In this matter, the constitutional court had to determine if shareholders of a company’s relief in terms of section 252 of the Companies Act falls within the scope of a “debt”.
The facts are such that Mr Harri holds the most shares in Sanbonani Holiday Spa Shareblock Limited (“Shareblock”). The reference to “limited” in the name of the entity indicates that the said entity is a public company, in which any person may acquire and hold shares.
Mr Harri amends Shareblock’s articles of association, which the members of the company argue was an unfair, prejudicial, unjustified and inequitable act. A company’s articles of association is regarded an important document which sets out the company’s purpose, duties and responsibilities of its members. Therefore, to amend the document without the input of the (majority) of members may on face value be regarded as unfair/prejudicial.
The members of the company approach the court for relief in terms of section 252 of the Companies Act 61 of 1973 (as amended). This is considered an important tool for the minority of shareholders in a company. The High Court held that the shareholders’ relief prescribed. There was an appeal to the Supreme Court of Appeal. The SCA found that the prescription period only commences upon appointment of a curator ad litem to litigate on behalf of the entity and/or shareholders. Therefore, the debt had not prescribed yet as three years had not lapsed since appointment of the curator ad litem.
The constitutional court had one specific legal enquiry – whether or not shareholders’ relief in terms of section 252 may be considered a debt. If the relief/tool may be considered a debt, the debt is of course subject to possible prescription.
The CC disagreed with the SCA’s interpretation that a prescription period only commences upon appointment of a curator ad litem.
The court considered the Escom case for the definition of a “debt”, in which a debt was found to be any obligation due to be paid or rendered from one to another.
The Makate v Eskom (2016) case was also considered, which found that a debt was not to be considered as anything that must be done or be refrained from being done other than a payment or delivery. Therefore, Mr Makate’s claim against Vodacom had not prescribed in the said matter.
The shareholders in their court papers consider the relief in terms of section 252 as declaratory in nature and not as a “debt”. The other party, amongst others Mr Harri as the majority shareholder, argued that the relief is a debt as a new contract came into existence when the articles of association was amended.
The constitutional court, in determining the nature of the claim/relief sought, referred to the basis of the claim. The cause of the claim had to be investigated. The basis of the claim is section 252, which is in essence relief in the form of seeking a declaratory order rather than a new contract coming into existence. The relief sought is not a debt and therefore falls outside the ambit of the Prescription Act. The minority shareholders’ relief sought could be granted as it had not prescribed.