Gardner v Margo : a misapplication of section 38 of the Companies Act

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Authors

Cassim, Rehana
Cassim, Maleka Femida

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Volume Title

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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.