In the recent decision in Lutchman No And Others v African Global Holdings And Others 2022 (4) SA 529 (SCA), the Supreme Court of Appeal had to interpret the meaning of the word “made” in terms of section 131(6) of the Companies Act of 2008 (“the Act”).
Section 131(6) of the Act provides that if liquidation proceedings have already been started by or against the company at the time an application is “made” in terms of section 131(1) of the Act to place the company under supervision, “the application will suspend those liquidation proceedings until (a) the court has adjudicated upon the application or (b) the business rescue proceedings end, if the court makes the order applied for”.
The court held that:
1. An application cannot be said to be “made” merely on being issued but not served. The application has to be filed with the registrar and served thereafter. In terms of section 131(2) of the Act, the application must be served on the company and the Commission and “affected persons” (as defined in section 128(1)(a) of the Act) must be notified (as opposed to being served) of the application by delivering a copy of the application, in accordance with Regulation 7, to each “affected person”. "Affected persons” includes shareholders, creditors of the company, registered trade unions or each of the individual employees of the company.
2. Where a company is already being wound-up, whether provisionally or finally, the application must be served on all the liquidators whether provisional or final. Knowledge of the application alone is insufficient. The reason for the application being served on all the liquidators and not the directors of the company is that the directors of the company are deprived of their control and custody of the company which is in the custody and control of the liquidators. “Made” in terms of this case means:
a. filing of the application with the registrar;
b. serving the application on all the liquidators of the company and on the Commission;
c. notifying (as opposed to serving) “affected persons” i.e. the shareholders, creditors of the company, registered trade unions or each of the individual employees of the company of the application; and
d. showing the Court that all reasonable steps have been taken to identify “affected persons” and that the persons have been notified of the application.
Accordingly, to satisfy the requirements of “made”, for an applicant to successfully suspend a company’s liquidation proceedings in terms of section 131(6) of the Act, an applicant must file its application with the registrar, serve its application on all the liquidators of the company and on the Commission, notify all “affected persons” of its application and show the court that it has taken all reasonable steps to identify “affected persons” and notify them of its application.
Mbongeni Dube
