There are decisions in a company require the shareholders of the company to vote on. Such decisions will be based on the majority votes of the shareholders, typically arrived at during a shareholder’s meeting. But what happens when a shareholder feels prejudiced by the majority’s conduct?

Oppression Remedies 

When a minority shareholder of a company feels like the majority’s decisions regarding the operation of the company have caused unfair prejudice to them, they may approach the court in terms of s163 of the Companies 71 of 2008, as amended (hereafter the “Act”) for relief.

The member seeking to invoke s163 of the Act must make an application to the court wherein they will be required to prove that the decision which they are challenging is either, prejudicial, oppressive or unfairly disregards their interests. In the case of Grancy Property (Pty) Ltd v Manala and Others 2013, the court stated that when determining the alleged oppressive conduct, the court must look at the conduct itself and the effect that it had on the other members. Where the conduct is alleged to have financial implications, an objective test is used, and objective evidence proving that a financial loss was suffered is required.

Who May Rely on s163? 

An application alleging that the conduct of a company was oppressive does not only have to be made by the company’s shareholders. Subsection 1 of the Act states that both directors and shareholders may rely on this section for relief.

Available Remedies 

Now that we have established how s163 works, here is a list of the remedies available if your application is successful:

An order restraining the oppressive conduct;An order appointing a liquidator if the company is insolvent;An order placing the company under supervision and beginning business rescue process;An order directing the company to amend its Memorandum of Incorporation or Shareholders Agreement;An order directing an issue or redistribution of shares;An order appointing additional directors;An order directing the company to a repay a shareholder any part of the consideration that the shareholder paid for shares, or pay the equivalent value, with or without conditions;An order changing or setting aside a transaction or an agreement which the company has concluded and compensating the company or other party involved;An order compensating an aggrieved person; orAn order for the trial of any issue as determined by the court. 

Conclusion 

Section 163 of the Companies Act prevents oppressive conduct of majority shareholders. An application in terms of s163 of the Act requires the determination of the conduct which is considered oppressive and the effect which that conduct had. A successful application allows the court to issue an order which either prevents the continued conduct or compensates the aggrieved party.

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Geffen and Others v Martin and Others [2018] 1 All SA 21 (WCC).

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