1 February 2016 by Cliffe Dekker Hofmeyr Dispute Resolution Matters

Validation of dispositions in terms of section 341(2) of the Companies Act

In liquidation proceedings one of the main concerns for a creditor is the setting aside of transactions in which a company’s assets have been disposed of. These dispositions directly impact on how much a creditor will receive once the assets have been realised and distributed. The courts, in certain instances, have the discretion to validate dispositions that would otherwise be void, this is particularly so in terms of s341(2) of the Companies Act, No 61 of 1973.

Section 341(2) provides that, “every disposition of its property (including rights of action) by any company being wound-up and unable to pay its debts made after the commencement of the winding-up, shall be void unless the Court otherwise orders”.

That being said, how far does this discretion reach and how do our courts apply s341(2)?

In the recent case of Engen Petroleum Ltd v Goudis Carriers (Pty) Ltd (In Liquidation) 2015 (6) SA 21 (GJ), the court was faced with an application in terms of which Engen, post the issuing of the court application, sought the validation of payments made subsequent to the granting of a final winding-up order of Goudis, the respondent. The court had to determine whether, in terms of s341(2), it had the power to validate dispositions made:

  • between the presentment of the application for winding-up and deregistration; or

  • only where dispositions are made between presentment and the date upon which the final winding-up order is granted.

Engen had supplied fuel to Goudis since 2002. Goudis also had a credit account with Engen. However, a creditor of Goudis had filed a winding-up application on 14 September 2012. The final winding-up order was granted on 23 October 2012, establishing a concursus creditorium on 14 September 2012. Engen, being ignorant of the application and the order, supplied fuel to Goudis up until 30 November 2012 and received payment from Goudis after the final-winding up order was granted.

Sutherland J in handing down his judgment pointed out that s341(2) does not empower the court to validate an unlawful, invalid or otherwise unauthorised transaction. The disposition needs to be initially lawful and valid in order for the court to intervene in terms of s341(2). The court held that the purpose of s341 (2) is to address the anomaly that occurs as a result of the retrospective invalidation of dispositions by a company which were initially lawful and valid.

A company cannot validly make a disposition from the date upon which the concursus creditorium comes into effect (pursuant to the final winding-up order). This is because at the moment of concursus the office bearers of the company no longer have lawful authority or control of the company, such authority and control are given to the master, the liquidator and the will of the creditors in a general meeting.

Thus it was held that s341(2) confers a power on a court to intervene with dispositions that a company may lawfully make during the period between the date on which the application for a winding-up has been presented and the date on which the final winding-up order is granted. As such the court did not validate the payments, and ordered Engen to pay back all the money it received from Goudis subsequent to the granting of the final winding-up order on 23 October 2012.

The court had also recognised that a s341(2) order is effective and binding on creditors, the company being wound up and on the recipient of the payment, which payment, but for the winding-up, would have been uncontroversial.

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