What are the formalities to succeed in a company winding up application?
As litigants, we have little control over the facts of our cases, as those are created by our clients before we go to court. It is important therefore to control the things we can control.
The Companies Act of 1973 prescribes certain formalities when presenting a winding up application of a company to Court. As an advocate specialising in commercial law matters, over the years I have seen winding up applications fail or being delayed because of non-compliance with formalities that are not difficult to comply with.
I discuss below pertinent sections of the Companies Act 61 of 1973 which must be complied with to succeed in a formal winding up application.
Section 346 (3)
When an application is moved, it must generally be accompanied by a Certificate by the Master, issued not more than ten days before the date of the application, to confirm that sufficient security has been given for the payment of all fees and charges necessary for the prosecution of all winding-up proceedings and of all costs of administering the company in liquidation until a provisional liquidator has been appointed or the order is discharged.
The “date of the application” is the date upon which the Notice of Motion is signed but this is so only if the application is then ready for filing, i.e. the affidavits have also been signed. It is necessary to look at the date of the Certificate, the date of the Notice of Motion and the date of the affidavit(s).
The date of the Certificate may be subsequent to the “date of the application,” or on the same date, or not more than ten days before.
Section 346 (4)
A copy of the application must generally be lodged with the Master (or other dedicated officer) who may report to the Court any facts which appear to justify the Court in postponing the hearing or dismissing the application.
Section 346 (4A) (a)
When the application is argued, the Court must be satisfied that copies of the application were furnished to –
- every registered trade union that, as far as the applicant can reasonably ascertain, represents any of the employees of the company; and
- the employees themselves by:
2.1. affixing a copy of the application to any notice board to which the applicant and the employees have access inside the premises of the company, or
2.2. if there is no access to the premises by the applicant and the employees, by affixing a copy of the application to the front gate of the premises, where applicable, failing which to the front door of the premises from which the company conducted any business at the time of the application;
- the South African Revenue Service (SARS); and
- the company, unless the application is made by the company, or the court, at its discretion, dispenses with the furnishing of a copy where the court is satisfied that it would be in the interests of the company or of the creditors to dispense with it.
Section 346 (4A)(b)
Compliance with subsection (4A)(a) must be proved by way of an affidavit, filed before or during the hearing, deposed to by the person who “furnished” the required copies.
The following must be noted:
In terms of Rule 4 of the Uniform Rules and Section 43 of the Superior Courts Act 10 of 2013, the sheriff must, subject to the applicable rules, execute all sentences, judgments, writs, summonses, rules, orders, warrants, commands and processes of any Superior Court directed to the sheriff and must make return of the manner of execution thereof to the court and to the party at whose instance they were issued.
Taking all into account, one gets the impressions that the person who drafted the provisions of Section 346 (4A)(b) were not au fait with the functions fulfilled in our practice by the Sheriff, as a return of service by the Sheriff is not sufficient.
Instead, an affidavit or affidavits by the person or persons who furnished the copies is required. These are commonly referred to as service affidavits.
The legislature specifically provided for condonation of non-compliance in the case of the copy to be furnished to the respondent company. In practice, this is done in most ordinary (ie non-urgent) applications – the usual return of service of the Sheriff is deemed to be sufficient.
Condonation is not provided for in respect of service on trade unions, employees or SARS.
The following rulings are notable and support the above:
- Standard Bank of SA Ltd v Sewpersadh 2005 (4) SA 148 (C) para 14: “It is clear from the above that the Legislature used the word ‘must’ and did not use ‘may’. The furnishing of copies of the application to the Commissioner for Inland Revenue, the employees and trade unions was therefore made peremptory (obligatory) and not permissive. (See Berman v Cape Society of Accountants 1928 (2) PH M47 (C).) The word ‘must’ was also used by the Legislature in defining the obligation of the petitioner as far as proof of service is concerned.”
- Hannover Reinsurance Group Africa (Pty) Ltd v Gungudoo 2012 (1) SA 125 (GSJ) para 14: “In terms of the provisions of s 9(4A)(b), applicants’ attorneys were obliged to file an affidavit either before or during the hearing of the application wherein the steps taken by the applicants in compliance with the provisions of s 9(4A) are set out.” In this matter the Court was seized with an application for sequestration and section 9(4A) of the Insolvency Act 24 of 1936 now contains provisions virtually identical to those in section 346(4A) of the Companies Act.
- Corporate Money Managers (Pty) Ltd v Panamo Properties 49 (Pty) Ltd 2013 (1) SA 522 (GNP) para 10: “Proof of such furnishing by means of an affidavit is … peremptory.”
- Sphandile Trading Enterprise (Pty) Ltd v Hwibidu Security Services CC 2014 (3) SA 231 (GJ) para 14: “It is clear that compliance with s 346(4A)(a)(iii) is peremptory in the sense that a copy of the application must be furnished to SARS. The same applies to proof of service on SARS by means of an affidavit (s 346(4A)(b).”
- Pilot Freight (Pty) Ltd v Von Landsberg Trading (Pty) Ltd 2015 (2) SA 550 (GJ) para 36: “What is clear from s 346(4A)(b) is that whoever furnishes the application, on any of the parties referred to in the section, must depose to an affidavit which sets out the manner in which s 346(4A)(a) was complied with.”
- Cassim N.O v Ramagale Holdings (Pty) Ltd and others  JOL 47600 (GJ) para 19: “Section 346 (4A) (b) must be complied with in respect of SARS and the employees. Affidavits by the Sheriff and the person who furnished a copy to the SARS should suffice.”
The affidavit must be by the person who furnished the copy. An affidavit by a person who merely refers to a Sheriff’s return of service is not sufficient.
The applicant need not show that the employees actually saw and read a copy affixed to a notice board or gate. When a company has ceased trading it may very well be that employees are no longer in attendance at the company premises.
An applicant will be well advised to also use alternative methods such as bulk sms’s (as often used in labour disputes, or when a business rescue practitioner seeks to convey information to employees and creditors). This will be advisable especially when it is doubtful whether employees will actually be at the respondent company’s place of business or registered address, perhaps because the company has closed its doors.
In very urgent applications it may very well be impossible by reasons of extreme urgency to give notice to all or some employees. In such a case the circumstances must be deal with in the service affidavit, and the service affidavit must explain what was done to ensure compliance as far as it was possible to comply, and what alternatives could be considered. There must always be an attempt at compliance, and the steps taken must be set out in the service affidavit.
Employees may or may not be represented by a trade union. A service affidavit or the main founding affidavit should deal with this aspect so that the Judge hearing the matter will know whether there is a union that must be served.
A copy of a provisional or a final winding up order must be served on –
- every trade union;
- the employees of the company by affixing a copy of the application to any notice board to which the employees have access inside the respondent company’s premises, or if there is no access to the premises by the employees, by affixing a copy to the front gate, where applicable, failing which to the front door of the premises from which the respondent company conducted any business at the time of the presentation of the application;
- the South African Revenue Service; and
- the respondent company, unless the application was made by the company itself.
A well-presented and properly-indexed application always has a better chance of finding favour with a Judge. A Judge sitting in a busy Court wants to that a proper case is made out insofar as the Court is expected to exercise a discretion, and that all formal requirements have been met. Making the Judge’s job easier is an important function of attorney and counsel.
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