A critical analysis of the judicial review procedures under section 71 of the Companies Act 71 of 2008
| Jurisdiction | South Africa |
| Published date | 16 August 2019 |
| Pages | 302-329 |
| Citation | (2018) 30 SA Merc LJ 302 |
| Author | Rehana Cassim |
| Date | 16 August 2019 |
A CRITICAL ANALYSIS OF THE JUDICIAL
REVIEW PROCEDURES UNDER SECTION 71
OF THE COMPANIES ACT 71 OF 2008
REHANA CASSIM*
Senior Lecturer in Law, Department of Mercantile Law, University of
South Africa
Abstract
Section 71(5) of the Companies Act 71 of 2008 provides that a
director who has been removed from office by the board of
directors may apply to court to review the board’s decision. If the
board of directors decides not to remove a director from office, any
director who voted in favour of the removal, may, under section
71(6) of the Companies Act 71 of 2008, apply to court to review the
board’s decision. This article critically examines: the powers of a
court under the judicial review processes; the permissible court
orders which may be made; the locus standi to apply to court for a
judicial review under section 71(5) and 71(6); the time period
within which an application for judicial review must be instituted;
the costs of the judicial review procedures; and the discretion of a
court in granting or dismissing such applications. It is argued that
the judicial review processes in section 71(5) and 71(6) are unclear
and ambiguous in certain respects. Recommendations to amend
and modify section 71(5) and 71(6) are made with a view to
removing ambiguities in these provisions, and to improving and
strengthening the judicial review processes under these provisions.
I INTRODUCTION
Section 71(3) of the Companies Act 71 of 2008 (‘the Companies Act’)
permits the board of directors to remove a fellow director from office.
This may be done in instances where a company has more than two
directors, and a shareholder or director alleges that the director in
question has become ineligible or disqualified to be a director, or has
* BA (cum laude) LLB (cum laude) LLM (cum laude) (Witwatersrand) LLD (Unisa).
Senior Lecturer, Department of Mercantile Law, School of Law, University of South Africa,
Attorney and Notary Public of the High Court of South Africa. This article is based on sections
of the author’s LLD thesis.
302
(2018) 30 SA Merc LJ 302
© Juta and Company (Pty) Ltd
become incapacitated to the extent that he is unable to perform the
functions of a director, and is unlikely to regain that capacity within a
reasonable time, or that he has neglected or has been derelict in the
performance of the functions of a director.
1
A director who has been
removed from office by the board of directors on these grounds is
empowered by statute to question the board’s decision to remove him or
her from office. Under section 71(5) of the Companies Act, a director
may apply to court within 20 business days of his or her removal from
office to ‘review’ the board’s decision. On the other hand, in terms of
section 71(6) of the Companies Act, if the board of directors has
determined that a director is not ineligible, disqualified or incapacitated
or has not been negligent or derelict, any director on the board who
voted in favour of the removal of the impugned director, or any holder
of voting rights entitled to be exercised in the election of that director,
may apply to court to ‘review’ the board’s determination not to remove
the director from office. For example, if the applicant is of the view that
the board of directors had favoured the impugned director by not
removing him or her from office, or had breached its fiduciary duties in
failing to remove the impugned director, the applicant may apply to
court to review the board’s decision. Decisions of the Companies
Tribunal to remove, or not to remove, a director from office, are also
subject to review.
2
The judicial review processes in section 71(5) and 71(6) of the
Companies Act are critically analysed in this article. In particular, the
article critically examines: the powers of a court under the judicial
review processes; the permissible court orders which may be made
under the review processes; the locus standi to apply to court under
section 71(5) and 71(6) for a judicial review; the time period within
which an application for judicial review must be instituted; the costs of
the judicial review procedures; and the discretion of a court in granting
or dismissing such applications. Furthermore, the article discusses the
review of decisions of the Companies Tribunal on the removal of
directors from office under section 71(8) of the Companies Act. It is
argued that the judicial review processes embodied in section 71(5) and
1
Under s 71(3) of the Companies Act the board of directors, other than the director
concerned, must determine the matter by resolution, and may remove a director whom it has
determined to be ineligible or disqualified, incapacitated, or negligent or derelict, as the case
may be.
2
If a company has fewer than three directors, the board of directors may not remove a
director from office. Instead, any director or shareholder may apply to the Companies
Tribunal for a determination concerning the removal of a director from office (s 71(8) of the
Companies Act).
A CRITICAL ANALYSIS OF THE JUDICIAL REVIEW PROCEDURES 303
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