The Companies Act 61 of 1973 (“the Act”) makes provision for the convening of insolvency enquiries to obtain the necessary information from relevant parties to assist with determining the affairs of a company which has been wound up. In this regard, insolvency enquiries are regulated in terms of section 417 read with section 418 of the Act.
Section 417 of the Act provides that in any winding-up of a company unable to pay its debts, the Master or the Court may, at any time after a winding-up order has been made, convene an enquiry to obtain information concerning the trade, dealings, affairs or property of the company. Section 418 of the Act allows for the Master or the Court to delegate the power of convening an enquiry to a commissioner, who can be a magistrate or another person who has been appointed for this purpose.
However, the question arises as to whether a section 417 and 418 enquiry can only be convened in instances where the company has been placed under compulsory winding-up and not when a company has been placed under voluntary winding-up.
In Janse van Rensburg and others v The Master and others 2001 (3) SA 519 (W), Soggot AJ held that the Master's decision to convene an enquiry in terms of section 417 and 418 of the Act and the issue of notices summoning the applicants to appear before the enquiry fell to be set aside because the company concerned was being voluntarily wound-up.
In arriving at this decision, Soggot AJ relied upon the decision of South African Philips (Pty) Ltd and Others v The Master and Others 2000 (2) SA 841 (N) where the Court found that upon interpretation of section 417 of the Act it was clear that the words in this section clearly expressed the intention of the Legislature to require the antecedent existence of a winding-up order as a jurisdictional requirement, in the absence of which an enquiry in terms of section 417 of the Act cannot be held. This decision was subsequently taken on appeal by the creditor, Michelin Tyre Co (SA) (Pty) Ltd, who had requested the enquiry.
The Supreme Court of Appeal dismissed the appeal In Michelin Tyre Co (South Africa) (Pty) Ltd v Janse van Rensburg and others 2002 (5) SA 239 (SCA) on the basis of the principles set out in South African Philips (Pty) Ltd and Others v The Master and Others 2000 (2) SA 841 (N) which has been set out above. The Court further held that the Act contains a number of provisions which are expressly devoted to compulsory windings-up and others which are expressly devoted to voluntary windings-up. It was further held that although the operation of the section is confined to compulsory windings-up, there are at least two ways of procuring a section 417 enquiry in a voluntary winding-up.
The first is to convert the winding-up into a winding-up by the Court under section 346(1)(e) of the Act. The second way is an application to Court under section 388 of the Act for leave to convene such an enquiry.
These two ways of allowing an enquiry under section 417 and section 418 of the Act, for a company under voluntary winding-up, was further confirmed in the case of Furniture Bargaining Council v AXZS Industries (Pty) Ltd 2020 (2) SA 215 (GJ).
Lastly, in the case of Swart v Heine 2016 JDR 0487 (SCA), Mathopo JA held that that in instances of a company placed under voluntary winding-up, an application for leave to convene a section 417 and 418 enquiry can be brought by virtue of section 388 of the Act. The court further held that when an application of this nature is brought, the court could determine any such question arising in the winding-up of the company or to exercise any of the powers which the court might exercise where a company is wound-up by the court.
It is clear from these principles that a company placed under voluntary winding-up is not afforded insolvency enquiries by virtue of the operation of section 417 and 418 of the Act alone. Accordingly, in the case of voluntary windings-up, liquidators and creditors cannot apply for the appointment of a Commissioner to conduct an enquiry under section 417 and section 418 of the Act as in the case of compulsory windings-up. Therefore, in order for a company under voluntary winding-up to conduct an enquiry in terms of section 417 and 418 of the Act, the creditors of the company must either apply to convert the winding-up into a compulsory winding-up or use the mechanisms provided for in terms of section 388 of the Act to apply for leave to convene such an enquiry, provided that it will be just and beneficial.
Gina Naidoo
