Johannesburg - Almost three years after installing themselves as directors of Great North Transport (GNT), a public transport company, the directors of the Limpopo Economic Development Enterprise (LimDev) have been kicked out by an order of court.
The same order has reinstated Zukile Nomvete, the former SAA chief executive and the GNT chairman, as well as his five co-directors.
Development corporation LimDev is the sole shareholder of GNT, which was established in the 1970s to ferry bus passengers in Limpopo. The GNT board was appointed by LimDev after consultation with the province's department of finance and economic development.
In the court papers, Nomvete and his co-directors said at the time of their removal in October 2004, they had turned GNT around from a company with a net loss of more than R2 million in the year prior to their appointment to one with a profit of more than R6 million.
During the course of 2003 and 2004 some differences of opinion erupted between the boards of LimDev and GNT over non-compliance with the provisions of the Public Finance Management Act (PFMA) and over the reinstatement of 53 dismissed workers, who belonged to the SA Transport and Allied Workers' Union (Satawu).
The allegations of non-compliance were made by Satawu, which led to a forensic investigation into GNT by LimDev, but was not initially brought to the attention of the GNT board.
In the court papers, it emerged that the LimDev board conceded that the 53 workers were lawfully dismissed by GNT but that their reinstatement was supported by the LimDev board for "socioeconomic requirements", which were the creation and maintenance of jobs in the fight against poverty.
Matters came to a head in July 2004 when the issue of non-compliance with the provisions of the PFMA was raised at a LimDev board meeting by a representative of the department and where it was decided that Nomvete be asked to resign.
In the event of Nomvete failing to resign, a special GNT shareholders meeting would be called by LimDev where he would be removed. Stan Mathabatha, a member of the LimDev board, would take up the position of chairman. It was also decided that in the event of the mass resignation of the GNT board, the directors of LimDev would take up positions as interim directors.
Seven days later, LimDev sent a letter to Nomvete requesting him to resign. However on August 10 2004, Nomvete, through his lawyers, refused. He also requested various documents and information, such as copies of the notices of the special meeting of the LimDev board and its minutes as well as a factual basis requesting his resignation.
On August 12 2004, LimDev wrote to Nomvete's lawyers and noted "with regret" that "our board has no other alternative but to proceed with his removal".
On August 19 2004, Nomvete's lawyers said that any such removal should take place in terms of section 220 of the Companies Act.
Section 220 provides a mechanism for the removal of directors of a company, while procedural aspects in the section also safeguard the rights of directors.
Unbeknown to Nomvete and his attorneys, LimDev had sent a letter to the GNT company secretary, requisitioning a general meeting of the GNT shareholders to remove Nomvete.
LimDev later furnished its reasons for Nomvete's removal on August 24 2004, alleging PMFA non-compliance as well as inadequate compliance with LimDev's socioeconomic objectives.
A LimDev board meeting of August 24 2004 was told by KS Mashalane of the provincial department of finance and economic development that resignations had been tendered to the department by some of the GNT directors and that other formal written resignations were pending from the remaining directors.
On the strength of this information, the meeting resolved to dissolve the GNT board and appoint the members of the LimDev board as acting directors. It was also agreed that the GNT shareholders meeting would be held on October 1 2004 and this was communicated to the GNT company secretary.
On the day of the meeting, Nomvete's lawyers sent a fax to LimDev saying that Nomvete was attending a conference in Canada and any attempt to remove him would be unlawful and void under section 220.
Regardless of Nomvete's legal objections, the meeting went ahead and he and his co-directors were removed.
They then took the matter up with the Pretoria high court for review on the grounds that they were unlawfully removed.
The court found that even if there was non-compliance with the PMFA by the GNT board, it was to be questioned why even innocent directors needed to be removed.
The court also found that the resolution of the LimDev board that the majority of GNT directors had resigned was invalid because only two had done so prior to the LimDev board meeting.
It also found that the procedures under section 220 had not been followed and the removal of the GNT directors was therefore unlawful.