Shareholders Rights and Company receivership: A critical analysis

Abstract

Precedent in Zambian Company Law has laid down well established rules with regard to shareholder rights and aspects of receivership in general. This paper seeks to delve into the confusion that may arise when the courts depart from clearly laid out rules to pass precedent that erodes the very foundation on which receivership law is governed, that is, the rules governing receivership and their effect on the company as a going concern. This was evidenced in the recent case of Antonio Ventriglia v East and Southern African Trade and Development Bank and Robert Simeza. This paper evaluates the above mentioned case and sets out the general framework of the law on receiverships with a view to show that this case departed from the basic rules as espoused in previous rulings of the courts. Secondly, the distinction between directors and shareholders' rights and roles is assessed in order to clearly outline the failure of the court in this case to distinguish which rights will be affected once a company undergoes receivership. Of relevance to this case is the fact that, it was unclear whether the court's intention was to recognise the applicants as shareholders or directors, as they served in a dual capacity. This paper also recognises and evaluates the issues of locus standi and derivative actions with regard to shareholders seeking to take action against a receiver. This is with a view to establish the fact that the court should have determined whether the matter was rightly before the court and lack of capacity of the applicants to sue both the creditor and the receiver in their own names. The paper further, brings to light two subsequent High Court cases that have been decided on the basis of the ruling in the afore mentioned case that give evidence of the undesirable affects of this judgment and impracticability of its application. After considering the foregoing, this paper recommends that the Supreme Court, revisit this precedent on the basis that the court has made case law which departs from well established principles of law.