ABT Angaza (Pty) Ltd v MPSA Projects (Pty) Ltd and Others

ABT Angaza (Pty) Ltd (ABT) held 300 shares (30%) and K2022570124 (South Africa) (Pty) Ltd (K2022) held 700 shares (70%) in MPSA Projects (Pty) Ltd (MPSA). On 17 March 2025, MPSA purportedly issued 290 additional shares to K2022, which would dilute ABT's shareholding from 30% to 23.26%, thereby eliminating ABT's veto power over special resolutions (which require 75% majority). ABT was offered 30% of the 290 shares but declined. On 19 March 2025, the directors notified ABT that a special resolution would be held on 4 April 2025 to sell MPSA's assets for R8,132,198. ABT challenged the share issuance on two grounds: (1) MPSA's memorandum of incorporation (MOI) only authorized 1,000 shares, all of which had been issued, and no special resolution was passed to authorize additional shares; (2) the issuance was oppressive and unfairly prejudicial under section 163 of the Companies Act. The respondents contended that MPSA's true MOI authorized 1,000,000 shares and that the 290 shares were issued for adequate consideration of R1,560,000 (representing capital requirements to settle a judgment debt and release attached assets).

• Whether the share issuance of 290 shares to K2022 was lawful given disputes about MPSA's true memorandum of incorporation
• Whether the issue could be decided on the papers or whether there were genuine factual disputes requiring trial
• Whether section 40(1)(a) of the Companies Act was complied with in determining adequate consideration for the shares
• Whether the share issuance constituted oppressive or unfairly prejudicial conduct under section 163 of the Companies Act
• Whether the matter was urgent
• Whether the directors should be declared delinquent

The court made the following orders: (a) The matter was enrolled as an urgent application; (b) It was declared that as at the date of the order, shares in MPSA were held as follows: ABT: 300 shares; K2022: 700 shares; (c) MPSA was ordered to rectify its share register to delete any reference to K2022 holding shares other than the 700 shares; (d) No order was made on the relief seeking to declare the third and fourth respondents delinquent directors; (e) The respondents were ordered to pay the applicant's costs jointly and severally on scale C.

When a board of directors issues shares under section 40(1)(a) of the Companies Act, it must genuinely determine 'adequate consideration' for those specific shares. This requires the board to explain why the consideration amount represents adequate value for the particular number of shares being issued, not merely why the company needs that amount of capital. Where an answering affidavit fails to respond to allegations that adequate consideration was not properly determined, the court will apply Plascon-Evans principles and decide the matter on the applicant's version. Share issuance that is wrongful (violating section 40(1)(a)), lacking in probity and good faith, and prejudicial to a shareholder (by diluting their shareholding and eliminating veto rights) constitutes oppressive or unfairly prejudicial conduct under section 163 of the Companies Act. Section 163 empowers the court to rectify share registers and restore the status quo ante where oppressive share issuances have occurred.

The court made several obiter observations: (1) Section 18(2) of the Companies Act (providing that CIPC-endorsed MOIs prevail over other versions) requires careful interpretation and may only apply to properly signed and dated MOIs - this interpretive question should be reserved for trial rather than urgent motion proceedings. (2) The court noted the 'most remarkable coincidence' that the reduced consideration for shares in 2025 (R1,560,000) compared to 2023 (R6,300,000) happened to match unrelated business requirements, and that 290 shares was precisely enough to eliminate ABT's veto power - suggesting potential bad faith. (3) The court observed that if ABT's version on the MOI were correct (only 1,000 authorized shares), then the purported issuance never happened in law, making declaratory orders setting aside the issuance inappropriate. (4) The court noted that determining a company's true value may require looking beyond net asset value. (5) The court commented that the Companies Act is 'notoriously difficult' to interpret, as evidenced by multiple conflicting judgments on various sections.

This case is significant for its application of section 163 of the Companies Act 71 of 2008 (oppression remedy) to share dilution scenarios. It confirms that issuing shares without properly determining 'adequate consideration' as required by section 40(1)(a) can constitute oppressive conduct under section 163. The judgment provides guidance on what constitutes 'adequate consideration' - requiring the board to explain not just why a particular amount is needed, but why that amount represents adequate value for the specific number of shares being issued. The case also illustrates the court's willingness to intervene where share issuances appear designed to eliminate minority veto rights, particularly when the consideration and timing raise suspicion. It demonstrates the application of Plascon-Evans principles in company law disputes and the limits of urgent court jurisdiction in resolving complex factual disputes about corporate documents.