ENTREPRENEURIAL LAW

LWELA2-B11

Eduvos (Pty) Ltd (formerly Pearson Institute of Higher Education) is registered with the Department of Higher Education and Training as a private higher education institution under the
Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008
 Learning Objectives
• Discuss what is meant by ‘the decriminalisation of company
law by the 2008 Companies Act’.
• Identify, distinguish and discuss the broad categories under
which civil remedies fall in terms of the 2008 Companies Act.
• Identify and distinguish the basic alternatives for addressing
complaints regarding alleged contraventions of the Act or for
the enforcement of rights.

• Explain the concept ‘Alternative Dispute Resolution’.

• Identify the different bodies/agencies responsible for the
enforcement of the Act and discuss the functions of each.

• Apply the principles to a set of facts.

 What will be covered
in today’s lesson?
Remedies,
enforcement agencies DECRIMINALISING COMPANY LAW

and alternative dispute

resolution REMEDIES AGAINST DIRECTORS WHO
HAVE ABUSED THEIR POSITIONS

STATUTORY REMEDIES OF DIRECTORS

Decriminalising company law
• The previous 1973 Act provided for criminal sanctions as means of
ensuring compliance with its provisions
• Criminal sanctions found to be an inadequate deterrent if not enforced
• Current Act provides for effective private law remedies to discourage
gross mismanagement and abuse of power
Non-criminal (civil) remedies fall under three broad categories:
1. remedies where there has been an abuse of the position of director or
prescribed officer;
2. remedies given to shareholders to protect their own rights; and
3. remedies where there has been an abuse of the separate juristic
personality of a company.
• These remedies assists with the upholding the enforcement of
stakeholders rights
• The 2008 Act decriminalized company law where possible = reduces use
of criminal law and provides for non criminal law to ensure compliance
with the Act and protection of the rights of stakeholders
Decriminalising company law

• The 2008 Act gives many remedies and rights to stakeholders like
the employees, trade unions representing employees, minority
shareholders, and directors and shareholders who feel that they
are oppressed. These are rights they didn’t have in the old Act.
• The Act now provides for
1. the common-law duties of directors (the fiduciary duty and
the duty of care, diligence and skill)
2. provisions that ensure compliance with the provisions of the
Act through making directors and others personally liable for
losses, damages and costs of the company under a variety of
circumstances
• There is thus a fundamental shift in holding directors and others
statutorily responsible and accountable.
Decriminalising company law

Criminal
sanctions still
exist for certain
matters

Ie. Ito s 26 of the

2008 Act, it is an • Similarly, ito s214, if any financial
offence to fail to statement of a company is false or
provide access misleading, any person who is a
to any record party to the preparation, approval
that a person or publication of that statement is
has a right to guilty of an offence.
inspect or copy.
Decriminalising company law
• The non-criminal measures that seek to ensure compliance with the
provisions of the Act, or that aim to protect the rights of shareholders
include the following:
1. The Commission can issue compliance notices to companies or to
other persons in certain situations – for example, if the Commission
believes that such company or person has contravened the Act.
2. The Commission can levy an administrative fine in certain
circumstances.
3. Application can be made for a court order to ensure compliance in
certain circumstances.
4. Application can be made to declare a director delinquent or under
probation.
5. Defaulting directors and certain other persons may be personally liable
in certain circumstances.
6. A number of provisions give rights to shareholders and other
stakeholders.
Abuse of position of director
or prescribed officer
The first category of non-criminal remedies concerns directors
who have blatantly abused their position.
• Ito s162, an application can be made to declare a director
delinquent or under probation. A court is empowered to
disqualify a delinquent director from serving as a director or
can place a director under probation.
• Ito s165, a shareholder is given a statutory right to bring
proceedings on behalf of a company where the company has
been prejudiced by acts of its controlling directors and where
the company has failed to take the necessary action to call
these directors to account.
• S77 provides for the personal liability of directors and
prescribed officers under a variety of different
circumstances.
• S218 also provides for personal liability of those people who
contravene the provisions of the Act resulting in loss or
damages to others.
Application to declare director delinquent or
under probation in terms of s162
• A court may, on application, declare a director to be a delinquent director or place a director
under probation.
• A director in this context includes a person who was a director of the company within two
years prior to the application.
• The persons who may bring the application include the company, a shareholder, a director,
a representative of the employees of the company, or the Commission.
• A person who has been placed under probation by the court must not serve as a director
except to the extent permitted by the order of probation and a person who has been
declared a delinquent is disqualified from being a director of any company.
• This disqualification can, for certain offences, be for life, or for minimum periods of seven
years in other cases.
• The Commission must establish and maintain a public register of persons who are subject to
an order declaring them to be delinquent or under probation
Delinquency
• The court is obliged to make an order declaring a person to be a delinquent director if one of
the statutory grounds is established.
1. consenting to act as director while ineligible or disqualified;
2. while under probation, acting as a director in a manner that contravenes the relevant
order; or
3. while a director, acting in a manner that amounts to gross negligence, wilful misconduct
or breach of trust.
A declaration of delinquency may be unconditional and for life, or it may be made subject to
any conditions the court considers appropriate, including limiting the declaration to apply to
only one or more particular category of company.
A conditional declaration of delinquency subsists for a period of seven years or a longer period
determined by the court
Probation
• A court may place a director under probation on the grounds set out in s 162(7).
1. acting in a manner materially inconsistent with the duties of a director; or
2. being present at a meeting and failing to vote against a resolution despite the
inability of the company to satisfy the solvency and liquidity test in circumstances
where this is required by the Companies Act, 2008
A declaration placing a person under probation may be made subject to any
conditions the court considers appropriate and subsists for a period determined by
the court not exceeding five years.
The court may also order that the director under probation must be supervised by a
mentor during the period of probation, or be limited to serving as a director of a private
company or of a company of which that person is the sole shareholder
Case study
• Can a shareholder act obo a
company to have a wrong
committed against it redressed
? Discuss in groups with ref to
Foss v Harbottle 1843 2 Hare
461.
The derivative action

• Under the common law, it was accepted that the company itself must act to
have a wrong committed against it redressed.
• This was decided in Foss v Harbottle. In that case, two minority shareholders
alleged that property of the company had been misapplied and wasted by the
directors and that various mortgages were given improperly over the
company’s property.
• The minority shareholders, acting as the plaintiffs in this case, asked that the
guilty parties (the directors of the company) be held accountable to the
company and that a receiver be appointed. The court dismissed the claim
and held that when a company is wronged by its directors, it is only the
company that has standing to sue – not shareholders of the company.
• In effect, the court established the proper plaintiff rule, which states that a
wrong done to the company may be vindicated by the company alone. The
company itself must be the plaintiff, and not shareholders of that company.
The derivative action

• Since persons in positions of power are unlikely to act against one another, it is
evident that a company will not act when wrongdoers dominate it. As a result, the
common law recognized that a company's shareholders may file a lawsuit on the
company's behalf under specific conditions. Because the member obtained the
right to file the case from the company's right, the action was known as a derivative
action.
• Derivative Action was allowed in the ff circumstances;
1. where the alleged act is ultra vires and illegal
2. alleged act could only have been validly done or sectioned, in violation of a
requirement in the articles by some members of the special majority.
3. alleged acts that cause invasion of the claimant’s personal and individual rights
in his capacity as a member of the company
4. fraud on minority has been committed by the majority who themselves control
the company
The derivative action
The common-law derivative action was unsatisfactory for a number of reasons:
1. The shareholder could personally incur substantial legal costs while
attempting to obtain a remedy for the company.
2. The plaintiff shareholder often had to launch the proceedings while the
required information was in the hands of the company and the
wrongdoers.
3. It was unclear as to precisely what conduct could or could not be ratified
by a simple majority, so the scope of the remedy was unclear. As stated in
Foss v Harbottle, the majority rule principle states that if the alleged
wrong can be confirmed or ratified by a simple majority of members in a
general meeting, then the court will not interfere with that transaction. In
other words, it was unclear that a plaintiff shareholder would succeed if a
simple majority of other shareholders had ratified the actions of the
directors.
4. Reported cases also failed to distinguish clearly between the derivative
action and a member instituting proceedings to enforce the member’s
individual rights (as opposed to the company’s rights)
The derivative action
ito s165
• a statutory derivative action ito s165 is a more certain
alternative to the common-law remedy.
• S165 provides that the persons who may use the
statutory derivative action are a shareholder, a
director (including a prescribed officer), a
representative of employees (normally a registered
trade union), or any other person with the leave
(permission) of the court.
• The remedy is typically available against an alleged
wrongdoer who is in control of the company.
 The derivative action ito s165
• The following five steps need to be taken to use the s 165 derivative action:
1. The first step is for the person wishing to pursue the derivative action to serve a demand on
the company requiring it to commence or continue legal proceedings to protect the
interests of the company.
2. Unless the company successfully applies to court to set aside the demand on the grounds
that it is frivolous, vexatious or without merit, the company must appoint an independent
and impartial person or committee to investigate the demand and to report to the board
especially on whether or not it appears to be in the best interests of the company to
institute or continue with legal proceedings.
3. Within 60 business days of receiving the demand, the company must either initiate or
continue legal proceedings, or must serve on the person who made the demand a notice
refusing to comply with the demand.
4. if a notice refusing to comply is served on the person who made the demand, that person
may then apply to court for leave to bring or continue proceedings on the company’s
behalf.
5. To grant such leave, the court must be satisfied that the company (in dealing with the
demand and the report) has failed to comply with the statutory requirements and that the
applicant for leave is acting in good faith, that the proceedings will involve the trial of a
matter of material consequence to the company and that it is in the best interests of the
company that leave be granted.
If the shareholders of a company have ratified or approved any particular conduct of the
company, this does not prevent a person from making a demand or applying for leave under s
165, but the court may take the ratification or approval into account in making any judgment or
order
NB! Derivative action should not abuse court process
Discussion
• Robert is the Managing Director of Abc (Pty) Ltd, Abc (Pty) Ltd’s main
business is construction. Abc (Pty) Ltd receives a tender from the SA
government to build a soccer stadium. Abc (Pty) Ltd cannot perform all that is
required in the construction deal but have to subcontract certain phases in
order complete the project. They are awarded the tender.
• Robert is a shareholder in another construction company called Sleezebuild.
Robert informs directors of Sleezebuild of the opportunity to contract with
Abc (Pty) Ltd. He provides Sleezebuild with copies of the quotations that are
submitted by other construction companies. Sleezebuild submits a quote
just below the lowest quotation. Sleezebuild is awarded the subcontract and
the company makes a R250 million rand profit from the deal. At no time did
Robert disclose his shareholding in Sleezeball to Abc (Pty) Ltd.
• As a result of this profit, Sleezebuild declares a dividend. Robert receives a
payment of R10 million in a form of a dividend. Abc (Pty) Ltd finds out about
the dividend received by Robert.
1. can the company have Robert declared delinquent or placed under
probation?
feedback
• Robert can be declared a delinquent according to section
162 5 (c)(ii) of the companies Act because he took personal
advantage of information and an opportunity contrary to
section 76(2)(a) and after which he made a profit.
• His non-disclosure of the financial interests that he has in
Sleezebuild means that he can be declared to be a
delinquent. Delinquency because Robert made use of
personal information to his advantage as a result of him
being a director or in alternative because he breached duty
of trust
• Company can apply for an order of delinquency because he
meets the requirements of being a director and Robert
shared the information about the tender to the company that
he was a shareholder of
Remedies available to shareholders to protect
their own rights
• The second category concerns remedies
available to shareholders to protect their
own rights where shareholders are the
victims of oppressive or prejudicial
conduct by the company or a related
person.
• S163 offers relief from oppressive or
prejudicial conduct
• s161 allows for an application to protect
the rights of securities holders, and s164
provides for dissenting shareholders’
appraisal rights
Statutory remedies for shareholders
Relief from oppressive or prejudicial conduct in terms of s 163
Section 252 of the Companies Act, 1973 aimed at providing a statutory remedy to
minority shareholders who were the victims of oppressive conduct by the majority in
their control of the company and the section is now refined in s163 of the Company’s
Act 2008 which applies to both directors and shareholders
The applicant must establish that an act or omission of the company (or a related
person - one who directly or indirectly controls the company ) has had a result that is
oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the
applicant.
Alternatively, the applicant must establish that the business of the company or a
related person is being or has been conducted in a manner that is oppressive or
unfairly prejudicial to, or that unfairly disregards, the interests of the applicant
NB! the applicant does not need to show that the oppressive conduct was that of the
company – for example, through a resolution of a general meeting or of the board of
directors. An act, omission or course of dealing by the person controlling the company
may also provide the basis of the oppressive conduct complained of.
Statutory remedies for
shareholders
• Section 163(1)(c) provides a new ground for relief, which is
when a director, prescribed officer, or other connected party
exercises or has exercised their authority in a way that
oppresses, unfairly prejudices, or disregarded the applicant's
interests.
• This defense is most likely to be invoked when a managing
director, executive director, or other person in charge of the
business abuses their authority and it would be difficult or
unnecessary to demonstrate that the director's actions were
company actions.
• Under s163 of the 2008 Act, the court may make an order if one
of the grounds is proved and if it is just and equitable to do so
Statutory remedies for
shareholders
• Section 163(2) a detailed description of the type of relief that the court
may give,
1. It could be in the form of interim or final relief, including an order
restraining the conduct complained of.
2. An order regulating the company’s affairs can direct the company
to amend its memorandum or create or amend a shareholders’
agreement or
3. The court may appoint replacement or additional directors or
declare any person delinquent or under probation.
4. The court may also order the varying or setting aside of a
transaction to which the company is a party and compensation for
the company or any other party to the transaction or agreement.
5. The court may also direct the rectification of the registers or
records of the company.
Statutory remedies for shareholders
Dissenting shareholders’ appraisal rights in terms of s 164
Under the 1973 Act, if a company had different classes of shares and it
decided to vary class rights attaching to these shares, s102 permitted
dissenting shareholders, who were aggrieved by the decision, to apply to court
for relief under s252, which could include the purchase by the company of
their shares.
little success was achieved with this remedy, but its existence discouraged
abuse of power by controlling shareholders in the context of the variation of
class rights
2008 Act introduced s164 which is an independent remedy for dissenting
shareholders. The new statutory remedy is referred to as a dissenting shareholder’s
appraisal right – that is, the right of a dissenting shareholder to require the
company to pay it the fair value of its shares in exchange for the shares in certain
circumstances.
Statutory remedies for shareholders
• The purpose of s164 is to provide minority shareholders with a means of
protection against certain actions of majority shareholders, rather than against
actions of the directors.
four situations are covered by s164
1. The remedy is firstly available to shareholders who consider themselves
aggrieved through the company adopting a special resolution to amend its
Memorandum of Incorporation (MOI) by altering the preferences, rights or other
terms of any class of its shares in a manner that is materially adverse to the rights or
interests of the holders of that class of shares
2. Where a company is considering adopting a resolution to dispose of all or
greater part of its assets or undertaking (in terms of s 112 of the Companies Act,
2008
3. Where a company is considering, or an amalgamation or merger (in terms of s
113)
4. Where a company is considering or a scheme of arrangement (in terms of s 114).
NB! s164 does not apply to a transaction, agreement or offer pursuant to a business
rescue plan
 Statutory remedies for
shareholders
Exercising the dissenting shareholders’ appraisal rights in terms of s 164 requires the following
five-step procedure:
1. A dissenting shareholder who wishes to have the option of exercising the appraisal rights
conferred by s 164 must notify the company in writing of that shareholder’s opposition before
the relevant resolution is put to the vote.
2. If the resolution is passed, the shareholder, in order to exercise the appraisal rights, must
demand payment of the fair value of the shares from the company.
3. The fair value must, in the first instance, be determined by the company, because all dissenting
shareholders of the same class are entitled to the same amount per share.
4. Dissenting shareholders who do not accept the company’s offer can either allow the offer to
lapse, in which case they will be reinstated to full rights as shareholders (as now changed), or
they can apply to court for the court to determine the fair value.
• Once again, the shareholders can choose between surrendering their shares for the amount determined
by the court, or withdrawing their respective demands, if they regard the fair value determined by the
court as unacceptable. In other words, shareholders either surrender their shares or they accept the
changes that have been made. The value determined by the court does not apply to dissenting
shareholders who accepted the company’s original determination of the fair value
 Statutory remedies for shareholders
Pertinent point ito s164 procedure
• The dissenting shareholder has the right to require the company to acquire the shareholder’s shares at their fair value at the time immediately
before the company adopted the resolution.
• A notification advising the shareholders of their appraisal rights under section 164 must be included in the notice when the firm calls a meeting
to adopt a resolution respecting one of the four scenarios covered by the provision.
• A shareholder wishing to exercise the appraisal rights must give written notice to the company of the objection at any time before the resolution
is put to the vote. The shareholder must also attend the meeting and vote against the resolution and comply with the procedural requirements of
s164
• If the resolution is adopted, the company must notify all shareholders who informed it of their objection within the prescribed period that the
company has adopted the resolution, unless they have withdrawn their objection or voted in support of the resolution – if you fail to vote you
lose appraisal rights
• shareholder wishing to exercise the appraisal rights must notify the company accordingly within 20 business days of receipt of the company’s
notification that the resolution was passed
• The company must respond to the demand by offering each of the shareholders who sent a demand an amount considered by the directors to
be the fair value of the shares, accompanied by a statement showing how the value was determined
• Every offer in respect of the same class or series of shares must be on the same terms. The offer lapses if not accepted within 30 business days.
If the company fails to make an offer, or if the shareholder regards the offer as inadequate, the shareholder may approach the court to
determine the fair value of the shares.
• All dissenting shareholders who have not accepted the offer must be joined as parties and are bound by the decision of the court.
• The court's decision must be made in a way that allows the shareholders who are in disagreement to either back down from their demands and
regain full shareholder rights or follow the procedures for giving up their shares and receiving from the business the fair market value that the
court has determined.
• The court may appoint one or more appraisers to assist it to determine the fair value
• The tendering of shares by a shareholder under s 164 and the payment by the company does not qualify as an acquisition of shares under s 48
or as a distribution, with the result that the solvency and liquidity test in s 4 does not apply but if payment by the company of the fair value would
result in the company being unable to pay its debts as they fall due in the ensuing 12 months, the company may apply to court for an order
varying the company’s obligations.
Additional remedy to protect rights of
securities holders in terms of s 161
• Section 161 of the Companies Act, 2008 provides
a remedy to protect the rights of the holders of
issued securities in addition to other remedies
under the 2008 Act or other remedies that they
may have in terms of the common law
• a holder of issued securities may apply to court for
A declaratory order on one's rights under the 2008
Act, the firm’s MOI, any company rules, or any
related debt instrument
• Alternatively, the holder of the securities can apply
for an appropriate order to protect those rights or
to rectify any harm done to the securities holder by
the company or by any of its directors
Questions
• What type of relief may a court order or grant
ito Section 163(2) ?
• The purpose of s164 is to provide minority
shareholders with a means of protection
against certain actions of majority
shareholders, what actions are these?
Any questions?
 What will be covered
in today’s lesson?
Week 5 LIABILITY FOR ABUSE OF
Lesson 2 SEPARATE JURISTIC
PERSONALITY OF A
COMPANY

ENFORCEMENT OF
RIGHTS AND
ENSURING
COMPLIANCE WITH
THE ACT
Abuse of the separate juristic personality of a
company
• The third category concerns the remedy that effectively allows for the
lifting of the corporate veil and the imposition of personal liability in
instances where there has been abuse of the separate juristic
personality of a company.
• This remedy always existed at common law in South Africa, and the
2008 Act specifically provides for this remedy in s20.
• In terms of s 20(9) of the 2008 Act, whenever a court finds that the
incorporation of, or any act by or on behalf of, or any use of, a company
constitutes an ‘unconscionable abuse’ of juristic personality of the
company as a separate entity, the court may declare that the company
is deemed not to be a juristic person in respect of any right, obligation or
liability of the company, or of a shareholder or member of the company,
or of another person as specified in the declaration.
• Consequently, the court may give any further order it considers
appropriate in order to give effect to such declaration.
Enforcement of rights and ensuring compliance
with the Act

• Offering remedies under the Companies Act, 2008 to shareholders and other stakeholders is fine, but it would
be useless if there was no way to actually exercise the remedies and decriminalisation of company law
requires alternative methods to ensure compliance with the Act.
• The body normally responsible for the enforcement of the Act is the Companies and Intellectual
Property Commission (the Commission), except as regards matters within the jurisdiction of the
Takeover Regulation Panel
• 2008 Act also establishes a Companies Tribunal, whose functions include the review of certain
decisions of the Commission
• the High Court remains the primary forum for resolving disputes regarding the interpretation and
enforcement of the Companies Act
Enforcement of rights and ensuring compliance
with the Act

• The 2008 Act outlines four fundamental options for handling complaints about purported
Act violations or for the enforcement of rights, whether those rights are guaranteed by the
Act, a company's MOI, or other regulations
1. ADR
2. Apply to Companies Tribunal for adjudication (only for matters the CA allows)
3. APPLY TO High Court for a court order
4. File a compliant with the CIPC = Commission after investigating the complaint issuing a
compliance notice
The Companies and Intellectual Property
Commission
• The Commission takes the place of the registrar of companies under the
1973 Act.
• In practice, even before the commencement of the 2008 Act, many of the
functions of the registrar had been taken over by the Companies and
Intellectual Property Registration Office (CIPRO) within the Department
of Trade and Industry.
• The Commission is an organ of state within the public administration.
• The Commission has jurisdiction throughout the Republic. It is
independent and must perform its functions impartially and in the most
costefficient and effective manner.
• The Commission is headed by a Commissioner appointed by the
Minister, who must also appoint a Deputy Commissioner
 The Companies and Intellectual Property
Commission
• Objectives and functions of the Commission
• monitoring proper compliance with the Act;
• receiving and promptly investigating complaints concerning contraventions of the Act;
• promoting the use of ADR by companies for resolving internal disputes;
• issuing and enforcing compliance notices;
• promoting the reliability of financial statements and making recommendations to the Financial Reporting
Standards Council 96 for improving financial reporting standards;
• establishing a companies’ register and any other register contemplated by the 2008 Act and making the
information in those registers available to the public;
• advising the Minister on changes to the law and administration of the 2008 Act in line with international best
practice;
• providing guidance to the public by issuing explanatory notices on procedures and non-binding opinions on the
interpretation of the Act;
• conducting research relating to its mandate and activities and publishing the results of that research
The Companies and Intellectual Property
Commission
Compliance notices
The Companies and Intellectual Property
Commission
• The formalities concerning compliance notices are contained in s171 of the Companies Act, 2008
1. A compliance notice may require the person to whom it is addressed to do any of the following:
i. cease, correct or reverse any action in contravention of the Act;
ii. take any action required by the Act;
iii. restore assets or their value to a company or any other person;
iv. provide a community service; or
v. take any other steps reasonably related to the contravention and designed to rectify its effect
2. the notice must set out the following:
i. the person or an association to whom the notice applies;
ii. the provision of the Act that has been contravened;
iii. details of the nature and extent of the non-compliance;
iv. any steps that are required to be taken and the period within which those steps must be taken; and
v. any penalty that may be imposed in terms of the Act if those steps are not taken.
The Companies and Intellectual Property
Commission
3. a compliance notice remains in force until any of the following occur:
i. it is set aside by the Tribunal, or by a court on a review of the notice; or
ii. the Commission issues a compliance certificate – such a certificate will be
issued if the requirements of the compliance notice have been satisfied
4. if a person to whom a compliance notice has been issued fails to comply
with the notice, the Commission may either:
apply to a court for the imposition of an administrative fine; or
refer the matter to the National Prosecuting Authority for prosecution as an
offence in terms of s 214(3) of the Companies Act, 2008.
Investigation of complaints by the
Commission
• The Commission plays a central role in the enforcement of the Companies Act, 2008.
• Any anyone may submit a written complaint to the Commission claiming that someone else has
behaved in a way that is against the Act or claiming that their rights under the Act, a company's
MOI, or guidelines have been violated.
• The Commission may also initiate complaints directly on its own motion or at the request of
another regulatory authority
• The Commission may respond to a complaint in one of three basic ways:
• 1. it may notify the complainant that it will not investigate a complaint that appears to be
frivolous, vexatious or without sufficient grounds;
• 2. it may recommend that the complainant resort to ADR; or
• 3. it may direct an inspector or investigator to investigate the complaint
Investigation of complaints by the
Commission
An investigator may be appointed by the Commissioner to assist the Commission in
carrying out an investigation, but such a person is not an inspector within the meaning
of the 2008 Act.

summons to a person, who is believed to be able to furnish information or documents

relevant to an investigation, to appear before the Commission or before an inspector
or independent investigator may be issued

judge of the High Court or a magistrate may issue a warrant for an inspector or police
officer to enter and search premises if, from information furnished on oath or
affirmation, there are reasonable grounds to believe that a contravention of the Act is
taking place on those premises
Investigation of complaints by the
Commission
• On receipt of the report of an inspector or independent investigator, the Commission has several options:
1. it may refer the complainant to the Companies Tribunal if the matter falls within its jurisdiction;
2. it may propose that the complainant and any affected party meet with the Commission or the Tribunal, with a view to
resolving the matter by consent order;
3. it may commence court proceedings in the name of the complainant;
4. it may refer the matter to the National Prosecuting Authority or other regulatory authority;
5. it may issue a compliance notice; or
6. it may in effect decide to take no action, by issuing the complainant with a notice of non-referral, while simultaneously
advising the complainant of any rights that it may have to seek a remedy in court. In this event, the complainant may
apply to court for leave to refer the matter directly to court. The court may grant leave only if it appears that the applicant
has no other remedy under the Act. If leave is granted, the court after hearing the matter may direct the Commission to
issue an appropriate compliance notice
• The Commission may in its sole discretion publish the report of the inspector or independent investigator. Irrespective of
whether it publishes the report, it must deliver a copy to the complainant and to any person who was the subject of the
investigation
The Companies Tribunal
• The provisions of the Companies Act, 2008 regarding the
establishment and functions of the Companies Tribunal
are to some extent based on the corresponding
provisions of the Competition Act relating to the
Competition Tribunal
• The three main tasks of the Tribunal are:
1. to adjudicate in relation to any application that may be
made to it in terms of the Act;
2. to assist in the resolution of disputes as contemplated in
the ADR provisions of the Act, discussed below; and
3. to perform any other function that may be assigned to it
in terms of the Act.
 • Alternatively, an applicant or complainant may submit a problem to the
Companies Tribunal or to an accredited body for settlement through
mediation, conciliation, or arbitration instead of filing a complaint with
the Commission or applying to court.
• If the Tribunal or accredited entity to whom a matter has been

Voluntary referred for ADR concludes that either party to the conciliation,
mediation or arbitration is not participating in good faith or there is no

resolution of
reasonable probability of the parties resolving their dispute through
that process, it must issue a certificate in the prescribed form stating
that the process has failed.
disputes • For purposes of the 2008 Act alternative dispute resolution (ADR), is
restricted to the following three alternatives to court proceedings:
• 1. mediation;
• 2. conciliation; and
• 3. arbitration
Voluntary resolution of disputes
Conciliation/Mediation
Through the processes of conciliation and mediation, the disputing
parties enlist the help of a third party to mediate talks between them
in the hopes of reaching a negotiated settlement. The parties cannot
be forced to accept a solution by the conciliator or mediator; rather,
any suggested resolution will only become legally binding upon the
parties' acceptance.
Arbitration
In arbitration, the parties submit arguments and supporting documentation
to the arbiter and mutually consent in advance to recognize the arbitrator's
decision as final and enforceable. An arbitrator's decision cannot be
appealed to the court; but, the court may examine the decision under
certain circumstances, particularly in cases where there was a significant
procedural error or an overabundance of jurisdiction.
Use of the ADR process by the complainant or applicant is voluntary
the other party must also agree to the use of the process 135 and that
neither the Tribunal nor the accredited entity has compulsory
jurisdiction under s 166
An order may be recorded by the Tribunal or other recognized body that
has assisted the parties in resolving a dispute or resolved it through a
voluntary ADR process. The Tribunal or other organization may submit the
order to the court for confirmation as a consent order under the court's
rules if the parties agree to it.
Activity

What are the four fundamental options for handling complaints

about purported Act violations or for the enforcement of rights ?

What is a compliance notice?

What must be in a compliance notice?

What is ADR for purposes of the Companies Act 2008

Differentiate between Mediation, conciliation and Arbitration.

What Happens Next?

• Other types of Businesses