Sekgoro v Commissioner: Companies & Intellectual Property Commission and Others (1898/2019) [2020] ZANCHC 75 (30 October 2020)

IN THE HIGH COURT OF SOUTH AFRICA,

NORTHERN CAPE DIVISION, KIMBERLEY

Reportable/Not reportable

Case No: 1898/2019

In the matter between:

DANIËL MABE SEKGORO

APPLICANT

and

THE COMMISSIONER: COMPanies &

INTELLECTUAL PROPERTY COMMISSION

FIRST RESPONDENT

SAMUEL MOTLAPELE MODISE

SECOND RESPONDENT

NTHABISENG JAQUELINE MASAO

THIRD RESPONDENT

TEKO MORENENG SCHALK PADISHO

FOURTH RESPONDENT

JOHN LANDELLA

FIFTH RESPONDENT

Heard: 14 August 2020

Delivered: 30 October 2020

Judgment

PHATSHOANE ADJP

[1] Mr Daniël Mabe Sekgoro, the applicant, is appearing in person. He was the sole director and shareholder of a company called Kgaraga Investment Company with registration number: 1998/000603/07 (‘the company”) prior to its alleged takeover or “hijacking” by Mr Samuel Motlapele Modise, Ms Nthabiseng Jaqueline Masao, Mr Teko Moreneng Schalk Padisho and Mr John Landella, the second to fifth respondents.

[2] Mr Sekgoro seeks a declarator that any resolution taken by the respondents to remove him as the director and shareholder of the company is null and void; an order directing the Commissioner of Companies and Intellectual Property Commission (CIPC), the first respondent, to do all things necessary to amend its records by removing the first to fifth respondents as directors and shareholders of the company and restoring the status quo ante.

[3] The company was first registered on 16 January 1998 at which time Mr Samuel Motlapele Modise, the second respondent, was its only director and shareholder. On the CIPC records Mr Sekgoro was appointed as a director of the company on 23 December 2015. Mr Modise resigned as a director on 23 February 2016. A copy of the extract of the minutes of meeting held on 23 February 2016 in terms of which Mr Sekgoro was appointed as a sole director and the notice of Mr Modise’s resignation are attached to the founding papers. In addition, the abridged certificate of annual returns (COR 30.1), issued by CIPC which shows Mr Sekgoro as the only active director as at 24 April 2019, is also attached to his papers.

[4] On 26 April 2019 Mr Sekgoro was made aware of an e-mail allegedly directed to CIPC which concerned a purported request by himself for an amendment of the details of the directors of the company. He had not made such a request. This allegation imputes criminal conduct on those involved which warranted an investigation. Mr Sekgoro made enquiries at CIPC offices and was placed in possession of a COR39 document titled “amendment to company information”, addressed to a certain Hyacinth Chineme Ogu. This documents shows that the CIPC records had been amended to reflect the respondents as the directors of the company with effect from 11 March 2019. As already shown, CIPC issued Mr Sekgoro with a (COR 30.1 document) reflecting his active directorship status at 24 April 2019.

[5] Confronted by this turn of events Mr Sekgoro lodged a complaint with the CIPC on 17 June 2019. CIPC investigated the grievance and issued a report on 24 February 2020 recommending, inter alia, that the company reverse the removal of Mr Sekgoro as director and reinstate him to his position. It further advised that the company reconsider filing a new application for the removal of Mr Sekgoro as director in compliance with s 71 of the Companies Act, 71 of 2008, (“the Act”) and the requirements for the removal of directors as laid down by CIPC.

[6] Section 71 of the Act sets out the procedure for the removal of directors. It provides:

“(1) Despite anything to the contrary in a company's Memorandum of Incorporation or rules, or any agreement between a company and a director, or between any shareholders and a director, a director may be removed by an ordinary resolution adopted at a shareholders meeting by the persons entitled to exercise voting rights in an election of that director, subject to subsection (2).

(2) Before the shareholders of a company may consider a resolution contemplated in subsection (1)-

(a) the director concerned must be given notice of the meeting and the resolution, at least equivalent to that which a shareholder is

entitled to receive, irrespective of whether or not the director is a shareholder of the company; and

(b) the director must be afforded a reasonable opportunity to make a presentation, in person or through a representative, to the meeting,

before the resolution is put to a vote.

(3) If a company has more than two directors, and a shareholder or director has alleged that a director of the company-

(a) has become-

(i) ineligible or disqualified in terms of section 69, other than on the grounds contemplated in section 69 (8) (a); or

(ii) incapacitated to the extent that the director is unable to perform the functions of a director, and is unlikely to regain that capacity within a reasonable time; or

(b) has neglected, or been derelict in the performance of, the functions of director, the board, other than the director concerned, must determine the matter by resolution, and may remove a director whom it has determined to be ineligible or disqualified, incapacitated, or negligent or derelict, as the case may be.

(4) Before the board of a company may consider a resolution contemplated in subsection (3), the director concerned must be given-

(a) notice of the meeting, including a copy of the proposed resolution and a statement setting out reasons for the resolution, with sufficient specificity to reasonably permit the director to prepare and present a response; and

(b) a reasonable opportunity to make a presentation, in person or through a representative, to the meeting before the resolution is put to a vote.

(5) If, in terms of subsection (3), the board of a company has determined that a director is ineligible or disqualified, incapacitated, or has been negligent or derelict, as the case may be, the director concerned, or a person who appointed that director as contemplated in section 66 (4) (a) (i), if applicable, may apply within 20 business days to a court to review the determination of the board.

(6) If, in terms of subsection (3), the board of a company has determined that a director is not ineligible or disqualified, incapacitated, or has not been negligent or derelict, as the case may be-

(a) any director who voted otherwise on the resolution, or any holder of voting rights entitled to be exercised in the election of that

director, may apply to a court to review the determination of the board; and

(b) the court, on application in terms of paragraph (a), may-

(i) confirm the determination of the board; or

(ii) remove the director from office, if the court is satisfied that the director is ineligible or disqualified, incapacitated, or has been negligent or derelict.

(7) An applicant in terms of subsection (6) must compensate the company, and any other party, for costs incurred in relation to the application, unless the court reverses the decision of the board.

(8) If a company has fewer than three directors-

(a) subsection (3) does not apply to the company;

(b) in any circumstances contemplated in subsection (3), any director or shareholder of the company may apply to the Companies Tribunal, to make a determination contemplated in that subsection; and

(c) subsections (4), (5) and (6), each read with the changes required by the context, apply to the determination of the matter by the Companies Tribunal.

(9) Nothing in this section deprives a person removed from office as a director in terms of this section of any right that person may have at common law or otherwise to apply to a court for damages or other compensation for-

(a) loss of office as a director; or

(b) loss of any other office as a consequence of being removed as a director.

(10) This section is in addition to the right of a person, in terms of section 162, to apply to a court for an order declaring a director delinquent, or placing a director on probation.”

[7] Mr Sekgoro argued that the respondents unlawfully and irregularly removed him as a director without observing the provisions of s 71 of the Act. He contended that they failed to notify him of any meeting where his removal as director would have been considered and had not afforded him an opportunity to make any representation. At the very least, he argued, they ought to have furnished him with a copy of a resolution passed at a meeting where his removal was considered. He further contended that, insofar as he was a sole director and shareholder of the company, the Companies Tribunal was not approached in terms of s 71(8) to make any determination concerning his purported removal. In any event, the respondents had no authority to remove him as a director and to appoint themselves.

[8] Mr Mongala, for the respondents, contended that Mr Sekgoro was removed by the shareholders of the company. The company and its eight shareholders are interested parties in the proceedings and had not been cited. He argued that the first to fifth respondents are only cited in their personal capacity and therefore the application ought to be dismissed for lack of joinder. He relied on the judgment of this Court in Members of Seed Life v Board of Directors of Seed of Life Case No: 2201/2019 handed down on 26 June 2020 in support of his argument that a company is a juristic person separate from the directors and shareholders and ought to be cited in the proceedings.

[9] The separate legal personality of a company is to be recognised and upheld except in the most unusual circumstances.[1] The facts in Members of Seed Life are very distinguishable from the present and did not concern the hijacking of a company. The present case concerns an amendment to the company records allegedly in a clandestine fashion and in complete disregard of the law as already stated. Mr Sekgoro may have cited the company as either an applicant or respondent merely as a prudent measure. I am unpersuaded that failure to join the company in these circumstances renders the application fatally defective. Even if I erred, there can be no prejudice against the company because no relief is sought against it. Substance must not trump form.

[10] Mr Sekgoro’s version is met by bare denials from the second to fifth respondents. Their stance, without more, is that Mr Modise, the second respondent, was never a director of the company and could never have resolved to appoint Mr Sekgoro as a director. They go on to state that:

“..Kgaraga Investment Company (Pty) Ltd has only three “members” consisting of the following associations:

15.1.1 Africa United Small Miners Association (AUSMA)

15.1.2 Rainbow Association

15.1.3 Nation Building Association

15.2 The said Associations consisted of small miners in the whole of the Northern Cape and it was never owed by one person.”

[11] The alleged three “members” (not directors) feature nowhere in the CIPC records. The respondents do not lay any basis of how and why Mr Sekgoro came to be replaced as a director of the company. Their allegation that the CIPC records produced by Mr Sekgoro were fraudulently obtained is unsubstantiated. Had Mr Sekgoro manufactured the CIPC records it would be expected that the CIPC, in the course of its investigation, would have uncovered this. It did not.

[12] There is adequate evidence to support that Mr Sekgoro was appointed as a director and shareholder of the company. On the available material the respondents acted outside the procedure set out in s 71 of the Act in ousting Mr Sekgoro as a director.

Pursuant to their surreptitious act they caused CIPC to amend its records and conferred directorship upon themselves. I am satisfied

that the respondents unlawfully took over the company from Mr Sekgoro.

[13] On the question of relief: Binns-Ward J in Entrepreneurial Business School (Pty) Ltd and Others v Africa Creek Investment (Pty) Ltd Case No: 3232/2016 handed down on 12 May 2016 (Western Cape High Court) considered a similar case were a company had been hijacked. The learned Judge remarked that the relief had been couched in language that would imply that the applicants should have their status as directors

‘restored’. That suggested that they had effectively been removed from office by their deregistration in the

CIPC records which would be misguided. Absent their resignation or removal from office in terms of s 71 of the Companies Act, they continued as directors of the company notwithstanding the indications to the contrary in the records kept by the CIPC. The

appropriate relief in the circumstances would be an order declaring that the applicants have at all times remained as duly appointed

directors of the company.

[14] I can conceive of no reason why similar relief should not prevail in this case. In the same breath, the Commissioner of CIPC ought to be directed to erase the names of the respondents as the directors and shareholders of the company from its records. I make the following order:

Order

1. It is declared that Mr Daniël Mabe Sekgoro, the applicant, has at all times, since 23 December 2015, been duly appointed director and shareholder of Kgaraga Investment Company, with registration number 1998/000603/07.

2. The Commissioner of Companies and Intellectual Property Commission, the first respondent, is authorised and directed to do all things

necessary to effect amendments to CIPC records by erasure of the names of Mr Samuel Motlapele Modise, Ms Nthabiseng Jaqueline Masao, Mr Teko Moreneng Schalk Padisho and Mr John Landella, the second to fifth respondents, as directors and shareholders of Kgaraga Investment Company, with registration number 1998/000603/07.

3. The second to fifth respondents are to pay the costs of the application, jointly and severally, the one paying, the other to be absolved.

MV Phatshoane ADJP

Appearances:

For the applicant (in person): Mr DM Sekgoro

For 2nd to 5th the respondents: Adv J.K Mongala

Instructed by: Althea Le Roux Attorneys

[1] Hülse-Reutter & others v Gödde 2001 (4) SA 1336 (SCA) at 1346A-C