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 shareholders, 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 limited scrutiny. To compound matters, even before the role  shareholders are expected to play has been thoroughly scrutinised, the sections relating to shareholders’ exercise of power are currently the subject of a  proposed repeal. Fortunately, recent judgments have begun to provide insight into the interpretation of section 115(2)(a), and the same can be said with  respect to similar sections from other jurisdictions. This contribution examines these latter sections. It chiefly shows that the judgments consulted 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.