Johnson v Hirotec (Pty) Ltd

The appellant, a shareholder and director of the respondent company, applied for the winding-up of Hirotec (Pty) Ltd. He was a creditor for unpaid salary amounting to R40 000 for July to October 1996. The respondent, controlled by the other shareholder-director, denied the debt and contended that payments were merely pre-payments of dividends. Financial statements showed declining turnover, losses, lack of liquidity, and factual insolvency. The court a quo dismissed the winding-up application, finding the company able to meet its debts. The appellant appealed to the Supreme Court of Appeal.

The appeal was upheld; the judgment of the court a quo was set aside; the respondent was placed under a final order of winding-up; and the appellant’s costs in both courts were ordered to be costs in the winding-up.

The case clarifies the assessment of commercial insolvency in South African company law and confirms that factual insolvency and dishonest denial of debt are material indicators of inability to pay debts. It also affirms that a final winding-up order may be granted without a provisional order where circumstances justify it.