In August 2021, the High Court in Miller v Natmed Defence (Pty) Ltd and others (18245/2019) [2021] ZAGPJHC 352 handed down a decision reaffirming the position that directors serve at the behest of the shareholders which elected them. To this end, the Court highlighted that shareholders may decide to remove a director without having to give reasons for such decision. This judgment further cements the prevailing position of shareholders and their powers relating to directors.
In this case, a director of a company sought, amongst other things, to set aside the decision of the shareholder of the company to remove him as a director on the basis that the decision to remove him had not complied with Companies Act of 2008 (Act). Particularly, it was alleged that the shareholder had not provided the director with the reasons for the intended removal and consequently the director was not given an adequate opportunity to make representations as to why the removal should not take place.
The Court found that the Act only requires that reasons for removal of a director must be given if it is the board of directors taking the decision to remove the director in question. There is no similar requirement applicable to shareholders choosing to remove a director. Indeed, the legislature has specifically preserved the right of the majority of shareholders to remove directors that they no longer support.
The Court finally determined that it was not the intention of the legislature that shareholders be compelled to provide reasons as to why they chose to remove the very directors they elected. Consequently, shareholders are free to remove directors at will, without the requirement to provide reasons for their decision.
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