In Weir v Wiehahn Formwork Solutions (Pty) Ltd and others [2025] JOL 68636 (WCC) (Wier) the Western Cape High Court (Court) was again called upon to determine whether shareholders are required to give a director reasons for the proposed removal of that director from the board of a company. This is in terms of sections 71(1) and (2) of the Companies Act 71 of 2008 (Act). The Court held that although sections 71(1) and (2) of the Act requires the director concerned to be furnished with a notice and be given a reasonable opportunity to make a presentation, the Act makes no provision for the affected director to be given reasons for his proposed removal. It was not the Legislature’s intention that such director be provided with reasons for removal.
Background
The applicant, Jonathan Weir (Mr Weir) was an executive director of the third respondent, PR Wiehahn Proprietary Limited (Company). On 13 June 2024 he was given notice of a shareholders meeting to be held for his removal as a director of the Company. He requested reasons for his removal, but his request was denied. He was told that the director he was corresponding with did not have the authority to provide him with reasons and he was given the opportunity to ‘discuss’ this in the shareholders’ meeting.
Mr Weir subsequently received two additional notices relating to an incompatibility hearing and a disciplinary hearing to be held. On 1 July 2024, Mr Weir’s attorney addressed correspondence to the same executive director of the Company stating that the meeting could not proceed as the notice did not comply with section 71 of the Act. They requested a postponement for the Company to provide reasons. Mr Weir’s attorney was advised that the shareholders do not need a reason to remove a director, and that Mr Weir could make presentations to the shareholders at the meeting. Another email was sent to his attorney stating that the reason they wanted his removal was because they had lost confidence in him.
Mr Weir and his attorney attended the meeting on 2 July 2024, where they said that Mr Weir was unable to make presentation as he did not know why the shareholders had lost confidence in him. If that is the reason for his removal, it was prejudicial as he was not given adequate time to prepare. The shareholders subsequently adopted a unanimous resolution to remove him as a director. The decision was communicated to Mr Weir on 4 July 2024.
Mr Weir threatened to bring an urgent application seeking to review and set aside the resolution. He was advised that if he launched the application a precautionary shareholders meeting would be held to again to resolve to remove him as a director. On 7 October 2024, the Company called for a precautionary shareholders meeting to take place (on 23 October 2024) if the removal on 2 July 2024 was invalid and reasons were provided in this notice. Mr Weir declined to attend the meeting on the basis that he was not a director in the Company as he had been removed. A second unanimous resolution was adopted removing him as a director to the extent he was still a director of the Company.
The Courts’ decisions
The crux of this matter was based on the interpretation of section 71(1) and (2) of the Act. The court compared the wording of section 71(4)(a) of the Act relating to the removal of a director by fellow directors of the Company, and section 71(1) and (2) of the Act relating to the removal of a director by shareholders. It held that the requirements for the removal of a director by fellow directors are more stringent in contrast to the requirements for shareholders to remove a director. The Court contended that this is instructive and sensible when considering the different roles shareholders and directors fulfil in a company.
The Court considered the role of, and the rights to vote, for directors and shareholders and held that directors are required to amongst other matters, exercise their votes in according to their fiduciary duty to act in good faith and in the best interests of a company , whilst shareholders’ right to vote is a proprietary right attached to their shareholding in a company, which may be exercised by the shareholder in his/her own interests.[1]
The Court noted that shareholders’ power to remove directors of a company may imply their ability to control the disposition of their investment in a company and the accountability of directors to the shareholders of the company.[2] The power to remove directors is a critical tool which strikes a balance between the directors’ power of management on the one hand, and the shareholders’ power of control on the other.
The Court also highlighted that the wording of section 71 (1) which applies “despite anything to the contrary in a company’s Memorandum of Incorporation or rules, or in any agreement between the company and a director, or between any shareholders and a director”. The aforementioned provision read with section 65(8) of the Act creates an unalterable provision where any agreement which contains a provision contrary to section 71(1) of the Act can be overridden by an ordinary resolution for removal in terms of section 71 of the Act.[3] The aforementioned provision prevails regardless of any agreement to the contrary between any shareholders and a director in which a director is otherwise entrenched.
Since there was a previous conflicting decision from the Western Cape High Court[4] on this issue, this new decision is welcomed. It confirms that shareholders do not need to give reasons to a director they want to remove in order for that director to make a presentation under sections 71(1) and (2) of the Act. This is different from the rule that applies when directors remove a fellow director — in those cases reasons must be given. The Western Cape High Court now appears to agree with the Gauteng High Court's decision in Miller v Natmed Defence (Pty) Ltd.
Written by Faheema Rahim (Senior Associate) and Sfundo Nala (Candidate Attorney) and supervised by Werner De Waal (Partner) at Fasken.
[1] See Sammel v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A) at 680.
[2] Cassim, Rehana. (2019), ‘The power to remove company directors from office: historical and philosophical roots’, 126-128.
[3] Weir, at 60.
[4] See Pretorious and another v Timcke and Others (Western Cape Division, Cape Town)(2 June 2015)
