Gardner v Margo : a misapplication of section 38 of the Companies Act
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Date
Authors
Cassim, Rehana
Cassim, Maleka Femida
Journal Title
Journal ISSN
Volume Title
Publisher
Juta Law
Abstract
The notorious prohibition against the giving of financial assistance for the
shares of a company contained in s 38 of the Companies Act 61 of 1973 arose
yet again in the recent Supreme Court of Appeal case of Gardner & another v
Margo 2006 (6) SA 33 (SCA), in a judgment handed down by Van Heerden
JA. One of the issues before the court was whether a guarantee given by a
company in respect of a sale of the shares of that company was a
contravention of s 38. The court ruled that the guarantee given by the
company had not constituted financial assistance. On a proper application of
the principles laid down in Gradwell (Pty) Ltd v Rostra Printers Ltd 1959 (4) SA
419 (A) and Lipschitz NO v UDC Bank Ltd 1979 (1) SA 789 (A), it appears
that the court may have misapplied the established legal principles. Had it not
done so, it might well have reached a different conclusion as to whether the
guarantee had constituted financial assistance.
Description
This article was written by Maleka Femida Cassim before she joined the University of Pretoria.
Keywords
Companies Act 61 of 1973, Supreme Court of Appeal, Judgement, Financial assistance
Sustainable Development Goals
Citation
Cassim, R & Cassim, MF 2007, 'Gardner v Margo : a misapplication of section 38 of the Companies Act', South African Law Journal, 124, no. 1, pp. 37-47.