Director Removal in South Africa: What Boards and Shareholders Must Know

The Companies Act 71 of 2008 provides South African companies with a legal framework for the removal of directors, balancing the powers of the Board and shareholders with procedural fairness and good corporate governance. While removal is often necessary for strategic or ethical reasons, companies must follow the law carefully to avoid litigation or reputational harm.

Board-Initiated Director Removal: When and How?

Under Section 71(3), a Board may only remove a director if the company has three or more directors. If fewer than three, the matter must be escalated to shareholders or the Companies Tribunal.

• Required Process:

  • A written notice must be provided to the director, stating:

    • The intention to remove

    • The director must be given an opportunity to respond in writing or present oral representations before the Board vote

    • Grounds for removal must align with Section 71(3)(b), such as misconduct, incapacity, or neglect of fiduciary duties

• Judicial Oversight:

  • Under Section 71(5)–(7), any aggrieved director may apply to court to review the decision. The court may:

    • Interdict the Board from proceeding

    • Reinstate the director

    • Award compensation

      
      

Shareholder initiated Director Removal: Broad Powers

Section 71(1) permits shareholders to remove a director by ordinary resolution (51% vote), without needing to specify cause, unless otherwise required in the Memorandum of Incorporation (MOI).

• Key Principles:

  • Shareholders can act in their own interests

  • Directors cannot block a shareholder resolution unless they can challenge the process itself under Section 61(3)

• Best Practice:

  • Although not mandatory, courts have recommended (Pretorius v Timcke) that shareholders provide reasons to ensure transparency and reduce procedural disputes.

Calling a Shareholders’ Meeting (Section 61(3))

The Board must call a meeting if:

• 10% or more of shareholders submit a written, signed demand

• The demand specifies the purpose (e.g. director removal)

If the Board fails to act, shareholders may request assistance from the Companies Tribunal or apply to court.

Conflict of Interest: Dual Role Directors

When a director is also a shareholder:

• At Board level, the director must recuse themselves from voting on their own removal

• At a shareholders' meeting, the director may vote as a shareholder, even on their own removal unless restricted by the MOI

Tip: Define voting exclusions and conflicts of interest in your MOI or Shareholders’ Agreement.

Rights of Recourse for Removed Directors

Removed directors may:

• Apply for damages under Section 71(9)

• Be reinstated by court order

• Seek relief under common law or Section 20

Additionally, a company or shareholder may pursue a declaration of delinquency or probation under Section 162, even after removal (within 24 months), where misconduct, gross negligence, or dishonesty is proven.

Boardroom Best Practices for 2025

• Keep your MOI updated with clear rules on director removal and conflicts of interest

• Document all Board and shareholder communications

• Avoid removing directors without a solid paper trail — even when not strictly required

• If in doubt, seek legal advice before issuing notices or holding votes

  
  

Need help navigating a sensitive director removal? Kern, Armstrong & Associates offers confidential, strategic legal guidance, whether you’re a Board, shareholder, or director needing protection.