Stand 242 Hendrik Potgieter Road Ruimsig (Pty) Ltd v Göbel NO and Others

Bubesi Investments 196 (Pty) Ltd sold its sole immovable property to Stand 242 Hendrik Potgieter Road Ruimsig (Pty) Ltd for approximately R31 million. The sale was concluded by two directors of Bubesi, Göbel and Wilken, who certified that the sale had either been approved by shareholders in terms of s 228 of the Companies Act 61 of 1973 or that the property did not constitute the whole or greater part of Bubesi’s assets. Both statements were false: the property was Bubesi’s only asset and no shareholder special resolution had been passed. The shares in Bubesi were held by two trusts whose other trustees were unaware of the sale. After disputes arose and Bubesi failed to perform, Stand 242 obtained an interim interdict preventing Bubesi from dealing with the property. The trustees and Bubesi then applied for a declarator that the sale was unenforceable due to non-compliance with s 228. The High Court granted the declaratory relief, and Stand 242 appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, and the High Court’s order declaring the sale unenforceable for non-compliance with s 228 was confirmed.

The case authoritatively settles that the Turquand rule does not apply to disposals governed by s 228 of the Companies Act 61 of 1973. It confirms that third parties cannot rely on ostensible compliance with internal formalities to enforce a disposal of a company’s major assets without proper shareholder approval, thereby strengthening shareholder protection in South African company law.