Besso Investments (Pty) Ltd and Others v Capeco Development (Pty) Ltd and Others

The applicants, three shareholder companies each holding one third of the issued shares in Capeco Development (Pty) Ltd, demanded in terms of section 61(3) of the Companies Act 71 of 2008 that Capeco’s board convene a shareholders’ meeting. The purpose of the meeting was to consider resolutions under section 71(1) to remove the third and fourth respondents as directors and to elect a replacement director. Although it was common cause that the statutory demand was valid, the third and fourth respondents (who formed the majority of the board) refused to convene the meeting, contending that they were entitled to detailed reasons and grounds for their proposed removal before issuing a notice. The applicants alleged that the directors were acting under the undue influence of a non-director, John Baeyens, to the detriment of Capeco, and approached the High Court urgently under section 61(12) to compel the convening of the meeting.

The application was granted. The applicants were ordered to furnish the respondents with the draft resolutions for removal of the third and fourth respondents as directors within five days. The respondents were ordered thereafter to convene and give notice of a shareholders’ meeting within the statutory timeframe. Costs were awarded against the third and fourth respondents, including costs of counsel on scale C.

The judgment clarifies South African company law on the procedural requirements for removing directors by shareholders under the Companies Act 71 of 2008. It affirms that shareholders are not obliged to provide reasons or grounds for the removal of directors under section 71(1), thereby reinforcing the principle that directors serve at the pleasure of shareholders. The decision also rejects the approach in Pretorius v Timcke and aligns with Natmed, providing authoritative guidance for future disputes concerning shareholders’ demands for meetings and director removals.