removal of directors Flashcards
what are the 3 ways in which a director can be removed
- Shareholders take a resolution
- Board of directors through a board meeting
- Tribunal
What does S71 say
directors can be removed by s/hs or board at any time
what is S71 an additional right to
The right to declare a director a delinquent in S162
what are 2 other ways a director can be removed besides the main ways
- removal by a business rescue proceeding
2. MOI makes provision for appointment or removal
What does the act say about removal of a director by shareholders
S71 says that a director may be removed by the s/hs at a shareholders meetings. it does not specify grounds upon which a director can be removed.
Can S71 override a company’s MOI when it comes to s/hs removing a director
yes it can
Why is S71 ito shareholders removing the director different to the old act
The old act did allowed a director to entrench their position in terms of a MOI or entering into agreements with s/hs not to remove them
What does S65 (8) say about the vote for removal of a director
It must be done in terms of an ordinary resolution which is 50% + one , it cannot be made higher
Can there be a provision in the MOI that gives a director the right to veto a s/h resolution to remove them
No as this would be inconsistent with the act
What are the two interpretations of “ persons entitled to exercise their voting rights”
- s/hs cannot remove a director appointed by a designated person in the MOI because they could not exercise their voting rights to elect them
- The director can be removed by s/hs who have voting rights that can be exercised in a general election of a director
What is Cassim’s preferred interpretation of “persons entitled to exercise their voting rights” and why
Interpretation 2 - had the legislature intended interpretation 1 , it would have been expressly stated in S71 (1), the words “despite anything” in S71 (1) cast serious doubt on interpretation 1 .
when can the board remove a director
- company has 2 or more directors
- alleged ineligible/disqualified
- alleged incapacity
- alleged derelict/ negligent
how is removal by the board different to shareholder removal of a director
when a director is removed by the board there are specific grounds that he can be removed on
what does S71 (3) say about the process for removing director
If any of the grounds alleged by the s/h or director is applicable, the board must make a resolution to remove the director or not.. The allegation does not have to be in writing , it can be made verbally.
what does S69 (4) say about the entitlement of a director who is ineligible or disqualified
The person ceases to be entitled to act as a director immediately
what does S71 (4) say about the director disputing the allegation against them on a ground for removal
The director will be given a reasonable opportunity at the meeting to make a presentation to dispute the allegation against them for their removal before the resolution is taken to remove them
How many days does a director have to apply to court to review the decision for his removal
20 days
when will a vacancy arise on the board after the removal of a director
after the 20 days for review or the court has made an order
On what basis is it decided that a director is incapacitated and therefore be removed
this is a question of fact
On what basis is it decided that a director is neglecting their duties
This is assessed with regard to duties and functions required by the directors i.e common law duties and duties set out in S76
Can a director vote in a resolution to remove him
NO but if the director is also a s/h he can vote in the resolution for his removal in his capacity as a s/h
when does removal by a tribunal occur
when a company has less than 3 directors
what types of companies does the tribunal usually deal with
smaller companies
what grounds does removal of a director by the tribunal take place on
essentially the same grounds as removal of a director by the board
what are the procedural requirements for removal of a director
- notice ( no set time period)
- Statement of reasons (for board removal)
- director makes presentation
- resolution taken
- director can apply for review if removed by board
can a director apply to the court to review a s/h decision taken to remove them
No
What did Kaimovitz say about the roles a director plays in a company
a director plays two roles 1. a director 2. an employee
what did SA post office say about the protection of directors
Directors fall within the ambit of the LRA and can still be unfairly dismissed. Parties to the contract cannot contract out of the protection afforded by the LRA for unfair dismissal. Automatic termination provisions are not permissible.
what section deals with ineligibility
S69
Does the act prescribe minimum qualifications for a director
No , this is internal company policy, provisions for this can be made in a company’s MOI
what are the grounds for disqualification
- juristic person
- minors / people with no legal capacity
- People who do not meet MOI requirements
where are the grounds for disqualification listed
S 69 (8)
can the MOI add additional grounds for disqualification
yes
what are the consequences of disqualification or ineligibility
- person cannot become a director
- cease to be a director immediately
- company cannot knowingly appoint an ineligible or disqualified person
what does it mean to be dishonest for the purpose of disqualification
to deceive, defraud or to steal , involve some element of fraud
what is the duration for disqualification
5 years but can be extended by the court
what did the court find in ex parte Tayob
Bribery and corruption posed a serious threat to an open and honest community. Too little time had lapsed between date of conviction and date of application to prove director had been rehabilitated.
what will the court consider in exemption for disqualification
the defect of character no longer exists and the person has been rehabilitated
what is the main idea behind disqualification
not to punish but to protect the interests of shareholders and the public and to ensure that these interests are not endangered i.e to ensure that public funds are protected from unscrupulous persons
why is delinquency more onerous than disqualification or ineligibility
a court application has to be made in order to declare a person a delinquent and place them on probation
who has locus standi ito of s162 (2) to apply for a director to be declared a delinquent
- company, shareholder, director etc
- trade union rep employees
- any other rep of employees
who has locus standi ito of S162 (3) to apply for a director to be declared a delinquent
- CIPC
- takeover regulation panel
what are the grounds for delinquency that the Myeni case is based on
gross abuse, personal advantage, gross negligence, wilful misconduct or breach of trust
