No, this is serious.
We have a name
Firstly there seemed to be liquidators who were appointed by the court to look at the assets of Edwafin. Forgive me, but the lady who told me spoke at 157 miles per hour so I missed one of the names as well as some of the other stuff she told me. We all accept that he is important in this matter and will discover his name soon enough. The other is Mr Eugene Nel (I think she said of Ber(r)inger Inc.). I have his addresses and phone number but would first like to get his permission to share it with you. I tried to look them up on the Internet, but Beringer seems a name closely associated with wine and underwear, so I suppose I didn't find it.
Quack Quack
Other news is that I received an urgent message from one of our co-investors telling me that all the remaining Edwafin staff has been moved to the DMC factory in Pietermaritzburg. Of course there is currently a lot of space in the factory now, since it seemed to be nothing more than an empty shell. Now why would old father Patrick waddle his chicks over to PM? Since I have made a new friend in Pietermaritzburg I'm all for the place but surely DMC is a subsidiary of Edwafin, and Edwafin is under provisional liquidation. Huh? Should anybody still be Edwafin at all? Sniff-sniff, there is a slight tinge in the air.
In my search for Mr Nel, I found an interesting article. yes, it states a price of R25.00, but because you take the trouble of reading this blog, I'll give it to you free. This is an extract (Eric Levenstein: AIPSA NEWS, March 2008) The complete newsletter is found here:
PERSONAL LIABILITIES OF DIRECTORSShall we dance?
The personal liability of directors is becoming an emotive and important issue for directors sitting on boards in South Africa. The topic has gained momentum amid talk of a new King Report (the third version, King 3 ), amendments to the Companies Act and general concerns
on the part of directors concerned with incurring personal liability. The prestige of holding numerous non-executive directorships is being overshadowed by the increased personal vulnerability to which it exposes directors, particularly those who lack the requisite experience or time to fulfil their fiduciary obligations to companies on whose boards they sit.
Two recent decisions have shed light on the meaning of incurring personal liability as a director in terms of section 424(1) of the Companies Act No 61 of 1973 (as amended). Before considering the recent developments in South Africa s case law, however, it is necessary to consider the scope of section 424(1) and its application. Section 424(1) of the Companies Act reads as follows -
'When it appears, whether it be in a winding-up, judicial management or otherwise, that any business of the company was or is being carried on recklessly or with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the Court may, on the application of the Master, the liquidator, the judicial manager, any creditor or member or contributory of the company, declare that any person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct'.
The intention of this section is to penalise any person who fraudulently or recklessly carries on or manages the business of a company with the intention to defraud creditors of the company. By recklessness , our courts have intended gross negligence with or without consciousness of risktaking. Our courts are, however, guided by the principle that a court should not lightly find recklessness. This principle was established in 1998 in Philotex (Pty) Limited and Others v Snyman and Others and Braitex (Pty) Limited and Others v Snyman and Others.
LATEST CASES - DIRECTORS PERSONAL LIABILITY
From a litigation perspective, the onus is on the plaintiff alleging fraud or recklessness in civil proceedings to prove such fraud or recklessness on a balance of probabilities.
Guidance has been given to our courts through the development of tests to establish recklessness. In 1992, Ozinsky NO v Lloyd and Others formulated the following test:
'If a company continues to carry on business and to incur debt when, in the opinion of reasonable businessmen, standing in the shoes of the directors, there would be no reasonable prospect of the creditors receiving payment when due, it will in general be a proper inference that the business is being carried on recklessly'.
The Philotex decision in 1998 refined the application of the recklessness test by signalling to the courts to have regard to, inter alia, the following factors: the scope of operations of the company, the role, functions and powers of the directors, the amount of the debts, the extent of the company s financial difficulties and the prospects, if any, of recovery .
Eric Levenstein
Posts
