The
applicant must be regretting tying her retirement, and, indeed, the
twilight of her career to an estate agency business that had the
second respondent in it.
After
what may have been an illustrious career as a Commercial Letting
Manager of a well-known estate agency in Bulawayo, John Pocock and
Company Limited, the applicant decided to resign from that
respectable company and start her own real estate business. Not being
a registered estate agent herself, she is a Property Manager and a
trained lawyer, she badly needed a partner registered as an estate
agent with the Estate Agents Council and the Real Estate Institute
Zimbabwe in order to start that business.
That
is where the second respondent came in, a registered estate agent and
a fellow of the Real Estate Institute.
If
the facts of this matter are anything to go by, perhaps that is all
that the second respondent had.
I
say so because he had purchased a shelf company in 2006 which had
absolutely nothing but a single issued share and had never traded. He
did not have the means to set it in motion. He had just left formal
employment armed with his qualifications and certificates of
registration but without the wherewithal to commence trading. It is
that shelf-company which was chosen as a vehicle for business. When
the parties came together, as they certainly needed each other, and
agreed to start an estate agency, under the banner of the first
respondent, which existed in name only, they had to take a soft loan
of $1,350= from the applicant's husband to find their feet.
This
was in January 2014.
From
then, the company progressed in leaps and bounds. The applicant and
the second respondent were allotted 500 shares each reflecting their
equal standing in the company. The company started trading in May
2014. No sooner had the new kid in town hit the ground running than
differences between the members started emerging. They traded
accusations and the inevitable happened on 13 October 2014, when, at
the instance of the applicant, this court, per MOYO J, granted an
order placing the first respondent company under provisional
liquidation. A provisional liquidator was appointed but is said to
have quickly resigned after the second respondent took issue with his
appointment.
It
is the granting of the final order of liquidation which has been
strenuously opposed by the second respondent and his loving wife, the
third respondent, who has dutifully deposed to a three-line affidavit
supporting every word uttered by the second respondent.
The
applicant has approached the court seeking the winding up of the
first respondent in terms of section 206(g) of the Companies Act
[Chapter 24:03] on the ground that it is just and equitable that the
company be wound up. This is because the applicant and the second
respondent, who are the only members of the company, holding an equal
shareholding, and the only directors of it, are incompatible and
unable to work together. They are unable to agree on anything
resulting in them reaching a deadlock each time there is a meeting or
there is need to make a decision.
The
applicant paints a picture of the precincts of the company having
been turned into a war zone. Intrigue and trickery are the order of
the day as the second respondent desperately tries to elbow the
applicant out of the business using every trick in the book. She
accuses the second respondent of delinquency and poor time-keeping
regularly failing to keep office hours, mismanagement of the
company's accounts and contributing very little in the furtherance
of the company's affairs. In addition, the second respondent is
accused of deliberately keeping the applicant in the dark about the
finances of the company.
As
if that was not bad enough, the second respondent is accused of
having convened a shareholders meeting in October 2014 for the sole
reason of removing the applicant as a director. To achieve that, he
has suddenly claimed that the applicant was never a shareholder -
despite the issuance of a share certificate to her. Instead, he now
claims that his wife, the third respondent, who, according to the
applicant, has never held shares in the company, was allotted 122,000
shares with the second respondent being allotted 127,500 shares, much
to the chagrin of the applicant.
To
justify that shareholding, the second respondent has pulled out and
dusted a Shareholders Agreement allegedly signed by himself and his
wife on 20 December 2012 long before the applicant came into the
picture and at a time when, by his own admission, the first
respondent company was not trading but a mere shelf-company. To cap
it all, the second respondent has suddenly produced share
certificates issued in favour of himself and his wife on 31 December
2012.
In
opposing the application and the confirmation of the provisional
order of liquidation, the second respondent has submitted that the
applicant lacks locus
standi in judicio
to make such an application because she “indicated her intention to
sell her shares and withdraw her capital she had injected from the
company.” After she collected $1,230=, being the capital she
injected in the company, the applicant ceased to be a shareholder and
remained only a director.
Unfortunately,
the second respondent did not indicate who bought the shares of the
applicant and did not produce proof of such a sale.
To
make a bad situation worse, he did not explain how, in law, the
withdrawal of $1,230= from the company (and not from a potential
buyer of the 500 issued shares of the applicant) could equate to a
sale of shares when there was no buyer of those shares and no price
for the shares. Quite to the contrary, the sum of $1,230= was paid by
the company itself, buttressing the applicant's point that it was a
loan repayment and nothing more.
The
second respondent insisted that although himself and his wife had
received an allotment of shares in December 2012, pursuant to an
agreement the two had signed on 20 December 2012, he had not prepared
any returns for the allotment as he “had no money and […,.] was
not using the company.” He has since rectified the anomaly by
filing them belatedly and paying late allotment filing costs. All
this is to justify the argument that it is him, out of the goodness
of his heart, who allowed the applicant to join his company before
he, again, allowed her to “withdraw her shareholding” leaving him
and his wife in the driving seat. Never mind that when the parties
came together, in January 2014, there was no company to join as it
was not trading and he “was not using the company” and that no
returns adverting to the allotment were submitted to the Registrar of
Companies “as [he] had no money.”
Alice
in Wonderland.
With
those facts, counsel for the applicant had a point when he called the
whole episode an elaborate fabrication.
In
terms of section 206 of the Companies Act [Chapter 24:03];
“A
company may be wounded up by the court –
(a)
If the company has, by special resolution, resolved that the company
be wound up by the court;
(b)
If default is made in lodging the statutory report or in holding the
statutory meeting;
(c)
If the company does not commence business within a year from its
incorporation or suspends its business for a whole year;
(d)
If the company ceases to have any members;
(e)
If seventy-five per centum of the paid up share capital of the
company has been lost or has become useless for the business of the
company;
(f)
If the company is unable to pay its debts;
(g)
If
the court is of opinion that it is just and equitable that the
company should be wound up.”…,.
The
court has a discretion to grant or withhold an order for winding up
of a company in terms of section 206(g) of the Companies Act [Chapter
24:03]. As stated by CHATIKOBO J in Sultan
v Fryfern Enterprises (Pvt) Ltd and Another
2000
(1) ZLR 188 (H)…,:
“Section
206(g) of the Act has been said to postulate not facts, but only a
broad conclusion of law, justice and equity as a ground for winding
up.
'In
its terms and effect, (the section) confers upon the court a very
wide discretionary power the only limitation, originally, being that
it had to be exercised judicially with due regard to the justice and
equity of the competing interests of all concerned.' Per
TROLLIP J in Moosa
NO v Manjee Bhawan (Pvt) Ltd and Another
1967 (3) SA 131 (T) 136H.”
The
discretion of the court arises out of the use of the word “may”
in section 206 of the Companies Act [Chapter 24:03] and the inherent
jurisdiction of the court to prevent abuse of its process. See
Croc-Ostrich
Breeders of Zimbabwe (Pvt) Ltd v Best of Zimbabwe (Pvt) Ltd
1999 (2) ZLR 410 (H)…,.
These
two sources, namely, the use of the word “may” and the inherent
jurisdiction of the court, provide a judicial discretion, based on
all the relevant circumstances of any case, to withhold an order of
winding up - even if grounds for it have technically been
established. That discretion is, however, very narrow. See Dominion
Trading FZ–LLC v Victoria Foods (Pvt) Ltd
2013 (2) ZLR 332 (H)…,.
Counsel
for the second and third respondents has not asked me to exercise
that narrow discretion and withhold the grant of a final order of
liquidation. Instead, he has commenced his onslaught on the
application by asserting that the applicant lacks locus
standi
to bring this application because she is not a member of the company
she having withdrawn her capital injection from the first respondent
company.
In
terms of section 207(1) of
the Companies Act [Chapter 24:03]:
“An
application to the court for the winding up of a company shall be by
petition presented, subject to this section, by the company or by any
creditor or creditors, including any contingent or prospective
creditor or creditors, contributory or contributories or by all or
any of those parties, together or separately, or, in a case falling
within subsection (2) of section one hundred and sixty two, by the
Minister, accompanied, save in the case of a petition by the
Minister, by a certificate of the Master, Assistant Master or a
magistrate that due security has been found for payment of all fees
and charges necessary for the prosecution of all proceedings until
the appointment of a liquidator.
Provided
that -
(1)
A contributory shall not be entitled to present a petition for
winding up a company unless -
(a)
The number of members of the company is reduced below two; or
(b)
The shares in respect of which he is a contributory, or some of them,
were originally allotted to him or have been held by him and
registered in his name for at least six months during the eighteen
months before the commencement of the winding up or have devolved
upon him through the death of a former holder.”
Section
202 of
the Companies Act defines
a contributory as every person liable to contribute to the assets of
a company in the event of its being wound up, and, in terms of
section 201 of
the Companies Act, every
present or past member of the company is liable to contribute to the
assets of the company to the extent of his unpaid up shares in the
case of a limited liability company.
Clearly,
therefore, a shareholder is a contributory or member.
The
applicant was allotted 500 shares and issued with a share certificate
on 14 January 2014 before the company commenced business in May 2014.
At that time, the second respondent was also issued with the same
amount of shares, and without paying for them, and the third
respondent had none. The applicant was therefore a shareholder and a
contributory to the first respondent company.
It
is a fact that cannot be wished away because some months down the
line merely because it then suited one member an attempt was made to
dis-engage her for him to remain with the whole company for himself.
It
must be appreciated that the moment the parties elected to conduct
their business through the medium of an incorporation they were
making the conscious decision to be governed by Company
Law
and could not, when it suited them, run away from its tentacles in
preference to customary law or some other obscure and indeterminable
law as would entitle the second respondent to fob off the applicant
from the company for no other reason than that he is the one who
bought it as a shelf company in 2006. For the applicant to lose her
shareholding something had to happen to her 500 shares. She had to
alienate them in one way or the other.
The
second respondent has argued that the applicant lost her shareholding
when she accepted payment of the sum of $1,230= from the company
which is the amount she had injected into the business as capital.
It
begs the question: What amount was injected by the second and third
respondents for them to claim a shareholding in the company?
There
has been a studious failure to allude to anything suggesting any
capital injection done by that couple although in their myopic view
they own the company.
Which
then brings me to the issue of the shareholding agreement allegedly
signed on 20 December 2012 between husband and wife and their share
certificates bearing the date 31 December 2012 which counsel for the
applicant has called “an elaborate hoax.”
The
respondents cannot rely on those documents without burning their
fingers. They have not disputed that at the time of engagement with
the applicant, in January 2014, the company only had one issued share
which was held by Tevison Makuwe - as so often happens with
self-companies. If the company had one issued share in January 2014
it is not possible that the shareholding agreement relied upon could
have been signed two years earlier, on 20 December 2012; neither is
it possible that the share certificates for 127,500 and 122,000, in
favour of the second and third respondents, respectively, could have
existed then especially as the applicant was issued with Share
Certificate Number Two.
Of
course, they claim that they held certificates 1(a) and 1(b)
respectively. If one believes that they would believe anything.
Even
if I be wrong in drawing that conclusion, I would still find those
documents invalid for other reasons.
Counsel
for the applicant
has drawn my attention to the Annual Return lodged by the company,
through none other than the second respondent, on 14 January 2014,
which shows that as at that date only one ordinary share had been
issued. If indeed the couple held the massive shares they claim to
have allotted in December 2012, surely that would have appeared on
the return.
The
inescapable conclusion is that the shareholding agreement and the
share certificates, in favour of the couple, are demonstrably a most
recent and extremely shameless fabrication by individuals prepared to
pull all the stops in order to divest a benefactor of everything that
she has put into the company; a company that has enabled a down and
out estate agent, unable to find his radius, to take off the ground.
In
any event, in terms of section 136(1) of
the Companies Act [Chapter 24:03]:
“Within
one month after the passing of any special resolution, a copy of that
resolution shall be transmitted to the Registrar who shall, subject
to subsection (2) register that resolution and that resolution shall
be of no force or effect until it is so registered.”
That
provision has been relied upon by the applicant in seeking to nullify
the Shareholders Agreement of 20 December 2012 and the share
allotment made under it.
One
would have expected the second and third respondents to address that
issue but counsel for the second and third respondents was unable to
respond to that; content to rely on the issue of lack of locus
standi
only.
What
is not disputed can only be taken as admitted.
It
is unimaginable that the second and third respondents would have
entered into such a shareholding agreement and allotted to each other
shares in December 2012 and fail to submit the resolution and/or
return to the Registrar recording such allotment. Thereafter, the
second respondent commenced trading with the applicant, in the name
of the company, after they joined forces in January 2014 all the way
until they hit turbulence in October 2014. Only then did the second
respondent see the wisdom of lodging the resolution and the returns.
He says he has since paid late allotment filing costs - an exercise
in futility in my view.
I
am satisfied that what the second respondent has done clearly
demonstrates that he cannot be trusted at all. He has cunningly tried
to elbow the applicant out of the company in the most despicable way.
He has dishonestly tried to bring his wife into a company she has no
interest in as a way of diluting the interest of the applicant and
has exhibited the uncanny readiness to fabricate company documents at
will in the pursuit of ill-gotten gain. Nothing can illustrate the
pressing need, in the name of equity, to liquidate the company more
than what the second respondent has done.
This
is a person who, even as this application was pending, and a
provisional liquidation order had been issued, did not hesitate to
register another company, Bankable Real Estates (Pvt) Ltd, on 23
October 2014 - exactly 10 days after the grant of the provisional
liquidation order.
It
would be recalled that the first respondent's trading name is
Bankable Real Estate.
What
the second respondent has done is to appropriate that trading name,
register it as an incorporation and then continue trading in that
name, on his own, as if nothing has happened. A breach of the duty of
utmost good faith between directors, and, indeed, members of a
company has never been so crass. Such conduct shows a disdain of all
that a provisional liquidation order stands for and a complete
disregard of all principles of fairness. To cap it all, the second
respondent has continued to contest the winding up proceedings all
the way. This development also points to the fact that equity demands
that the company be wound up.
In
addition, it also goes to the question of costs because by
registering another company in the trading name of the company whose
liquidation is sought, the second respondent not only displayed a
contemptuous regard of the process of the court, but a readiness to
circumvent the due process for his personal aggrandizement….,.
In
the result, it is ordered that:
1.
The provisional order granted by the Honourable Mrs Justice MOYO in
this matter, on 13 October 2014, be and is hereby confirmed as a
final order save that Antony Morris-Davies is not confirmed as the
final liquidator.
2.
The final liquidator shall be appointed in terms of the Chamber
Application in case number HC3005/2014 or in terms of section 218 as
read with section 219 of the Companies Act [Chapter 24:03].
3.
The costs shall be borne by the second and third respondents, jointly
and severally, the one paying the other to be absolved on a legal
practitioner and client scale.
