Mhlwana and Another v Denel SOC Ltd (40858/19) [2021] ZAGPPHC 199 (19 March 2021)

Mhlwana and Another v Denel SOC Ltd (40858/19) [2021] ZAGPPHC 199 (19 March 2021)

The court found that the board resolutions of 7 June 2017 and 30 November 2017 purporting to grant conversion payments to the applicants were unlawful and invalid, as they were not sanctioned by the shareholder in accordance with section 66(9) of the Companies Act. The applicants, as executive directors, could not lawfully receive such payments without shareholder approval, and the resolutions contravened both statutory requirements and binding remuneration guidelines for state-owned enterprises. The payments made to the first applicant were similarly unlawful and must be recovered by Denel. The applicants' claim for payment based on these resolutions was dismissed, and Denel's...

Citation
[2021] ZAGPPHC 199
Parties
Applicant: Ziphiwo Madododwa Mhlwana; Applicant: Zwelakhe Ntshepe; Respondent: Denel SOC Ltd
Court
North Gauteng High Court, Pretoria
Jurisdiction
South Africa
Judgment Date
19 March 2021
Case Number
40858/19
Procedural Posture
Review Application / Opposed Motion; Judgment Delivered After Hearing on 8 March 2021
Outcome
Application dismissed with costs; counter-application granted; impugned board resolutions reviewed and set aside; first applicant ordered to repay unlawful payment.
Judges
PM Mabuse
Legal Topics
Directors Remuneration, Companies Act Section 66, State Owned Enterprise Guidelines, Ultra Vires Board Resolutions, Employment Contract Conversion
Commercial and Corporate Labour Law Directors Remuneration Companies Act Section 66 State Owned Enterprise Guidelines Ultra Vires Board Resolutions Employment Contract Conversion

Case Brief

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Parties

Ziphiwo Madododwa Mhlwana

Applicant

Zwelakhe Ntshepe

Applicant

Denel SOC Ltd

Respondent

Procedural Posture

Review Application / Opposed Motion; Judgment Delivered After Hearing on 8 March 2021

Legal Issues

  1. 1 Whether the board resolutions of 7 June 2017 and 30 November 2017 regarding conversion payments to the applicants constituted binding and lawful agreements.
  2. 2 Whether Denel is legally obliged to pay the applicants the amounts specified in the board resolutions.
  3. 3 Whether the board resolutions were ultra vires and invalid for want of shareholder approval under section 66(9) of the Companies Act.

Ratio Decidendi

The court found that the board resolutions of 7 June 2017 and 30 November 2017 purporting to grant conversion payments to the applicants were unlawful and invalid, as they were not sanctioned by the shareholder in accordance with section 66(9) of the Companies Act. The applicants, as executive directors, could not lawfully receive such payments without shareholder approval, and the resolutions contravened both statutory requirements and binding remuneration guidelines for state-owned enterprises. The payments made to the first applicant were similarly unlawful and must be recovered by Denel. The applicants' claim for payment based on these resolutions was dismissed, and Denel's...

Court Disposition

Application dismissed with costs; counter-application granted; impugned board resolutions reviewed and set aside; first applicant ordered to repay unlawful payment.

Orders

  • The application is dismissed with costs.
  • The board resolutions of 7 June 2017 and 30 November 2017 are reviewed and set aside.