Matsepe NO and Others v London and Others (1994/11) [2013] ZANCHC 5 (15 February 2013)

Matsepe NO and Others v London and Others (1994/11) [2013] ZANCHC 5 (15 February 2013)

The court found that the dividends were declared and paid at a time when the company was insolvent and had not made profits, contrary to both the Articles of Association and section 90 of the Companies Act 61 of 1973. The directors, who were also the shareholders, were aware of the company's financial position and the substantial liabilities to Nissan and Toyota. Their subsequent resolution to negotiate refunds of the dividends confirmed their knowledge of the irregularity. The respondents' reliance on cash flow projections and alleged advice was insufficient, as these did not reflect the true financial position. The financial statements, signed and approved by the directors, were...

Citation
[2013] ZANCHC 5
Parties
Applicant: Tsiu Vincent Matsepe N.O; Applicant: Simone Liesel Margardie N.O; Applicant: Molelekwa Ashworth Tau N.O; Applicant: Ottlie Anton Noordman N.O; Respondent: Mr F O London; Respondent: Mr M P Rantho; Respondent: Mr A A Joseph; Respondent: Mr M L Mokwena; Respondent: Ms Ntabiseng C Kemane
Court
Northern Cape High Court, Kimberley
Jurisdiction
South Africa
Judgment Date
15 February 2013
Case Number
1994/11
Procedural Posture
Civil Application / Judgment on Merits
Outcome
Application granted. Respondents ordered to repay dividends with interest and costs as specified.
Judges
Tlaletsi
Legal Topics
Unlawful Dividend Payment, Shareholder Liability, Liquidation Proceedings, Companies Act 1973, Director Duties
Commercial and Corporate Unlawful Dividend Payment Shareholder Liability Liquidation Proceedings Companies Act 1973 Director Duties

Case Brief

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Parties

Tsiu Vincent Matsepe N.O

Applicant

Simone Liesel Margardie N.O

Applicant

Molelekwa Ashworth Tau N.O

Applicant

Ottlie Anton Noordman N.O

Applicant

Mr F O London

Respondent

Mr M P Rantho

Respondent

Mr A A Joseph

Respondent

Mr M L Mokwena

Respondent

Ms Ntabiseng C Kemane

Respondent

Procedural Posture

Civil Application / Judgment on Merits

Legal Issues

  1. 1 Whether the dividends paid to the respondents as shareholders were unlawful and must be repaid to the company.
  2. 2 Whether the respondents acted reasonably and in good faith in declaring and receiving the dividends.
  3. 3 Whether the use of motion proceedings was appropriate given the alleged factual disputes.

Ratio Decidendi

The court found that the dividends were declared and paid at a time when the company was insolvent and had not made profits, contrary to both the Articles of Association and section 90 of the Companies Act 61 of 1973. The directors, who were also the shareholders, were aware of the company's financial position and the substantial liabilities to Nissan and Toyota. Their subsequent resolution to negotiate refunds of the dividends confirmed their knowledge of the irregularity. The respondents' reliance on cash flow projections and alleged advice was insufficient, as these did not reflect the true financial position. The financial statements, signed and approved by the directors, were...

Court Disposition

Application granted. Respondents ordered to repay dividends with interest and costs as specified.

Orders

  • The late filing of the replying affidavit is condoned.
  • First respondent is ordered to pay the applicants R1,417,500.00.