South Africa: Director resignations vs director removals

published on 18 August 2022 | reading time approx. 3 minutes

While a director resignation or a director removal may come across as the same “terminology”, the two have vast differences in terms of legislation and processes to be followed. The incorrect use of wording could lead to unintentional consequences for the company.

Director Resignation

This process, being the simpler of the two, is initiated when a director voluntarily steps down from his/her post as a director of a company for various reasons such as retirement, relocation etc. The resigning director would then submit a resignation letter to the company and the remaining directors would note his/her resignation by way of a resolution or at a meeting of directors. A director amendment application, within ten business days as per section 70 (6) of the Companies Act No 71 of 2008 ("the Act"), is then submitted to the Companies and Intellectual Property Commission ("CIPC") and all relevant record updates are finalised (company letterheads etc) to reflect the resignation.

Director Removal

This being the most administrative instensive and complicated out of the two processes, is when a director is involuntarily removed from his/her post as a director in a company after either the board of directors or the company's shareholders have successfully complied with the requirements for the removal in terms of South Africa's company laws. Section 69 of the the Act sets out the grounds in which the director can be removed by way of the board of directors and section 71 of the Act governs the requirements for the director to be removed by the shareholders of the company. After the relevant steps have been followed, an application is submitted to CIPC for the finalisation of the removal.

Employment

It is important to note that in terms of South African legislation, the position of a director and that of an employee are not one and the same and it is therefore possible for a director that has resigned from his position as director or has been removed to still be employed by the company.

Conclusion

Although conflict is at times unavoidable, it is important for all companies to adopt principles of good corporate governance to possibly avoid lengthy and time consuming processes that could be resolved by amicaple separations. Should any confusion to the above processes occur, it is key to seek out professional advice on the way forward.