With several other regulators closing in on it, Moneyweb has established that the Companies Tribunal has given South African Airways (SAA) a six-month extension for holding its annual general meeting (AGM).
This was done despite the fact that the tribunal found that the application was defective.
The extension will lapse at the end of October.
The Companies and Intellectual Property Commission (CIPC) responded to questions from Moneyweb, saying it had engaged SAA about its failure to submit annual financial statements for 2014/15.
These are still outstanding and those for 2015/16 have likewise not been finalised. SAA needs a further government guarantee – additional to the R14.5 billion of government guarantees already issued in support of the national carrier – to preserve its going concern status.
In December SAA applied for a further R4.5 billion guarantee, but finance minister Pravin Gordhan has indicated that he would only consider it after the appointment of a new SAA board. The board has however not yet been replaced, despite numerous calls for this – particularly board chairperson Dudu Myeni, who is seen to be close to President Jacob Zuma.
The CIPC said it advised SAA to consult the Companies Tribunal “as the authority with the mandate in this regard.”
In a tribunal decision dated June 6 2016 and signed by tribunal member Professor P.A. Delport, it is stated that SAA last held its AGM on January 30 2015. The audited financial statements have to be tabled at the AGM.
In terms of the Companies Act, the next AGM was supposed to take place within 15 months of that date, which means on April 30 2016 at the latest.
SAA company secretary Ruth Nambi Kibuuka applied on behalf of the company for an extension, stating in an affidavit that “at the finalisation of the applicant’s financial statements for the financial year ending 31 March 2015, it appeared that the liquidity and solvency of the applicant was such that it could not comply with the requirements of a going concern for the ensuing 12 months without a guarantee provided by the shareholder (National Treasury obo the SA government).”
According to Kibuuka, the shareholder advised SAA to delay the AGM until the annual financial statements (AFS) had been finalised.
The tribunal concludes: “This seems like a ‘chicken and egg’ situation, in that the shareholder recommends an extension for the holding of the AGM, due to the AFS not being finalised due to the lack of action by the shareholder in providing a guarantee.”
The tribunal states that the Companies Act gives it discretion to grant a public company an extension for holding an AGM “on good cause shown”.
It then points out several deficiencies in the application, including a lack of evidence that the SAA board authorised the application and that the application does not state the length of the extension applied for.
The tribunal then states: “Section 61 (8) of the Act requires that the audited financial statements must be presented at the AGM. If such statements are not available – under the circumstances as in this case where the non-availability of the AFS is not due to, exclusively, the fault of the company, it may be categorised as ‘good cause’.”
The tribunal then finds that despite the deficiencies in the application, the company has only one shareholder and the AGM is for the benefit of the shareholder.
“It would serve no purpose, even in light of the serious deficiencies, to refuse the application. It is also noted in favour of the applicant that the application was brought before the 15-month period elapsed.”
On this basis the tribunal ordered a six-month extension from 30 April 2016.
The CIPC warned that directors of companies who continue to ignore the requirement to file audited financial statements to the CIPC are contravening the Companies Act. “Any continued non-compliance can trigger a formal investigation by the commission which can lead to the issuance of a compliance notice and other actions which can be imposed in collaboration with other regulators.”
SAA said in a statement on Friday that there are “extensive, on-going engagements” on the matter of the going concern guarantee.
It denied facing liquidation or any need to be placed under business rescue, stating “the airline is able to and continues to pay its debts as and when they become due and payable.
“The airline has neither defaulted nor been unable to meet its obligations to service its debts.”
SAA states that it is highly unlikely that there will be service interruptions in September and October on any of its routes. This follows reports that the Hong Kong companies regulator is turning the screws on SAA for its failure to submit annual financial statements.
It said it is engaging the shareholder on financial assurances required by the local and international licensing authorities before the end of September.
In an apparent reference to the resignation of board member Kwinana and calls for the appointment of a new board, SAA said: “The airline would also like to reiterate that SAA board members do not appoint themselves. Board members serve at the invitation of the shareholder representative. It follows that any board rotations and/or new appointments to serve, is a prerogative of the shareholder representative.”
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