Minority shareholder protection refers to the measures put in place to safeguard the rights and interests of shareholders who own less than 50% of the shares in a company. In South Africa, the Companies Act, 71 of 2008 (the Act) includes provisions to protect minority shareholders, including Section 163.
Section 163 outlines the rights of minority shareholders
Section 163 of the Act sets out the rights of minority shareholders to bring actions for the protection of their interests, such as the right to bring an action if they feel that the majority shareholders are acting in an oppressive manner. The section also states that the court may make any order it deems fit, including an order for the purchase of shares by the company or other shareholders.
Minority shareholders often feel that the majority shareholders are acting in a way that is prejudicial to their interests. This could include actions such as the majority shareholders making decisions that are not in the best interests of the company, or using company assets for personal gain. In such cases, the minority shareholders can apply to the court for an order to rectify the situation.
Winding up or exiting the company
The winding-up of a company is another remedy available to minority shareholders under Section 163. This drastic remedy is usually used when all other avenues have been exhausted, and shareholders do not foresee being able to work together any longer. The court can order the winding-up of the company if it determines that it is just and equitable to do so.
Section 163 also gives minority shareholders the right to request the purchase of their shares by the company or other shareholders. This can be used when the minority shareholders feel that the company is not being run in their best interests and they wish to exit the company. The court can order the purchase of the minority shareholders’ shares at a fair value.
Get an expert legal opinion
In conclusion, Section 163 of the Companies Act, 71 of 2008 provides important protections for minority shareholders in South Africa. These rights help to ensure that minority shareholders are treated fairly and that their interests are protected.
For expert advice on Shareholder Protection, speak to one of the Corporate and Commercial Law attorneys at Abrahams & Gross.
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