Confusion in the Judicial Review of Board Decisions to Remove Directors under Section 71 of the Companies Act 71 of 2008

Abstract

A significant innovation of the Companies Act 71 of 2008, contained in section 71(3), is that the board of directors of companies is empowered to remove directors from office. Within twenty business days directors so removed may apply to court under section 71(5) of the Companies Act to have the board's decision reviewed. Section 71(5) is an essential remedy for directors. More than ten years after the promulgation of the Companies Act South African courts are beginning to develop the jurisprudence on the interpretation of section 71(5). This article examines recent cases in which courts had to interpret section 71(5) of the Companies Act. It discusses the following issues that these cases canvassed: (i) whether the board's power to remove a director under section 71(3) of the Companies Act constitutes administrative action and whether the Promotion of Administrative Justice Act 3 of 2000 applies to the review of these decisions under section 71(5) of the Companies Act; (ii) the ambit of a section 71(5) review and whether courts may review both the procedural aspects and the merits of the board's decision; (iii) the trigger for the twenty-business-day period to run; (iv) whether a court may condone a section 71(5) review application brought after the twenty business days expire; and (v) the awarding of costs in a successful section 71(5) review. As this article shows, courts have disagreed with and contradicted one another on the correct interpretation of section 71(5). This disagreement has led to confusion in South African law regarding the judicial review of board decisions to remove directors.