Section 71(1) and (2) of the Companies Act 71 of 2008 (“the Act”) permit shareholders to remove directors from their office by passing an ordinary resolution. In the recent case of Weir v Wiehahn Formwork Solutions (Pty) Ltd and Others (19494/2024) [2025] ZAWCHC 74 (the “Weir case”) the question arose as to whether a director is entitled to reasons for their intended removal before the resolution is put to a vote. On consideration of previous conflicting case law, Holderness J found in the negative.
Section 71(1) of the Act permits shareholders to remove a director from their office by passing an ordinary resolution at a shareholders meeting. Section 71(2) requires that before such a resolution is put to a vote, the director must be (a) given notice of the meeting and (b) afforded with a reasonable opportunity to make a presentation. This differs from the instance where a director is removed by fellow directors, in which case section 71(4)(a) additionally requires a statement of reasons to be provided.
In the Weir case, the shareholders removed Mr Weir as executive director by way of an ordinary resolution. Mr Weir applied to have the resolution declared invalid and set aside as he was not explicitly provided with reasons for his intended removal prior to the shareholders’ meeting. He believed that this omission rendered him unable to exercise his right to make a reasonable presentation and that section 71(2)(b) was therefore not complied with. However, the application was dismissed by Holderness J on the basis that (i) the clear wording of section 71(2) does not include the additional requirement that reasons be provided and (ii) even if it did, Mr Weir had already been given a reason; that ‘the company had lost confidence in him.’
Holderness J addressed the conflicting judgments of Pretorius and Another v Timcke and Others (15479/14) [2015] ZAWCHC 215 (2 June 2015) (“Timcke”), Miller v Natmed Defence (Pty) Ltd (18245/2019) [2021] ZAGPJHC 352; 2022 (2) SA 554 (GJ) (“Miller”) and Besso Investments (Pty) Ltd and Others v Capeco Development (Pty) Ltd and Others (3812/2024) [2024] ZAECQBHC 74; [2025] 1 All SA 622 (ECP) (“Besso Investments”). In his argument, Mr Weir relied upon the Timcke judgement in which the additional requirement of reasons was read into section 71(2)(b). Holderness J however held this to be incorrect. Instead, he agreed with the more recent judgment of Miller, which held that the legislature’s intention is clear: reasons are only required when directors are removed by fellow directors, and this requirement cannot be read into section 71(2)(b).
Holderness J explained the sound reasoning behind the heavier burden placed on directors removing a fellow director, compared to the lighter burden placed on shareholders. Whereas shareholders voting at shareholders’ meetings exercise their proprietary rights and ultimate control over the company, directors do so under the auspices of their fiduciary duties towards the company. Moreover, as directors can only remove fellow directors on specific grounds, it is thus sensible that reasons for removal are provided.
For further information on the removal of directors, please contact us here.