THE COMPANIES TRIBUNAL: A LIFELINE FOR SMMES
Gary Warne | Legal Services Manager
In a significant move towards enhancing the landscape of corporate dispute resolution in South Africa, the Companies Amendment Bill of 2021 (“the Bill”) places the Companies Tribunal at the forefront of adjudicating conflicts involving small to medium-sized enterprises (SMMEs).
This strategic shift aims to provide an accessible, efficient, and cost-effective alternative to traditional court proceedings, ensuring that the country’s private companies and close corporations have a reliable forum for resolving their disputes.
Judge Dennis Davis, Chairman of the Companies Tribunal, emphasizes the need to build trust in the Tribunal’s capabilities, equating its potential efficacy to that of private arbitration bodies.
RATIONAL BEHIND THE ESTABLISHMENT OF THE TRIBUNAL
The Tribunal was established in terms of the 2008 Companies Act (“the Act”) with the purpose of having a public body outside of the courts that would be empowered to deal with disputes arising from the Act.
The main focus is on small to medium-sized enterprises, of which SA has approximately 400 000 private companies and 1 600 000 close corporations.
Many such entities cannot afford to retain the services of attorneys or to litigate before the courts.
A second reason for the establishment of the Tribunal was that disputes as between companies can be resolved by way of arbitration outside of the courts, akin to the Competition Tribunal.
In terms of the Bill, which is currently before parliament, apart from the courts, disputes within the Act are only to be dealt with by the Tribunal.
Judge Davis said that in order for the Tribunal to be effective there has to be engagement with law firms whereby they are informed that if they wish to arbitrate on any company dispute that same has to be done via the Tribunal. This includes instilling trust in the process so that firms have confidence that the Tribunal is competent to deal with complex commercial arbitrations.
Judge Davis further stated that one of his plans is to ensure that the capacity of the Tribunal is extended to include a number of retired judges with the necessary experience so that the services offered by the Tribunal are of the highest standard.
The notion of private arbitrating bodies making huge sums of money and seeking to arbitrate companies’ disputes are a thing of the past, however the Tribunal has to be able to provide the same quality of adjudication as has been expected in the private process.
TYPES OF DISPUTES TO BE ADJUDICATED UPON BY THE TRIBUNAL
Due to the limited mandate given to the Tribunal in terms of the Act, the Tribunal has been inundated with naming disputes.
There are significant issues now where companies aren’t, for example, constituting their social ethics committees on time or not conducting their AGMs in time.
An example of same is the recent ex parte application by The Mount Edgecombe Country Club Estate where it applied for an exemption from the requirement to appoint a Social and Ethics Committee (“SEC”) in terms of section 72(5)(b) as read with section 76(6) of the Companies Act. The Tribunal found that based on the nature and extent of the Applicant’s activities that it is not reasonably necessary to appoint a SEC. It was also considered that the Applicant had previously obtained an exemption and that its circustamces had not changed since such exemption was granted. Accordingly the exemption was granted for a period of 5 years.
An area which requires expansion is dealing with the disputes of directors. Currently the Tribunal is only able to deal with directors’ disputes of small companies i.e 2 to 3 directors.
An example is the recent application by a director of a private company, Mthokozisi (Pty) Ltd who sought to have her fellow director removed. The application by Ms Mbutuma (director) was launched in terms of section 71(8)(b) of the Companies Act whereby she sought an Administrative Order determining the removal of the Respondent as a director of Mthokozisi (Pty) Ltd. The main consideration was whether the Respondent had neglected or been derelict in the performance of his duties as a director of the company. The application was dismissed by the Tribunal on the basis that insufficient evidence was put before it to prove that the Respondent had neglicted his duties as a director of the company.
For further information regarding the functions of the Companies Tribunal as well as recent decisions handed down please refer to the Tribunal’s website https://www.companiestribunal.org.za
BENEFITS OF ARBITRATION VIA THE TRIBUNAL VS PRIVATE ARBITRATION
The Tribunal publishes its decisions on their website so companies have a good idea of how to bring their dispute applications and also provides them with an understanding of how the Tribunal arrives at a particular decision. This is not the case with private arbitration.
Ideally the Tribunal wants to see that all small firms which cannot afford the services of attorneys can approach the Tribunal and get a fair deal.
IN SUMMARY
Small and medium-sized enterprises which cannot afford legal representation or costly protracted litigation can benefit from having disputes between them being referred to and being adjudicated upon by the Companies Tribunal in a cheaper and quicker manner.
By engaging with law firms and expanding its capacity with experienced retired judges, the Tribunal is poised to become a cornerstone of corporate dispute resolution in South Africa. This evolution not only promises to alleviate the burden on the courts but also to provide SMEs with the high-quality adjudication they deserve, fostering a more equitable and efficient business environment.