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Minority shareholders are starting to rely on the innovative remedies provided in the new Companies Act in fighting oppression and prejudice, says Kara van de Pol, a senior associate at Bowman Gilfillan attorneys.

Last week the Supreme Court of Appeal (SCA) came to the assistance of an oppressed minority shareholder who invoked section 163(2)(f)(i) of the new legislation in asking the court to appoint two independent directors to a board riddled with “malfeasance” and “moral turpitude”.

“Although the old Companies Act of 1973 also contained ‘minority oppression’ provisions, the new section 163 has dramatically widened the scope of the protection afforded to minorities,” says van de Pol. “They may now seek an order appointing directors in place of, or in addition to, all or any of the directors in office.”

She says this ruling should encourage shareholders who allege oppressive or unfairly prejudicial conduct to consider, when framing the relief they seek, the 13 specific orders listed in section 163. “They range from orders appointing a liquidator or commencing business rescue proceedings, to orders that the price paid for shares be refunded or that compensation be paid.”

In the SCA’s recent judgment in Grancy Property Limited v Lancelot Lenono Manala and others, a senior advocate from the Cape Bar and a chartered accountant were appointed directors of the company so that they could investigate whether certain of the seven respondents – including the well-known attorney Dines Gihwala – had behaved unfairly to the applicant shareholder.


Van de Pol points out that there have been no reported judgments on this provision of the new legislation since the Companies Act came into effect in May 2011. “But last year the South Gauteng High Court – in Kudumane Investment Holding Ltd v Northern Cape Manganese Company (Pty) Ltd and Others – also relied on section 163 in declaring that certain persons should be regarded as comprising the board of the company in question.”