Volume: Volume 26 - 2022

Article type: Refereed article

Author/s: Simphiwe S Bidie

For the purposes of protecting the rights and interests of shareholders, section 115(2)(a) of the Companies Act 71 of 2008 is imperative and essential. The veracity of the section and its concomitant provisions are beginning to find their footing before South African courts. One of the occasions when the imperative nature of the section is seen is when directors take part in decision-making where companies intend to enter into share buy-back schemes of arrangement. In that respect, the clarity and precision of the section has so far received limited scrutiny. To compound matters, even before the role shareholders are expected to play has been thoroughly scrutinised, the sections relating to shareholders’ exercise of power are currently the subject of a proposed repeal. Fortunately, recent judgments have begun to provide insight into the interpretation of section 115(2)(a), and the same can be said with respect to like sections from other jurisdictions. This contribution examines these latter sections. It chiefly shows that the judgments consulted regard shareholder protection not as a strait-jacket, a view which has its pitfalls. On most occasions, however, the pitfalls are deliberately manifested. The examination of how courts have sifted out these tendencies, such that parties in the wrong are compelled to comply with the law, is of utmost importance. These contributions ease disconcertment because the judgments consulted speak with one voice on interpreting provisions aimed at maintaining the necessary balance between the rights and interests of company stakeholders. Essentially, the judgments admirably show that the process of finding that balance is a delicate exercise.

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