In terms of section 7 of the Companies Act, No. 71 of 2008, as amended (“Companies Act“), one of the purposes of the Companies Act is to promote the South African economy by encouraging entrepreneurship. There are many thriving companies in South Africa started by ingenious entrepreneurs. These entrepreneurs are, by default or design, mostly sole shareholders and sole directors of these companies. Decision making in respect of these companies is centralised in one person who is a sole shareholder and a sole director. If not managed properly, the death of that person may cause serious business continuity risk to companies and negatively affect the estate of the deceased and the funders and suppliers of the company.

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On 22 August 2019, the High Court of South Africa, North West Division, Mahikeng (“High Court“) declared to be unlawful an acknowledgement of debt (“AOD“) between friends of some 18  years relating to a capital amount of R 831 000 lent and advanced between them. When the lender friend enforced the AOD in the High Court, the borrower friend dispensed with the friendship niceties and successfully argued that the AOD was unlawful for failure by the lender friend to register as a credit provider as required in terms of the National Credit Act, No. 34 of 2005, as amended (“NCA“).

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The High Court of England and Wales recently decided that a director of a company who disagrees with his or her fellow directors (dissenting director) in the governance of a company must always observe his fiduciary duties and not publicly engage in “freelance activity” or engage in “renegade actions” outside the board of directors which may hinder the management of the business of the company.

What happened?

On 15 February 2019 judgment was handed down in the case of Stobart Group Limited v William Andrew Tinkler [2019] EWHC 258 (Comm), (“Stobart Group Judgment“). Stobart Group Limited (“Stobart Group“) is an infrastructure services company registered in Guernsey whose securities are listed on the London Securities Exchange. Mr William Andrew Tinkler (“Tinkler“) was the founder and CEO of Stobart Group for some ten years. He was also one of the major shareholders. He later resigned as the CEO and became an executive director.

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Trustees for the Time Being of the Oregon Trust v BEADICA 231 CC and Others

On 28 March 2019, the Supreme Court of Appeal of South Africa (“SCA”) handed down a seminal decision in Trustees for the Time Being of the Oregon Trust v BEADICA 231 CC and Others (“Oregon Trust Decision”) relating to the impact of The Constitution of the Republic of South Africa (“Constitution”) on the law of contract.

Why is this decision important?

In 2016, Judge Malcolm Wallis (currently a Judge of the Supreme Court of Appeal of South Africa) said, in a private speech, “There is a view abroad, among both academics and legal practitioners, that certain decisions by the Constitutional Court of South Africa  impacting commercial life of the country have introduced uncertainty in our commercial law.” He sounded a warning that the effect of such uncertainty will be to drive commercial litigation away from the Courts into arbitral forums that are seen as more predictable in their outcomes and therefore deprive the country the much-needed constitutional-contractual law jurisprudence.

Since then, academics, sitting and retired Judges have written extensively on the impact of the Constitution on the law of contract. Whilst the SCA have been trenchantly criticised for its conservatism and reticence to infuse contract law with the principles in the Constitution, The Constitutional Court of South Africa (“Constitutional Court“) have been criticised for introducing uncertainty in the law of contract.

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