Chapter 5

• A company must keep copies of any written communications sent to each shareholders' resolution for a period of seven years after the date on which each such communication was issued
• When a person becomes a minority shareholder in a company, they will be bound by the decisions of the majority
• Case example


  • Garden Province Investment and Others v Aleph (Pty) Ltd and Others¹¹
• In the case of Garden Province Investment and Others v Aleph (Pty) Ltd and Others¹¹, the court dismissed the application of minority shareholders seeking relief under s 252 of the Companies Act, 1973
• The court held that when a person acquires shares in a company as a minority shareholder, it is not unfairly prejudicial, unjust, or inequitable if a company asset is sold contrary to the minority's wishes, provided that it is sold at a fair and reasonable price
• According to the court in Sammel v President Brand Gold Mining Co Ltd


  Shareholders are bound by the decisions of the prescribed majority of shareholders, even if they adversely affect the minority's rights
• All shareholders are bound by the terms of a company's MOI (Memorandum of Incorporation) as per the Companies Act, 2008
• A company's MOI will determine the rights, including the voting rights, of shareholders
• Despite the principle of 'majority rule', there are remedies and safeguards in the Companies Act, 2008 and common law to protect the interests of minority shareholders
• Safeguards and remedies for minority shareholders

  • Remedies against directors who have abused their position
  • Relief from oppressive or prejudicial conduct in terms of s 163
  • Derivative action in terms of s
• There are remedies against directors who have abused their position, and directors have fiduciary duties both in terms of the Companies Act, 2008 and in terms of the common law
• There is relief from oppressive or prejudicial conduct in terms of s 163
• There is a derivative action in terms of s 165
• There are dissenting shareholders' appraisal rights in terms of s 164
• There is an additional remedy to protect rights of securities holders
• Depending on the percentage of shares held, a minority can demand a meeting of shareholders in terms of s 61
• A minority can block a special resolution that is required before certain transactions take place
• The shareholder of a profit company, other than a state-owned company, with only one shareholder may exercise all of the voting rights pertaining to that company
• Rules pertaining to setting a record date for the determination of shareholders' rights, proxies, notice of meetings, and the like, do not apply to a profit company with only one member
• Where a profit company, other than a state-owned enterprise, has only one director, the director may exercise any power or perform any function of the board at any time, without notice or compliance with any other internal formalities, except to the extent that the company's MOI provides otherwise
• Where every shareholder is also a director of a particular company, other than a state-owned enterprise, any matter that is required to be referred by the board to the shareholders for decision may be decided by the shareholders at any time after being referred by the board, without notice or compliance with any other internal formalities, except to the extent that the MOI provides otherwise
• The board of a company that holds any securities of a second company may authorise any person to act as its representative at any shareholders' meeting of that second company
• A person authorised to act as a company's representative may exercise the same powers as the authorising company could have exercised if it were an individual holder of securities
• The Companies Act, 2008 provides that it is possible to take decisions without convening a meeting
• If the company wishes to take an ordinary resolution in such a way, the company must submit a proposed resolution to every person who is entitled to vote on the resolution
• The shareholders are then entitled to exercise their vote in writing within 20 days from receiving the proposed resolution and to return the written vote to the company
• An election of a director that could be conducted at a shareholders' meeting may instead be conducted by written polling of all of the shareholders entitled to exercise voting rights in relation to the election of that director
• Within 10 business days after adopting a resolution, the company must deliver a statement describing the results of the vote, consent process, or election to every shareholder who was entitled to vote on the resolution
• Shareholders are entitled to exercise voting rights


  In relation to the election of that director
• Company must deliver a statement

  Within 10 business days after adopting a resolution, describing the results of the vote, consent process, or election to every shareholder entitled to vote on the resolution
• No business required to be conducted at the annual general meeting of the company may be conducted without convening a meeting
• First annual general meeting of a public company must occur no more than 18 months after the date of the previous annual general meeting
• Subsequent annual general meetings must occur no more than 15 months after the company's date of incorporation
• Companies Tribunal may grant an extension if good cause is shown
• Topics to be discussed at a company's annual general meeting

  • Presentation of the directors' report, the audited financial statements for the immediately preceding financial year and the audit committee report
  • Election of directors
  • Appointment of an auditor for the ensuing financial year and appointment of the audit committee
  • Any matters raised by shareholders, with or without advance notice to the company
• Where the company cannot convene a meeting because it has no directors or all directors are incapacitated


  Any other person authorised by the company's MOI may convene the meeting
• If a company fails to convene a meeting for any reason

  A shareholder may apply to court for an order requiring the company to convene a meeting on a date, and subject to any terms, that the court considers appropriate in the circumstances
• Failure to hold a required meeting does not affect the existence of a company
• The Companies Act, 2008 provides for two types of resolutions that can be taken by shareholders - ordinary resolution and special resolution
• Shareholders can pass resolutions either at a meeting of shareholders or by acting other than at a meeting