Summary of Judgment

1. Introduction

This matter concerned an urgent application brought in the Gauteng Division of the High Court, Johannesburg, in which the applicant sought relief setting aside his removal as a director of a company and securing his reinstatement as a director, together with consequential relief aimed at correcting the official records of the Companies and Intellectual Property Commission (CIPC).

The parties were Tshepo Rametse as applicant, Avhapfani Mathada as first respondent, MART Attorneys Inc (a law firm incorporated as a company) as second respondent, and the Companies and Intellectual Property Commission (CIPC) as third respondent. The first and second respondents opposed the application and were collectively referred to in the judgment as “the respondents”.

Procedurally, the matter came before the court as an urgent application. The immediate trigger for the proceedings was the applicant’s name having been removed from the CIPC’s list of directors for the second respondent. The dispute before the court was confined to whether that removal complied with the statutory requirements for removing a director, and whether urgent corrective relief should be granted to restore the position reflected in the public register.

The general subject-matter of the dispute was the lawfulness (and procedural validity) of the applicant’s removal from the board of the second respondent under the Companies Act 71 of 2008, and the resulting accuracy of the CIPC’s public records.

2. Material Facts

It was common cause that there were broader disputes between the parties which could not be resolved in this application. The court treated the application as limited to the legality of the director-removal process and the consequent state of the CIPC register.

The following facts were common cause and material to the determination. The applicant held 30% of the share capital of the second respondent and the first respondent held 70%. The first respondent was a director of the second respondent, and the applicant had been a director until his name was removed from the list of directors held by the CIPC. There were no other directors and no other shareholders.

On 5 June 2023, the first respondent addressed a letter to the applicant stating, in substance, that it was the first respondent’s decision “as a sole shareholder” of the second respondent to terminate the applicant’s directorship. Although that letter described the first respondent as the “sole shareholder”, the shareholders’ agreement recorded the 70:30 shareholding split.

It was further common cause that no shareholders’ meeting was held to consider or discuss the applicant’s removal as a director. The removal therefore did not follow a process involving a meeting of shareholders at which a resolution to remove the director was considered after notice to the director.

The shareholders’ agreement contained termination provisions (including a clause dealing with unilateral termination prior to the expiry of five years and consequences said to include forfeiture of shares). However, the court treated the existence of those provisions as part of the background and did not determine broader contractual disputes arising from them, focusing instead on compliance with the statutory requirements for director removal.

3. Legal Issues

The central legal question was whether the applicant’s removal as a director of the second respondent was effected in accordance with section 71 of the Companies Act 71 of 2008, particularly the requirements that the director receive proper notice and be afforded a reasonable opportunity to make representations before a resolution is put to a vote at a shareholders’ meeting.

A related legal issue, arising from the respondents’ approach, was whether a resolution to remove a director could be passed informally (with reference to the notion of decisions taken other than at a meeting, as contemplated by section 60 of the Companies Act), and if so, whether that could dispense with the protections in section 71. The court addressed this issue with reference to commentary indicating that removal resolutions cannot be passed informally under section 60.

A further issue was whether the matter was urgent, given the respondents’ contention that the application did not warrant urgent enrolment. This involved an evaluative assessment of the implications of maintaining an allegedly incorrect public company register pending ordinary motion proceedings.

The dispute primarily concerned the application of law to largely common-cause facts, rather than factual disputes requiring oral evidence. The decisive facts (shareholding, absence of a meeting, and the fact of removal reflected at CIPC) were common cause.

4. Court’s Reasoning

The court located the governing legal framework in section 71 of the Companies Act 71 of 2008, emphasising that the provision is framed to operate despite anything to the contrary in a company’s Memorandum of Incorporation, rules, or any agreement between the company and a director, or between shareholders and a director. The court highlighted that section 71(1) requires removal by an ordinary resolution adopted at a shareholders’ meeting by persons entitled to exercise voting rights in an election of that director, and that section 71(2) imposes procedural safeguards before such a resolution may be considered.

On the court’s reading of section 71(2), two core procedural requirements had to be met before shareholders could consider a removal resolution. The director concerned had to be given notice of the meeting and the proposed resolution at least equivalent to that which a shareholder is entitled to receive, and the director had to be afforded a reasonable opportunity to make a presentation, personally or through a representative, to the meeting before the resolution is put to a vote.

The court accepted the view expressed in Henochsberg on the Companies Act 71 of 2008 (as cited in the judgment) that a resolution to remove a director cannot be passed informally in terms of section 60 of the Act. On this approach, the statutory scheme required adherence to the meeting-based process in section 71, including the notice and hearing requirements, rather than an informal procedure that would bypass those protections.

Applying those principles to the common-cause facts, the court reasoned that the applicant’s removal was not effected in compliance with section 71 because there was no shareholders’ meeting convened to consider a removal resolution and, correspondingly, the applicant was not afforded the statutory opportunity contemplated by section 71(2) to make representations to the meeting before any vote.

The court also addressed the contention that compliance could be overlooked because the outcome would in any event be dictated by the majority shareholding. The court rejected that as a justification, holding that the perceived inevitability of the result is not a basis for non-compliance with the statutory requirements. In the court’s reasoning, section 71’s procedural protections remain applicable even where the majority shareholder is positioned to carry the vote.

On urgency, the court accepted that the CIPC register functions as a publicly accessible record and described it as a “window to the World”. The court considered it desirable that the records be rectified as soon as possible, particularly because third parties may act in reliance on what the register reflects. This supported the conclusion that urgent relief was justified to restore the status quo that existed prior to the impugned removal.

Finally, the court considered costs and noted that the applicant appeared in person, concluding that no costs order was required.

5. Outcome and Relief

The court granted relief setting aside the applicant’s removal as a director of the second respondent. It directed the first and second respondents to reinstate the applicant as a director of the second respondent in the records of the CIPC. It further authorised the CIPC to correct its records to reflect the applicant as a director and to expunge entries relating to his removal.

No order as to costs was made.

Cases Cited

No judicial decisions were cited in the judgment.

Legislation Cited

Companies Act 71 of 2008, section 71.

Companies Act 71 of 2008, section 60.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the applicant’s removal as a director was procedurally invalid because it was not effected in compliance with the mandatory requirements of section 71 of the Companies Act 71 of 2008, specifically the requirement of a shareholders’ meeting with proper notice to the director and an opportunity for the director to be heard before a removal resolution is voted upon.

The court also held that urgency was established because the CIPC register is publicly relied upon and should be corrected promptly to prevent third parties from acting on inaccurate information. It consequently granted urgent corrective relief reinstating the applicant as a director and authorising rectification of the CIPC records, without making a costs order.

LEGAL PRINCIPLES

Section 71 of the Companies Act 71 of 2008 imposes mandatory procedural safeguards for the removal of a director, including notice equivalent to that given to shareholders and a reasonable opportunity for the director to make representations before a removal resolution is put to a vote at a shareholders’ meeting.

Non-compliance with section 71 cannot be justified on the basis that the majority shareholder’s voting power would render the outcome inevitable; the statutory protections apply regardless of anticipated outcome.

In the context of director removal, the judgment accepted the view (as recorded in authoritative commentary cited) that a removal resolution cannot be passed informally in terms of section 60, reinforcing the requirement for a properly convened shareholders’ meeting and compliance with the procedural protections in section 71.

Where the CIPC’s public register reflects a contested and allegedly unlawful change to directorship, the need to ensure accurate public records may justify urgent judicial intervention to restore the status quo pending resolution of broader disputes.