Can Directors in a Private Company have Weighted Voting Rights at Board Meetings?

• Jurisdiction: South Africa
• DOI: 10.10520/ejc-btclq_v14_n2_a3
• Author: Matthew Blumberg SC
• Pages: 8-12
• Date: 01 June 2023
• Published date: 01 June 2023
• Published By: Siber Ink

8© Juta and Company (Pty) Ltd

Can Directors in a Private

Company have Weighted Voting

Rights at Board Meetings?

MATTHEW BLUMBERG SC

ABSTRACT

The Companies Act1 implicitly permits the memorandum of incorporation of

a company to depart from the default or general position of ‘one director,

one vote’.

But, as I have endeavoured to set out, the freedom to do so is not unlimited.

A regime for directors’ voting rights that weights votes in proportion to

the shareholding of the shareholder that appointed the director in question

should in my view withstand court scrutiny. It is simply another means by

which to confer majority control over the board (in the sense explained

below) — which is in line with the company law principle of majoritarianism,2

and in my view unobjectionable.

That the weighting of directors’ voting rights results in a situation in which

individual directors have equal responsibilities, but unequal ‘rights’, is in my

view not in itself problematic. Duties are imposed on individual directors in

order to ensure the effective governance of companies (not because those

duties are commensurate with the director’s ‘rights’). Thus, the diminution of

a director’s ‘rights’ need not bring about a commensurate reduction in his or

her responsibilities.3

Introduction

One of the means by which majority shareholders in a private company

exercise control over the company is through the appointment of directors.

Typically, the composition of the board of directors is a function of

shareholding — in that the shareholders will confer on the majority share-

holder the entitlement to appoint directors making up a majority on the

board.

A different way of achieving the same result (ie for the majority share-

holder to appoint directors who control a majority of the votes on the

board) is through a weighting of directors’ votes, ie whereby each director’s

voting right is weighted according to the shareholding percentage of the

shareholder who appointed the director in question.

1

71 of 2008.

2

Cf Delport Henochsberg on the Companies Act71 of2008 and the authorities there

cited.

3

Section66(5) of the Companies Act 71 of 2008 implicitly recognises this.