The South African Statutory Derivative Action: Background, Comparisons and Application
Posted: 9 Apr 2018
Date Written: September 28, 2017
This essay focuses on the statutory derivative action under South African law, with some comparative notes. The former statutory derivative action in South Africa ( contained in section 266 of the Companies Act 61 of 1973) is explained as well as the current section 165 of the Companies Act 71 of 2008. Some comparative notes have been added to illustrate that there are several similarities, but also significant differences between the Australian and South African statutory derivative actions. The leading case of the Supreme Court of Appeal, Mbethe v United Manganese of Kalahari (Pty) Ltd, is discussed as example of the application of section 165. There is a particular focus on the onus of proof for applicants and the 'good faith' requirement of section 165. This essay concludes that, based on the Mbethe case, section 165 has the potential to be an effective remedy for the parties who have standing to bring such actions. However, the discretion of the court, in granting or refusing leave for a statutory derivative action to be instituted, provides a good safeguard against frivolous and vexatious actions.
Keywords: statutory derivative, South Africa, SACA
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