Mashike and Ross NNO v Senwesbel Limited and Another

Senwes Limited and its holding company, Senwesbel Limited, implemented share buy-back offers during 2003–2005. Senwes resolved that Senwesbel would acquire shares in Senwes, with the purchases financed by Senwes through a loan account arrangement. Under the first offer of January 2004, targeted shareholders tendered their shares, with payment effected by Senwes cheques or by set-off against debts owed to Senwes. The appellants, shareholders in Senwes, sought a declaratory order that Senwesbel’s acquisition of shares pursuant to the first offer was invalid on the basis that Senwes unlawfully provided financial assistance in contravention of s 38 of the Companies Act 61 of 1973. They further sought cancellation of shares or rectification of the share register. The vendors of the shares were not joined in the proceedings.

The appeal was dismissed with costs, including the costs of two counsel.

The case reaffirms the strict requirements of joinder in South African civil procedure, particularly where declaratory relief is sought that may prejudicially affect third parties. It also confirms that courts may decline to determine substantive company-law issues, including alleged contraventions of s 38 of the Companies Act 1973, where proceedings are procedurally defective.