A curate’s egg: A misunderstanding of financial assistance in section 45 of the Companies Act

In Constantia Insurance Co Ltd v Master, Johannesburg High Court 2023 (5) SA 88 (SCA), the Supreme Court of Appeal considered the prohibition against giving financial assistance to directors and related companies, as provided for in s 45 of the Companies Act 71 of 2008. The term ‘financial assistance’ is at the heart of s 45. Controversially, the Supreme Court of Appeal asserted that the list of three financial-assistance transactions referred to in s 45(1)(a) is exhaustive of the meaning of ‘financial assistance’. This note submits that by misconstruing the concept of ‘financial assistance’, the Constantia judgment imprudently truncates the scope of the prohibition in s 45 and frustrates the fundamentally important objectives that it is designed to achieve. Serious practical ramifications may be expected to arise. The Constantia judgment does, however, sound a timely warning to innocent third parties who deal with companies in transactions connected with the giving of financial assistance.