- November 2, 2023
- |Civil Law, Practice, And Procedure, Concise Law Reports (CLR)
The applicant filed an ex parte application for its provisional liquidation into the hands of the Master of the High Court. The members of the applicant filed a resolution in terms of s 68(a) of the Close Corporations Act 26 of 1988, (‘the Act’), for the provisional liquidation of the applicant. The matter was served before the court, and it was removed from the roll on the basis that the Master of the High Court had not been cited as a respondent.
The Act
Musuku J:
[5] Section 68 of the Act, in terms of which this application was brought, provides the following:
‘A corporation may be wound up by a Court, if –
a) members having more than one-half of the total number of votes of members, have so resolved at a meeting of members called to consider the winding-up of the corporation, and have signed a written resolution that the corporation be wound up by a Court;
b) the corporation has not commenced its business within a year from its registration or has suspended its business for a whole year;
c) the corporation is unable to pay its debts; or
d) it appears on application to the Court that it is just and equitable that the corporation be wound up.’
[6] It is clear, from reading the provisions of the Act, that the word ‘Court’, occurring in the said provision, relates to this court. That much is clear from reading s 1 of the Act, with s 7. The latter, states in part that this court ‘shall have jurisdiction to entertain any matter in respect of a corporation.’ This includes an application for the liquidation of a corporation, which the matter serving before this court is.
[7] It is apparent from the founding affidavit filed in this matter, that the members of the applicant, filed a resolution dated 4 August 2023, in which they acknowledged that the applicant is factually insolvent and is unable to pay its debts as they fall due in the ordinary course of business. They therefore resolved to approach this court in terms of s 68(a) of the Act.
[26] In the instant case, I need to proceed to consider, despite the procedure that was eventually followed, whether the applicant has made a case for the relief sought. I have perused the papers filed of record. I note that the applicant has made all the necessary allegations. First, it is stated that the applicant is unable to pay its debts. In this regard, it is stated on oath that the applicant has been operating at a loss of at least N$12 154 098,62 for the period ended 30 April 2023. Furthermore, the applicant is indebted to the Receiver of Revenue for N$16 964 290,19.
[27] In addition to the above-stated facts, which are in appropriate cases accompanied by relevant documents, the members of the applicant have approached the court in terms of s 68(a) of the Act and have filed a resolution for the voluntary winding-up of the applicant.
[28] The Master has, as required by law, filed a certificate in terms of s 66 of the Act, confirming that the applicant has furnished sufficient security for the payment of all fees necessary for the administration of the applicant until a provisional liquidator has been appointed and that all fees for the discharge of the applicant from winding-up, have been secured. Furthermore, the Master, in her certificate, confirms that her office was served with the application issued by the applicant in the instant matter on 26 September 2023.
[29] Section 352(3)(a) of the Companies Act, which applies mutatis mutandis, in this matter, provides the following:
‘Where the application is presented –
a) by members of the company and it appears to the Court that the applicants are entitled to the relief, the Court must make a winding-up order unless it is satisfied that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound-up instead of pursuing that other remedy. (Emphasis added).
[30] Having regard to what is before me, as stated above, I am of the view that all the necessary allegations regarding the provisional winding-up of the applicant have been made in the affidavit supporting the order sought. I accordingly incline to the view that the applicant is entitled to the relief it seeks. There is nothing before me that suggests that there is any other suitable remedy available than winding up the applicant in this case. Neither, I may add, is there any suggestion or indication on the papers before me that the applicant is acting unreasonably in seeking its winding up in the circumstances when there is another suitable remedy open to be pursued.
[31] I must point out that when proper regard is given to the above-cited provision, it makes it mandatory for the court, where the court forms the view that the applicant has made out a good case to be entitled to the relief sought. The only exception is where the court is convinced that there is some other suitable remedy available or that the applicant is acting unreasonably or frivolously, or is abusing the processes of the court in seeking the winding-up order – in the presence of a viable alternative remedy available to the court.
Wherefore the Court held that:
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- That the provisions of the Companies Act 28 of 2004, apply with necessary modifications in cases of liquidation of closed corporations in line with 66 of the Act.
- Applications for provisional liquidation are moved ex parte and the Master is ordinarily not cited as a respondent in such matters. The office of the Master is, in terms of the Act, entitled to being served with the application for provisional liquidation and is expected to file a certificate confirming that sufficient security has been provided for the costs and charges of liquidation proceedings. Additionally, the Master may, in appropriate cases, file a report to the court for the postponement or dismissal of the application for a provisional order.
- Applications for liquidation normally provide for the issuance of a rule nisi to interested parties. The rule nisi is issued after the provisional order has been granted. The Master in this connection, must be served with the application before the matter serves in court and is not an interested party in the conventional sense to be served with the rule nisi for the first time after its issue.
- The court is obliged to grant a provisional order of liquidation where it is satisfied that the applicant has made out a case unless it occurs to the court that there is a suitable remedy available other than the liquidation order, or where it appears to the court that the applicant is acting unreasonably or frivolously in seeking the winding up order.
In the premises, the applicant was thereby placed under provisional liquidation into the hands of the Master of the High Court.