Communicare v Khan

The appellants, two related companies and an individual, appealed against a Western Cape High Court order declaring invalid the election of directors at the appellants’ annual general meetings held on 27 October 2009. Under the articles of association, one-third of directors had to retire annually by rotation, but retiring directors were eligible for re-election and were also members of the companies by virtue of being directors. Acting on legal advice, the company excluded the retiring directors from voting in the election of replacement directors on the basis that they had to retire before vacancies could be filled. The respondents, members/directors of the companies, challenged the validity of the resolutions appointing the new directors, contending that the exclusion of the retiring directors’ votes was contrary to the articles and unlawfully diminished their voting rights.

The appeal was dismissed with costs, including the costs of two counsel and the costs of the application for leave to appeal. The High Court order setting aside the resolutions appointing the directors was confirmed.

The case clarifies South African company law on the distinction between personal and corporate membership rights, confirming that voting rights are personal and enforceable by individual members. It limits the application of the Foss v Harbottle rule where individual voting rights are infringed and provides authoritative guidance on the interpretation of articles of association governing rotational retirement of directors.