The key issue in the Cowan case, concerning a shareholder dispute in Phumelela Air Conditioning (Pty) Ltd (PAC), was the validity of certain shareholder decisions of PAC:

• to appoint and remove directors in PAC (which required an ordinary resolution under section 68 or 71 of the Companies Act 71 of 2008 (Companies Act)); and
• issue shares to a purported shareholder and related party of PAC, Frontier Pipeline Services (FPS) (which would require a special resolution under section 41 of the Companies Act).

For now, let us park section 71 removals of directors, since the affected director must be given proper notice and the audi alteram partem applies under that section, and therefore, informal unanimous assent was probably never a candidate for this process anyway. Aside from this, under South African common law, in the absence of resolutions passed formally, the doctrine of unanimous assent states that the consent of all the shareholders of a company – even if informal or tacit – to a decision (when such consent is granted with full awareness by the shareholders of what is being done) is a valid alternative method of passing company resolutions. This is an oversimplification of the rule, but it captures its essence. 

The court in the Cowan case reaffirmed a settled principle in South African law, namely that decisions requiring a mere ordinary resolution of the shareholders may be passed using the doctrine of unanimous assent. Thus, in respect of the director appointments (requiring only an ordinary resolution) the court found that these were valid despite no proper ordinary resolution having been passed. 

However, regarding the issuance of shares (requiring a section 41 special resolution) the court found itself bound by a case decided under the old Companies Acts of 1926 and 1973 (Quadrangle Investments (Pty) Ltd v Witind Holdings Ltd [1975] (1) SA 572 (A) (Quadrangle) and found that such an action could not have been taken validly by way of informal unanimous assent.

Competing (and overlooked) cases

In the case of Moraitis Investments (Pty) Ltd and Others v Montic Dairy (Pty) Ltd [2017] (5) SA 508 (SCA) (Moraitis) the Supreme Court of Appeal found that a decision requiring a special resolution of shareholders (in this case, the disposition of the whole or greater part of the assets of an undertaking under sections 112 and 115 of the Companies Act) could be validly made by using the doctrine of unanimous assent. Under the pre-Companies Act 2008 era (when Quadrangle was decided), a key rationale for unanimous assent being impermissible for special resolutions was that all special resolutions had to be registered with the companies registry in order to be effective – but that is no longer the case, and it is only a select few special resolutions that need to be filed in order to be effective. The Cowan case contradicts Moraitis and also contradicts an earlier decision in the very same division – Swissinc AG (Pty) Limited and Others v Jupiter 8 Commercial Trust and Others (2013/4487) [2013] ZAGPJHC 296 (6 December 2013) (Swissinc).

Granted, in the Moraitis case the company in question had a sole shareholder, and in the Cowan case multiple shareholders were involved – which may have made a difference. It is an intriguing point but nothing in this regard is discussed in Cowan. Rather, Cowan simply overlooks Moraitis and follows Quadrangle. In Swissinc there were multiple shareholders, and the court had no problem with accepting unanimous assent for a financial assistance (section 44) special resolution.

A final caveat: as alluded to earlier it is important to note that where the Companies Act requires a special resolution to be filed with the Companies and Intellectual Property Commission (CIPC) (for example, an amendment to a company’s memorandum of incorporation), the doctrine of unanimous assent cannot be relied upon, and the special resolution must be properly passed and filed with CIPC for it to be valid.

Conclusion

In the course of closing out a transaction, it is hardly ever a practitioner’s conscious aim to rely on unanimous assent. Obviously formal resolutions must be obtained for all matters which require shareholder approval. Unanimous assent is always an afterthought argument, made in an attempt to rescue a transaction where formalities were overlooked but everyone factually agreed. Despite the Cowan decision, it is (cautiously) submitted that the balance of the authorities favour unanimous assent, even for special resolution matters, save where a CIPC filing or other mandatory procedural formality is required for the particular resolution).