Section 163 of the Companies Act 71 of 2008 (“the Companies Act”) provides shareholders and directors with a statutory avenue for relief where conduct within a company is deemed oppressive, unfairly prejudicial, or unfairly disregards their interests. The scope of the provision is broad, and the discretion afforded to courts is wide. However, case law has demonstrated that, in practice, judicial intervention is cautiously exercised and closely tied to the specific facts of each matter.
Section 163(1) of the Companies Act states:
A shareholder or a director of a company may apply to a court for relief if –
- any act or omission of the company, or a related person, has had a result that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicant;
- the business of the company, or a related person, is being or has been carried on or conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicant; or
- the powers of a director or prescribed officer of the company, or a person related to the company, are being or have been exercised in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicant.
Upon such application, Section 163(2) permits the court to make “any order it considers appropriate,” which may include restraining conduct, amending governance instruments, or even ordering compensation. The provision is not confined to minority shareholders, nor does it require a breach of fiduciary duty. Its scope extends to directors, including those holding equal or majority control. However, its effectiveness is tempered by the courts’ insistence on objective evidence of harm and a reluctance to interfere with internal management decisions absent clear abuse.
Parry v Dunn-Blatch and Others
In Parry v Dunn-Blatch and Others (394/2022) [2024] ZASCA 19, the Supreme Court of Appeal was called upon to evaluate the application of Section 163 in the context of a breakdown in relations between two equal shareholders and directors of TRADSA (Pty) Ltd.
Ms. Parry alleged that her co-director’s conduct in relation to the use of TRADSA’s intellectual property by a related non-profit entity, ITRISA, was unfairly prejudicial and amounted to oppression. The High Court agreed and granted relief. However, the Full Court overturned the decision, and the SCA ultimately dismissed the application for leave to appeal.
The SCA emphasised that while Section 163 is available to equal shareholders and directors, it is not a remedy for all disputes. The conduct must objectively meet the threshold of unfair prejudice or oppression. Mere allegations of commercial unfairness or personal animosity do not suffice. The court noted that Section 163 does not entitle a party to override commercial contracts or restructure company arrangements absent clear evidence of abusive conduct.
Further Examples
Previous and subsequent cases have both affirmed and refined the principles applied in Parry.
- In Technology Corporate Management (Pty) Ltd and Others v De Sousa and Another (613/2017) [2024] ZASCA 29; 2024 (5) SA 57 (SCA) (26 March 2024), the Supreme Court of Appeal declined to grant relief under section 163, emphasising that the provision is not designed to resolve routine internal disputes or director fallouts. The Court found no oppressive or unfairly prejudicial conduct where a director was removed following due process, reinforcing that section 163 is reserved for conduct that is substantively abusive, rather than merely contentious.
- In Edery N.O v Brands 2 Africa Proprietary Limited and Others (2021/58016) [2023] ZAGPJHC 85 (3 February 2023), the applicant’s claim under Section 163 failed due to a lack of evidence. The court reiterated that the provision is not a mechanism for revisiting board decisions or business judgments simply because one party is dissatisfied with the outcome.
- In Bey v Constantia Metering Services (Pty) Ltd and Others (31250/2022) [2025] ZAGPPHC 81 (31 January 2025), the court affirmed that applicants must present objective evidence of the conduct and its prejudicial effect. The decision reinforced judicial caution in awarding discretionary relief under Section 163.
- In Khawa v Littlefish App (Pty) Ltd and Others (2024/069982) [2025] ZAGPJHC 418 (25 April 2025), the Gauteng High Court held that Section 163 is not applicable to foreign entities not domesticated in South Africa. The ruling provides useful guidance on the territorial application of the provision.
Practical Implications
The emerging jurisprudence underscores several key considerations:
- Threshold of Conduct: The courts require a clear demonstration of conduct that materially prejudices the applicant. Subjective perceptions of unfairness are not sufficient.
- Evidentiary Burden: Section 163 applications require factual support. Bare allegations or speculative harm are unlikely to succeed.
- Remedial Caution: Despite the provision’s open-ended language, courts will tailor relief narrowly to fit the harm. Courts remain reluctant to interfere with commercial arrangements or direct corporate strategy.
- Broad Standing, Limited Reach: While the provision is available to any shareholder or director, including those with significant control, the availability of relief is limited by the nature and effect of the conduct in question.
Conclusion
Section 163 is a powerful but carefully guarded statutory remedy. Its utility lies in its flexibility, but its application is bound by the principles of fairness, restraint, and judicial non-interference in internal corporate affairs. For directors and shareholders seeking to invoke Section 163, the guiding principle remains: the conduct must not simply be disagreeable or commercially unfavourable, it must be oppressive, prejudicial, or disregard legitimate interests in a manner that warrants the court’s intervention.
By:
Matthew Keegan
