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Liquidation chaos: new or old Companies Act?

Reading Time 4 minute read

Somewhere close to Sandton – Africa’s richest square mile – lies the suburb of Parkmore in the Gauteng Province.   This is the principal place of business of a debtor that cannot pay its debts, and is facing the barrel of an application for its winding-up. The debtor’s registered address is in Mbombela within the province of Mpumalanga – close to Africa’s Big Five game. Two court options come into play. 

Should the winding-up application have been served in Parkmore (principal place of business) and heard by the High Court, Johannesburg? Or should it have been served in Mbombela (registered address) and heard by the High Court, Mpumalanga? Do both courts have jurisdiction in a winding-up application of this debtor (a dual-jurisdiction argument) or does only one court have exclusive jurisdiction over this debtor in such an application (an exclusive jurisdiction argument)? That is the question considered by the High Court, Johannesburg in Wild & Marr (Pty) Ltd v Intratek Properties (Pty) Ltd 2019 (5) SA 310 (GJ).

According to s12(1) of the 1973 Companies Act, a creditor may launch a winding-up application either in the division of the High Court in which the registered office of the debtor or the principal place of business of the debtor is situated. The 2008 Companies Act does not have a similar provision. S23(3) of the 2008 Companies Act states that a company must continuously maintain at least one office in South Africa and register the address of its office, or its principal office if it has more than one office, with such address serving as its registered office.

In Wild & Marr, Intratek Properties (the debtor) argued that because the 2008 Companies Act (which repealed all but the winding-up provisions in chapter 14 of the 1973 Companies Act) requires the principal place of business to be identical to the registered address, winding-up applications must therefore be launched exclusively in the court that has jurisdiction over the debtor’s registered address. The opportunity to choose to serve a winding-up application at the debtor’s registered office or at debtor’s principal place of business, so Intratek Properties argued, is extinguished by the 2008 Companies Act. Therefore, so continued the argument, the ‘dual-jurisdiction’ regime is abolished. 

There are a number of conflicting judgments on the issue. Some concluded that a company can reside at only one place; that the 2008 Companies Act contemplates a company’s principal place of business and its registered address as one and the same, thus abolishing the dual-jurisdiction regime. Others rejected the abolition of the dual-jurisdiction regime, and concluded that s23 of the 2008 Companies Act cannot be given an interpretation that has the effect of ousting a court’s jurisdiction where such ousting has not been articulated in clear terms in s23.    

In Wild & Marr, the court held that the winding-up of insolvent companies is governed by chapter 14 of the 1973 Companies Act. The definitions, internal references and interpretations in the 1973 Companies Act that apply to chapter 14 must continue to apply despite the promulgation of the 2008 Companies Act. One may not refer to the provisions of the 2008 Companies Act to interpret chapter 14 of the 1973 Companies Act – this would be “chaotic”.

A creditor that launches a winding-up application against a debtor, on the basis that the debtor is unable to pay its debts, should follow the interpretation of, and the procedure set out in, the 1973 Companies Act – not the 2008 Companies Act. Such a creditor may launch a winding-up application in the court within whose area of jurisdiction the debtor’s registered address or principal place of business is situated. The court in Wild & Marr, logically in our view, therefore favoured the dual jurisdiction regime.

However, given the conflicting judgments on this issue, creditors should determine the legal position in the relevant division of the High Court before issuing and serving the winding-up application. Practically, the registered address of a debtor remains the safest basis for determining the court that has jurisdiction to hear a winding-up application – to avoid the potential “chaos” that may arise from the provisions of the 1973 Companies Act and the 2008 Companies Act.

Until the Supreme Court of Appeal sitting in Bloemfontein, the land of roses, decides the issue, we advise creditors seeking a winding-up application to exercise caution when choosing the court to which an application for winding-up is to be made, particularly where a debtor operates in multiple jurisdictions and has a registered address in another jurisdiction.


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