Review: Legal standing rules under the Companies Act, 2008: A critical review

• Author: Heyerdahl, J.
• DOI: https://doi.org/10.47348/JCCL/V7/i1a5
• Published date: 16 May 2022
• Date: 16 May 2022
• Citation: (2021) 7(1) JCCL&P 104
• Pages: 104-112

104

LEGAL STANDING RULES UNDER

THE COMPANIES ACT, 2008: A

CRITICAL REVIEW

Jens Heyerdahl

Attorney of the High Court

I INTRODUCTION

It was illustrated in Organisation Undoing Tax Abuse NPC & Another

v Myeni & Another (15996/2017) [2019] ZAGPPHC 957 (hereafter

Myeni) that a director alleged to have breached the Companies

Act 71 of 2008 (the Act) can be sued by any person or entity. This is

notwithstanding the fact that such a person or entity is specifically

mentioned in the list of parties entitled to bring the action under the

relevant section of the Act, or if it can be provided on the facts that

the action is in the public interest (para 32). The purpose of this note

is to critically review the legal standing rules under the Act in light

of the Myeni case.

II THE COMMON-LAW APPROACH TO LEGAL STANDING

A traditional common-law approach was the shareholder dominance

theory, which was based on the traditional philosophy of corporate

objectives that were based on company ownership concepts and

that directors only owed duties to shareholders to the benefit of

the company with the exclusion of other stakeholders. (See more

as to how the approach operated and linked with the issue of locus

standi: T Donaldson & L E Preston ‘The Stakeholder Theory of the

Corporation: Concepts, Evidence, and Implications’ (1995) 20 The

Academy of Management Review 83–91. The corporate law enforcement

mechanism was limited to an action for a breach of directorial duties

owed to shareholders’ legal standing, and the causal link to the legal

standing test was whether the relevant director duties were owed to

the person. (See Hutton v West Cork Railway Co (1883) 23 ChD 645

(CA)).

A second common-law approach was the shareholder primacy

theory where shareholder wealth maximisation was the primary focus

of a company and directors had an obligation to consider company

(shareholder) interests and could also consider non-shareholder

interests but did not owe fiduciary duties to these stakeholders nor

did they approach or allow any enforcement mechanisms to non-

(2021) 7(1) JCCL&P 104

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