Contesting the Removal of a Director by the Board of Directors under the Companies Act 71 of 2008

Abstract

The Companies Act 71 of 2008 has introduced into our company law a novel provision which permits the board of directors of a company under certain circumstances to remove a director from office, contained in s 71(3). While there may be merits in vesting boards of directors with this power, concerns arise whether the fear of removal from the board of directors 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 (1057/2013) [2013] ZAWCHC 89 (14 June 2013) 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. While the Companies Act 71 of 2008 contains some provisions on which a director may rely to contest his removal from office by the board of directors, it is argued that a director who has been unfairly removed from office by the board of directors will face certain difficulties in relying on each of these provisions. In light of these difficulties and as a result of the Pretorius decision it is submitted that the potential for abuse of this new power given to boards of directors must be guarded against.