Examining the interpretation of section 115(2)(a) of the Companies Act of 2008

Abstract

For the purposes of protecting the rights and interests of sharehoIders, section 115(2)(a) of the Companies Act 71 of 2008 is imperative and essential. The section and its concomitant provisions are beginning to find their footing before South African courts. One of the occasions when the imperative nature of the section is seen is when directors take part in decision-making where companies intend to enter into share buy-back schemes of arrangement. In that respect, the clarity and precision of the section has so far received Iimited scrutiny. To compound matters, even before the roIe shareholders are expected to play has been thoroughIy scrutinised, the sections relating to shareholders' exercise of power are currently the subject of a proposed repeaI. FortunateIy, recent judgments have begun to provide insight into the interpretation of section 115(2)(a), and the same can be said with respect to simiIar sections from other jurisdictions. This contribution examines these Iatter sections. It chiefIy shows that the judgments consuIted regard shareholder protection, not as a straight-jacket; the protection has its pitfalls. Meritoriously, it shows how courts interpret section 115(2)(a) to protect shareholders from the pitfalls by promoting/advancing shareholder protection. The judgments also speak with one voice in their interpretation of provisions aimed at maintaining the necessary balance between the rights and interests of company stakeholders. Essentially, the judgments admirably show that the process of finding that balance is a delicate exercise.