BOARD DEADLOCK AND MOI DISPUTES

Deadlock does not pause the damage — it accelerates it, because value erodes while a company sits paralysed. Where the shareholders agreement and the memorandum of incorporation contain no mechanism to break the impasse, the routes available include a section 163 application, a court-supervised resolution, or in the last resort winding-up on just and equitable grounds.

FAQS

CAN A MINORITY SHAREHOLDER FORCE THE MAJORITY TO BUY THEM OUT?

Yes, in the right circumstances. Section 163 empowers the High Court to order that shares be purchased, and to determine the valuation itself rather than accept the price the majority offers. The application must establish that the conduct complained of was oppressive or unfairly prejudicial — a breakdown in the relationship alone is not enough.

HOW LONG DOES A SECTION 163 APPLICATION TAKE?

An opposed application in the Gauteng High Court typically runs twelve to twenty-four months to judgment, longer where a referral to oral evidence or a valuation enquiry is ordered. Urgent interim relief, where the facts justify it, can be obtained in days. Most matters settle before judgment, and the settlement is usually driven by how strong the papers look after the answering affidavit.

WHAT DOES IT COST?

A shareholder dispute is priced by the complexity of the financial reconstruction as much as by the law. Where the conduct is documented and the valuation is straightforward, costs are contained. Where loan accounts, inter-company transfers or diverted business must be traced across several years, forensic work becomes the largest component. We give a written estimate broken down by phase after reviewing the documents, so the decision to proceed is made on figures rather than hope.

DO I HAVE TO GO TO COURT?

Often not. Negotiation, mediation and arbitration are all available, and the shareholders agreement frequently prescribes which applies. But leverage in those forums comes from being genuinely ready to litigate. The strategy is to prepare the application properly and negotiate from that position, rather than negotiate first and prepare later.

WHAT IF THE COMPANY IS ALSO IN FINANCIAL DISTRESS?

This is common and it changes the sequence. Business rescue under Chapter 6 imposes a moratorium that affects what proceedings may be brought and when, and a liquidation displaces the dispute into a different forum entirely. Where a shareholder fight and an insolvency are running together, the order in which steps are taken frequently determines the outcome.

HOW WE WORK

These cases are won on financial detail as much as on legal argument. Loan account treatment, the timing of transfers, the paper trail behind a rights issue — this is usually where the unfairness is demonstrated, and it is why the practice runs forensic analysis alongside the litigation rather than litigating around someone else's summary.

June Stacey Marks personally runs each matter from strategy through drafting to argument. BCom, LLB and LLM, each cum laude, the LLM in Insurance, Company and Insolvency Law. Top LLB graduate at UNISA. Admitted attorney of the High Court with rights of appearance, in practice twenty-two years. LPC 8811.

SPEAK TO US

If you are being excluded from a company you own part of, or you are a director whose conduct is being challenged, the first step is a review of the shareholders agreement, the MOI and the financial records.
Telephone 011 262 0470 • june@junemarksattorneys.co.za