Ace Films Corporation v Mimosa Rolprent Produksies (Pty) Ltd (In Liquidation) and Others

Mimosa Rolprent Produksies (Pty) Ltd (Mimosa), a South African film production and distribution company, was placed under provisional liquidation on 26 July 2022. Mimosa is the 100% shareholder of CAT Films Inc (CAT), a Nevada-incorporated entity, which in turn owns 100% of ACE Films Corporation (ACE). On 30 November 2023, Steven Salant, purporting to act as the sole director of ACE, launched a business rescue application to place Mimosa under business rescue in terms of Section 131 of the Companies Act, 2008. He instructed CK Attorneys to represent ACE. On 11 December 2023, the joint liquidators of Mimosa appointed Rina Troskie as director of CAT. On the same day, Troskie, acting on behalf of CAT, removed Salant and appointed herself as the sole director of ACE. On 16 January 2024, Troskie's attorneys, JVA, instructed CK Attorneys to withdraw the business rescue application. CK Attorneys, on Salant's instructions, refused. Both parties then challenged each other's authority to act for ACE in terms of Rule 7 of the High Court Rules. Salant relied on a written consent dated 17 January 2023, purporting to reappoint him as director of ACE, which he himself signed as president of CAT. Salant alleged that the liquidators' and Troskie's appointments were invalid, forged, and part of a fraudulent scheme to scupper the business rescue application.

• Whether Steven Salant was validly appointed as a director of ACE Films Corporation and thus had the authority to instruct CK Attorneys to represent ACE in business rescue proceedings.
• Whether the liquidators of Mimosa had the power to appoint Rina Troskie as director of CAT and thereby authorise her appointment as director of ACE.
• Whether the written consents appointing Troskie as director were validly executed.
• Whether CK Attorneys or JVA are the duly authorised attorneys of record for ACE in the business rescue application.

1. Steven Salant and CK Attorneys are not authorised to act on behalf of ACE Films Corporation. 2. Rina Troskie is the validly appointed director of CAT and ACE and is authorised to represent ACE. 3. JV Attorneys are the validly appointed attorneys of record for ACE in the business rescue application. 4. Mr Salant, in his personal capacity, is to pay the costs of the Rule 7 application. 5. Mr Salant, in his personal capacity, is to pay the costs of Mr W Moolman in the application to strike on an attorney and client scale.

Where a company is in liquidation, the liquidators are vested with the authority to administer the company's estate, including its shareholding in subsidiaries, and have the power to appoint directors to those subsidiaries. Consequently, any appointment of a director to a subsidiary without the liquidators' consent is invalid. The authority of a person to act on behalf of a company in legal proceedings is dependent on the validity of their appointment as a director, which in turn depends on compliance with the company's constitutional documents and the lawful exercise of shareholder power.

The court noted that it was inclined to give Salant the benefit of the doubt that a board resolution was not required for instituting business rescue proceedings, but this did not assist him because even if properly authorised, he was removed shortly thereafter.

This case clarifies the scope of liquidators' powers in relation to the subsidiaries of a company in liquidation, particularly regarding the appointment and removal of directors. It affirms that liquidators, as custodians of the insolvent estate, have the authority to manage shareholdings in subsidiaries to preserve assets for the benefit of creditors. The case also illustrates the interplay between business rescue applications and liquidation proceedings, and the practical consequences of authority disputes under Rule 7.