South Africa: Feeling Sidelined? – How To Have Your Voice Heard By Your Fellow Shareholders

Last Updated: 14 January 2014
Article by Van Velden Pike Inc

Remedies for minority shareholders in terms of the South African Companies Act 71 of 2008

It is in the context of a private company (where shares cannot always simply be sold on an open market as recourse to an undesirable resolution being passed) that the need for protective mechanisms for minority shareholders' interests is highlighted. The Companies Act 71 of 2008 ("the Act") makes provision explicitly for the protection of minority shareholders in cases where a resolution, which adversely affects their rights or interests, is passed by the majority. This article will discuss these, along with various other remedies.

Court approval / review (A handy option!)

Section 115 of the Act deals with the requirements for the passing of a resolution relating to the implementation of an amalgamation, merger, scheme of arrangement, or the disposal of all or the greater part of the company assets. It provides that a special resolution (at least 75% of the voting rights exercised on the resolution) must be obtained in order to implement any of the mentioned arrangements or schemes. If, however, 15% or more of the voting rights exercised on that resolution voted against it being adopted, any of those may require the company to obtain the court's approval for the resolution to be implemented. The company will then have to either apply to court for its approval within 10 business days or treat the resolution as a nullity. If the 15% minimum is not achieved, anyone who voted against its adoption can still apply directly to court for the resolution to be reviewed. In the latter case the court will only grant leave for the application provided that the applicant is acting in good faith, appears prepared and able to sustain proceedings and has alleged facts which, if proven, would support an order to set the resolution aside.

There are only two bases upon which the court may set the resolution aside, the first being that the resolution is "manifestly unfair to any class of holders of the company's securities." The second basis is that "the vote was materially tainted by conflict of interest, inadequate disclosure, failure to comply with the Act, the Memorandum of Incorporation or any applicable rules of the company, or other significant and material procedural irregularity."

Majority of creditors' or members' approval of a resolution has been held to be an indication that it is indeed fair and reasonable.1 The court is especially careful not to impose its view over that of a creditors' majority.2 It has been argued that the court would have sufficient justification to refuse approval of a resolution if decisive votes to the resolutions adoption have been 'bought' (i.e. consideration given or promised for an undertaking to vote in a certain manner) and that our courts would take into consideration general commercial morality and public interest.3

Appraisal rights (If you can't beat them – force them to pay you!)

Section 164 of the Act also provides for the remedy of appraisal rights for dissenting shareholders in cases where the company:

  • has given notice of its intention to "amend its Memorandum of incorporation by altering the preferences, rights, limitations or other terms of any class of its shares in any manner materially adverse to the rights or interests of holders of that class of shares"; or
  • considers any resolution relating to transactions or arrangements which require a special resolution – such as the implementation of an amalgamation, merger, scheme of arrangement, or the disposal of all or the greater part of the company's assets.

The requirement that a shareholder's interests or rights must be affected in a 'materially adverse' manner is broad and possibly unclear, even perhaps including cases of potential, rather than probable prejudice and dilution of shareholder's relative voting rights. 4

Where the requirements of this section are met, shareholders who have given written notice of their intention to object to the resolution, and have in fact exercised their vote against it, will have the right to demand payment of the fair value of their shares from the company as recourse upon such resolution being passed. There will be no requirement to give notice of intention to object to the resolution if the company either failed to send notification of that proposed resolution or, having sent such notice, failed to include the shareholders rights in terms of section 164. The demand for payment of the shares' fair value must be sent within 20 business days after receiving notice of the resolution being adopted or, where no notice of the adoption has been sent, within 20 business days after becoming aware of its adoption. It must also be delivered to the Takeover Regulation Panel (a regulatory body) stating the details of the shareholder, the class of shares and the fair value payment demanded for it.

Once a shareholder demands such payment, all his or her rights with regard to the shares - apart from the right to payment of their fair value - fall away. These rights may be reinstated if the offer made by the company has not been accepted by the shareholder within 30 business days after it was made, or if the demand has been withdrawn by the shareholder. This withdrawal can be done prior to the company making an offer or if the company fails to make a valid offer.

A shareholder may also apply to court for the determination of a fair value if the company has not made an acceptable offer or if it has not made an offer at all. If there are reasonable grounds to believe that paying the demands made will result in the company not being able to meet its debts as they fall due for the ensuing year, the court may, on application by the company, amend the payment demanded according to what is just and equitable in the financial circumstances of the company.


1. Dundas & Miller (Pty) Ltd v Burton NO 1971 (1) SA 106 (E) at 108; Ex Party Utility Shoe ManufacturingCompany: In re ABC Store (Pty) Ltd 1948 (4) SA 1 (W) at 5; Delport P, Henochsberg on the CompaniesAct 71 of 2008 (Vol. 1, Service issue 4, December 2012) at 419.

2. Lordan v Dusky Dawn Investments (In Liquidation) 1998 (4) SA 519 (SEC)

3. Delport P, Henochsberg on the Companies Act 71 of 2008 (Vol. 1, Service issue 4, December 2012) at 419.

4. Ibid at 578.

Originally published July 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions