Alienation of Shares In Company Law.

The case of Malunga and Another v Sanqela [2025] 3 All SA 173 (WCC) underscores critical principles within company law, particularly concerning the alienation of shares, spousal consent, and the protection afforded to third parties. The respondent, Ms. Sanqela, inherited a 50% shareholding in a fishing rights company after her husband’s death. Mr. Malunga, who held the other 50%, offered her an option to purchase his shares. Upon fulfilling the agreement's conditions, Ms. Sanqela sought a declaratory order to affirm the validity of the shareholders' agreement and the resolution related to the sale.

Central to the court's deliberation was whether the agreement was void under section 15(2)(c) of the Matrimonial Property Act 88 of 1984. Mr. Malunga, married in community of property, was required to obtain his spouse's consent prior to the alienation of his shares. The court concluded that the option agreement constituted a binding future sale, triggering the necessity for consent. This transaction did not occur in the ordinary course of business, thus exempting it from section 15(6).

Although Ms. Sanqela claimed ignorance of Mr. Malunga's marital status, the court examined if she could reasonably have known about the requirement for consent. Importantly, section 15(9)(a) provides protection for third parties unaware of any lack of consent. However, Ms. Sanqela failed to conduct any inquiries, relying solely on her attorney for assurance. The court deemed this reliance as objectively unreasonable, ruling that she did not satisfy the conditions outlined in section 15(9)(a).

Consequently, the appeal was upheld, and the agreement was declared invalid. The ruling serves as a stark reminder of the complexities surrounding the transfer of shares in companies governed by matrimonial property laws, highlighting both the responsibilities of potential buyers to ensure compliance with legal frameworks and the potential pitfalls of reliance on legal counsel without due diligence.

***Kindly note that the contents of this article are intended for information purposes only and does not constitute legal advice. Consult an attorney.