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Court case about authority to act on behalf of company

Interfocus SA Investments 172 (Pty) Ltd and Another v Storbeck and Another [2019] ZAWCHC 12

Mr and Ms S are in the process of getting divorced.  They are married in community of property and are the only directors of a private company (Interfocus).  Ms S has the use of a motor vehicle under a lease agreement from Mercedes Benz Financial Services (SA) (Pty) Ltd, which lease is in the name of Interfocus.

Mr S brought this urgent application on behalf of Interfocus for the return of the vehicle to the dealer on the expiry date of the lease, as he alleged that the company cannot afford the lease anymore and will incur penalties in the absence of a new agreement if the vehicle is not returned.  Ms S responded that the lease continues and the vehicle is automatically re-financed for the same monthly payment and under the same conditions if not returned on the termination date of the lease.  She also averred that Mr S had no locus standi to bring the application, as the board of directors of Interfocus did not empower him to do so.  Despite Mr S relying on the fact that he was at all times the managing director, the court found that, in fact, he lacked locus standi due to the fact that he was not authorised by the company to institute the legal proceedings.

Comment:  Executors or trustees who find themselves in the position as a co-shareholder or minority shareholder in a company should take great care to ascertain their rights and position before embarking on legal action “on behalf of” the company.  Estate planners should attempt to plan for deadlock-breaking mechanisms in family business and trust situations.

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