Contesting the Removal of a Director by The Board of Directors Under the Companies Act
Authors Rehana Cassim
Affiliations: Attorney and Notary Public of the High Court of South Africa. Senior Lecturer, Department of Mercantile Law, University of South Africa
Source: South African Law Journal, Volume 133 Issue 1, 2016, p. 133 – 159
Section 71(3) of the Companies Act 71 of 2008 has introduced a novel power into our company law, which permits the board of directors of a company under certain circumstances to remove a director from office. While there may be merits in vesting a company’s board of directors with this power, concerns arise whether the fear of removal from office would stifle the actions of a director in managing the company’s affairs, whether the power would be abused, and whether the board of directors could act with ulterior motives in removing a diligent director from office. In Pretorius v PB Meat (Pty) Ltd  ZAWCHC 89, the Western Cape High Court shed some light on the interpretation of s 71(4) of the Companies Act 71 of 2008 and on the power of a director to contest his removal from office. Although the Companies Act 71 of 2008 makes some provision for a director to contest his removal from office by the board of directors, a director who has been unfairly removed from office by the board of directors will nevertheless face certain difficulties. In light of these difficulties and as a result of the Pretorius decision, it is important to guard against the potential for abuse of this new power by boards of directors.