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Minority shareholders in a business do have rights under South African law

Being a minority shareholder in a business doesn’t mean you have no say. In South Africa, if you hold 49% or less of a company’s voting shares, you might lack some control, but you still have rights and while majority shareholders might call the shots with 51% or more of the vote, that doesn’t mean your voice doesn’t count.

Minority shareholders in South African companies often find themselves at odds with poor decisions made by the majority. But, under the South African Companies Act 71 of 2008 there are certain, inalienable rights and protections in place to ensure your interests are not ignored.

Caitlin Moses, a candidate attorney at commercial law firm, Gillan & Veldhuizen Inc., emphasises, “Recent high court cases have confirmed this, ensuring that minority shareholders are not side-lined when it comes to corporate decision-making.”

Here’s a rundown of your key rights:

  • Attendance and participation: You have the right to be present and actively participate in shareholder meetings. That means you may have your say on crucial decisions like electing directors and approving financial matters. “Whether you will be able to sway the decision is often dependent on whether an ordinary or special resolution is required to implement the decision,” adds Moses.
  • Access to information: The law grants you access to the company’s financial statements and other pertinent information about its operations.
  • Legal recourse: If your rights as a shareholder are violated, you can take legal action against the company.  Section 161 of the Act allows you to seek court orders to remedy any harm caused by the company’s actions.
  • Relief from unfair practices: If the company’s management unfairly prejudices your interests, you can seek assistance from the court.
  • Defending against oppressive conduct: You can defend your interests in court, especially if you believe the majority shareholders are acting oppressively.
  • Company dissolution: In extreme cases, the company can be dissolved if cooperation becomes impossible.
  • Preventing unwanted transactions: You have the option to exit the company if you’re unable to prevent a fundamental transaction you oppose.
  • Legal action on behalf of the corporation: You can follow a process to  cause the company to initiate legal action if it’s in its best interests.

The South African Companies Act ensures that minority shareholders have a say in corporate governance and provides protection for their investments. Caitlin concludes, “These rights empower minority shareholders to actively participate in corporate decisions and safeguard their interests, even in the face of majority control.”

“Even with these protections, mediation is worth considering as a first step to resolve disputes while preserving relationships and finding sensible and workable solutions”, advises Moses.

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