GROUND-BREAKING JUDGMENT AS COURT CLARIFIES THE PROCEDURAL REQUIREMENTS IN SECTION 129 OF THE COMPANIES ACT 71 OF 2008 Panamo Properties v Nel NNO 2015 (5) SA 63 (SCA)

Abstract

The judgment of the Supreme Court of Appeal (SCA) in Panamo Properties v Nel NNO (2015 (5) SA 63 (SCA)) is important because it clarifies certain controversial provisions of the Companies Act 71 of 2008 regarding the interpretation and application of section 129(1) of the Act, and the non-compliance by a company with the further requirements of sections 129(3) and (4), as well as the effect of section 129(5). In a number of cases in the various divisions of the High Court, it has been held that, where a company is placed in business rescue pursuant to a resolution of its board of directors, but thereafter fails to comply with the procedural requirements of section 129, the effect is to cause the business-rescue proceedings to terminate.  The reason for this was said to flow from the provisions of section 129(5), which provide that non-compliance with procedural formality, in terms of sections 129(3) and (4), results in the resolution placing the company under business rescue lapsing and becoming a nullity. The SCA held that non-compliance does not automatically result in the business rescue being terminated. Non-compliance is a ground for applying to court to set aside the resolution in terms of section 130(1)(a)(iii). But such resolution will be set aside only if it is otherwise just and equitable to do so, in terms of section 130(5), and the business rescue terminates in terms of section 132(2)(a)(i) once an order setting aside the resolution has been granted.