What is the right point in time to appoint a proxy? The effect of the recent SCA judgement of Richard du Plessis Barry v Clearwater Estate NPC 2017 (3) SA 364 (SCA).

Posted on: June 28th, 2019 by Talia Cullinan

S58(1) of the Companies Act no. 71 of 2008 (the “Act”) grants shareholders the right to be represented by proxy either at a shareholders meeting or to give or withhold consent where shareholders act other than at a meeting (s60 of the Act). This is an important right, especially where a company’s shareholders are disbursed, as it provides a practical solution to shareholders not being able to personally attend meetings.

S58(1) of the Act states that the right may be exercised “at any time”. Furthermore, s58(3)(c) of the Act states that a copy of the instrument appointing the proxy must be delivered to the company before the proxy exercises any rights of the shareholders. The period within which such appointment and delivery of the appointing instrument must be made, has recently been considered by the Supreme Court of Appeal in Richard du Plessis Barry v Clearwater Estate NPC 2017 (3) SA 364 (SCA).

The SCA considered whether the articles in the company’s Memorandum of Incorporation (“MOI”) can validly require instruments appointing proxies to be delivered within a specific time period of the shareholders meeting (in this case, it was 48 hours).

In its reasoning, the SCA confirmed that s58(1) of the Act is an unalterable provision. An unalterable provision, as defined in s1 of the Act, means a provision of the Act which cannot be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by the company’s MOI or rules.

Accordingly, and in considering the plain wording of ss58(1) (“at any time”) read with the plain wording of ss58(3)(c) (“before” ) with due regard to these sections’ context and purpose, the SCA held that such articles in the MOI are inconsistent with the provisions of s58(1). The articles were rendered void in terms of s15(1) of the Act.

The judgment introduces practical difficulties, which the SCA considered and agreed to be valid concerns. V Madlela expands on this in his article “The Appointment Of A Proxy ‘At Any Time’ in terms of Section 58 of the Companies Act 71 Of 2008: Richard Du Plessis Barry V Clearwater Estate NPC (2017) ZASCA” PER/PELJ 2019(22) – DOI http://dx.doi.org/10.17159/1727- 3781/2019/v22i0a4401. In short, it creates the opportunity whereby a large number of proxies could be submitted a few moments before the shareholders’ meeting. In turn this may cause undue delays, inconveniences or disruptions of such meetings, especially since s63(1)(b) requires that the presiding chairperson verify and validate the proxies before they are able to participate at a meeting.

The SCA submitted that the practical challenge be appropriately addressed by the legislature. Until such time however, the precedent now stands that should a company’s MOI include such restrictive and limiting periods when appointing a proxy, it shall be void.

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