Is a Restraint of Trade Enforceable in South Africa, and What If It Fails?

 

Written by Roy Bregman, admitted attorney with over 52 years' experience in commercial law. View Roy's profile.

Last updated: 11 November 2026

Key Takeaways ·        A restraint of trade is valid in South Africa, but a court will enforce it only to protect a real business interest, such as client relationships or confidential information, and never simply to stop competition. ·        If a restraint is too wide, other protections often still work: a narrow non-solicitation clause, a confidentiality undertaking and the common law against unlawful competition. ·        Speed matters. Most restraints last about 12 months, and in 2026 the Supreme Court of Appeal declined to decide an appeal because the restraint had almost run out. ·        When a key employee resigns, secure your devices and data, send a letter of demand and take legal advice within days, not weeks.

 

Yes, a restraint of trade is generally enforceable in South Africa, but only to the extent that it protects a genuine business interest and is reasonable. If your restraint is too wide, a court may cut it down or refuse to enforce it. Even then, your business is not left defenceless.

Picture this. Your senior sales manager resigns on a Friday. By Monday, they are working for your biggest competitor, and your clients are taking their calls. Your lawyer reads the restraint and warns that it is probably too broad to survive in court.

This article explains when courts enforce restraints, which other protections often work better, what the Supreme Court of Appeal has said recently, and what to do when a key employee leaves.

What is a restraint of trade, and when will a court enforce it?

A restraint of trade is a clause that stops a person from competing with a business for a period after the relationship ends. It usually appears in employment contracts, sale of business agreements and franchise agreements.

South African courts treat restraints as valid unless enforcing them would be unreasonable and against public policy, meaning against the interests of society as a whole. The Supreme Court of Appeal confirmed this approach in Reddy v Siemens Telecommunications (Pty) Ltd.

Who must prove that a restraint is unfair?

The person who wants to escape the restraint usually must prove that it is unreasonable. In Reddy, the court explained that it must balance two ideas. The first is that people must keep their promises, which lawyers call pacta sunt servanda, Latin for "agreements must be honoured". The second is that everyone should be free to work and earn a living, a right protected by section 22 of the Constitution.

What will a court protect?

A court will protect only what lawyers call a protectable interest. In practice there are two: your trade connections, meaning your relationships with clients and suppliers, and your confidential information, such as pricing, client data and trade secrets. A business has no right simply to be free of competition, and it cannot stop a former employee from using the general skills and experience they built up.

To decide whether a restraint is reasonable, courts ask four questions first set out in Basson v Chilwan:

·        Does the business have an interest that deserves protection after the person leaves?

·        Is that interest threatened by the former employee?

·        If so, does that interest outweigh the person's interest in being free to work?

·        Is there any other public interest reason to enforce or reject the restraint?

What protects your business if the restraint fails?

Several other legal tools can protect your clients and information even when a broad restraint fails. They are often easier to enforce, because they intrude less on a person's freedom to work. The table below compares them.

Protection	What it does	How likely a court is to enforce it
Broad restraint of trade	Stops the person working for a competitor in a set area for a set time	Only if reasonable; wide restraints are often cut down or refused
Non-solicitation clause	Stops the person approaching or doing business with your clients	More likely, especially if limited to clients they actually dealt with
Non-poaching clause	Stops the person recruiting your staff	Usually enforced if limited to a reasonable period
Confidentiality undertaking	Stops the person using or disclosing your confidential information	Very likely, and it can last indefinitely
Common law against unlawful competition	Protects your information even without any written clause	Available if you can prove the misuse
Garden leave clause	Pays the person to stay away from work during the notice period	Effective if the contract allows it

 

A non-solicitation clause is easier to enforce

A non-solicitation clause does not stop someone working for a competitor. It only stops them from approaching your clients. Because it leaves the person free to earn a living, courts are more willing to uphold it.

The strongest clauses cover the clients the employee actually dealt with in the last 12 to 24 months. They also prohibit accepting business from those clients, not only approaching them.

Your confidential information is protected even without a restraint

Client lists, pricing, margins and tender strategies are protected by the common law, which is the law developed by the courts rather than by Parliament. A former employee who uses that information to get a head start on you competes unlawfully, whether or not they signed a restraint. Lawyers sometimes call this the springboard principle.

Garden leave buys time

Garden leave means paying an employee during the notice period while keeping them away from clients and systems. You need a contract clause that allows it. By the time they join a competitor, the information they carry is out of date.

What have the courts decided recently about restraints?

The Supreme Court of Appeal has decided three restraint cases in the past three years, and in each one the outcome turned on confidential information or on time running out. We found no Constitutional Court judgment on restraints of trade in that period.

Maritz v Truworths (2026): the clock keeps running

In Maritz v Truworths Limited, a senior credit risk executive resigned after ten years at Truworths and joined the TymeBank group. Truworths said the group was a competitor and obtained a High Court order enforcing his 12-month restraint and stopping him from disclosing its trade secrets.

Parts of that order were suspended while he appealed, so he started the new job. When the Supreme Court of Appeal heard the appeal in August 2026, the restraint had only two weeks left to run. The court dismissed the appeal as moot, meaning a decision would have no practical effect. It noted, however, that the order protecting Truworths' trade secrets lasts indefinitely.

The lesson is simple. A restraint protects you only if you enforce it quickly, but a confidentiality obligation keeps working long after the restraint ends.

Oasis Water (2025): franchisees cannot take the business system with them

In Van den Berg Water (Pty) Ltd t/a Oasis Water Lynnwood and Others v Oasis Water (Pty) Ltd, several franchisees left the Oasis Water franchise and reopened under their own brand. They used Oasis client records to contact its customers and copied its marketing and pricing.

By the time the case reached the Supreme Court of Appeal, the 12-month restraint in the franchise agreements had expired, so the court did not decide whether it was enforceable. It nevertheless upheld orders that the franchisees return Oasis manuals, client lists and signage, and stop using its business system and intellectual property. It held that pricing, margins, marketing strategies and client records are confidential, because they are neither trivial nor publicly available.

Lead HV v HV Test (2024): the new employer can be stopped too

In Lead HV (Pty) Ltd and Another v HV Test (Pty) Ltd, two employees bound by a restraint joined a direct competitor. HV Test obtained an Anton Piller order, which is a court order allowing a supervised search to find and preserve evidence before it can be destroyed. The search found HV Test's confidential information in the employees' possession.

The High Court granted a final interdict, a permanent court order, stopping the competitor and its general manager from using HV Test's customer and quote lists or approaching its customers. The Supreme Court of Appeal dismissed the competitor's appeal. Notably, HV Test's first urgent application against the competitor failed for lack of urgency, so the case took the ordinary, slower route.

The older cases that still set the rules

In Reddy v Siemens, the Supreme Court of Appeal enforced a 12-month restraint against an employee who joined a direct competitor, because he held confidential information and the risk of it being used was obvious. By contrast, in Digicore Fleet Management (Pty) Ltd v Steyn, the court refused to enforce a two-year restraint against a sales executive who left with nothing more than the experience and broker contacts she had brought with her.

What should you do when a key employee resigns?

Act within days, not weeks, because courts expect you to move quickly and restraints run out. These steps give you the best chance of protecting your business.

1.     Read the contract immediately. Identify each protective clause and note when it expires.

2.     Secure your information. Collect laptops and phones, cut off system access and preserve email and download records as evidence.

3.     Find out where the employee is going. Ask directly and record the answer in writing.

4.     Send a letter of demand. Ask the employee, and if necessary, the new employer, for written undertakings within a short deadline, usually 24 to 48 hours.

5.     Go to court quickly if the undertakings are refused. An interdict, which is a court order stopping the conduct, is the usual remedy. Delay can cost you urgency and, as Maritz shows, the restraint itself.

6.     Fix your contracts for next time. Use separate clauses for competition, clients, staff and confidentiality, so that if one fails the others survive.

What if you are the employee?

If you signed a restraint, assume it is valid until a lawyer tells you otherwise. You may be able to escape it if your former employer has no real interest to protect, for example because you had no client contact or confidential information, or if it is far wider than necessary.

Even then, never take or use your former employer's confidential information. That exposes you to an interdict and a damages claim, whatever the restraint says.

The bottom line

A restraint of trade is enforceable in South Africa, but only if it is reasonable and you act on it quickly. Recent Supreme Court of Appeal judgments show that confidentiality obligations and the law against unlawful competition often protect a business long after a restraint fails or expires.

The best protection is built before anyone resigns: narrow, separate clauses, good control of your data and a clear plan for the first 48 hours after a resignation.

Frequently asked questions

Is a restraint of trade enforceable in South Africa?

Yes, provided it is reasonable. South African courts enforce a restraint of trade unless the person bound by it proves that enforcing it would be against public policy. A court will protect real interests, such as client relationships and confidential information, but it will not enforce a restraint whose only purpose is to stop competition.

How long can a restraint of trade last in South Africa?

There is no fixed maximum. A court asks whether the period is longer than the business needs for protection. Restraints of 12 months are common and often upheld, while two years or more needs strong justification. A court can enforce a shorter period than the contract states, or refuse to enforce the restraint altogether.

Can my former employer stop me from working for a competitor?

Only if the restraint protects a genuine interest. If you had access to confidential information or close client relationships, a court may stop you from joining a competitor for a reasonable period. If you leave with only your own skills and experience, a court is unlikely to enforce the restraint against you.

What is the difference between a restraint of trade and a non-solicitation clause?

A restraint of trade stops you from working for a competitor, usually within a set area and period. A non-solicitation clause lets you work anywhere, but stops you from approaching your former employer's clients or staff. Because it is narrower and leaves you free to earn a living, courts are more willing to enforce it.

Can a business protect its confidential information without a restraint of trade?

Yes. The common law protects confidential information such as client lists, pricing and trade secrets, whether or not the employee signed a restraint. A former employee who uses that information to gain a head start competes unlawfully, and the business can ask a court for an interdict stopping the misuse.

Talk to us before the next resignation lands

Whether you are an employer protecting your clients or an employee wondering whether your restraint will hold, early advice saves time, money and stress. At Bregman Moodley Attorneys, we draft restraints that courts will enforce, review existing contracts, and act quickly when a key person leaves.

Get in touch today. Call us on +27 (0)11 646 0335, email roy@bmalaw.co.za, or visit bregmans.co.za. We will take the sting out of your restraint dispute.

Miss the Deadline in Your Property Deal by One Day and the Sale Is Gone

 

Written by Roy Bregman, admitted attorney with over 51 years' experience.

Last updated: 6 November 2026

Key Takeaways ●       A suspensive condition that is not fulfilled, or validly waived, by the agreed date makes the sale lapse automatically. No notice or cancellation is needed. ●       A lapsed sale cannot be revived by an addendum that "extends" the deadline. The Supreme Court of Appeal confirmed this in 2024. ●       Extensions and waivers work only if they are in writing and completed before the deadline. To go ahead after a lapse, the parties must sign a new deed of sale. ●       Until a new agreement is signed, the seller is free to sell to someone else, and the original buyer has no claim to the property.

 

A buyer signs an agreement to purchase a commercial or residential property, subject to bond approval within 30 days. The bank approves the loan on day 32. Relieved that finance is in place, the buyer and seller exchange friendly emails, s

Whake hands and carry on as if nothing has happened.

In South African law, that assumption is often fatal. There may be no contract left to enforce, and the problem usually surfaces only when one party changes its mind or a better offer arrives.

This article explains how suspensive conditions work, what the courts have said recently, and the steps buyers, sellers and practitioners should follow.

What is a suspensive condition?

A suspensive condition suspends the operation of the core obligations of a contract, such as delivering the property and paying the price, until a future, uncertain event occurs. Typical examples are bond approval, the sale of the buyer's existing property, or a regulatory consent (Design and Planning Service v Kruger 1974 (1) SA 689 (T) at 695C; Corondimas v Badat 1946 AD 548).

What happens while the condition is pending?

The parties are already bound to each other. Neither may withdraw unilaterally, and each must refrain from preventing the condition from being fulfilled. If the condition is fulfilled on time, the agreement becomes unconditional and fully enforceable. If it is not, the agreement falls away.

What happens if the deadline is missed?

The agreement lapses automatically, by operation of law (Fairoaks Investment Holdings (Pty) Ltd v Oliver [2008] ZASCA 41).

No breach, no notice

A failed condition is not a breach of contract. No letter of demand, notice placing a party in mora (in default), or notice of cancellation is needed. The parties are restored to their positions before the agreement, and any deposit must be repaid in accordance with the agreement, usually with the interest earned on it while it was held in trust.

No date in the agreement?

Where the agreement does not fix a date for fulfilment, the condition must be fulfilled within a reasonable time. A clear date, and preferably a time, avoids that uncertainty.

Can the parties extend the deadline after it has passed?

No. The most common and costly mistake is to sign an addendum extending the deadline after it has already passed. An agreement that no longer exists cannot be amended, so there is nothing for the addendum to attach to.

Why the law requires a new agreement

Section 2(1) of the Alienation of Land Act 68 of 1981 provides:

"No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority."

Once the original agreement has lapsed, any agreement to go ahead is a new alienation of land. It must be a written deed of alienation, signed by both parties, that contains all the material terms, including the description of the property, the price and the payment terms (Fairoaks). A handshake, an exchange of emails, or a short addendum stating that "the bond approval date is extended" does not meet that standard.

The parties may sign a new agreement on the same terms. If they do, it must contain a fresh, future date for each condition. A new agreement that simply repeats the old, expired date is subject to a condition that can no longer be fulfilled.

Can a buyer waive the condition instead?

Yes, but only within strict limits. A condition inserted solely for one party's benefit, such as a bond clause protecting the buyer, may be waived by that party:

●       before the deadline expires, and in the manner the agreement requires (often written notice to the seller);

●       only by the party it benefits, because a condition that protects both parties cannot be waived by one of them alone.

A buyer cannot "waive" the bond condition on day 31 or day 32 and so revive the sale.

What works before and after the deadline?

Step	Before the deadline	After the deadline
Extend the date by written addendum signed by both parties	Valid	Ineffective: nothing is left to extend
Waive a condition inserted for your sole benefit	Valid, if notice is given as the agreement requires	Ineffective
Rely on emails, WhatsApp or a handshake	Risky: may not satisfy the non-variation clause or s 2(1)	Ineffective
Sign a new, complete deed of sale	Not needed	The only way to proceed

 

Do emails and electronic signatures count?

Most deeds of sale contain a non-variation clause requiring any amendment to be in writing and signed by both parties, and our courts enforce these clauses (SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren 1964 (4) SA 760 (A); Brisley v Drotsky 2002 (4) SA 1 (SCA)). Informal assurances by telephone, WhatsApp or email will not alter a contractual deadline.

The Electronic Communications and Transactions Act 25 of 2002 excludes agreements for the sale of immovable property from its general recognition of electronic signatures. In Borcherds v Duxbury [2020] ZAECPEHC 37 the court accepted an image of a handwritten signature applied through DocuSign, but the judgment has been criticised for not engaging with that exclusion. Until the position is settled, any extension, waiver notice or new deed of sale should be signed in wet ink.

Is there any way to save a lapsed sale?

Fictional fulfilment

Where a party deliberately prevents a condition from being fulfilled to escape the contract, the law treats the condition as fulfilled (MacDuff & Co Ltd v Johannesburg Consolidated Investment Co Ltd 1924 AD 573; Scott v Poupard 1971 (2) SA 373 (A)). A buyer who never applies for a bond, or who withdraws an application, cannot rely on the failed condition to walk away.

The doctrine requires deliberate conduct by the party concerned. Where a bank or authority is simply slow, it does not apply and the agreement lapses in the ordinary way.

What have the courts said recently?

Three judgments show how strictly the courts apply these rules.

Palma Codevilla v Kennedy-Smith NO (Supreme Court of Appeal, 2024)

The facts: The buyer's bond condition had already been extended once and was not met by the new deadline of 19 February 2020. The parties signed a second addendum the following day to extend it again.

The decision: The majority held that the second addendum could not revive the lapsed agreement, even though the parties clearly wanted to proceed. Two judges dissented, but the majority view is binding ([2024] ZASCA 136).

Africast (Pty) Ltd v Pangbourne Properties Ltd (Supreme Court of Appeal, 2014)

The facts: The agreement allowed the condition to be waived only by written notice on or before the fulfilment date. No such notice was given, and the condition was not fulfilled in time.

The decision: The court held that the agreement never came into operation ([2014] ZASCA 33). Waiver must follow the method and timing the agreement prescribes.

Abrinah 7804 (Pty) Ltd v Kapa Koni Investments CC (Northern Cape, 2017)

The facts: After a suspensive condition failed, a party sought to waive it and hold the other to the sale.

The decision: The court held that a lapsed agreement cannot be revived by waiving the condition after the event (2018 (3) SA 108 (NCK)).

What does a lapse cost the parties?

●       A better offer: If property values have risen or a better offer arrives, the seller may accept it. The original buyer has no claim for transfer.

●       Transfer: A conveyancer cannot lodge transfer on a lapsed agreement. If the lapse is discovered during the transfer process, the transaction must be restarted with a new deed of sale.

●       Commission: A property practitioner's commission usually depends on a valid, unconditional sale. A lapse may defeat the claim unless the mandate provides otherwise. Practitioners are regulated by the Property Practitioners Act 22 of 2019, in force since 1 February 2022.

How do you protect the sale, step by step?

1.      Identify every suspensive condition and record exactly what event fulfils it, such as written approval of a loan of a stated amount.

2.      Fix a specific date, and preferably a time, for fulfilment of each condition.

3.      State whose benefit each condition is for, and how it may be waived: in writing, to whom and by when.

4.      Include a mechanism for extending the date by written agreement signed by both parties before it expires.

5.      Diarise every deadline for the buyer, seller, conveyancer, property practitioner and bond originator, with reminders well before each date.

6.      Make sure the buyer applies for finance promptly and keeps the application alive.

7.      Send written proof of fulfilment, such as the bank's grant letter, to the other party and the conveyancer before the deadline.

8.      If a deadline is at risk, sign an extension or deliver a waiver notice in wet ink before it expires, not after.

What should you do if the deadline has already passed?

Treat the agreement as lapsed and do not sign an addendum that "extends" the expired date. If both parties still want to proceed, sign a new, complete deed of sale with fresh, future dates for every condition, and tell the conveyancer, bond originator and property practitioner. If the other party refuses, take advice immediately on whether fictional fulfilment or a waiver given in time may apply.

What is the bottom line?

A suspensive condition deadline is absolute. Fulfil the condition, extend the date or waive it in writing before the deadline expires. After that, the only way forward is a new agreement, and the other party is free to refuse.

Frequently asked questions

Can a suspensive condition be extended after the deadline has passed?

No. Once the deadline passes without fulfilment or a valid waiver, the agreement lapses automatically and there is nothing left to extend. The Supreme Court of Appeal confirmed this in Palma Codevilla v Kennedy-Smith NO [2024] ZASCA 136. The parties must sign a new deed of sale that complies with section 2(1) of the Alienation of Land Act.

Does the seller have to cancel the agreement if the bond is not approved in time?

No. A failed suspensive condition is not a breach of contract, so no notice of cancellation or letter of demand is needed. The agreement falls away by operation of law on the deadline.

Can the buyer waive the bond condition?

Yes, if the condition was inserted solely for the buyer's benefit and the waiver is given before the deadline, in the manner the agreement requires. A waiver after the deadline cannot revive the sale.

What happens to the deposit if the sale lapses?

The parties are restored to their positions before the agreement, so the deposit must be repaid in accordance with the agreement, usually together with the interest it earned while held in trust.

Can we sign an extension or a new deed of sale electronically?

The law is unsettled. The Electronic Communications and Transactions Act excludes sales of immovable property from its general recognition of electronic signatures, and the one judgment that accepted a DocuSign signature has been criticised. Sign in wet ink to be safe.

Need help with a property sale that is running out of time? Whether you are a buyer waiting on the bank, a seller weighing a better offer, or a practitioner who has just spotted a missed date, the days before a deadline matter most. Speak to us before you sign an addendum, send a waiver or walk away. We will tell you plainly where you stand and what to do next. Call: +27 (0)11 646 0335   Email: roy@bmalaw.co.za   Website: bregmans.co.za Bregman Moodley Attorneys Inc. Taking the Sting Out of Legal Problems Since 1974.

 

How do you lawfully remove an executive from the board in South Africa?

 

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.

Is removing an executive from the board the same as dismissing them?

No. Removing someone as a director ends their seat on the board, but it does not automatically end their employment contract.

Two roles, two sets of rules

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.

Who can remove a director from the board?

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.

Removal by the shareholders

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.

Removal by the board

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.

Companies with only one or two directors

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

 

Is "loss of confidence" a fair reason to dismiss an executive?

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.

Turning a breakdown of trust into a lawful reason

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.

What changed in 2025?

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.

Do senior executives get less protection?

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".

What have the courts said recently?

Three recent judgments show how courts approach removals, from the board seat to the job itself.

Golden v Quantum Foods Holdings Ltd (2024)

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.

Mawerco (Pty) Ltd v Sithole (Supreme Court of Appeal, 2024)

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.

Maleka v Boyce N.O. (Constitutional Court, 2026)

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.

What could an unfair dismissal cost the company?

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.

How should a company remove an executive lawfully, step by step?

Follow a structured process that deals with the board seat and the job separately.

1.     Take legal advice before anyone speaks to the executive, and read the MOI, any shareholders' agreement and the employment contract together.

2.     Identify the true reason, and decide whether it is conduct, capacity (including poor performance or incompatibility) or operational requirements.

3.     Gather objective evidence, such as minutes, targets, correspondence and performance reviews.

4.     Choose the correct route for the board seat: a shareholder resolution, a board resolution on the statutory grounds, or the Companies Tribunal.

5.     Give proper notice, written reasons where required, and a real opportunity to respond. Record the response and genuinely consider it.

6.     Run a fair employment process for the job itself, alongside or after the board process.

7.     Consider a negotiated separation agreement covering pay, restraint of trade, confidentiality and a full and final settlement.

8.     Communicate accurately. Never announce a resignation that did not happen, and update the company's records with the Companies and Intellectual Property Commission (CIPC).

What should an executive do if they are removed?

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.

What is the bottom line?

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.

Frequently asked questions

Can shareholders remove a director without giving a reason?

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.

Does removing a director from the board end their employment?

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.

Is loss of confidence a valid reason to dismiss an employee in South Africa?

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.

How long does a director have to challenge removal by the board?

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.

How much compensation can an executive get for unfair dismissal?

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.

Need help removing an executive, or have you been removed?

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.

•       Call: +27 (0)11 646 0335

•       Email: roy@bmalaw.co.za

•       Website: www.bregmans.co.za

Bregman Moodley Attorneys Inc. Taking the Sting Out of Legal Problems Since 1974.