C&A Friedlander Attorneys


Section 164 of the Companies Act 71 of 2008 (“the Act”) is a statutory instrument constructed to provide a dissenting shareholder with a remedy to exit a company in instances where the majority of the shareholders resolve to pursue a transaction that the dissenting shareholder disagrees with.

Until 1 May 2011, the types of corporate actions to which appraisal rights now apply were regulated in terms of the traditional principles of “majority rules”, with dissenting minority shareholders having no such right or remedy against the company.

Accordingly, unless the particular shareholder could prove that he or she was entitled to relief under the oppression remedy, the only exit option available to the disgruntled shareholder would be to find a willing purchaser and to dispose of his or her shareholding in an ordinary course of the sale of the shares.

Section 164 of the Act accordingly seeks to afford a shareholder, in specific circumstances, the right to demand that the company buy-back all shares held by that shareholder in the company, and pay the shareholder the fair value of those shares, as opposed to the value placed thereon by the company.

Relevance and application of Section 164

Appraisal rights are notoriously underutilized and have often been dismissed as an ineffective and onerous remedy for minority shareholders. This is a relatively new concept in South Africa, as opposed to many foreign jurisdictions where appraisal rights have already found application for decades.

  • Samuel v President Brand Gold Mining Co Ltd.
  • The proper and effective exercise of appraisal rights under the South African Companies Act 2008, J Yeats.

The current economic climate has seen a rise in shareholder activism and raised various questions surrounding the enforcement of minority shareholder protection and appraisal remedies.

Section 164 of the Act provides dissenting shareholders, provided that they follow procedures as prescribed in the Act, with an opportunity to liquidate their shareholding on terms often more favourable than those initially offered by the company. More particularly, if a shareholder does not consider the valuation provided by the company as adequate, or if the company fails to make an offer as required by section 164 of the Act,  the aggrieved shareholder may apply to have the shares valued by a Court. The Court will be required to make a ruling which will either determine the value of the shares or which may appoint appraisers to assist with this process.

The provisions of Section 164 will find application in various instances, including but not limited to:

  1. where a company has given notice to shareholders of a meeting to consider adopting a resolution to amend its Memorandum of Incorporation by altering the preferences, rights, and limitations on certain classes of shares; and
  2. where the company intends on entering into a transaction as contemplated in sections 112, 113 and 114 of the Act.

It is therefore of paramount importance that both the shareholders as well as the board of directors of the company are well aware of the implications of section 164 and the consequences resulting from the application thereof.


Should you be in a position where you are being forced out of a company on their terms (as a minority shareholder), or alternatively, should you be a majority shareholder in a company anticipating a merger and / or a takeover, it is imperative that you obtain the appropriate legal advice pertaining to section 164 of the Act prior to the implementation of the envisaged transaction.

Please do not hesitate to contact the writer hereof should you require any assistance in this regard. 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

      Written by James Gallow

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