CDH Invest NV v Petrotank South Africa (Pty) Ltd and Others

CDH Invest NV and Amabubesi Investments (Pty) Ltd were the sole shareholders in Petrotank South Africa (Pty) Ltd in a 60/40 ratio. Due to an incorporation error, Petrotank’s Memorandum of Incorporation (MOI) recorded only 1 000 authorised shares instead of the agreed 100 000. In March 2014, the CDH-appointed directors passed a round-robin resolution under s 74 of the Companies Act 71 of 2008 purporting to increase the authorised shares to 1 000 000 and to amend the MOI accordingly, despite objections from Amabubesi’s directors and without explaining the basis for the increase beyond correcting the error. The resolution was filed with the CIPC. When CDH later demanded a shareholders’ meeting to consider, inter alia, a rights issue, Amabubesi counter-applied to have the round-robin resolution declared invalid. The High Court invalidated the resolution, and CDH appealed to the Supreme Court of Appeal.

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

The case clarifies the limits of directors’ powers under the Companies Act 71 of 2008, particularly the use of round-robin resolutions under s 74 and the board’s power to increase authorised shares under s 36. It affirms that statutory powers must still be exercised in good faith, for a proper purpose, and with adequate disclosure, reinforcing corporate governance standards in South African company law.