Abstract
Section 162 of the Companies Act 71 of 2008 introduces a novel provision into our law in that it empowers a broad range of persons to apply to the court to declare a director delinquent in certain circumstances. The effect of a declaration of a person as delinquent is that he is disqualified, for the duration of the order, from being a director of a company.In Lewis Group Limited v Woollam (2017 (2) SA 547 (WCC)) the Western Cape High Court was faced with an application brought by Lewis Group Limited in terms of section 165(3) of the Companies Act for an order setting aside a demand served on it by a shareholder, Mr David Woollam on the ground that it was frivolous, vexatious or without merit. Woollam wished to rely on the derivative action to require Lewis Group Limited to commence proceedings to declare four of its directors delinquent under section 162 of the Companies Act. The main question before the court was whether, under the Companies Act, a shareholder might institute proceedings to declare a director delinquent under section 162 of the Companies Act using the derivative action. The court, per Binns-Ward J, held that this may not be done and that the application must be instituted in terms of section 162 of the Companies Act. This note critically analyses the judgment and evaluates whether the court came to the correct decision.
Highlights
In Lewis Group Limited v Woollam (2017 (2) SA 547 (WCC)) the Western Cape High Court was faced with an application brought by Lewis Group Limited in terms of section 165(3) of the Companies Act for an order setting aside a demand served on it by a shareholder, Mr David Woollam on the ground that it was frivolous, vexatious or without merit
Woollam wished to rely on the derivative action to require Lewis Group Limited to commence proceedings to declare four of its directors delinquent under section 162 of the Companies Act
The court held that in any case there was no merit in Woollam’s demand to have the four directors of Lewis Group Limited declared delinquent because, due to insufficient evidence, he had failed to prove that the conduct of the directors in question fell within the scope of section 162(5)(c) of the Companies Act
Summary
The effect of a declaration of a person as delinquent is that he is disqualified, for the duration of the order, from being a director of a company (s 69(8)(a) of the Companies Act). In Lewis Group Limited v Woollam (2017 (2) SA 547 (WCC)) (hereinafter “Lewis Group v Woollam”) the Western Cape High Court was faced with an application brought by Lewis Group Limited in terms of section 165(3) of the Companies Act for an order setting aside a demand served on it by a shareholder, Mr David Woollam (hereinafter “Woollam”) on the ground that it was frivolous, vexatious or without merit. This note critically analyses the judgment and evaluates whether the court came to the correct decision
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