Authored by Christina Pretorius and Zubenathi Ndlwana.

Introduction

In March 2026, the High Court delivered a judgment clarifying the nature of the review of a board’s decision to remove a director in terms of section on 71(5) of the Companies Act, 2008. The applicant was a director of the first and second respondent companies. The respective boards removed him as a director in terms of section 71(3) of the Act.  The applicant instituted review proceedings against the respondents in terms of section 71(5) of the Act challenging the decision to remove him.  The dispute related to the nature of the review process set out in section 71(5) of the Act and whether it allowed for a reconsideration of the merits of the removal decision.  The court found that it had the powers of review on legality and rationality grounds, not appeal rights to consider the merits of the decision.

Legal framework

The board of directors of a company is empowered by section 71(3) of the Act to remove a director where the company has more than two directors and a shareholder or director of the company alleges that a director has: 

  1. become ineligible or disqualified in terms of section 69 of the Act;
  2. become incapacitated to the extent that they cannot perform their functions as a director and is unlikely to regain the capacity to do so within a reasonable time; or 
  3. neglected or have been derelict in the performance of their functions. 

Section 71(5) of the Act states that where a board of a company decides that a director is ineligible, disqualified, incapacitated, negligent or derelict, the director concerned or the person who appointed that director may apply within 20 business days from the date of the determination to a court to review the determination of the board. The Act does not specify what the extent of the review powers of the court are in terms of this section.

Court’s findings

The court held that section 71(5) reviews are a type of special statutory review and that referring to section 71(5) reviews as of its own kind (sui generis) or being reviews in the “wide” or “narrow” sense is unhelpful.  Section 71(5) purposefully refers to a review as opposed to an appeal. As a review remedy, it provides a mechanism for the courts to consider the legality and rationality of the decision and not the merits.

The court held that where the decision of a board on which the removal is based (ineligibility, disqualification, incapacitation, neglect, or dereliction) is clearly wrong, a court may correct that factual finding.  The decision of the board may also be reviewed if it is found to be irrational.  The court further confirmed that section 71(5) permits a review of whether there was non-compliance with the procedural requirements for removals set out in section 71.  Importantly, the court does not have the power to usurp the functions of the board of directors when conducting such reviews.  

The court found in favour of the board because there were no grounds on which the decision to remove the applicant could be reviewed and set aside. Interestingly, the court held that if any of the directors concluded before the board meeting that they would vote in favour of the removal of a director and the procedures prescribed in terms of section 71(4) were followed, the mere fact that a voting director had an initial view to remove the director does not render the procedure that was followed irrational.

Takeaways

Directors looking to review removal decisions should be aware that their right of review does not allow the courts to consider the matter afresh.  Courts will only intervene if a board’s removal decision is procedurally or legally flawed. Courts will not substitute the decision of the board lawfully and rationally made on the fact with their own. 

Pityana v ABSA Group Limited and Others (2021/64258) [2026] ZAGPPHC 176 (9 March 2026)