Islandsite Investments 180 (Pty) Ltd vs. National Director of Public Prosecutions and Others - (01 Dec 2023)

Directors did not have the authority to represent the company in the POCA litigation

Company

The Appellant (the company) has been in business rescue in terms of Chapter 6 of the Companies Act, 2008. The fourth and fifth respondents on appeal were appointed business rescue practitioners (the BRPs). The first respondent, the National Director of Public Prosecutions (the NDPP), launched an application in the Free State Division of the High Court of South Africa, Bloemfontein, (the high court) in terms of Section 26(3) of the Prevention of Organised Crime Act, 1998 (the POCA litigation). It was brought on an ex parte basis, without prior notice to the company, the BRPs or the other Respondents. The high court granted a provisional restraint order in respect of property of the company and also of the second, third, sixth, seventh and eighth respondents.

The Supreme Court of Appeal dismissed an appeal from a judgment of the high court in which Musi JP granted an order declaring that attorneys appointed by the directors of Islandsite Investments 180 (Pty) Ltd (the company), which was in business rescue, did not have authority to represent the company in an application brought by the National Director of Public Prosecutions (the NDPP) to restrain assets of the company under the Prevention of Organised Crime Act, 1998 (the POCA litigation). A second order made clear that, the directors and shareholders had no standing to oppose the POCA litigation without the approval of the business rescue practitioners (the BRPs).

The Supreme Court of Appeal analysed the provisions of chapter 6 of the Companies Act relating to business rescue and concluded that those provisions accorded to the BRPs the authority to represent the company in the POCA litigation. Following previous cases of this court, it was held that ‘the facilitation of the rehabilitation of a company expressly include management of property’ and that management should be widely construed.

In the light of the provisions of chapter 6 of the Companies Act, it was held that the directors did not have the authority to represent the company in the POCA litigation. The appeal was dismissed. Since the directors did not have authority to appoint the attorneys concerned to represent the company, the company could not be held liable for the costs of the appeal and the directors were ordered to pay those costs personally.

Tags : BRPS DIRECTORS AUTHORITY