On 15 October 2026, the High Court of South Africa, Gauteng Division, Johannesburg (High Court) handed down judgment in Feng-Ju Group (Pty) Ltd and Another v South African COID Institute (Pty) Ltd and Another (2026/214281) [2026] ZAGPJHC 1202 (15 October 2026), dismissing an application by one of the shareholders of the South African COID Institute Proprietary Limited (SACI) to have this solvent and profitable company wound up on the basis of an alleged deadlock and breakdown in the relationship between its shareholders.

In setting out the principles that guided its decision, the High Court endorsed the warning given in Koen v Wedgewood Village Golf & Country Estate (Pty) Ltd that –

“It is clear that the legislature has recognised that the liquidation of companies more frequently than not occasions significant collateral damage, both economically and socially, with attendant destruction of wealth and livelihoods. It is obvious that it is in the public interest that the incidence of such adverse socioeconomic consequences should be avoided where reasonably possible”.

Following its deliberation, the High Court found that the applicants had failed to show that it would be just and equitable to wind up SACI under section 81(1)(d) of the Companies Act 71 of 2008 (Companies Act). The Court held that the disputes between the shareholders were “readily capable of resolution” through the shareholders’ agreement and the remedies available under the Companies Act, and that winding up a successful business in these circumstances would be “entirely pointless and futile”. The application was dismissed with costs on Scale C.

Bishop Fraser Attorneys acted for Adriana Investments Proprietary Limited (Adriana Investments), SACI’s co-shareholder and the second respondent, throughout this litigation, briefing Adv L M Spiller, and successfully opposing the winding-up of SACI on Adriana Investments’ behalf.

Background

SACI was incorporated in 2019 to provide consultancy services relating to the Compensation for Occupational Injuries and Diseases Act 130 of 1993 (COIDA), assisting employers to improve compliance, recover overpayments and credits, and reduce their ongoing COIDA costs. Its business comprises a Savings Division, which reviews and optimises clients’ COIDA classifications, and a Filing Division, which attends to annual COIDA filings. For its 2026 financial year, SACI recorded income of approximately R17.5 million and net earnings of approximately R13 million, with assets exceeding liabilities by approximately R16 million. Its client base includes several prominent South African retail chains.

SACI’s two shareholders, Feng-Ju Group Proprietary Limited (Feng-Ju) and Adriana Investments, concluded a shareholders’ agreement in December 2019 (Shareholders’ Agreement), under which each shareholder was entitled to appoint one director. From the outset, SACI’s directors were Mr Feng-Ju Shih, on behalf of Feng-Ju, and the late Mr Gerhardus Barnard, on behalf of Adriana Investments, who also conducted SACI’s day-to-day business and exercised financial oversight of its affairs. The Court recorded that, until Mr Barnard’s untimely passing on 10 August 2026, the two directors enjoyed a good relationship and the business operated profitably.

Following Mr Barnard’s death, Adriana Investments nominated his son, Mr Louis Barnard, as its replacement director. An informal meeting between the parties on 19 August 2026 was described by the Court as “cordial and constructive”. Within days, however, relations deteriorated sharply, with disputes arising over control of SACI’s bank account, communications with staff, and the mass resignation of company staff. On 02 September 2026, Feng-Ju and Mr Shih launched proceedings to wind up SACI. A shareholders’ meeting was subsequently convened by Adriana Investments on 10 September 2026, at which Adriana Investments proposed a further meeting to resolve the parties’ differences without litigation, a proposal it repeated on 17 and 22 September 2026. The applicants did not take it up.

The application was brought under section 81(1)(d)(i) and/or (iii) of the Companies Act, which permits a court to wind up a solvent company where –

• the directors are deadlocked in the management of the company, the shareholders are unable to break the deadlock, and irreparable injury to the company is resulting, or the business cannot be conducted to the advantage of shareholders generally, as a result;
• the shareholders are deadlocked in voting power and have failed, for at least two consecutive annual general meetings, to elect successors to directors whose terms have expired; or
• it is otherwise just and equitable for the company to be wound up.

In its heads of argument, Adriana Investments opposed the application on several grounds, contending, among other things, that –

• the liquidation of a solvent company is a remedy of last resort, described by a full bench of the Pretoria High Court in Du Plessis v Bonnox (Pty) Ltd as “a drastic and draconian remedy”, and that a range of alternatives remained available and untried, including a buy-out at fair value under the Shareholders’ Agreement, relief under section 163 of the Companies Act, arbitration, mediation, the appointment of a chief executive officer or an independent director, and the further shareholders’ meeting that Adriana Investments had proposed;
• winding-up on the just and equitable ground, based on a breakdown in personal relationships, is confined to quasi-partnerships, and SACI, whose shares are held by two corporate entities under a detailed shareholders’ agreement, was not one;
• there was no deadlock in the management of SACI, the board having never met or failed to pass any resolution, and SACI was not paralysed but continued to service its clients;
• because SACI is a services company whose value lies in its client relationships, contracts and goodwill, a winding-up would destroy, rather than realise, that value, to the prejudice of both shareholders; and
• a party who seeks a winding-up on the basis of a breakdown in the relationship between shareholders must come to court with clean hands, and cannot rely on a breakdown of its own making.

The High Court’s Key Findings

Following its deliberation, the High Court found that –

• SACI is a solvent, profitable and properly run business – the Court emphasised that SACI had operated for almost six years, had grown into a substantial enterprise servicing an existing and stable client base, and that the papers did not suggest any disharmony between the role-players, or any operational dysfunction, prior to Mr Barnard’s death;
• The alleged breakdown was sudden and unexplained – the disharmony said to constitute an irretrievable breakdown occurred over a period of some ten days, and the applicants failed to explain why “a profitable and positive relationship, from which both shareholders derived vast benefit, deteriorated suddenly and dramatically in this fashion”;
• Deadlock is not, on its own, a ground for winding up – relying on Emphy v Pacer Properties (Pty) Ltd, the Court confirmed that the mere existence of a deadlock does not entitle an applicant to a winding-up order, and that the true enquiry is what is just and equitable having regard to all the circumstances of the case;
• Available alternative remedies must be considered – drawing on Moosa NO v Mavjee Bhawan (Pty) Ltd, Miller v Lilly Valley (Pty) Ltd and the Privy Council’s three-stage analysis in Lau v Chu, the Court held that winding up is a shareholders’ remedy of last resort, and that the disputes between the parties could be resolved through the co-operation, good faith and arbitration provisions of the Shareholders’ Agreement, or under section 163 of the Companies Act; and
• Liquidation would destroy, not preserve, value – because SACI’s value lies almost exclusively in its ongoing client contracts, which a liquidator would have to bring to an end, the Court held that it “seems absurd to suggest that the destruction of a successful and profitable business can be in the interests of the shareholders”. This aspect of the judgment is expanded on below.

Winding Up As A Remedy Of Last Resort For Solvent Companies

A central feature of the judgment is its careful treatment of the “just and equitable” ground under section 81(1)(d)(iii) of the Companies Act. While accepting, in line with the Supreme Court of Appeal in Thunder Cats Investments 92 (Pty) Ltd v Nkonjane Economic Prospecting and Investment (Pty) Ltd, that the examples of deadlock in section 81(1)(d) are not exhaustive, the Court stressed that each case turns on its own facts, and that the decisions relied on by the applicants, including Thunder Cats and Apco Africa (Pty) Ltd v Apco Worldwide (Pty) Ltd, involved years of litigation, prolonged paralysis or companies that could no longer trade. As Adriana Investments argued, none of those features were present in SACI’s case, a profitable, trading services company whose value would be destroyed by liquidation. Notably, the Court did not adopt the view that the just and equitable ground is confined to quasi-partnerships, observing that the partnership analogy should not be treated as an essential prerequisite. It decided the matter instead on the availability of alternative remedies and the futility of a winding-up.

Critically, the Court gave real weight to the bargain the shareholders had struck between themselves. Relying on Lord Wilberforce’s speech in Ebrahimi v Westbourne Galleries Ltd, the Court held that it is “fair to the shareholders, and commercially sensible” to have regard to the arrangements they made for the running of the company. Clause 13 of the Shareholders’ Agreement obliged the shareholders to co-operate fully, to consult with one another on the company’s business, and to observe good faith towards one another. The Court found that this clause imposes on the shareholders some elements of the duties ordinarily owed by directors, and that its effect is that shareholders “cannot intentionally refuse to consult with one another, especially where such refusal would harm the company’s interest”. The Court found that each of the disputes identified by the applicants, namely access to the bank account, staffing, staff discipline and the correct shareholding percentages, were “not issues of great complexity”, and could be resolved through consultation or by referral to arbitration under clause 15 of the Shareholders’ Agreement.

The practical force of this reasoning is reflected in the Court’s analysis of what a liquidator could achieve. A liquidator of a solvent company is obliged to realise its assets, settle its creditors, distribute the balance and ultimately bring about the dissolution of the company. A liquidator cannot compel one shareholder to buy out the other, cannot force the shareholders to co-operate, and, because SACI is not unable to pay its debts, would not have the investigative powers available under sections 415 to 418 of the Companies Act 61 of 1973. As the Court concluded, “there is nothing he could achieve that the shareholders cannot by themselves accomplish, without having their company wound up”.

In light of this judgment, the High Court has made clear that –

• A deadlock is not a shortcut to liquidation – a shareholder seeking to wind up a solvent company on just and equitable grounds must show why winding up, rather than any other remedy, is warranted on the facts, and courts will not grant a winding-up order simply because shareholders are at odds;
• Shareholders’ agreements will be held to their terms – where shareholders have agreed on mechanisms for consultation and dispute resolution, including arbitration, courts will expect those mechanisms to be used before the company itself is brought to an end;
• Good faith and co-operation clauses carry real weight – contractual duties to co-operate, consult and act in good faith may impose director-like obligations on shareholders, and a shareholder who refuses to engage with its co-shareholder does so at its own risk; and
• The interests of the business come first – courts will weigh the collateral damage that liquidation causes to clients, employees and the broader economy, and will be slow to destroy a successful business to resolve a dispute between its owners.

The Applicants’ Conduct, And The Court’s View Of The Breakdown

Another striking feature of the judgment is the Court’s scrutiny of the conduct of the party seeking the winding-up. The Court found that the papers did not explain why “a profitable and properly run company should, within the space of a few days, begin to encounter the difficulties highlighted in the papers”, and that there was “virtually no information demonstrating how the various forms of acrimony between the individuals have impacted on the running of the company, if at all”.

• The Court recorded that it was not disputed that, on 24 August 2026, Mr Shih convened an emergency meeting of staff at which he told them that they had to choose sides in the conflict. It noted that the applicants “do not rebut the allegation that Shih called a meeting with staff and seems to have incited a number of them to resign from the business”, that the resignations which followed “occurred within a suspiciously short timeframe”, and that the one employee who declined to resign was suspended and faced disciplinary charges which were “vaguely formulated”.
• The Court described as “somewhat disturbing” an email sent to an important SACI client by a former employee on 22 September 2026, asserting that SACI was being liquidated. The Court found it “perplexing” that the email was sent three weeks after the employee’s departure, and noted that the applicants “nowhere explain why, and on whose authority, this email was written”.

The Court was equally forthright about the applicants’ unwillingness to engage. It found that the applicants had not explained why they were not prepared to table positive suggestions at the shareholders’ meeting of 10 September 2026, or why they declined to attend the further meeting proposed to resolve the parties’ differences. The Court observed that, even though the winding-up proceedings had already been launched, the applicants “could have participated in such discussions on a without prejudice basis. They have not attempted to explain their failure to do so.” This finding echoed Adriana Investments’ submission that the applicants had not invoked the exit mechanism in the Shareholders’ Agreement, had not referred the dispute to arbitration, and had opposed a referral to mediation under Uniform Rule 41A, choosing instead to launch winding-up proceedings before the shareholders’ meeting process had run its course.

• The judgment holds that, in exercising its discretion, a court must weigh the competing interests of all concerned, and that this requires a value judgment rather than “a mechanical recitation of factors” drawn from other cases. In SACI’s case, the scale was decisively tipped by the applicants’ failure to explain how a winding-up would promote the interests of the shareholders at all.
• The Court further reasoned that, because many of SACI’s clients would likely terminate their contracts on becoming aware of a liquidation, a winding-up would “destroy the business and value of SACI”. This reasoning offers meaningful protection to shareholders in closely held, service-based businesses, whose value lies in client relationships rather than in hard assets, against the use of winding-up proceedings in response to a shareholder dispute.

Bishop Fraser Attorneys’ Role In Securing This Outcome

Bishop Fraser Attorneys, instructing Adv L M Spiller, represented Adriana Investments throughout this litigation, from the urgent opposition of the winding-up application through to the hearing before Oosthuizen AJ on 6 October 2026.

This judgment represents a significant outcome for Adriana Investments, preserving a profitable business, its client relationships and the value of its shareholding in SACI, at a time when its founding director had only recently passed away. Beyond the dismissal of the winding-up application, the judgment stands as clear authority that courts will not permit liquidation proceedings to be used to bring a successful company to an end where the shareholders’ own agreement, and the Companies Act, provide the means to resolve their differences.

How Bishop Fraser Attorneys Can Assist

Bishop Fraser Attorneys advises shareholders, directors and companies on shareholder disputes and deadlocks, the drafting and enforcement of shareholders’ agreements, winding-up applications under section 81 of the Companies Act, oppression and unfair prejudice remedies under section 163, urgent interim relief, and arbitration. This judgment underscores the value of well-drafted dispute resolution, co-operation and succession provisions in shareholders’ agreements, and of decisive legal action where a co-shareholder seeks to resolve a commercial dispute at the expense of the company itself.