Buying or selling a major asset of a company – be aware of latest SCA judgment
Over the years there has been uncertainty about whether a company’s failure to comply with the requirements of Section 228 of the Companies Act (which is now succeed by Section 112 read with 115 of the new Act) can be override the Turquand Rule. The Supreme Court of Appeal has now held that the Turquand Rule cannot remedy long compliance with these formalities of the Companies Act.
Therefore where a company is disposing of its sole asset or the majority of its assets there must be a prior special resolution of its shareholders in place as provided for in terms of the aforesaid sections of the New Companies Act.
For more on this issue, we refer you to an article as included in the Law Society’s monthly De Rebus Magazine (September issue) which discusses this case and the topic in general.