Interesting Judgment: MM Tayob & Another v Shiva Uranium & Others
10 December 2020
The crisp issue for determination before the Supreme Court of Appeal was who had the power to appoint a substitute business rescue practitioner, as contemplated in section 139(3) of the Companies Act 71 of 2008, in the event of the death, resignation or removal from office of the existing business rescue practitioner.
The Supreme Court of Appeal found that the 2008 Companies Act does not confer any power on a business rescue practitioner to appoint another practitioner. Instead, section 139(3) only provides for the appointment of a substitute practitioner by either the board of a company, if business rescue proceedings commenced through the adoption of a board resolution in terms of section 129(1), or an affected person if business rescue proceedings commenced through section 131.
The business rescue proceedings in casu commenced by way of board resolution. Accordingly, the issue then was whether the board of the company in business rescue had to act subject to the authority of the business rescue practitioners in appointing a substitute. On this point, the Supreme Court of Appeal held that section 139(3) provides a board with the unfettered power to appoint a substitute practitioner. The Supreme Court of Appeal went on to state that the interpretation of the court a quo, namely that a board is to act in terms of section 139(3), with the approval of the practitioner of the company would render the section unworkable. This finding was premised on the fact that if a practitioner dies, resigns or is removed from office, there would either be no practitioner in office to authorise a board to act under section 139(3), or alternatively if two or more practitioners were appointed jointly, the remaining practitioner(s) would have no authority to act.
The Supreme Court of Appeal further held that during business rescue proceedings, a board retains all of its powers and functions except to the extent that the 2008 Companies Act expressly or by necessary implication provides otherwise. The Supreme Court of Appeal found that the power of the board under section 139(3) is not expressly or by necessary implication qualified, such that approval of the practitioner for the appointment of a substitute practitioner is necessary. The court came to this conclusion on the basis that although business rescue practitioners enjoy full management control of the company in substitution of its board during the course of business rescue proceedings, the appointment of a substitute practitioner is a function of governance and not a management function. Notably, the Supreme Court of Appeal held that any function of a director that falls outside the ambit of the authority of the practitioner, cannot be subject to the practitioner's approval. Therefore, in view of the above, the board of a company may appoint a substitute practitioner in terms of section 139(3) without the approval of the business rescue practitioner.
This judgment was kindly sent to us by Dr E Levenstein, H Mayo and M Tayob.
Judgment - 8 December 2020: MM Tayob & Another v Shiva Uranium & Others - SCA 336/2019