WOMEN'S MONTH: Protective provisions for minority shareholders

22 August 2017 ,  Dr Candice Reynders 652

Since the dawn of time, women have been proving to their counterparts that they can do anything a man can do. Things are no different in the corporate world. Women have started to invest in and acquire shareholding in companies either as passive or active shareholders. Now, while it cannot be said that this is always the case, many women have adopted the view that the best way to eat an elephant is bite for bite, acquiring shares incrementally until eventually they have enough voting interest to be heard.  While this makes practical sense, minority shareholders are sometimes unfairly taken advantage of, and when the minority shareholder is a woman, the conventional notion that women are easy targets is, unfortunately, aggravated.

But do not fret. All minority shareholders have been afforded protection in the Companies Act 71 of 2008 (the “Act”), such as appraisal rights in section 164, where minority shareholders are entitled to dispose of their shares to the company in certain circumstances and protection against the abusive and oppressive conduct of majority shareholders and directors in section 163, if only to name a few. The topic under discussion, however, relates to protection against unfair oppressive and prejudicial conduct or omission of shareholders or directors who have power over the company and other shareholders. 

In terms of section 163 of the Act, a shareholder or director who is the subject of oppressive or unfairly prejudicial conduct or conduct that unfairly disregards the interest of such shareholder or director, may apply to court for relief. A court may essentially overturn decisions which it rules to be oppressive or unfairly prejudicial to other shareholders, including minority shareholders.

Accordingly, section 163 determines that a shareholder or director may apply to court for relief if -

  

any act or omission of the company or a related person has had a result that is oppressive or unfairly prejudicial to or has unfairly disregarded the interests of the applicant; 

the business of the company or a related person is being or has been carried on or conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicant; or 
 
where the powers of a director or prescribed officer of the company or a person related to the company are being or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of the applicant.
  

It should, however, be remembered that the application of the protection of section 163 should not be abused, as same may result in the minority shareholders oppressing the majority. As a result, a court will not lightly grant relief to a minority shareholder which experiences treatment inherently due to a shareholder with less shares. The conduct or omission of majority shareholders, which the minority perceive to be oppressive and prejudicial, needs to be unfair in order to rely on section 163. In such an instance the court will not consider the motive for the conduct which is challenged, but rather the conduct itself and the effect which the conduct has on the other shareholders of the company.

So, my fellow women, go forth into the corporate world, without fear of oppression and subordination. The journey of a thousand miles begins with one step – so let us start, one share at a time, by arranging a consultation with a commercial attorney today.

Disclaimer: The content of this article refers only to the basic principles founded in section 163 of the Companies Act 71 of 2008, as amended, with specific reference to minority shareholders in a private company.

 
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