WHAT YOU NEED TO KNOW ABOUT S112 OF THE COMPANIES ACT 71 OF 2008

WHAT IS SECTION 112 OF THE COMPANIES ACT

This is the successor to and has the same effect as Section 228 of the Companies Act 61 of 1973. If the Company sells the whole or greater part of the undertaking of the Company or the whole or greater part of the assets of the Company a special resolution is required to be authorised, passed and ratified by the shareholders of the Company. In other words, if a Company decides to sell immovable property which is the only or the majority asset (51%) of the Company, compliance with Section 112 is a necessity.

Directors are not authorised without the approval of a General Meeting to dispose of the whole or substantially the whole of the undertaking of a company. This shareholder’s resolution is a special resolution.

WHAT IS A SPECIAL RESOLUTION?

A special resolution is a resolution passed by 75% of the shareholders of the Company at a general meeting of which the prescribed notice has been given to all shareholders specifying the intention to propose the resolution as a special resolution, the terms and effect of the resolution and the reason for it.

WHY IS A SPECIAL RESOLUTION REQUIRED?

If Directors wish to dispose of an asset of the Company where the transaction involves disposing of the whole or substantially the whole of the Company’s assets Section 112 requires the shareholders of the Company to approve the disposal of the asset. A special resolution is required due to the importance attached to the disposal of the whole or a greater part of the Company’s assets.

QUORUM

The special resolution must be passed at a General Meeting at which members holding in the aggregate at least one quarter of the total votes of all members entitled to vote at the meeting are present in person or by proxy.

RELAXATION OF NOTICE PERIODS FOR THE GENERAL MEETING

A shorter notice period than as prescribed is permitted if all the members having a right to attend and vote at the meeting are present at the meeting and agree to waive the required minimum notice for such meeting.

Alternatively, if all members consent in writing to waive the notice period in totality a document with the signatures of all members should be lodged with the Registrar of Companies.

MUST THE SPECIAL RESOLUTION BE REGISTERED IN THE COMPANIES OFFICE?

In terms of section 228 of the previous Companies Act the special resolution was only effective from the date it was registered by the Registrar in the Companies office. The current view in terms of the new Companies Act 71 of 2008 the special resolution does not need to be registered in the Companies office and but a copy thereof should be filed with the Companies Office.

CONCLUSION

The explanation given in this article has been simplified and is intended as general information. Section 112 of the Companies Act has intricacies and one should consult an Attorney for further information before the specific application of this provision.

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