The removal of directors in state-owned companies: shareholders’ franchise in jeopardy? Molefe and others v Minister of Transport and others

• Published in: SA mercantile law journal Vol. 30; no. 1; pp. 155 - 171
• Main Author: Thabane, Tebello
• Format: Journal Article
• Language: English
• Published: Juta and Company (Pty) Ltd (Juta's Law Journals) 01-11-2018
• ISSN: 1015-0099; 1996-2185

The partial, and sometimes wholesale, removal of boards of directors by shareholder representatives is an all too common phenomenon in South Africa’s state-owned companies (SOCs). In Molefe & others v Minister of Transport & others (17748/17) [2017] ZAGPPHC 120 (10 April 2017) ( Molefe) the Minister of Transport, in her capacity as the shareholder representative, removed directors en masse. At issue before the High Court was whether the minister’s decision constituted administrative or executive action. The court concluded that it was administrative. This note primarily provides an analysis of the court’s characterisation of the shareholder representative’s action to remove directors (a corporate decision) as an administrative action subject to review under the Promotion of Administrative Justice Act 3 of 2000 (the PAJA). Relying on the careful and nuanced reasoning of the Constitutional Court in Minister of Defence and Military Veterans v Motau and others 2014 (5) SA 69 (CC) ( Motau) this note offers an explanation and critique of the Molefe decision by showing how the decision falls short of the key guidelines for distinguishing administrative action from executive action as espoused in Motau. The note also takes issue with the way the Molefe decision unpersuasively distinguished Motau. Further, the note assesses the ‘rationality and lawfulness’ enquiry undertaken by the court to dispose of issues and concludes that it was inchoate because the court failed to address the nub of the minister’s reasons for removing the board. Finally, the note considers the wider implications of the decision on the fundamental right of shareholders to remove directors unhindered by substantive considerations.