REMOVING A DIRECTOR: THE WHO, WHAT, WHEN AND WHY OF NAVIGATING SECTION 71 OF THE COMPANIES ACT

Removal of a director from a company can come with its fair share of issues and hurdles. Section 71 of the Companies Act 71 of 2008 (“the Act”) sets out the framework for the removal of directors and distinguishes clearly between removal by fellow directors and removal by shareholders. In this regard however, a company’s Memorandum of Incorporation (“MOI”) can provide for additional mechanisms other than those as set out in the Act.

To assist with understanding the complicated framework and (in some cases) contradictory interpretations of the Act, this article sets out the key considerations which must be borne in mind when removing a director from office.

WHO can remove a director?

A director can be removed from office in terms of section 71 by:

1.    the shareholders of the company; or

2.    the board of directors.

Removals by shareholders are governed by section 71(1) and (2) whilst directors seeking to remove fellow directors must bear section 71(3) and (4) in mind.

Whilst directors can only remove another director in terms of a closed list of grounds (namely an ineligibility to serve as a director, disqualification, incapacity or negligent or derelict performance of duties), shareholders are not bound by this list and no grounds are in fact prescribed by the Act.

This seemingly unlimited authority is in line with the accepted principle that directors act and serve at the behest of the shareholders.

WHAT is required to remove a director?

The Act prescribes that at a minimum, a director may be removed by ordinary resolution by either the shareholders or directors at a meeting duly constituted (taking into account the provisions of the MOI).

Before any resolution can be voted on at a meeting of the shareholders however, the director concerned must:

1. be given notice of the meeting and the proposed resolution, at least equivalent to that which a shareholder would be entitled to receive (irrespective of whether or not that director is a shareholder); and

2. be given an opportunity to make representations, either in person or through a representative, before the resolution is put to a vote.

In circumstances where the removal of the director is by fellow directors, the requirements are somewhat different, in that the director concerned must:

1. be given notice of the meeting, including the proposed resolution and a statement setting out the reasons for the resolution, with sufficient specificity to reasonably permit the director to prepare and present a response; and

2. be given a reasonable opportunity to make representations, either in person or through a representative, to the meeting before any proposed resolution is put to a vote.

What may become apparent from the wording above is that the Act clearly contemplates the director being given reasons when being removed by fellow directors but not by shareholders, which is dealt with further and in detail below.

WHEN can a director be removed?

The removal of a director in terms of section 71 can only take place at a shareholder’s meeting or a director’s meeting, depending on who intends considering the resolution for removal.

The wording of section 71(2)(a) notes that the notice given to a director must be “at least equivalent to that which a shareholder is entitled to receive”.

The typical notice periods are as follows:

• Public company/NPO: At least 15 business days’ notice.

• Private/personal liability company: At least 10 business days’ notice.

The company’s MOI might specify longer periods.

WHY can a director be removed?

A director can be removed from office by shareholders at their behest whilst by directors only where the circumstances set out in the closed list contained above are met. The question which comes to the forefront (and which was set out briefly above) is whether or not a shareholder is obliged to give reasons for the removal of a director.

This very issue has played out in numerous decisions in different divisions of the High Court of South Africa.

Coming to light first in the case of Pretorius and Another v Timcke and Others (“Timcke”), in which case the Western Cape division of the High Court held that section 71(2) must be read to include the additional requirement that shareholders must furnish reasons to provide a director with sufficient opportunity and ability to make representations.

This decision in Timcke has repeatedly been found to have been wrong in other divisions, however. In Miller v Natmed Defence (Pty) Ltd (“Natmed”), the applicant expressly relied on the court’s ruling in Timcke, asserting that reasons were required to be given.

This contention was rejected by the learned Matojane J, who reasoned that the legislature deliberately preserved the rights of shareholders to remove directors they no longer wish to have managing the affairs of the company.

The finding in Natmed has been upheld in numerous decisions in various divisions, most notably (and recently) in the case of Weir v Wiehahn Formwork Solutions (Pty) Ltd and Others (“Weir”), meaning the prevailing position in our courts (and now seemingly accepted by the Companies and Intellectual Properties Commission and the Companies Tribunal) is that shareholders are not required nor obliged to furnish reasons to directors for their removal.

In summary, the onus imposed on shareholders to remove a director is significantly lower than that of fellow directors, which is consistent with the scope and ambit of the role and involvement of each in a company. The shareholder acts in their own interest since they are exercising a proprietary right, whereas a director acts in the interests of the company in line with their fiduciary duties.

The Companies Act and the interpretation of its provisions can be complicated and lead to major disputes. Contact us for all your company law related legal issues and advice.

By Cameron Phillips

(Senior Associate)

02 October 2025

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