Page 58 - Q&A

Minority shareholder rights
in a private company

September 2020
“I hold 20% shares in a private company that I bought into a few years ago. The
majority shareholders heavily influence the directors who take decisions which
in my view is not always in the best interests of the company or my own as a
Commercial Shares in a company afford a shareholder voting rights/voting power in a
minority shareholder in the company. What remedies are available to me?”

company, with the percentage of shares held representing the extent of such
voting rights/voting power. In your case, as only a 20% shareholder this stake
is usually not sufficient to provide the necessary voting power to sway matters
resolved to by the majority shareholders of the company.
In order for shareholders meetings and decisions to be valid, the requirements
contained in Sections 61 up to and including Section 65 of the Companies
Act 71 of 2008 (“Companies Act”) must be complied with, and your first port of
call as shareholder is to ascertain whether these formalities have been met. It
should be noted that some of these provisions can be varied by a company’s
memorandum of incorporation (MOI), and this would also need to be reviewed.
Often the percentage of voting rights needed for certain types of resolutions to
be taken are prescribed in the MOI.

Where decisions are validly taken, but a minority shareholder is of the opinion
that other shareholders are oppressive and unfairly disregarding their interests,
they have the option of approaching the court and applying for a relief in terms
of Section 163 of the Companies Act. Section 163(1) sets out instances in terms
of which a shareholder or director can approach the court, and can include
the following:
• An act or omission which is oppressive or unfairly prejudicial to the interests
of the applicant or that unfairly disregards the interests of the applicant.
• The business of the company is being or has been carried on or conducted
in a manner that is oppressive or unfairly prejudicial to the applicant or that
unfairly disregards the interests of the applicant.
• The powers of a director or prescribed officer of the company have been
exercised in a manner that is oppressive or unfairly prejudicial to the
applicant or unfairly disregards the interests of the applicant.

Section 163(2) sets out a variety of remedies, including interim or final orders,
which the court can make. These can include restraining the conduct
complained of, placing the company under supervision and commencing with
business rescue proceedings, directing the company to amend its MOI or to
create or to amend a unanimous shareholders agreement, directing an issue

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