SAA
Arrangement
A Fuel Procurement arrangement in terms, which the following services are provided, to SAX:
- Procurement of Aviation Fuel as part of SAA’s annual Tender Process for uplift volumes for all SA Express’ designated stations unless otherwise agreed, at the same prices as negotiated by SAA;
- Administration of Aviation Fuel Accounts including payment of fuel invoices to Suppliers on behalf of SAX in accordance with agreed payment terms and including reasonable assistance in the resolution of Fuel payment queries raised by Suppliers; and
- The provision of an IT platform for processing of Fuel documents and reporting (Fuel Plus)
SAX gets the benefit of SAA’s bulk fuel procurement and, in turn, SAA invoices SAX on a weekly basis for their fuel procurement requirement.
SAX fell behind with their Fuel payments to SAA during the latter part of 2012. In the letter from the Minister to the Chairperson at the time, Mr. Kona, the Minister proposed that SAA extend SAX a grace period of two months in respect of all payments to assist them with their liquidity challenges. The two months payment requirement was capped at R140m. In discussions between the two Chairs of the respective Boards, Vuyisile Kona and Andile Mabizela, SAX CEO and SAA CFO, an agreement was reached to extend the repayment terms of the R140m owing to SAA over 14 months, with interest, to ensure that SAX could not be seen as financially benefitting from the arrangement. The last repayment was scheduled for February 2014, which has now been fully repaid.
Application of the Arrangement to Section 45 of the Companies Act 2008 (2008Act)
In assessing whether the above arrangement is subject to the provisions of s 45 of the 2008Act it is important to divide such an arrangement into separate parts: first the payments made by SAA on behalf of SAX and second the extension of the terms of repayment in respect of the first component of the arrangement.
General Application of Section 45 of the 2008Act
Applicability of Section 45
The board may authorize [subject strict criteria] the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member. The question arises as to whether SAX is a person contemplated in s 45. In other words, is SAX a related or inter-related company?
It is important to note that the shareholder of SAA is the same as that of SAX. However, the shareholder is not a juristic person as defined or even one contemplated by the 2008Act. In addition, the shareholder of SAA and SAX does not fall within the meaning of person as defined in the 2008Act. A person is defined in the 2008Act as includes a juristic person. This term “includes” suggests that this is not an exhaustive list of who maybe a person. Quite clearly, the only other person mentioned in the 2008Act is “individuals”. The 2008Act defines individuals as means a natural person. A natural person is a real human being, as distinguished from a company which is often treated at law as a juritic person. Section 2 of the 2008Act is divided into two parts. The first part is about the relationship between individuals and based on the wording of s 2 (1) a and (b) government department cannot be considered to be an individual. The termonology that are essential to understanding the term “individual” is; marriage; degrees of consangunity; terminology that can only be associated with natural persons. In addition s 2 (1) (b) states that only an individual can be related to a juristic person; an individual contenplated by the 2008Act. The remaining question is whether the shareholder is a juristic person in the manner contemplated by the 2008Act. This quite clearly is not the case. The shareholder is neither a individual or a juritisc person. Related and inter-related only apply to the relastionships between individuals and juristic persons and juristic persons and jurstic persons. A trust is a juristic person for the purposes of the 2008Act. The shareholder is not a trust.
The Department of Public Enterprises (DPE) is the shareholder representative of the South African Government with oversight responsibility for State Owned Companies (SOC). The DPE simply manage the SOC’s. Therefore the South African Government itself is not a person in terms the 2008Act. SAA and SAX are not related or inter-related in a manner contemplated by the 2008Act. This is not a loophole or a deficiency in the law. To be related or inter-related there must be a relationship between persons as defined by the 2008Act and in my opinion SAA has no control over SAX in voting rights nor does it have the ability to materially influence the policy of SAX.
Based on the above s 45 does not apply any arrangments between SAA and SAX as they are not related as contemplated by the 2008Act. If they were related then every time one SOC loaned money to another SOC s 45 would have to complied with. There is sufficient evidence to conclude that the very reason for s 45 was include those individuals or juristic perons or any other person who do not act independently of each other. Quite clearly SAX and SAA act indpendently of each other, they have nothing to do with each other. In substance they are not related or inter-related to each other; at times they are in competition with each other.
The only remaining issue is whether a shreholder can be considered a person as one that is contemplated by the 2008Act. [S57 (1)] - A shareholder includes a person who is entitled to exercise any voting rights in relation to a company, irrespective of the form, title or nature of the securities to which those voting rights are attached. Does it mean that because one is entitled to vote one is a person contemplated by s 45. When it pertains to the relationship between SAA and SAX yes it does. If SAA had shares in SAX then the defintion of person applies viz a vi the meaning of shareholding. As s 45 is about loans to persons within a family of companies. However s 57 (1) where this is discussed always states - If a profit company, other than a state-owned company. In my opinion when one interprets the meaning of the term shareholder one must exclude a SOC.
Conclusion
The relationship between SAA and SAX s not one contemplated by s 45 therefore the arrangment is not one that must comply with s 45.
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