I recently had a client requiring our services as he became aware that he was removed and replaced as the Director of his own Company – a Company owning vast and luxurious properties. Upon investigation, we determined that our client had placed one of the properties, being a large wild reserve, in the market and a prospective “buyer” who showed interest in the property, was replaced as the Director of the Company without our client’s knowledge or consent.
Upon further investigation, I found that our client’s Company was not the only Company in which this “buyer” was replaced as the Director and immediately also informed the affected Companies.
Why is this such a big issue?
For one, our client cannot be returned as Director of the Company purely by bringing this under the attention of the Companies and Intellectual Properties Commission of South Africa (CIPC), as the current Director would have to sign a consent to be removed. CIPC would then also take at least two weeks in order to do any amendment. Further, by doing such amendment, any action or decision taken by the unauthorized Director during the time when he was reflected as Director, would be valid.
The further and more pertinent issue being, the unauthorized Director can sell the property or obtain a bond over the property whilst he is reflected as Director. If this is not noticed and prevented in time, the Company would lose its asset and the unauthorized Director can simply disappear with the profits.
How could such an unauthorized change have been done at CIPC?
CIPC requires several documents for any changes in Directors to be done, including signed COR39 forms, resolutions and certified ID’s. To the best of our knowledge, only some of these documents were submitted fraudulently to CIPC with forged signatures, whilst no ID documents were submitted. This is currently still under investigation with CIPC.
We immediately proceeded with an urgent application to the High Court and obtained an order in terms whereof:
1. A caveat was to be registered over the property to avoid any unauthorized transfer or bonds in respect of the property;
2. The appointment of the unauthorized Director was declared null and void and set aside;
3. Any decision taken by the unauthorized Director during the time he was reflected as Director is declared null and void;
4. CIPC is directed to immediately rectify their records and to investigate the change in directorship in terms of Section 169 of the Companies Act.
CIPC is still investigation the matter, but it is extremely worrying that such Corporate Hijacking could take place, especially considering the effects it may have on legitimate Directors and property owners. Stay vigilant! Beware of Corporate Hijacking and Scams!