Technology Corporate Management (Pty) Ltd and Others v De Sousa and Another

Technology Corporate Management (Pty) Ltd (TCM) was founded in the late 1980s by Andrea Cornelli and Luis de Sousa as a closely held company resembling a partnership, with equal shareholding and complementary roles. Over time the business expanded significantly and additional employees, including Jose Diez and Tony da Silva, were promised and later granted minority shareholdings. In 2004, to improve TCM’s BEE profile, Iqbal Hassim was introduced as a major shareholder pursuant to heads of agreement and subsequent sale of shares and shareholders’ agreements, materially altering the company’s ownership and management structure. Relations between De Sousa and Cornelli deteriorated following this change, marked by disputes over management decisions, valuation of divisions (notably the Supplies Division), and internal communications. In 2009, after acrimonious negotiations about De Sousa and Diez exiting the company, De Sousa was suspended, subjected to disciplinary proceedings, and dismissed. The CCMA later found his dismissal procedurally and substantively fair. De Sousa and Diez nevertheless instituted proceedings under s 252 of the Companies Act 61 of 1973, alleging that the conduct of TCM’s affairs was unfairly prejudicial, inequitable or unjust, and seeking a compulsory buy-out of their shares. The High Court upheld their claim and ordered TCM to purchase their shares. TCM and the remaining shareholders appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court’s judgment was set aside and replaced with an order dismissing the plaintiffs’ claims with costs, including the costs of two counsel. Various ancillary cost orders made by the High Court were also altered or set aside, and the intervening applicant’s application was dismissed with costs.

This judgment is a leading authority on the interpretation and application of s 252 of the Companies Act 61 of 1973 (and by extension s 163 of the Companies Act 71 of 2008). It clarifies the stringent requirements for establishing unfair prejudice, limits the scope of legitimate expectations in companies governed by shareholders’ agreements, affirms the relevance of CCMA awards in civil proceedings, and underscores that courts should be slow to compel buy-outs that may prejudice the company or remaining shareholders. The case also provides important guidance on the proper use of company funds in shareholder litigation and on fair trial standards in complex commercial disputes.