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  • Strategic Partners Group (Pty) Ltd and Others v The Liquidators of Ilima Group (Pty) Ltd (in liquidation) and Others (Case no 1291/2021) [2023] ZASCA 27 (24 March 2023)

Strategic Partners Group (Pty) Ltd and Others v The Liquidators of Ilima Group (Pty) Ltd (in liquidation) and Others (Case no 1291/2021) [2023] ZASCA 27 (24 March 2023)

Are the rights of liquidators to obtain information for the valuation of a shareholding in a company limited to the rights of an ordinary shareholder.?

Author

Ross Shepstone
January 25, 2024

Ilima Group (Pty) Ltd (Ilima) was placed into final liquidation in April 2010, and the appointed liquidators were tasked with realising its assets, including a significant shareholding in Strategic Partners Group (Pty) Ltd (Strategic). The liquidators needed to value this shareholding to distribute the proceeds to creditors. However, disagreements arose over the valuation process and the information required to conduct it.

Initially, Strategic had the shareholding valued by Mazars Corporate Finance (Pty) Ltd, but the liquidators rejected this valuation. Subsequent valuations and offers were also disputed, leading to a protracted conflict over the market value of the Ilima shareholding and the information the liquidators were entitled to receive from Strategic.

The liquidators sought additional information to perform an updated valuation, but Strategic was reluctant to provide it. This led to the issuance of subpoenas for an insolvency enquiry to obtain the necessary documents. Strategic responded by launching a legal application to limit the liquidators' rights to information to those of an ordinary shareholder, as per certain sections of the Companies Act of 1973 and 2008.



During this time, Strategic amended its Memorandum of Incorporation (MOI), introducing a clause that would affect the sale of shares in the event of insolvency, which the liquidators viewed as an attempt to circumvent the need to provide further information for valuation.

The High Court dismissed Strategic's application and upheld the liquidators' counter-application, which included a declaration that the new MOI clause did not apply to the Ilima shareholding and that the documents sought at the insolvency enquiry were to be provided. Strategic appealed this decision.

The ratio decidendi of the Supreme Court of Appeal's decision in this case is that the rights of liquidators to obtain information for the valuation of a shareholding in a company are not limited to the rights of an ordinary shareholder. Instead, the liquidators are entitled to a broader range of documents and information as provided under sections 414 and 415 of the Companies Act 61 of 1973, which are necessary to fulfill their statutory duty to realize the shareholding and distribute the proceeds to the creditors of the company in liquidation.

"It is accepted by all, as it must be, that the liquidators are duty bound to obtain sufficient documents for the purpose of placing a value on the Ilima shareholding. Liquidators are required to be diligent in the interests of creditors in recovering and distributing assets of the company in liquidation. As was accepted by this Court of the duties of the liquidator in Receiver of Revenue, Port Elizabeth v Jeeva: 'It is his duty to the whole body of shareholders, and to the whole body of creditors, and to the Court, to make himself thoroughly acquainted with the affairs of the company; and to suppress nothing, and to conceal nothing, which has come to his knowledge in the course of his investigation, which is material to ascertain the exact truth in every case before the Court. And it is for the Judge to see that he does his duty in this respect.'" (Paragraph [28])

Justice Gorven


The court also held that the provisions of a company's Memorandum of Incorporation (MOI) cannot be used to oppressively or unfairly prejudice the interests of the liquidators in the performance of their duties. Specifically, the court found that the amendment to Strategic's MOI, which introduced a clause that would restrict the liquidators' access to information and limit the manner in which they could dispose of the shareholding, was oppressive and unfairly prejudicial to the liquidators. Consequently, the court exercised its discretion under section 163 of the Companies Act 71 of 2008 to declare that the provisions of the amended MOI did not apply to the Ilima shareholding.

The core legal principle is that liquidators have statutory rights and duties that extend beyond those of ordinary shareholders, particularly in the context of realizing assets and settling the affairs of a company in liquidation. These rights and duties include accessing information and documents necessary to accurately value and dispose of the company's assets for the benefit of its creditors. Any attempt by a company to impede this process through its internal governance documents can be challenged and set aside if it results in unfair prejudice to the liquidators' interests.

In its reasoning process, the court referred to the case of Grancy Property Ltd and Another v Manala and Others [2013] ZASCA 57; [2013] 3 All SA 111 (SCA), which provided guidance on the interpretation of the relevant provisions of the Companies Act concerning the oppression remedy.

The court relied on the principles established in Grancy to determine the scope of the liquidators' rights to information and the application of section 163 of the Companies Act 71 of 2008, which provides relief for oppressive or unfairly prejudicial conduct. The court also referenced the case of Aspek Pipe Co (Pty) Ltd and Another v Mauerberger and Others 1968 (1) SA 517 (C) to define what constitutes "oppressive" conduct.