Under current South African case law, shareholders who remove a director under section 71(1) of the Companies Act 71 of 2008 are not legally required to provide reasons for the removal.
Section 71(1) of the Companies Act allows shareholders to remove a director by passing an ordinary resolution at a shareholders’ meeting. Section 71(2) adds procedural safeguards which are that the director must be given notice of the meeting and an opportunity to make representations before the vote. However, the Act does not require shareholders to provide reasons for the proposed removal.
Case Law:
Historically, there was some judicial uncertainty. In Pretorius v Timcke (2015) [1], the Western Cape High Court controversially held that shareholders must provide reasons, invoking the common law principle of audi alteram partem (hear the other side). This interpretation was criticized for reading into the Act requirements that were not explicitly stated.
Later, in Miller v Natmed Defence (Pty) Ltd (2022) [2], the Gauteng High Court rejected the Pretorius reasoning, affirming that shareholders are not bound to provide reasons when exercising their ownership rights to remove a director.
This conflict was definitively resolved in the 2025 Western Cape High Court case Weir v Wiehahn Formwork Solutions (Pty) Ltd [3], which aligned with Miller. The court held that section 71(1) imposes no obligation on shareholders to justify their decision. It emphasized the distinction between shareholder-led removals (which are discretionary) and board-led removals under section 71(3) and (4), which require reasons as the right to remove a director relates to dereliction of directors’ fiduciary duties.
Case Footnotes:
- Pretorius and Another v Timcke and Others (15479/14) [2015] ZAWCHC 215 (2 June 2015
- Miller v Natmed Defence (Pty) Ltd 2022 (2) SA 554 (GJ)
- Weir v Wiehahn Formwork Solutions (Pty) Ltd and Others (19494/2024) [2025] ZAWCHC 32 (4 March 2025)