Ross and Others v Microsystems On Silicon (Pty) Limited and Others (32265/2018) [2018] ZAGPPHC 862 (17 December 2018)

Ross and Others v Microsystems On Silicon (Pty) Limited and Others (32265/2018) [2018] ZAGPPHC 862 (17 December 2018)

The court held that the majority shareholder's attempts to remove minority directors and force settlement or abandonment of the German litigation, while procedurally permissible under company law, constituted an improper use of rights when intended to obstruct the minority's pursuit of the fundamental dispute. The court found that the minority is entitled to have its dispute resolved by a fair process, protected by section 34 of the Constitution and section 163 of the Companies Act. The majority's undertakings to abide by the section 165 process and not obstruct the German litigation were accepted, with the court adding further protection to prevent the majority from using its shareholder...

Citation
[2018] ZAGPPHC 862
Parties
Applicant: Helgard Ross; Applicant: Arthur Wilhelm; Applicant: Wolfgang Manfred; Applicant: Jutta Ingrio Schmidt NO; Respondent: Microsystems On Silicon (Pty) Limited; Respondent: Elmos Services BV; Respondent: Jan Oienstuhl
Court
North Gauteng High Court, Pretoria
Jurisdiction
South Africa
Judgment Date
17 December 2018
Case Number
32265/2018
Procedural Posture
Urgent Application / Final Determination After Urgent Interim Relief and Argument Over Three Days
Outcome
Application granted in part; declaratory and directory orders issued to protect minority rights and regulate conduct pending the section 165 process and German litigation. Costs reserved.
Judges
Tuchten
Legal Topics
Oppressive Conduct, Shareholder Rights, Derivative Actions, Removal of Directors, Section 165 Process, Section 163 Relief
Commercial and Corporate Civil Procedure Oppressive Conduct Shareholder Rights Derivative Actions Removal of Directors Section 165 Process Section 163 Relief

Case Brief

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Parties

Helgard Ross

Applicant

Arthur Wilhelm

Applicant

Wolfgang Manfred

Applicant

Jutta Ingrio Schmidt NO

Applicant

Microsystems On Silicon (Pty) Limited

Respondent

Elmos Services BV

Respondent

Jan Oienstuhl

Respondent

Procedural Posture

Urgent Application / Final Determination After Urgent Interim Relief and Argument Over Three Days

Legal Issues

  1. 1 Whether the majority shareholder may use its position to circumvent or neutralize the minority's efforts to have the fundamental dispute adjudicated in the Landgericht Dortmund.
  2. 2 Whether the removal of minority directors for the purpose of obstructing the section 165 process or the German litigation constitutes good cause under the shareholders' agreement.
  3. 3 Whether the majority's conduct is oppressive or unfairly prejudicial under section 163 of the Companies Act.

Ratio Decidendi

The court held that the majority shareholder's attempts to remove minority directors and force settlement or abandonment of the German litigation, while procedurally permissible under company law, constituted an improper use of rights when intended to obstruct the minority's pursuit of the fundamental dispute. The court found that the minority is entitled to have its dispute resolved by a fair process, protected by section 34 of the Constitution and section 163 of the Companies Act. The majority's undertakings to abide by the section 165 process and not obstruct the German litigation were accepted, with the court adding further protection to prevent the majority from using its shareholder...

Court Disposition

Application granted in part; declaratory and directory orders issued to protect minority rights and regulate conduct pending the section 165 process and German litigation. Costs reserved.

Orders

  • Elmos BV is directed to abide by the section 165 process initiated by the applicants on 25 April 2018, subject to MOS pursuing that process to its conclusion within a reasonable time.
  • Shareholders and directors of MOS are directed to cooperate fully and timeously for MOS to fulfil its obligations under paragraph 1.