Company acts through its shareholders

2017-02-01 06:02
Luhann Prinsloo

Luhann Prinsloo

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I’ve purchased a shareholding stake in my father’s family business, which I’ve been part of for some time. However, I’m clueless as to the basics of how the company’s shareholders are supposed to take decisions. What should I know about company resolutions?


A company is a juristic person and can only act through its shareholders and directors. As established by the Companies Act 71 of 2008, shareholders have the right to vote at meetings but are not primarily responsible for the management of the company. The board of directors, except to the extent that the Act or the company’s Memorandum of Incorporation (MOI) provides otherwise, has the authority to manage and control the company’s day-to-day business and affairs.

The board or any other person specified in the company’s MOI may call a meeting of the shareholders at any time. A meeting must be properly convened by means of a written notice setting out the date, time, venue and matters up for consideration. Such notice must be delivered to all shareholders at least 10 business days before the meeting is to commence in the case of a private company and 15 business days in the case of a public or non-profit company. It must also contain copies of all proposed resolutions to be taken, as well as a notice of the percentage of voting rights required for any specific resolution to be adopted.

On the date of the meeting and before commencement thereof, the attendees, or the chairperson, must ensure that holders representing at least 25% of the voting rights that can be exercised on at least one matter on the agenda for the meeting, are present. The Act further requires that a matter may not begin to be considered unless persons representing at least 25% of the voting rights which may be exercised on that matter are present when the matter is called on the agenda. The MOI may however set a lower or higher percentage in either or both cases.

The next step is establishing a person quorum for the meeting. This requires that, regardless of the votes’ quorum, should the company have more than two shareholders, a meeting may not begin and a matter may not begin to be considered, unless at least three shareholders are present at the meeting.

In the event that a quorum, whether a votes quorum or person quorum, is not present within one hour after the time at which the shareholders’ meeting is scheduled to begin, the Act provides for an automatic postponement of the meeting for a period of one week (unless modified by the MOI) and the shareholders then present at such postponed meeting shall be deemed to constitute a quorum.

Voting on any matter up for consideration and authorised for voting by the shareholders in terms of the Act or the MOI, may occur. Generally, with regards to voting, the majority principle applies.

Most matters, from a shareholders perspective however, will require an ordinary majority (50% plus 1) although some matters like amending the company’s MOI may require a special resolution (75%).

It is therefore very important to consult your MOI and also read the relevant provisions of the Act to familiarise yourself with the rights and duties of a shareholder. If necessary, obtain advice from a corporate specialist that can help guide you in understanding your shareholder rights.

– Luhann Prinsloo, associate, Phatshoane Henney Attorneys

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