n Journal of Corporate and Commercial Law and Practice - Judicial construction of the requirement of good faith in section 165(5)(b) of the Companies Act 71 of 2008 : Mbethe v United Manganese of Kalahari - research

Volume 4 Number 2
  • ISSN : 2412-2998


A worrying practical weakness of the company law principle of separation of ownership and control is that corporate governance may potentially be undermined if directors, who are supposed to institute litigation on behalf of the company, are the wrongdoers. (Maleka Femida Cassim ‘The statutory derivative action under the Companies Act of 2008: The role of good faith’ (2013) 130 SALJ 496 at 499. See also Wallersteiner v Moir (No 2) [1975] All ER 849 (CA) 857.) For example, it is practically difficult for miscreant directors who would have seized a corporate opportunity belonging to a company for their own personal benefits to commence litigation on behalf of the company. The separation of ownership and control principle coupled with the proper plaintiff rule may result in corporate injury without redress (Wallersteiner v Moir (No 2) supra). Every sound system of corporate governance must provide for minority shareholder remedies and other stakeholders’ protection. One way of doing so is through a statutory derivative action, which is one of the major highlights of the South African Companies Act 71 of 2008 (hereinafter ‘the Act’) which only came into effect on 1 May 2011.

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