The procedure for the removal of directors from the board of a company differs according to the number of directors serving on the board.
Removal by Shareholders
The shareholders of the company may by ordinary resolution remove a director from office at a shareholder’s meeting. The director must first have received notice of the resolution and the shareholders meeting in the manner prescribed in the Companies Act 71 of 2008 (the Act) and must have been afforded an opportunity to make representations in regard to the removal.
Removal by the board where there are three or more directors
Section 71(3) of the Act provides:
‘71(3) If a company has more than two directors, and a shareholder or director has alleged that a director of the company –
(a) has become –
(i) ineligible or disqualified in terms of section 69, other than on the grounds contemplated in section 69(8)(a); or
(ii) incapacitated to the extent that the director is unable to perform the functions of a director, and is unlikely to regain that capacity within a reasonable time; or
(b) has neglected, or been derelict in the performance of, the functions of director,
the board, other than the director concerned, must determine the matter by resolution, and may remove a director who it has determined to be ineligible or disqualified, incapacitated, or negligent or derelict, as the case may be.’
Application to the Companies Tribunal where there are two or less directors
Section 71(8) of the Act provides that any shareholder or director may apply to the Companies Tribunal for a determination of whether or not a director is ineligible, disqualified or, incapacitated or derelict in the performance of the functions of a director (i.e. those circumstances referred to in 71(3)(a) & (b) of the Act).
In this instance, if the Companies Tribunal does make a determination for the removal of a director, it will incorporate relief in which the Commissioner or Acting Commissioner of the Companies & Intellectual Property Commission is requested to assist in giving effect to the determination and remove the name of the director from the records of the aforesaid Commission.
Further, as stated in the matter before the Companies Tribunal South Africa (case CT021NOV2014 Webb/Webb) the process for the removal of a director requires reasonableness and sufficiency in the allegations made by a director and affords the impugned director the right to be heard before a determination is made.
In the entire procedure involving the consideration and removal of a director it is important that the substantive and procedural requirements are correctly addressed through out and that legal advice is sought in this regard.
Article by Lisa Boogaard
24 February 2019