Afrisam (South Africa) Proprietary Limited v Maleth Investment Fund Proprietary Limited

Maleth Investment Fund (Pty) Ltd (Maleth), a creditor of Cemlock Cement (Pty) Ltd (Cemlock), applied for Cemlock's compulsory winding-up on 31 October 2013, as Cemlock was unable to pay its debts. Cemlock initially opposed the application but withdrew its opposition after Maleth exercised step-in-rights under a cession and pledge agreement and appointed new directors who facilitated the withdrawal. On 12 March 2014, before the compulsory winding-up application was heard, Cemlock was placed in voluntary winding-up via a special resolution registered with CIPC. Eighteen months later, on 4 December 2015, the High Court granted a compulsory winding-up order "with effect from 31 October 2013" based on Maleth's "conversion application". Liquidators subsequently sought to recover payments totaling over R250 million made by Cemlock to Afrisam (another creditor) prior to 31 October 2013, claiming they constituted impeachable dispositions under sections 29 and 30 of the Insolvency Act. Afrisam, who had not been notified of the conversion application, applied to intervene and set aside the December 2015 order, arguing the effective date should be 12 March 2014 (date of voluntary winding-up resolution), not 31 October 2013. The High Court dismissed Afrisam's application.

• Whether an intervening voluntary winding-up extinguishes a pending application for compulsory winding-up
• What is the effective commencement date for a compulsory winding-up that supersedes a voluntary winding-up for purposes of impeaching dispositions under the Insolvency Act
• Whether it is necessary to set aside a voluntary winding-up before a compulsory winding-up order can be granted
• The correct interpretation and application of section 340(2)(a) of the Companies Act 61 of 1973
• The significance of the commencement date for determining which statutory provisions (section 29 or 30 of the Insolvency Act) apply to impeachable dispositions

The appeal was upheld with costs, including costs of two counsel. The High Court order was set aside and replaced with an order: (a) granting Afrisam leave to intervene; (b) varying the order of Windell J dated 4 December 2015 by deleting the words "with effect from 31 October 2013"; and (c) directing Maleth to pay costs including costs of two counsel.

Where a compulsory winding-up order supersedes a voluntary winding-up of a company, section 340(2)(a) of the Companies Act 61 of 1973 mandates that for purposes of setting aside impeachable dispositions under the Insolvency Act, the date deemed to correspond with the sequestration order shall be the date of registration of the special resolution to wind up the company (i.e., the commencement date of the voluntary winding-up), not the date of presentation of the application for compulsory winding-up. An intervening voluntary winding-up does not extinguish a pending application for compulsory winding-up. It is not necessary to set aside a voluntary winding-up before a compulsory winding-up order can be granted, although the court has discretion to do so under section 354 of the Act.

The court noted that it was unnecessary to pronounce on whether the date of commencement of the winding-up itself may change between the period of voluntary winding-up and subsequent compulsory winding-up, as the judgment was only concerned with the date for purposes of setting aside impeachable dispositions. The court observed that the Act envisages replacement of a voluntary winding-up with a compulsory winding-up in several provisions (sections 346(1)(e), 347(4)(a), and 354). The court also noted that where a creditor seeks winding-up and the application is not opposed by other creditors, the court's discretion is very narrow, as an unpaid creditor is entitled ex debito justitiae to a winding-up order. The court commented that section 346A of the Act only requires service of winding-up applications on trade unions, employees, SARS, and the company itself (unless the company is the applicant), addressing Afrisam's complaint about lack of notice.

This case is significant in South African company law as it clarifies important principles regarding winding-up proceedings, particularly: (1) It authoritatively confirms that an intervening voluntary winding-up does not extinguish a pending compulsory winding-up application; (2) It provides clear guidance on the proper interpretation of section 340(2)(a) of the Companies Act 61 of 1973, establishing that where a compulsory winding-up supersedes a voluntary winding-up, the effective date for purposes of impeaching dispositions under the Insolvency Act is the date of registration of the special resolution for voluntary winding-up, not the earlier date of presentation of the compulsory winding-up application; (3) This has practical implications for the onus of proof in recovering impeachable dispositions, as it determines whether section 29 (voidable preferences - where onus is on recipient) or section 30 (undue preferences - where onus is on liquidators) of the Insolvency Act applies. The judgment provides certainty for creditors, liquidators and recipients of payments in determining the applicable timeframes and evidentiary burdens for challenging pre-winding-up transactions.