By Hennie Welgemoed

In the matter between R du Plessis Barry v Clearwater Estates NPC and Others (GP) (unreported case no 82306/2014, 13-11-2015) (Van der Westhuizen, AJ), it was decided that the provisions of Articles (contained in the Memorandum of Articles) stipulating, inter alia, (1) that a proxy must be deposited at the office of the company not less than 48 hours before the time appointed for holding of a meeting and (2) if not deposited timeously, it shall not be treated as valid. It ‘would result in an internal conflict within section 58 of the Act’ and ‘… are inconsistent with the provisions of the Act and in particular with provisions of section 58(1) of the Act. Consequently the provisions of the articles … of the first respondent’s Memorandum of Incorporation are void to that extent’ (see para 30 and 31).

As per para 32 of the judgment, it was also found that the condoning of and acceptance of the alleged late proxies at the annual general meeting of the NPC were consistent with the provisions of s 58(1) of the Companies Act 71 of 2008 (the Act).

One can only ponder the dire consequences of the practical utility of the above judgment in respect of, inter alia, the following:

• I estimate that at least 90%, if not more, of our colleagues who have drafted a Memorandum of Incorporation (MOI) on behalf of their corporate clients, were wrong and advised their company clients incorrectly.
• I further estimate that 90%, if not more, literally thousands of registered MOI’s in our country contain void stipulations, which are inconsistent with the Act pertaining to late proxies.
• General meetings or annual general meetings will be disrupted and inconvenienced to the extent that no meeting will commence on the stipulated time scheduled in the notice until all proxies delivered, whether a millisecond or a nanosecond before the time scheduled for that meeting are firstly scrutinised, the validity thereof verified and counted.
• One can only imagine what absolute chaos will ensue in instances when public companies with literally hundreds and possibly thousands of eligible voter members giving proxies, are confronted with proxies delivered a second before the scheduled time for the commencement of the meeting.

The concept of disqualifying ‘late proxies’ stood the test of judicial scrutiny over time since the Companies Act 46 of 1926, the previous Companies Act 61 of 1973 and I, therefore, suggest that the reasoning behind or justification for the conclusions in the above judgment, are wrong.

Section 58 of the Act stipulates, inter alia, the following:

‘58(1) At any time, a shareholder of a company may appoint any individual, including an individual who is not a shareholder of that company, as a proxy to –

(a) participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or

(b) give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.

(2) A proxy appointment –

(a) must be in writing, dated and signed by the shareholder; and

(b) remains valid for –

(i) one year after the date on which it was signed; or

(ii) any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in subsection (4)(c), or expires earlier as contemplated in subsection (8)(d).

(3) Except to the extent that the Memorandum of Incorporation of a company provides otherwise –

(a) …

(b)…

(c) a copy of the instrument appointing a proxy must be delivered to the company, or to any other person on behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders meeting’ (my emphasis).

In para 22 of the judgment, with reference to s 58(3)(c), it was, in my view, incorrectly concluded:

‘That section does not refer to or relate in any way as to the time when the proxy is to be so delivered. That is provided in section 58(1) of the Act.’

Surely ‘before the proxy exercises any rights’ refers to and relates to time, ‘before’ can be nothing else than time related.

Surely the introductory wording ‘except to the extent that the Memorandum of Incorporation of a company provides otherwise’ postulates that the contents of s 58(3)(c) is alterable as stipulated in s 15(2) of the Act, which reads as follows:

‘15(2) The Memorandum of Incorporation of any company may –

(a) include any provision –

(i) …

(ii) altering the effect of any alterable provision of this Act;

(iii) imposing on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the company in terms of an unalterable provision of this Act’ (my emphasis).

An ‘alterable provision’ is defined by s 1 of the Act, as follows:

‘[A] provision of this Act in which it is expressly contemplated that its effect on a particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by the company’s Memorandum of Incorporation’ (my emphasis).

Does ‘except to the extent that the Memorandum of Incorporation of a company provides otherwise’ not mean ‘expressly contemplated’ within the meaning of an alterable provision?

The ‘any time’ referred to in s 58(1) relates to the giving of a proxy inter partes between the member and whomever the member appoints in terms of the proxy. However, as far as the company is concerned for purposes of regulating its own administrative procedures as provided for in s 15(2)(a)(iii) above, it is entitled to change ‘before’ as stipulated in s 58(3)(c) to ‘48 hours before’. Inter partes the proxy giver and the proxy receiver, it can be done any time.

Hennie Welgemoed BIur (UP) BProc (UP) is an attorney at Botha Massyn & Thobejane Attorneys in Kempton Park.

This article was first published in De Rebus in 2016 (March) DR 13.