Regiments Capital (Pty) Ltd (Regiments) was placed in final winding-up on 16 September 2020 at the instance of an unpaid creditor. A provisional restraint order under the Prevention of Organised Crime Act had been obtained by the National Director of Public Prosecutions (NDPP) on 18 November 2019, which restrained the assets of Regiments and halted an 'unbundling' transaction involving Capitec Bank shares. On 26 October 2020, the restraint order was discharged. The first to 11th respondents (parties with interests in Regiments) brought an urgent application to the Gauteng Division seeking to stay the winding-up and authorise the unbundling transaction, and subsequently to set aside the winding-up entirely. SARS intervened, conducting an audit showing that Regiments owed at least R279,343,833 in income tax and VAT liabilities (excluding penalties and interest) for the 2014-2019 tax periods, though assessments had not yet been issued. The high court (Vally J) set aside the winding-up, finding Regiments was 'asset rich but cash poor' and only commercially insolvent. The court valued Regiments' interests in Kgoro Consortium (Pty) Ltd at R513 million and Little River Trading 191 (Pty) Ltd at R32 million, together with liquid assets of R390,848,950, finding total assets of R935,848,950 against total liabilities of R671,275,734. SARS appealed to the Supreme Court of Appeal.
The appeal was upheld. Paragraphs 1 to 6 and 8 of the order of the court a quo dated 22 February 2021 were set aside and replaced with an order dismissing the application to set aside the winding-up with costs, including costs of two counsel and reserved costs. The first to 11th respondents were ordered to pay SARS's costs of the appeal jointly and severally, including costs of two counsel. The costs incurred by the 12th and 13th respondents (the liquidators) in respect of the appeal, including costs of their application for leave to adduce further evidence and costs of two counsel, were declared to be costs in the liquidation of Regiments Capital (Pty) Ltd.
The binding legal principles are: (1) A decision to set aside a winding-up under section 354 of the Companies Act 61 of 1973 based on subsequent events does not constitute the exercise of a true discretion but requires proof of facts demonstrating that continuation of the winding-up is unnecessary or undesirable. An appeal court may reach a different conclusion on the merits. (2) Tax liability arises at the end of the tax year, not when an assessment is issued; the assessment is a prerequisite for enforcement but not for existence of the liability (following Namex). Therefore, unassessed tax liabilities are not contingent debts. (3) Commercial insolvency is determined by examining whether the company can pay its current liabilities, including contingent and prospective liabilities, as they come due in the ordinary course, not merely whether debts currently due can be paid (following Murray v African Global Holdings). (4) Valuation evidence, particularly of shares in private companies, requires proper expert evidence with cogent reasoning; unsubstantiated valuation reports that do not qualify the valuer as an expert and provide no reasoning are inadmissible and carry no evidential weight. (5) A court cannot create an alternative winding-up regime or arrogate statutory functions and powers determined by legislation such as the Tax Administration Act when deciding whether to set aside a winding-up.
The court noted that the expression 'wide decision-making powers' in Florence v Government of the Republic of South Africa refers to the multitude of permissible options that characterize a true discretion and must not be confused with a 'wide or loose discretion' which means merely that the court may regard a number of disparate and incommensurable features in coming to a decision. The court also observed that the statement in Klass v Contract Interiors CC that 'the court's discretion is practically unlimited' under section 354 is wrong, and the principles tabulated in that case should be read subject to the present judgment. The court mentioned that after the court a quo's order, the full court upheld the NDPP's appeal against the discharge of the restraint order, suspending restraint proceedings against Regiments. Regarding applications for leave to adduce further evidence on appeal, the court noted it was unnecessary to consider these given the appeal succeeded on existing evidence, and declined to refer counsel's conduct to the Legal Practice Council after considering submissions.
This judgment provides important clarification on the nature of the court's power under section 354 of the Companies Act 61 of 1973 to set aside a winding-up. It establishes that such a decision, when based on subsequent events, is not a true discretion but rather a determination of whether proven facts satisfy the legal requirement that continuation of the winding-up is unnecessary or undesirable. The judgment reinforces the high evidential standard required to set aside a winding-up, particularly regarding valuation evidence which must be properly substantiated by admissible expert evidence. It confirms the principle from Namex that tax liability arises at the end of the tax year and is not contingent on the issuing of an assessment, which has significant implications for determining both factual and commercial insolvency. The judgment applies and reinforces the test for commercial insolvency from Murray v African Global Holdings, emphasizing that the assessment must consider the company's ability to pay existing, contingent and prospective liabilities as they come due, not merely debts currently payable. The case illustrates that courts cannot create alternative winding-up regimes or interfere with statutory powers of tax authorities under the Tax Administration Act when setting aside liquidations.
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