Written by Roy Bregman, admitted attorney with over 51 years’ experience in employment law and company law.
Last updated: 29 October 2026
| Key Takeaways
• An executive director holds two positions, a seat on the board and a job. Removing one does not automatically end the other. • Shareholders can remove a director by majority vote without a specific reason, but only after proper notice and a chance to be heard. The board can do so only on limited grounds set out in the Companies Act. • “Loss of confidence” is not a reason for dismissal on its own. It must be linked to conduct, capacity or operational requirements and backed by evidence. • Getting it wrong can lead to reinstatement, compensation of up to 12 months’ pay, and public damage to the company’s reputation. |
You cannot lawfully remove an executive simply because the board has lost confidence in them. South African law treats an executive director as holding two separate positions, a seat on the board and a job, and each has its own rules for bringing it to an end.
Boards often get this wrong. They pass a resolution behind closed doors, send a short letter, and announce a resignation that never happened. That approach can lead to a court order reinstating the director, a claim at the CCMA (the Commission for Conciliation, Mediation and Arbitration), and an expensive public dispute.
This article explains how the law works, what the courts have said recently, and the steps a company should follow.
No. Removing someone as a director ends their seat on the board, but it does not automatically end their employment contract.
The board seat is governed by the Companies Act 71 of 2008. The job is governed by the employment contract and the Labour Relations Act 66 of 1995, known as the LRA.
Section 71(9) of the Companies Act confirms that a director who is removed keeps any right to claim damages or compensation for losing the office of director, or any other office lost as a result. A company that deals with only one of the two roles leaves itself exposed on the other.
Under section 71 of the Companies Act, the shareholders can remove a director, and in limited cases so can the board or the Companies Tribunal.
Shareholders can remove a director by ordinary resolution, meaning a simple majority vote at a shareholders’ meeting. They do not need a specific reason. The director must, however, receive proper notice of the meeting and the proposed resolution, and must have a reasonable opportunity to address the meeting before the vote.
The board can remove a director only on specific grounds: the director has become ineligible or disqualified, is incapacitated, or has neglected or been derelict in (seriously failed to perform) their duties. This route is available only where the company has more than two directors.
The director must receive the proposed resolution with written reasons specific enough to prepare a reply, and a chance to respond before the vote. A director removed this way can ask a court to review the decision within 20 business days.
Where there are two or fewer directors, a director or shareholder can ask the Companies Tribunal to decide whether a director should be removed on the same grounds.
Comparison: the four ways an executive can lose their position
| Route | Who decides | Is a reason needed? | Key safeguard |
| Shareholder removal, s 71(1) Companies Act | Shareholders, by majority vote | No specific reason | Notice and a chance to address the meeting |
| Board removal, s 71(3) Companies Act | The board, without the director concerned | Yes: ineligible, incapacitated, negligent or derelict | Written reasons, a chance to respond, court review within 20 business days |
| Companies Tribunal, s 71(8) Companies Act | Companies Tribunal | Same grounds as board removal | Independent decision where there are two or fewer directors |
| Dismissal from employment, LRA | The employer | Yes: conduct, capacity or operational requirements | Fair procedure, with a challenge at the CCMA or Labour Court |
Not on its own. Section 188 of the LRA allows only three fair reasons for dismissal: the employee’s conduct, the employee’s capacity, or the employer’s operational requirements, meaning genuine business needs such as a restructuring.
A breakdown of trust must be tied to one of those three reasons and supported by evidence. Proven dishonesty may justify dismissal for misconduct. A persistent failure to meet clear targets may justify dismissal for poor performance. A general feeling around the boardroom table that the chief executive is “not the right fit” is not enough.
A new Code of Good Practice: Dismissal took effect on 4 September 2025, replacing the old Schedule 8 guidelines. It now formally recognises incompatibility, an inability to work in harmony with colleagues or the company culture, as a form of incapacity. The employer must still show that the problem exists, that the executive contributed to it, and that reasonable steps were taken to fix it first.
They get different protection, not less. The 2025 Code accepts that senior employees can judge their own performance and may not need the coaching or repeated warnings a junior employee would receive.
They are still entitled to know what the concerns are and to be heard before a decision is made. Lawyers call this audi alteram partem, Latin for “hear the other side”.
Three recent judgments show how courts approach removals, from the board seat to the job itself.
The facts: Ms Golden, a non-executive director of a JSE-listed poultry group, pressed the board to disclose a legal opinion. Days later, most of her fellow directors signed a notice requiring her to resign, relying on a clause in the company’s Memorandum of Incorporation (MOI), its founding rules. The company told the market she had resigned. She had not.
The decision: The Western Cape High Court held that a clause allowing removal without reasons and without a hearing is against public policy and void. It found the removal oppressive and unfairly prejudicial under section 163 of the Companies Act, set it aside, reinstated her, and ordered a corrective market announcement. This is a High Court decision, and the company indicated it would seek leave to appeal.
The facts: A 51% shareholder appointed two directors under a shareholders’ agreement and later removed them. The directors asked the High Court for orders restoring them but never asked the court to review and set aside the decision that removed them. The High Court found in their favour.
The decision: The Supreme Court of Appeal overturned that order. Because the removal decision itself had not been challenged and set aside, the application had to fail. The lesson for removed directors is to bring the right application, and to do so promptly.
The facts: Mr Maleka, an IT director, resigned after a restructuring changed who he reported to. He kept his title, duties and pay, and did not use the company’s grievance procedure. He then claimed constructive dismissal, meaning that the employer had made his job so intolerable that he had no real choice but to resign.
The decision: The majority refused condonation (permission to proceed despite lateness) because his claim had poor prospects. The test is objective, and fears about future treatment are not enough. The warning for boards runs the other way too: quietly stripping an executive of status or duties to force a resignation invites exactly this kind of claim.
Compensation for an ordinary unfair dismissal can reach 12 months’ remuneration under section 194(1) of the LRA, and 24 months’ where the dismissal is automatically unfair, for example because it is discriminatory. For an executive, remuneration can include allowances and benefits, so the figure is often large.
On top of that come possible contract claims, such as pay for the rest of a fixed term contract, legal costs, and reputational harm when the dispute becomes public.
Follow a structured process that deals with the board seat and the job separately.
Act quickly. A removal by the board can be taken on review within 20 business days, and an unfair dismissal dispute must generally be referred to the CCMA within 30 days of the dismissal.
Keep every notice, set of minutes and message, and do not resign in protest before taking advice.
Removing an executive involves two legal processes, not one. The board seat and the job each need a valid reason, a fair process and accurate records.
Boards that follow the rules can act decisively and with confidence. Boards that take shortcuts may watch a court reverse their decision in public.
Yes. Under section 71(1) of the Companies Act, shareholders may remove a director by ordinary resolution without stating a specific reason. However, the director must receive notice of the meeting and the proposed resolution and must be given a reasonable opportunity to address the meeting before the vote. Skipping these steps can make the removal invalid.
No. Removal from the board ends the directorship only. An executive’s employment contract continues until it is lawfully ended under the contract and the Labour Relations Act. The employer needs a fair reason, such as misconduct, poor performance or restructuring, and must follow a fair procedure, or it risks an unfair dismissal claim.
Not on its own. The Labour Relations Act recognises only three fair reasons for dismissal: conduct, capacity and operational requirements. A breakdown in trust can support a dismissal only where it flows from proven misconduct, poor performance, genuine incompatibility or real business needs, supported by evidence and a fair process.
A director removed by the board under section 71(3) of the Companies Act may apply to court to review the decision within 20 business days. Separately, an executive who is also dismissed from employment generally has 30 days to refer an unfair dismissal dispute to the CCMA. Early legal advice protects both rights.
For an ordinary unfair dismissal, the CCMA or Labour Court may award compensation of up to 12 months’ remuneration, calculated at the rate on the date of dismissal. For an automatically unfair dismissal, such as one based on discrimination, the limit is 24 months. Separate contractual claims may also be available.
Whether you sit on a board that needs to act, or you are an executive who has just received a notice, the first few days matter most. Speak to us before you sign, vote or resign. We will tell you plainly where you stand and what to do next.
Bregman Moodley Attorneys Inc. Taking the Sting Out of Legal Problems Since 1974.
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