SOS Support Public Broadcasting Coalition v South African Broadcasting Corporation (81056/14)
[2017] ZAGPJHC 289 (17 October 2017)
Facts
The Minister of Communications unlawfully interfered in the Board of the SABC.
o She interfered in decision-making of the Board and amended the MOI to centralise
the power in the ministry.
March 2015: three non-executive directors of the SABC were removed without due regard to
the provisions of S 15 of the Broadcasting Act, as the removal process under S 71 of the
Companies Act was followed.
Legal Question
Whether the powers vested in the Minister undermine the independence of the SABC, which is
contended to be required by the right of freedom of expression under S 16 of the Constitution.
Whether the Minister’s powers contravene S 13(11) of the Broadcasting Act, which provides that the
SABC Board must “control the affairs” of the SABC.
Whether S 71 of the Companies Act may be applied in the removal of Directors of the SABC or
whether the procedures under S 15 and S 15A of the Broadcasting Act must be followed.
Ratio Decidendi
S 1(2) of the Act provides that any interpretation of the provisions of the Act must be
construed and applied in a manner which is consistent with freedom of expression and the
journalistic, creative and programming independence of the broadcasters guaranteed by the
Constitution.
S 6(2) provides the SABC with the freedom of expression and journalistic, creative and
programming independence, in pursuit of its objectives and exercise of its powers.
S 12 provides that the Board of the SABC is to consist of 12 non-executive directors and 3
executive directors: GCEO, COO and CFO.
S 13 stipulates that the non-executive directors must be appointed by the President on the
advice of the National Assembly, after a public nomination process.
o The President has no discretion but to appoint the candidates recommended by the
National Assembly.
o This approach is sensible as the National Assembly is made up of multiple political
parties who appoint members who are acceptable to all parties.
In terms of the amended MOI, the Minister has the power over the three executive
directors.
o Powers relating to their appointments, terms, and conditions of appointment,
discipline and suspension.
o The Minister has veto power over the appointment of these directors, is permitted
to manipulate the Board’s interview and shortlisting process and to accept
recommendations of a single candidate. Thus, the Minister could waive the
requirement of advertising the position.
o The Minister has an unfettered discretion in the appointment process as there are
no prescribed criteria for the appointments of candidates.
The amended MOI also extends new powers to the Minister over the administration and
operation of the SABC Board.
, The Broadcasting Act is silent on the appointment of executive directors.
S 13(11) confers upon the Board the exclusive power to control the affairs of the SABC. The
Minister is precluded from exercising any powers by which she may control the Directors in
how they control the affairs of the SABC.
S 15A deals with a resolution for the removal of a member in two ways:
o The appointing body conducts and inquiry and determines that member is guilty of
misconduct and is unable to perform his or her duties efficiently and makes a
recommendation to that effect to the President for that member’s removal.
o A National Assembly committee conducts an inquiry and makes a finding that a
member is guilty of misconduct or is unable to perform his duties efficiently. The
National Assembly the adopts a resolution calling for that member’s removal, and
then the President removes the member from office.
S 71 of the Companies Act prescribes two removal processes:
o S 71(1)-(2): The removal by ordinary resolution is adopted at a shareholder’s
meeting.
o S 71(3)-(4): Removal by the Board on grounds specified in S 71(3) (negligence,
dereliction of duty, disqualification, incapacity).
S 39(2) of the Constitution require the court to interpret the Broadcasting Act in the manner
that “promotes the spirit, purport an object of the Bill of Rights” and must give effect to S
192 of the Constitution which requires broadcasting to be regulated “in the public interest,
and to ensure fairness and a diversity of views broadly representing South African society”.
S 15 and S 15A of the Broadcasting Act ensure that the is a level of oversight in the removal
of a SABC Director, neither the Minister nor the Board can remove the Director unilaterally.
Whereas S 71 of the Companies Act, empowers the Minister to remove any member of the
Board, for any reason, subject only to the notice requirement.
The removal provisions of the Companies Act cannot be construed as applying to the SABC
because the Broadcasting Act prevails over the Companies Act as it was specifically enacted
to govern the operations of the SABC. The removal processes prescribed under the
Companies Act denies members of the SABC Board security of tenure and thus undermine
the independence of this SABC Board in a manner that is inconsistent with the Constitution.
S 5(4)(b)(i) of the Companies Act provides for specific statutes and provisions in other
statutes to prevail in the event of inconsistency with the Companies Act.
o The Broadcasting Act is not included in this list of statutes and so none of its
provisions is made applicable in the event of inconsistency with the Companies Act.
Decision
The executive directors are to be appointed solely by the non-executive members of the board and
without any requirement of approval by the Minister.
The members of the SABC Board may not be removed safe in compliance with S 15(1)-(2) and S 15A
of the Broadcasting Act.
, Michael Kuper: Another Look at the Companies Act: Royals Royce or Ford Edsel
Things that bothered the author:
o South Africa took the company law from England, as well as bits from Canada and
New Zealand. However, there is no coherent design or unifying theme.
o The Act is badly drafted as the sections present interpretation problems caused by a
poor choice of wording. Thus, the provisions in the Act are incoherent.
o The Act codifies the directors’ duties but only in part.
o The flexibility of the common law is impaired to the extent that there is now part
codification which introduces the need to reconcile part codification which
introduces the need to reconcile the part codification and the common law, giving
rise to further complications.
Where do you draw the line between majority rights and minority protections?
o Best answer: defer to the majority except when the majority targets the minority in
an unjust or oppressive way.
o Reasons for favouring the majority:
- To ensure stability in the operation of the company.
o The Act alters the balance in the wrong direction.
- E.g. Shareholders may go to court to stop a resolution being put to the
shareholders if that shareholder feels that the resolution is insufficiently
clear or is not accompanied by sufficient explanatory material. Irrespective
whether that shareholder wins or loses, delays will ensue and if the matter is
subject to appeal, then the delays will become insufferable.
, Rentekor (Pty) Ltd v Rheeder and Berman NNO 1988 (4) SA 469 (T)
Rentekor was set up as a private company
Two individuals (Snyman and Vermootens) started an insurance company = Rentmeester –
got shares
As the company grew more valuable they pooled their share in a partnership
Then made it into a company
Started working together when they were young; cooperated well and got rich together
Had a shareholding in their company
After a while there were also lots of other shareholders, but they were the controlling
shareholdings
They had to formalise their relationship
Initially they held their shares through a partnership
As the business grew they formalised it further and created a company: Rentekor
The company had a constitution and they also had an agreement between themselves that
determined how they held their shares in the company
It’s only asset was shares
Each had 50% of the shares in Rentekor – in every decision, they had the right to veto
Both Mr S and V were appointed in terms of the shareholder’s agreement as directors of the
company
The constitution of the company provided that new further directors could only be
appointed by the existing directors (they did not use the default rule that shareholders
appoint new directors)
Reason why they wanted directors to be appointed by the board and not the shareholders:
directors have stricter duties to act in the interests of the company
There were no provisions regarding the dismissal of directors in the companies constitution;
Act says that shareholders can dismiss directors – but they each had a veto so they couldn’t
kick each other out
Companies Act now says the majority of shareholders can dismiss a director by a majority
vote
They each wanted to involve their sons in the business; each agreed as a board member to
involve one new board member – balance of power was now 25% each for the fathers and
their sons
At one point, S and V no longer wanted to hold their shares themselves, so they put their
shares in trusts and companies
o Typical scenario
V senior then passed away: the carefully created balance was now disturbed
Next problem: V junior is very actively involved, but S junior was less keen to be involved in
the business
V and S junior have a fall out; they can’t work together anymore
S senior is still involved but not as actively
S junior wants to get out of the business and wanted to make as much money out of it as he
could
o Wanted to sell his shares; stop being a director; but wanted the highest possible
price for his shares
o Why would anybody want to buy a share in Rentekor? Because they want to acquire
an interest in Rentmeester
o Might be put off by the fact that you would have to work closely with V junior
[2017] ZAGPJHC 289 (17 October 2017)
Facts
The Minister of Communications unlawfully interfered in the Board of the SABC.
o She interfered in decision-making of the Board and amended the MOI to centralise
the power in the ministry.
March 2015: three non-executive directors of the SABC were removed without due regard to
the provisions of S 15 of the Broadcasting Act, as the removal process under S 71 of the
Companies Act was followed.
Legal Question
Whether the powers vested in the Minister undermine the independence of the SABC, which is
contended to be required by the right of freedom of expression under S 16 of the Constitution.
Whether the Minister’s powers contravene S 13(11) of the Broadcasting Act, which provides that the
SABC Board must “control the affairs” of the SABC.
Whether S 71 of the Companies Act may be applied in the removal of Directors of the SABC or
whether the procedures under S 15 and S 15A of the Broadcasting Act must be followed.
Ratio Decidendi
S 1(2) of the Act provides that any interpretation of the provisions of the Act must be
construed and applied in a manner which is consistent with freedom of expression and the
journalistic, creative and programming independence of the broadcasters guaranteed by the
Constitution.
S 6(2) provides the SABC with the freedom of expression and journalistic, creative and
programming independence, in pursuit of its objectives and exercise of its powers.
S 12 provides that the Board of the SABC is to consist of 12 non-executive directors and 3
executive directors: GCEO, COO and CFO.
S 13 stipulates that the non-executive directors must be appointed by the President on the
advice of the National Assembly, after a public nomination process.
o The President has no discretion but to appoint the candidates recommended by the
National Assembly.
o This approach is sensible as the National Assembly is made up of multiple political
parties who appoint members who are acceptable to all parties.
In terms of the amended MOI, the Minister has the power over the three executive
directors.
o Powers relating to their appointments, terms, and conditions of appointment,
discipline and suspension.
o The Minister has veto power over the appointment of these directors, is permitted
to manipulate the Board’s interview and shortlisting process and to accept
recommendations of a single candidate. Thus, the Minister could waive the
requirement of advertising the position.
o The Minister has an unfettered discretion in the appointment process as there are
no prescribed criteria for the appointments of candidates.
The amended MOI also extends new powers to the Minister over the administration and
operation of the SABC Board.
, The Broadcasting Act is silent on the appointment of executive directors.
S 13(11) confers upon the Board the exclusive power to control the affairs of the SABC. The
Minister is precluded from exercising any powers by which she may control the Directors in
how they control the affairs of the SABC.
S 15A deals with a resolution for the removal of a member in two ways:
o The appointing body conducts and inquiry and determines that member is guilty of
misconduct and is unable to perform his or her duties efficiently and makes a
recommendation to that effect to the President for that member’s removal.
o A National Assembly committee conducts an inquiry and makes a finding that a
member is guilty of misconduct or is unable to perform his duties efficiently. The
National Assembly the adopts a resolution calling for that member’s removal, and
then the President removes the member from office.
S 71 of the Companies Act prescribes two removal processes:
o S 71(1)-(2): The removal by ordinary resolution is adopted at a shareholder’s
meeting.
o S 71(3)-(4): Removal by the Board on grounds specified in S 71(3) (negligence,
dereliction of duty, disqualification, incapacity).
S 39(2) of the Constitution require the court to interpret the Broadcasting Act in the manner
that “promotes the spirit, purport an object of the Bill of Rights” and must give effect to S
192 of the Constitution which requires broadcasting to be regulated “in the public interest,
and to ensure fairness and a diversity of views broadly representing South African society”.
S 15 and S 15A of the Broadcasting Act ensure that the is a level of oversight in the removal
of a SABC Director, neither the Minister nor the Board can remove the Director unilaterally.
Whereas S 71 of the Companies Act, empowers the Minister to remove any member of the
Board, for any reason, subject only to the notice requirement.
The removal provisions of the Companies Act cannot be construed as applying to the SABC
because the Broadcasting Act prevails over the Companies Act as it was specifically enacted
to govern the operations of the SABC. The removal processes prescribed under the
Companies Act denies members of the SABC Board security of tenure and thus undermine
the independence of this SABC Board in a manner that is inconsistent with the Constitution.
S 5(4)(b)(i) of the Companies Act provides for specific statutes and provisions in other
statutes to prevail in the event of inconsistency with the Companies Act.
o The Broadcasting Act is not included in this list of statutes and so none of its
provisions is made applicable in the event of inconsistency with the Companies Act.
Decision
The executive directors are to be appointed solely by the non-executive members of the board and
without any requirement of approval by the Minister.
The members of the SABC Board may not be removed safe in compliance with S 15(1)-(2) and S 15A
of the Broadcasting Act.
, Michael Kuper: Another Look at the Companies Act: Royals Royce or Ford Edsel
Things that bothered the author:
o South Africa took the company law from England, as well as bits from Canada and
New Zealand. However, there is no coherent design or unifying theme.
o The Act is badly drafted as the sections present interpretation problems caused by a
poor choice of wording. Thus, the provisions in the Act are incoherent.
o The Act codifies the directors’ duties but only in part.
o The flexibility of the common law is impaired to the extent that there is now part
codification which introduces the need to reconcile part codification which
introduces the need to reconcile the part codification and the common law, giving
rise to further complications.
Where do you draw the line between majority rights and minority protections?
o Best answer: defer to the majority except when the majority targets the minority in
an unjust or oppressive way.
o Reasons for favouring the majority:
- To ensure stability in the operation of the company.
o The Act alters the balance in the wrong direction.
- E.g. Shareholders may go to court to stop a resolution being put to the
shareholders if that shareholder feels that the resolution is insufficiently
clear or is not accompanied by sufficient explanatory material. Irrespective
whether that shareholder wins or loses, delays will ensue and if the matter is
subject to appeal, then the delays will become insufferable.
, Rentekor (Pty) Ltd v Rheeder and Berman NNO 1988 (4) SA 469 (T)
Rentekor was set up as a private company
Two individuals (Snyman and Vermootens) started an insurance company = Rentmeester –
got shares
As the company grew more valuable they pooled their share in a partnership
Then made it into a company
Started working together when they were young; cooperated well and got rich together
Had a shareholding in their company
After a while there were also lots of other shareholders, but they were the controlling
shareholdings
They had to formalise their relationship
Initially they held their shares through a partnership
As the business grew they formalised it further and created a company: Rentekor
The company had a constitution and they also had an agreement between themselves that
determined how they held their shares in the company
It’s only asset was shares
Each had 50% of the shares in Rentekor – in every decision, they had the right to veto
Both Mr S and V were appointed in terms of the shareholder’s agreement as directors of the
company
The constitution of the company provided that new further directors could only be
appointed by the existing directors (they did not use the default rule that shareholders
appoint new directors)
Reason why they wanted directors to be appointed by the board and not the shareholders:
directors have stricter duties to act in the interests of the company
There were no provisions regarding the dismissal of directors in the companies constitution;
Act says that shareholders can dismiss directors – but they each had a veto so they couldn’t
kick each other out
Companies Act now says the majority of shareholders can dismiss a director by a majority
vote
They each wanted to involve their sons in the business; each agreed as a board member to
involve one new board member – balance of power was now 25% each for the fathers and
their sons
At one point, S and V no longer wanted to hold their shares themselves, so they put their
shares in trusts and companies
o Typical scenario
V senior then passed away: the carefully created balance was now disturbed
Next problem: V junior is very actively involved, but S junior was less keen to be involved in
the business
V and S junior have a fall out; they can’t work together anymore
S senior is still involved but not as actively
S junior wants to get out of the business and wanted to make as much money out of it as he
could
o Wanted to sell his shares; stop being a director; but wanted the highest possible
price for his shares
o Why would anybody want to buy a share in Rentekor? Because they want to acquire
an interest in Rentmeester
o Might be put off by the fact that you would have to work closely with V junior
