David John Smyth and Forty Others v Investec Bank Limited and Randgold & Exploration Company Limited

The appellants sought relief under section 252 of the Companies Act 61 of 1973 alleging unfairly prejudicial conduct by Investec Bank Limited and Randgold & Exploration Company Limited. The dispute arose from two settlement agreements concluded in January 2010 between the respondents and JCI Ltd regarding fraud claims. The appellants comprised three categories: (1) first to seventh applicants who instituted the main application; (2) eighth to thirty-fourth applicants who sought to intervene as beneficial owners holding shares through nominees; and (3) thirty-fifth to forty-first applicants who procured registration of their shares in their own names on 2 May 2014. The key factual issue was that many appellants were beneficial shareholders whose shares were registered in the names of nominees, not in their own names on Randgold's register of members. Investec challenged the locus standi of those appellants who were not registered members.

• Whether the term 'member' in section 252 of the Companies Act 61 of 1973 includes beneficial owners of shares held through nominees
• Whether section 103 of the Companies Act 61 of 1973 definitively defines who qualifies as a 'member' for purposes of section 252
• Whether beneficial owners have locus standi to institute proceedings under section 252
• Whether beneficial owners may join as co-applicants with their nominees in section 252 proceedings on the basis of direct and substantial interest
• Whether the court can 'read in' words to section 252 to extend the remedy to beneficial owners

The appeal was dismissed with costs, including costs of two counsel.

The ratio decidendi is that: (1) The term 'member' in section 252 of the Companies Act 61 of 1973 means a person whose name is entered in the company's register of members as defined in section 103 of the Act. (2) Beneficial owners of shares who hold their shares through nominees are not 'members' for purposes of section 252 and therefore lack locus standi to invoke that remedy. (3) Section 103 definitively establishes who qualifies as a member for all purposes of the Companies Act, including section 252, and courts cannot interpret 'member' differently in the context of section 252 without doing violence to the clear language of the statute. (4) Beneficial owners cannot join as co-applicants with their nominees in section 252 proceedings merely on the basis of having a direct and substantial interest, as they lack the requisite legal standing to assert a claim under section 252. (5) A legal interest that falls short of a right to assert a claim cannot be the basis for joinder as an applicant. (6) The company law policy that companies concern themselves only with registered shareholders applies equally to section 252 proceedings.

The court made several obiter observations: (1) It noted that section 252 should be given a construction that advances the remedy rather than limits it, citing Donaldson Investments cases, though this principle did not assist the appellants given the clear statutory language. (2) The court observed that it would have been a simple matter for the appellants to terminate their nominee arrangements and register the shares in their own names if they wished to invoke section 252 - they were 'ill-advised' in pursuing their chosen course. (3) The court distinguished the current Companies Act 71 of 2008, noting that section 163 of that Act provides the remedy to 'a shareholder or director' whereas section 252 of the old Act confined it to 'members', suggesting the legislature's deliberate choice of terminology. (4) The court commented that three counsel were not warranted for a case of this complexity, limiting costs to two counsel despite both parties employing three. (5) The court noted that nominees act subject to instructions of beneficial owners and in their interests, and that allowing beneficial owners to join would result in nominees and beneficial owners pursuing the same remedy together, which the court characterized as improper.

This case authoritatively establishes the principle in South African company law that the remedy for oppressive or unfairly prejudicial conduct under section 252 of the Companies Act 61 of 1973 is available only to registered members - persons whose names appear on the company's register of members as contemplated in section 103. Beneficial owners of shares who elect to hold their shares through nominees cannot invoke section 252 in their own right, nor can they join as co-applicants with their nominees even if they have suffered the prejudice complained of. The judgment reinforces the fundamental company law principle that companies concern themselves only with registered shareholders, and courts will not depart from clear statutory language under the guise of purposive interpretation. The case provides important guidance on the interpretation of 'member' throughout the Companies Act and on the limitations of joinder rules where statutory remedies are confined to specific classes of persons. It confirms that beneficial owners who wish to avail themselves of section 252 must first procure registration of shares in their own names.