CPR for companies failing to convene an annual general meeting: The Companies Tribunal

July 22nd, 2016
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By Siyabonga Vusi Ntshangase

The Companies Tribunal (the Tribunal) is established in terms of s 193 of the Companies Act 71 of 2008 (the Act) and has been in operation since September 2012. It has jurisdiction throughout South Africa (s 193(1)(a)). It is mandated to adjudicate applications made in terms of the Act (s 195(1)). As part of its adjudication function, the Tribunal adjudicates, among others, applications for an extension of time to convene an annual general meeting (s 61(7)(b)). The Tribunal is empowered by the Act to make any order provided for in terms of the Act in respect of such an application (s 195(1)(a)).

In terms of subs 61(7) of the Act, public companies are required to convene an annual general meeting (AGM). The initial AGM must take place no more than 18 months after the company’s date of incorporation (s 61(7)(a)) and thereafter, subsequent AGMs must be convened once in every calendar year, but no more than 15 months after the date of the previous AGM, or within an extended time allowed by the Tribunal, on good cause shown (s 61(7)(a)). All shareholder’s meetings (this includes an AGM) of public companies may be held in South Africa or elsewhere, but must be accessible to the company’s shareholders for electronic participation as contemplated in subs 63(2), irrespective of the location of the meeting (s 61(10)).

A public company is a profit company that is not a state-owned company, a private company or personal liability company (s 1). Public companies are obliged to convene an AGM (s 61(7)). The AGM provides an opportunity for the Board of Directors to account to shareholders on the overall status and performance of the company. Subsection 61(8) of the Act requires that among others, the AGM at minimum must provide for presentation of the directors and audit committee reports; audited annual financial statements for the year immediately preceding financial year (s 61(8)(a)(i – iii)); social and ethics committee reports where applicable. Other business that may be conducted at the AGM is the election of directors, as required by law and the Memorandum of Incorporation (MOI); appointment of the auditors and audit committee and matters raised by shareholders (s 61(8)(b), (c), and (d)).

Section 61(7)(b) provides that after the initial AGM, which is in-line with subs 61(7)(a), and on applicant advancing good cause for failure of compliance thus justifying the relief sought. The Act does not define or provide a meaning of the phrase ‘good cause’. This requirement is intended to dissuade non-compliance with the Act without substance.

Consequently, s 61(7)(b) of the Act confer powers to the Tribunal to extend the date of a company to convene an AGM. The Act set timeframes that need to be complied with, in regard to the convening of an AGM. However, companies that are required by the Act to convene an AGM within the specified timeframes may apply to the Tribunal for an extension of the time to convene its AGM. The Tribunal will only grant a relief of extension if ‘good cause’ is shown in line with s 61 of the Act.

It is of utmost importance to note that the Tribunal does not have jurisdiction to extend the time to convene the initial 18 month period from the date of company incorporation to convene an AGM (s 61(7)(a)).

Before filling an application to the Tribunal, an applicant must make sure that the application relates to a matter that falls within the jurisdiction/authority of the Tribunal. An application must be filed with the Registrar of the Tribunal through registered mail, hand delivery, by facsimile or by e-mail. When applying for an extension of a period to convene an AGM, the documents that should be included in the application are –

  • CTR 142;
  • a sworn statement of affidavit setting out the facts on which the application for extension of a period for convening an AGM is based;
  • a copy of the company’s Memorandum of Incorporation as filled with the Companies and Intellectual Property Commission;
  • proof of authority to act on behalf of the company; and
  • proof of service of the application on interested parties, if any, in any of the methods stated in Table CR3 of Annexure 3 of the Companies Regulations, 2011.

Conclusion

In summation, AGMs are integral part of company governance. Companies which are required, but fail to convene an annual general meeting are advised to apply to the Tribunal for extension of a period to convene an annual general meeting. Services of the Companies Tribunal are free and there are no fees/costs for filling any application with the Companies Tribunal. For more information, please visit the Companies Tribunal website at www.companiestribunal.org.za.

Siyabonga Vusi Ntshangase LLB (UKZN) is a research intern at the Companies Tribunal in Pretoria.

This article was first published in De Rebus in 2016 (Aug) DR 19.