The Companies Act shows its teeth
By Jerome Veldsman
S v Quantum Property Group Ltd was a plea and sentence agreement (a “plea bargain”) in the Regional Court, Bellville (one of the Commercial Crime Courts) on 21 July 2016.
Since 2001, the Criminal Procedure Act makes provision for a sentence agreement: a written agreement between the accused and the prosecutor in respect of a guilty plea and the sentence. The sentence agreement is then presented in Court, and if the Judge or Magistrate (as the case may be) regards it as just, the Court convicts and sentences the accused in accordance with the sentence agreement.
The Companies Act provides that a company must:
– each year prepare annual financial statements within six months after the end of its financial year; and
– each calendar year convene an annual general meeting of its shareholders (no more than 15 months after the date of the previous AGM).
There was a standard shareholder vs shareholder and shareholder vs director dispute regarding Quantum Property Group (the company). As is often the case in such an instance, both the audited financial statements and the annual general meeting were overdue. One shareholder used this to its advantage.
The shareholder lodged a complaint with the Companies and Intellectual Property Commission (CIPC). CIPC corresponded with the company, and the latter undertook to prepare annual financial statements and hold an AGM. However, the undertaking was not honoured, and CIPC issued a formal compliance notice to the company. The company failed to comply with the compliance notice.
It is an offence under the Companies Act to fail to comply with a compliance notice issued by CIPC, and CIPC may either (1) apply to a Court for the imposition of an administrative fine, or (2) lay a criminal complaint with SAPS. In this matter, CIPC followed the latter route.
The company had no defence, and entered into a sentence agreement. The agreed sentence was a fine of R40 000, of which R15 000 was suspended for five years on condition that the company is not convicted of contravening any of the provisions of the Companies Act during the period of suspension.
The directors (and their shareholder ‘backers’) were now at a distinct disadvantage. They could be liable to compensate the company for the fine (and legal costs), and any repeat offence could lead to them being declared delinquent.