It is important to note that unalterable provisions pitch the MoI vs the Companies Act. The latter will always prevail over provisions of the company’s MOI. What are the alterable provisions?
Cliffe Dekker Hofmeyr (“CDH”) noted that “proxy appointments are a critical tool to ensuring that meetings proceed and decisions are made, where shareholders/members cannot personally attend. Chairpersons will, however, need to be prepared for the appointment of proxies on the day of meetings, and not receiving advance warning of proxy appointments. Ensuring that sufficient administrative assistance to receive and verify proxies at a meeting will need to be provided for.”
Companies need to be cognisant of the unalterable provisions of the Companies Act in order to safeguard compliance with it.
Unalterable provisions
Section 1 of the Companies Act 71 of 2008 (“the Companies Act”) differentiates between alterable and unalterable provisions and defines “unalterable provisions” as a provision that “does not expressly contemplate that its effect on any particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by a company’s memorandum of incorporation”. Clearly pitching the MoI vs the Companies Act.
This principle lies at the heart of Supreme Court finding in the Barry v Clearwater Estates NPC & Others 2017 (3) SA 364 (SCA).
In short, it was contended that proxy forms submitted by shareholders on the day of the meeting were invalid and therefore that the necessary quorum had not been met. The board proposed that in order to now meet the quorum requirements, it would vote on condoning the late filing of the proxies.
CM Attorneys (“CMA”) in their article noted that “it was contended that the articles found in the MOI relating to proxies were in contravention of the Companies Act in that section 58(1) of the Companies Act states that: ”at any time, a shareholder of a company may appoint any individual, including an individual who is not a shareholder of that company …” The requirement in the MoI that any proxy be delivered not less than 48 hours before the meeting was therefore null and void.”
The court found that although section 58(3)(c) is an alterable provision while 58(1) is not, the plain wording of sections 58(1)(a) and 58(3)(c) read together is that a shareholder may appoint a proxy at any time provided that a proxy delivers a copy of the instrument appointing the proxy before the proxy may exercise any of the rights of the shareholder at the meeting.
CDH notes that the SCA acknowledged that this interpretation may impose a significant practical administrative burden on organisations, in particular those with large numbers of shareholders or members, as with no cut-off for proxy appointments, appointments (and the resulting necessary validations prior to quorum and voting) may be made shortly before or at meetings.