In an earlier article "Director removal: Even a rogue director must still be treated fairly" we analysed the Mdumela v Van Wyk[1] ruling and emphasised the importance of procedure in director removal applications at the Companies Tribunal (“Tribunal”).
In this case, one director (the “Applicant”) unsuccessfully applied to the Tribunal for an order to remove her co-director (the “Respondent”) as a director of a company in which they were joint and equal shareholders.
While the Tribunal agreed that the Applicant had made a compelling case for the removal of her co-director, the Tribunal dismissed the application for non-compliance with the requirements of Regulation 142 of the Companies Act Regulations, in that the Applicant had not served a copy of the application on her co-director.
The Tribunal stated that –
‘Should the Applicant wish to proceed, she has the opportunity to re-issue and comply with the requirements of the Act by ensuring proper service on the Respondent’
The Applicant has since reapplied to the Tribunal for the same relief, and having satisfied the procedural requirements this time, the Tribunal granted an order for the removal of the Respondent as a director of the company.[2]
Nearly three months passed between the original ruling and the granting of the order in the second application. In that time, the Respondent – despite being a clear candidate for removal, even in the Tribunal’s view – continued to be a director of the company. The dismissal of the first application, and the time elapsed between the two applications, emphasise the importance of first-time compliance with the Regulations in director removal applications.
The removal of a director is a process that often requires urgent finalisation, especially if the director is accused of potentially criminal conduct that is damaging to the company, as was the case here. A delay in their removal can cause further damage to the company. Caution should be taken by applicants to ensure that applications (and ultimately, the removal sought) are not delayed due to avoidable non-compliance with the Regulations.
