must be shown to be unfairly prejudicial, unjust or inequitable." [9]

The dictum in Garden Province Investment v Aleph [10] [11] was duly applied.

See also

Related Research Articles

Liquidation is the process in accounting by which a company is brought to an end in Canada, United Kingdom, United States, Ireland, Australia, New Zealand, Italy, and many other countries. The assets and property of the company are redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation. The process of liquidation also arises when customs, an authority or agency in a country responsible for collecting and safeguarding customs duties, determines the final computation or ascertainment of the duties or drawback accruing on an entry.

Corporate law Body of law that applies to the rights, relations, and conduct of persons, companies, organizations and businesses

Corporate law is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

In corporate law in Commonwealth countries, an oppression remedy is a statutory right available to oppressed shareholders. It empowers the shareholders to bring an action against the corporation in which they own shares when the conduct of the company has an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder. It was introduced in response to Foss v Harbottle, which had held that where a company's actions were ratified by a majority of the shareholders, the courts will not generally interfere.

Unfair prejudice in United Kingdom company law is a statutory form of action that may be brought by aggrieved shareholders against their company. Under the Companies Act 2006 the relevant provision is s 994, the identical successor to s 459 Companies Act 1985. Unfair prejudice actions have generated an enormous body of cases, many of which are called "Re A Company", with only a six-digit number and report citation to distinguish them. They have become a substitute for the more restrictive conditions on a "derivative action", as an exception to the rule in Foss v Harbottle. Though not restricted in such a way, unfair prejudice claims are primarily brought in smaller, non public companies. This is the text from the Act.

s 994 Petition by company member

(1) A member of a company may apply to the court by petition for an order under this Part on the ground—

(2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company.

(3) In this section, and so far as applicable for the purposes of this section in the other provisions of this Part, "company" means—

<i>Scottish Co-op Wholesale Society Ltd v Meyer</i>

Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 is a UK company law case, concerning the predecessor of the unfair prejudice provision, an action for "oppression" under section 210 of the Companies Act 1948.

O'Neill v Phillips[1999] UKHL 24 is a UK company law case on an action for unfair prejudice under s.459 Companies Act 1985. It is the only case thus far in the House of Lords on the provision and it deals with the concept of members of a business having their "legitimate expectations" disappointed.

Examinership Process in Irish law

Examinership is a process in Irish law whereby the protection of the Court is obtained to assist the survival of a company. It allows a company to restructure with the approval of the High Court.

Canadian corporate law

Canadian corporate law concerns the operation of corporations in Canada, which can be established under either federal or provincial authority.

South African company law

South African company law is that body of rules which regulates corporations formed under the Companies Act. A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by which partnerships and trusts are governed in South Africa, together with cooperatives and sole proprietorships.

South African labour law regulates the relationship between employers, employees and trade unions in the Republic of South Africa.

Insurance Regulatory and Development Authority

The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory body under the jurisdiction of Ministry of Finance, Government of India and is tasked with regulating and licensing the insurance and re-insurance industries in India. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India. The agency's headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.

British Virgin Islands company law

British Virgin Islands company law is primarily codified in the BVI Business Companies Act, 2004, and to a lesser extent by the Insolvency Act, 2003 and the Securities and Investment Business Act, 2010. The British Virgin Islands has approximately 30 registered companies per head of population, which is probably the highest ratio of any country in the world. Annual company registration fees provide a significant part of Government revenue in the British Virgin Islands, which accounts for the comparative lack of other taxation. Accordingly, company law forms a much more prominent part of the law of the British Virgin Islands than might otherwise be expected.

Cayman Islands company law National economic law

Cayman Islands company law is primarily codified in the Companies Law and the Limited Liability Companies Law, 2016, and to a lesser extent in the Securities and Investment Business Law. The Cayman Islands is a leading offshore financial centre, and financial services form a significant part of the economy of the Cayman Islands. Accordingly company law forms a much more prominent part of the law of the Cayman Islands than might otherwise be expected.

Anguillan company law is primarily codified in three principal statutes:

  1. the International Business Companies Act ;
  2. the Companies Act ; and
  3. the Limited Liability Companies Act.

Australian insolvency law regulates the position of companies which are in financial distress and are unable to pay or provide for all of their debts or other obligations, and matters ancillary to and arising from financial distress. The law in this area is principally governed by the Corporations Act 2001. Under Australian law, the term insolvency is usually used with reference to companies, and bankruptcy is used in relation to individuals. Insolvency law in Australia tries to seek an equitable balance between the competing interests of debtors, creditors and the wider community when debtors are unable to meet their financial obligations. The aim of the legislative provisions is to provide:

Provisional liquidation is a process which exists as part of the corporate insolvency laws of a number of common law jurisdictions whereby after the lodging of a petition for the winding-up of a company by the court, but before the court hears and determines the petition, the court may appoint a liquidator on a "provisional" basis. Unlike a conventional liquidator, a provisional liquidator does not assess claims against the company or try to distribute the company's assets to creditors, as the power to realise the assets comes after the court orders a liquidation.

<i>Wilson v Alharayeri</i> Supreme Court of Canada case

Wilson v Alharayeri, 2017 SCC 39 is a leading case of the Supreme Court of Canada which significantly extends the application of the oppression remedy under the Canada Business Corporations Act to include non-corporate parties.

The oppression remedy in Canadian corporate law is a powerful tool available in Canadian courts, unique in breadth and scope compared to other examples of the oppression remedy found elsewhere in the world.

Evidence Act 2006

The Evidence Act 2006 is an Act of the Parliament of New Zealand that codifies the laws of evidence. When enacted, the Act drew together the common law and statutory provisions relating to evidence into one comprehensive scheme, replacing most of the previous evidence law on the admissibility and use of evidence in court proceedings.

<i>McInerney Homes Ltd v Cos Acts 1990</i> Irish Supreme Court case

McInerney Homes Ltd v Cos Acts 1990 [2011] IESC 31 is one of the few Irish Supreme Court cases on the topic of examinership under the Companies (Amendment) Act 1990. The Court held that the onus of proof under the legislation lay with the Examiner to show that a proposed scheme of debt restructuring was not unfair to any interested party.

References

Case law

Legislation

Notes

  1. ↑ 1996 (3) SA 118 (E).
  2. ↑ Act 69 of 1984.
  3. ↑ 124A-B.
  4. ↑ 122F, 121H.
  5. ↑ Act 61 of 1973.
  6. ↑ 121I-122A.
  7. ↑ 122D-F.
  8. ↑ 123E-G.
  9. ↑ 124B-G.
  10. ↑ 1979 (2) SA 525 (D).
  11. ↑ 531C-H.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.