NCA Plant Hire CC v Blackfíeld Group Holdings (Pty) Limited [2021] JOL 51810 (GJ) Some critical observations on the legal effect of a provisional winding-up order

Abstract

The facts and judgment in NCA Plant Hire CC v Blackfield Group Holdings (Pty) Limited [2021] JOL 51810 (GJ) raises some interesting questions in relation to the legal effect of a provisional winding-up order on the power and authority of the board of a company to conclude agreements on behalf of the company after such an order is made. A company is a separate juristic person from the date of its registration in terms of the Companies Act 71 of 2008 (the 2008 Companies Act) (s 19). Unless its capacity to do so is restricted in its Memorandum of Incorporation, a company has the capacity to enter into all agreements to which a juristic person can be a party (s 19 read with s 20 of the 2008 Companies Act; see also the commentary of Delport et al on s 19 in Henochsberg on the Companies Act 71 of 2008 (May 2022 - SI 28)). The power to manage the business and affairs of a company vests in the board of directors (s 66 of the 2008 Companies Act). Because a company cannot act by itself it must be represented by its board or a duly authorised agent in agreements that bind the company. Consideration will be given in this case note specifically to the legal status of agreements concluded by a company represented by its board in the time between the granting of a provisional winding-up order and prior to the appointment of a liquidator. One of the implications of the judgment in NCA Plant Hire CC v Blackfield Group Holdings is that the board has the authority to enter into an agreement to settle the claim of one of the company's creditors after a provisional winding-up order is granted, but prior to the appointment of a provisional liquidator. In short, the court found that because the creditor who brought the application for the provisional winding-up of the company is dominus litis such creditor may enter a settlement agreement, which may include a condition that the provisional liquidation order be discharged, with the company in provisional liquidation. The approach of the court, in this case, is evaluated against the general legal principles applicable, namely the power of the board to manage the business and affairs of a company, the legal effect of a provisional winding-up order, and the concursus creditorum which begins as from the moment of liquidation but effectively backdated to the date of the filing of the application of liquidation by the Registrar of the High Court (s 348 of the 1973 Companies Act).