A critical analysis on the use of the oppression remedy by directors removed from office by the board of directors under the Companies Act 71 of 2008

Abstract

Both sections 71(3) and 163 of the Companies Act 71 of 2008 are innovative in South African company law in that the former section permits the board of directors to remove a fellow director from office, while the latter section extends the oppression remedy to directors. Previously, under the Companies Act 61 of 1973, the power to remove directors from office was confined to shareholders. Moreover, only shareholders could apply for relief from oppressive or prejudicial conduct. Now that section 163 of the Companies Act 71 of 2008 has been extended to directors, this article argues that a director who has been removed from office by the board of directors under section 71(3) of the Companies Act may rely on the oppression remedy for relief if his or her removal from office was oppressive or unfairly prejudicial or if it unfairly disregarded his or her interests. The article further examines the nature of any orders a court may grant in this context. It argues further that, in the interests of fairness, clarity and certainty, section 163 of the Companies Act 71 of 2008 ought to be amended to make it clear that the section may be relied upon by a former director.