Disputes between shareholders and directors are among the most high-stakes matters a business can face. They often involve the people who built the company together, they put control of the business at risk, and they can paralyse decision-making until resolved.
The Companies Act 71 of 2008 gives shareholders and directors a range of remedies. This article explains the main ones, when they are used, and the leading case law.
Why these disputes escalate
Common triggers include:
- deadlock between equal shareholders or between board factions;
- a majority excluding a minority from management, information or dividends;
- related-party transactions that benefit some shareholders at the company’s expense;
- allegations that directors have misused company funds or opportunities;
- disputes over the value of shares when someone wants to exit.
Many of these could be avoided with a well-drafted shareholders’ agreement and memorandum of incorporation. Once a dispute starts, those documents are also the first place to look for deadlock, exit and dispute resolution mechanisms.
Relief from oppressive or prejudicial conduct (section 163)
Section 163 allows a shareholder or director to apply to court where:
- an act or omission of the company,
- the way the company’s business is carried on, or
- the way directors exercise their powers
is oppressive or unfairly prejudicial to, or unfairly disregards, the applicant’s interests.
The court has wide powers to make any order it considers fit. These include restraining conduct, appointing a liquidator or business rescue practitioner, directing the company or other shareholders to buy the applicant’s shares, setting aside transactions, and amending the company’s governing documents.
Section 163 is often the most practical route for a minority shareholder who has been squeezed out, because a buy-out order can give a clean exit at a fair value.
Derivative actions (section 165)
Where a wrong has been done to the company itself, for example a director diverting a business opportunity, the company is the proper party to sue. But if those in control of the company are the wrongdoers, they are unlikely to authorise a claim against themselves.
Section 165 addresses this. A shareholder, director or certain other persons may serve a demand on the company to start or take over proceedings to protect its legal interests. If the company does not act appropriately, the person who made the demand may apply to court for leave to bring proceedings in the company’s name. The court will consider whether the applicant acts in good faith, whether the proceedings involve a serious question of material consequence to the company, and whether they are in the company’s best interests.
Delinquency declarations (section 162)
A court may declare a director delinquent, disqualifying them from serving as a director, typically for seven years or more, on grounds including gross negligence, wilful misconduct, breach of trust, or gross abuse of the position of director.
In Gihwala and Others v Grancy Property Ltd and Others 2017 (2) SA 337 (SCA), the Supreme Court of Appeal upheld delinquency orders against directors who had dealt with an investor’s money in a way that grossly abused their positions. It also rejected a constitutional challenge to section 162, describing the section as a rational response to the problem of delinquent directors. The case is a reminder that delinquency applications are a serious remedy with lasting consequences.
Director liability (sections 76 and 77)
Directors owe duties to the company to act in good faith, for a proper purpose, in the company’s best interests and with the care, skill and diligence reasonably expected of a person in their position (section 76). Section 77 makes directors personally liable to the company for loss caused by breaches of these duties, and for specific conduct such as reckless trading or knowingly participating in fraud.
The business judgment rule in section 76(4) gives directors some protection where they took reasonably diligent steps to be informed, had no material personal interest, and had a rational basis for believing the decision was in the company’s best interests.
Business rescue and winding-up
In some disputes, one party tries to place the company into business rescue or seeks its winding-up on the “just and equitable” ground. Courts scrutinise these applications. Business rescue requires a reasonable prospect of rescuing the company, and in Oakdene Square Properties v Farm Bothasfontein (Kyalami) 2013 (4) SA 539 (SCA), the Supreme Court of Appeal held that this requires more than speculation. Business rescue should not be used simply as a tactic to delay creditors or gain leverage in a shareholder fight.
Practical steps
- Read the governing documents first. The MOI and shareholders’ agreement may contain deadlock, pre-emption, valuation and arbitration provisions that control how the dispute must be resolved.
- Exercise information rights. Shareholders and directors have statutory rights to certain company records. Using them early helps build or test a case.
- Keep the business running. Courts look unfavourably on parties who damage the company to gain leverage.
- Consider interim relief. Where a transaction, meeting or resolution threatens to change the position irreversibly, an urgent interdict may be needed.
- Take independent advice. Directors and shareholders often have different interests from the company and from each other.
How O’Reilly Law can help
We act for shareholders, directors and companies in disputes over control, exits, director conduct and transactions, and draft the agreements that help prevent them. Speak to our litigation and dispute resolution team or our business structuring practice.
Contact us to discuss your matter in confidence.
This article is general information and not legal advice. Every dispute turns on its own facts. Correct as at October 2026.