How to remove a director of a company in South Africa?
24 August 2016

– Summary

There are strict rules to follow when removing a director without consent, this article will help you understand to process involved.

Directors of South African Companies can step down voluntarily (i.e. resign) or can be removed without their co-operation/consent.

This article will deal specifically with the removal of directors without co-operation/consent (i.e. by force) and the correct procedures to be followed in such circumstances.  If these procedures are not followed then the removal is unlawful and can be challenged by the aggrieved director.

In all cases, a change of directors in South Africa law requires that the incoming/outgoing directors should be registered with the Companies and Intellectual Property Commission (“CIPC”).

If a director resigns they will complete certain documentation including a CR2 form.

Removal of a company director without his consent or without his co-operation must be done following the provisions of the Companies Act, 2008 (“the Act”).

These provisions apply to anyone that holds a position of “director” in a company, whether that position is held formally or informally.

 

Removal by the Board of Directors

 

The Board of Directors may remove a director if he/she has been neglecting or has been derelict in the performance of his/her functions, the procedure to be followed is:

  • An allegation against one of the directors is made.
  • The remaining Board of directors must agree to the adoption of a resolution confirming its desire to remove the director in question.
  • The Board must prepare a notice to the accused director containing the following:
    1. The proposed resolution for removal.
    2. A statement explaining why the resolution is being proposed with sufficient detail to enable the director to respond appropriately.
  • The accused director must be allowed to make representations to the remaining board of directors in person or through a representative.
  • Thereafter, the removal must be confirmed by an ordinary resolution (over 50%).

The board of directors may remove a director, provided there are more than 2 directors, on one of the following grounds:

  • The director is disqualified or is no longer eligible to be a director in terms of the Act (e.g. declared insolvent and not yet rehabilitated; convicted of a crime of trust – theft, fraud, forgery, etc.).
  • The director is incapacitated and he/she is unable to perform his/her functions as a director, and he/she is not likely to regain such capacity within a reasonable period.

Removal by the Shareholders

The Shareholders of a company may remove a director at a shareholders meeting with an ordinary resolution (over 50%).

  • There are no specified grounds which need to be relied on to remove a director.
  • Shareholders may remove a director regardless of a provision in the contained in the company’s Memorandum of Incorporation (“MOI”) to the contrary; this shareholders’ right also supersedes an agreement between the company and a director and even an agreement between any shareholders and a director.
  • The Shareholders must provide the director with notice of the meeting and a copy of the proposed resolution for removal.
  • The director must be allowed to make representations to the shareholders before the resolution may be considered.
  • Thereafter, the removal must be confirmed by an ordinary resolution (over 50%).

Removal in terms of the Memorandum of Incorporation (“MOI”):

As stated above the Act supersedes any provision in an MOI; any agreement between the company and a director and even an agreement between the shareholders any shareholders and a director.

Get a Shareholders Agreement now

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If you have a company or if you are starting a company you should have a Shareholders Agreement.

DISCLAIMER: THERE ARE MORE CONSIDERATIONS THAN WE CAN COVER IN THIS ARTICLE SO ONLY USE THIS INFORMATION AS A GUIDE.   THIS INFORMATION DOES NOT CONSTITUTE LEGAL ADVICE.  IT IS ALWAYS BEST TO DISCUSS YOUR SITUATION WITH AN ATTORNEY; CONTACT US AT 0861 88 88 35helpdesk@gcm-legal.com AND THROUGH THE CONTACT FORM ON THIS PAGE.

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