This Appeal case revolved around the unwinding of a so-called BBBEE structure, that followed a pattern that is frequently employed. The defendant was a wholly-owned subsidiary of SPX Corporation and was the majority and controlling shareholder in DBT Technologies (Pty) Ltd (DBT), a South African company that provided products and services to firms in the power generation and petrochemical industries. In 2006, defendant engaged the appellant, a company with the requisite black economic empowerment (BEE) credentials, to become the BEE shareholder in DBT. The appellant subscribed for 25.1% of the shares in DBT (the BEE shares) and financed the purchase through a loan granted by the defendant (referred to as Loan B), that held the remaining shares.


Whether Call and Put options on BEE were mutually compatible

Law and Courts I

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It is not necessary for the purposes of our summary to get too involved in the remaining mechanics of the arrangements between defendant and appellant set out in the shareholders agreement, save to state that - (a) the original amount of the loan was R 19m and bore interest at prime rate - the interest on the loan was supposed to be covered by the dividends which would have accrued to the appellant from the shares; (b) there was a ‘stay’ period of seven years during which the appellant was not allowed to dispose of the shares it had acquired; (c) at the end of the ‘stay’ period each of the parties had a put option (in the case of the appellant) or a call option (in the case of the defendant) on the BEE shares - the strike price being the current value of the shares (as determined by formula) plus an appropriate adjustment for any amount outstanding in respect of the loan. As frequently happens in these structures while the business of DBT had grown exponentially from an annual R 250m to over R 2,4billion in five years (due no doubt to the benefit of the existence of the requisite BBEEE credentials which the participation of the appellant provided), the dividend stream was slow and at the end of the period the loan plus accumulated interest had grown to about R 31 million. It would appear that over the same period however, DBT had paid an amount of R 1,2 billion to the defendant in the way of “fees and charges”. In June 2014, the appellant exercised its put option and demanded that the defendant purchase its shares but they resisted and eventually the dispute was, in accordance with the terms of the shareholders agreement referred to arbitration where the defendant continued to resist paying the appellant for the shares. Paragraph 12 - In my view, no case has been made out to support a finding that the arbitrators misconceived the nature of the enquiry. Then para 12 to 22. . . . . At para 23 - Overall the binding dispute resolution process, which included an arbitration procedure in force between the parties, the applicant was also of the view that the issues raised in the main application, linked to those arising from the counter application concerning the issues in dispute in the arbitration (prayers 2 to 4), ought to be decided by this court. The applicable legal principles as to when a court can set aside an arbitration award for reason of gross irregularity are well-settled and the subject of detailed consideration*. In SA Breweries^ this court considered the issue of finality in the context of an expert determination in addition there existed certain other questions still open to arbitration, questions fundamental to the appellant’s liability and whether the appellant was entitled to further relief sought in the counter-application, namely a judgment sounding in money and arbitration, that did not preclude the Court from granting such relief. Counsel for the defendant accepted that if the appellant's appeal in respect of the main application was upheld and the arbitrators’ award reinstated, the appeal in respect of the repudiation application must fail where the arbitrator had excluded any possibility of defendant exercising its Call Option over the same shares in 2016, the exercise of both the put and call options being mutually incompatible.

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Vide Termico v SPX Technnologies (Pty) Ltd & Others ; SPX Technologies (Pty) Ltd v Termico (Pty) Ltd; [2019] ZASCA 109; *by Harms JA in Telcordia Technologies Inc v Telkom SA Ltd 2007(3) SA 266 (SCA); Palabora Copper (Pty) Ltd v Motlokwa Transport and Construction (Pty) Ltd 2018(5) SA 462 (SCA); [2018] ZASCA 23; ^Limited v Shoprite Holdings Limited [2007] ZASCA 103; 2008(1) SA 203 (SCA); [2008] 1 All SA 337 (SCA) Company Law Today - you can run, but you can't always hide!

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