INTRODUCTION
For years, corporate boardrooms across the country have whispered a dangerous gospel of false security, that a strategic resignation can outrun past misconduct. Further that majoritarian shareholding grants absolute rule and that a single director’s signature can effortlessly bind an organisation. These assumptions are just wrong. Propelled by sweeping legislative shifts of the Companies Second Amendment Act 17 of 2024 and an activist judiciary, the traditional armour of corporate has completely dissolved. The modern South African legal landscapes has shifted away from loopholes toward transparency and stakeholder protection.
MYTH 1: Resignation Completely Cuts My Legal Liability For Past Actions”
The Companies Second Amendment Act 17 of 2024 amended Section 162 of the Companies act 71 of 2008. It explicitly states that a delinquency or probation application can be brought against a person who is currently a director, or was a director within the 60 months (5 years) immediately preceding the application.
The legislature inserted Section 162(2A), which gives the High Court explicit discretion to extend this 5-year period even further on “good cause shown”. This applies retrospectively, meaning older historical misconduct is not insulated from scrutiny.
In the Gihwala and Others v Grancy Property Ltd and Others (20760/2014) [2016] ZASCA 35, case the Supreme Court of Appeal affirmed that delinquency provisions under Section 162(2A) are protective not just punitive. Resigning doesn’t absolve a director of accountability because the purpose of the order is to safeguard the public and other corporate stakeholders from abusive or grossly negligent fiduciaries.
MYTH 2: If I Hold The Majority Shareholding, I Can Change Company Rules At Will
Section 163 of the Companies Act 71 of 2008 allows any shareholder or director to apply to court for relief against oppressive or unfair prejudicial conduct. If management powers or voting rights are exercised in a manner that unfairly disregards the interest of a minority stakeholder, the court can issue any order it deems it fit under Section 163(2). Including rewriting the Memorandum of Incorporation(MOI), reversing a majority resolution, or forcing the majority to buy out the minority at a fair market value.
The High Court in Ungerer v Ferreria and Others(4475/2024) [2025] ZAECQBHC 13, looked directly past the formal and strict majority shareholding structure and ruled that in private companies operating as “quasi-partnerships” , majority shareholders can’t rely strictly on their legal voting rights to justify exclusionary, non-transparent or oppressive behaviour against a minority partner.
Findings in Van der Watt v Schoeman and Others (3393/2022) [2023] ZAECQBHC 61, further expanded the boundary of Section 163 by confirming that oppression claims can even be litigated in a deadlocked company split 50/50. This further debunks the myth that corporate power begins and ends with majority voting control.
MYTH 3: “A Signed Contract Is Automatically Binding, Even If The Signing Director Lacks Internal Board Approval”
Section 20(7) of the Companies Act 71 of 2008 contains the statutory codification of the common law Turquand Rule. It allows a third party contracting with a company in good faith to presume internal compliance with all formal and procedural requirements of the Act and the MOI. Crucially, this statutory protection contains an explicit trap for outsiders, the presumption is totally voided if, in the cases that, the person knew or reasonably ought to have known of the failure or the director’s lack of authority. Because the doctrine of constructive notice was largely abolished by Section 19(4), actual or reasonable red flags must be managed.
In One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikklings (Pty) Ltd and Another (20028/14)[2015] ZAWHC 89, the High Court clarified the strict limits of both section 20 (7) and the common law Turquand Rule. The court ruled that an outsider can’t rely on the rule if they are dealing with an individual director who lacks the ostensible or apparent authority to bind the company to a massive transaction on their single signature.
CONCLUSION
The takeaway is unmistakeable, the era of corporate impunity in South Africa is officially over. The law no longer tolerates the weaponisation of corporate structures to evade personal accountability or oppress minority interests. Resignation is no longer a valid escape hatch; a five-year retrospective look-back window ensures that your past corporate misdeeds will chase you. Similarly, majoritarian power is no longer an absolute shield. The courts will gladly look directly past voting percentages and step into rewriting your company rules if you cross the line into oppression. Even the age-old reliance on commercial signatures has shifted, placing the burden on outsiders to mind the red flags of unauthorised deal-making.
In this regulatory environment, the corporate veil is no longer a concrete fortress!
DISCLAIMER : The information and material published provides general information only and should not be considered legal advice. Please consult one of our lawyers at M Ramalivha Attorneys on any specific legal problem or matter. We do not accept responsibility for any loss or damage, whether direct or consequential which may arise from reliance on the information contained herein. Those accessing the site are responsible for verifying the accuracy and relevance of any information before relying on it. Accessing this site does not establish an attorney-client relationship. The opinions expressed belong to individual authors and may not reflect the firm’s stance. M Ramalivha Attorneys disclaim all liability for decisions made based on the site’s content, which is offered without guarantees of accuracy.
