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Visser Sitrus (Edms) Bpk v Goede Hoop Sitrus (Edms) Bpk 2014 5 SA 179 (WCC) : regte
Statutory shareholder protection : judicial evaluation of oppressive and unreasonably prejudicial directors' decisions
The decision in Visser Sitrus (Edms) Bpk v Goede Hoop Sitrus (Edms) Bpk 2014 5 SA 179 (WCC) dealt with the relationship between the statutory business judgment rule in section 76(4) of the Companies Act 71 of 2008 and the oppression remedy in section 163. The court considered and confirmed the validity of a restriction on the transfer of shares in a memorandum of incorporation of a private company in South African company law. The court also confirmed the important principle that although a director has the duty to report what he or she has done, it does not include providing reasons for those actions to shareholders. The nature and scope of the discretion of directors to act bona fide and in the best interest of the company are (were??) considered, and and the court held that a director's discretion is limited only by these two considerations. This is also the first decision where a court had to apply the business judgment rule as enacted in section 76(4) of the Companies Act. The court also established the general principle that an applicant seeking relief in terms of section 163 will seldom be successful with such an application if he or she fails to prove a breach of duty by a director or directors. The reluctance of the judiciary to interfere with internal company matters and affairs was also discussed and confirmed. In this case note the judicial approach taken by the court is critically analysed in the context of the established common law principles.
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