''Cohen, NO v Segal'' is an important case in South African law. It was heard in the Witwatersrand Local Division by Boshoff J on March 17, 1970, with judgment handed down on April 28. The case is significant for its finding that a dividend cannot be declared which has the effect of diverting a portion of the ''corpus'' of the company to the shareholders. A dividend may therefore, generally speaking, only be declared out of profits, and a resolution which declares a dividend to be paid out of the capital of the company is ''ultra vires'' the company.
[706A-B.]
Facts
Prior to the liquidation of a company, the defendant and one "H," the sole directors and shareholders, had sold the fixed property of the company. They had then divided the proceeds of the sale between them, the company's accountant having debited their loan accounts with the amounts. Thereafter they had purported to distribute the proceeds between them as a declared dividend. The liquidator of the company sued the defendant for the pecuniary loss which the company had sustained as a result of the
delict
Delict (from Latin ''dēlictum'', past participle of ''dēlinquere'' ‘to be at fault, offend’) is a term in civil and mixed law jurisdictions whose exact meaning varies from jurisdiction to jurisdiction but is always centered on the notion of ...
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Judgment
The court held that, as the declaration of the dividend was ''ultra vires'' and of no force and effect, and as the money had been paid to the defendant as a loan, which loan still existed, the plaintiff had failed to make out a case for the payment of any money on the cause of action relied upon.
See also
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Law of South Africa
South Africa has a 'hybrid' or 'mixed' legal system, formed by the interweaving of a number of distinct legal traditions: a civil law system inherited from the Dutch, a common law system inherited from the British, and a customary law syst ...
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Management
Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business.
Management includes the activities o ...
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South African company law
South African company law is that body of rules which regulates corporations formed under the Companies Act. A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by ...
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South African law of delict
The South African law of delict engages primarily with 'the circumstances in which one person can claim compensation from another for harm that has been suffered'. JC Van der Walt and Rob Midgley define a delict 'in general terms ..as a civil wr ...
References
Case law
* ''Cohen, NO v Segal'' 1970 (3)
SA 702 (W).
Notes
1970 in South African law
1970 in case law
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