Goldfields v Harmony : a lost opportunity to clarify Section 145 of the Companies Act

Abstract

Two fiercely debated issues arose in the recent and as yet unreported decisions in the case of Gold Fields Limited v Harmony Gold Mining Company Limited (WLD Case 04/27304 judgment of Goldblatt J handed down on 11 November 2004 (hereafter Goldfields (HC)) and SCA case 559/04 judgment of Nugent JA handed down on 26 November 2004 (hereafter Goldfields (SCA)). The two courts involved in the case—the Witwatersrand Local Division of the High Court and the Supreme Court of Appeal—were faced with two issues: (i) whether the taking up of shares in exchange for other shares fell within the meaning of the term ‘subscription’ in s 145 of the Companies Act 61 of 1973 (‘the Act’), or whether this term is confined to the taking up of shares for cash only; and (ii) whether an offer by company A made to the shareholders of company B to acquire their shares in company B in exchange for shares in company A (in order to achieve a merger) would constitute an ‘offer to the public’ as defined in s 142 of the Act. Section 142 states that an ‘offer to the public’ means ‘any offer to the public and include[s] an offer of shares to any section of the public, whether selected as members or debenture-holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.’ If the offer constitutes an ‘offer to the public for the subscription of shares’, as contemplated by s 145 of the Act, a prospectus is required. (Section 145 states that ‘no person shall make any offer to the public for the subscription for shares unless it is accompanied by a prospectus’.)