A DISCUSSION ON THE REMOVAL OF DIRECTORS AS DIRECTORS AND EMPLOYEES

Written by Cherise Hansen on October 28th, 2014. Posted in companies, Companies Act, company law, directors, dismissal, employee, employer, employment law., labour law

More often than not, a director often wears two hats; one as the director of the company and the other as an employee of the company.

 

Needless to say, this may lead to complications when the company wishes to terminate a director’s services as the company will need to decide whether it wants to:

 

  1. Terminate the director’s services only as an employee;
  2. Remove the director from the position of director and retain him as an employee; or
  3. Terminate the director’s services as an employee and remove him as a director.

 

Each of the aforementioned outcomes sought by the company will require a different procedure to be followed, which we will proceed to discuss.

 1. TERMINATION OF THE DIRECTOR’S SERVICES AS AN EMPLOYEE AND NOT  REMOVAL AS A DIRECTOR

 

Where the company only intends to terminate the director’s services as an employee and retain him as a director of the company, the company only needs to comply and give effect to the provisions of the Labour Relations Act (“LRA”).

 

The procedure that company will follow is that the board of directors will pass an ordinary resolution to remove the director, as employee, from his post. Thereafter, the correct procedures in terms of the LRA must be followed, in that the director, as employee, must be advised of the charges against him and provided sufficient notice of a disciplinary hearing to be held. A disciplinary hearing must be held where the director, as employee, is afforded the opportunity to be represented, to present his case, to call witnesses and to cross-examine any witnesses. The Chairman, chairing the hearing, is required to make an impartial and unbiased finding and recommendation as to the sanction.

 

The board of directors must then decide whether to implement the sanction of the chairperson or not.

2. THE REMOVAL OF A DIRECTOR FROM THE OFFICE OF DIRECTOR ONLY

In terms of the Companies Act, a director can be removed by an ordinary resolution adopted at a shareholder’s meeting.

 

However, before shareholders may consider a resolution to remove a director, the director concerned must be given notice of the meeting and the proposed resolution and must be given an opportunity to make representations to the meeting of shareholders before the shareholders consider the resolution to remove the director concerned.

 

Thereafter the shareholders will vote on whether to remove the director or not.

3. THE REMOVAL OF A DIRECTOR FROM OFFICE AND AS AN EMPLOYEE OF THE COMPANY

 

Where the company wishes to remove a director from his office as director and as an employee of the company, the procedure is twofold and reference must be given to both the Companies Act as well as the LRA.

 

Firstly, the company must take the correct steps to remove the director as a director of the company as set out in point 2 above.

 

Thereafter and in order to remove and/or terminate the director (in his capacity as an employee), the company is required to follow the procedures of the LRA as set out in point 1 above.

 

In some instances, the employment contract with the director as employee contains an automatic termination clause which provides that if the director is removed from his office as director, his employment with the company will be automatically terminated or vice versa. In other instances, the Memorandum of Incorporation (“MOI”) of the company will have an automatic termination clause.

 

However, in the case of Chilliebush v Commissioner Johnson & Others the court held that the insertion of an automatic termination clause into a company’s MOI is in direct contravention with the LRA. The reasoning provided for the court’s decision is that an employer is not at liberty to contractually negotiate the terms of an employee’s dismissal, despite that employee also being a director.

 

Should a company rely on an automatic termination clause as its reasoning for the automatic termination of the director/employee’s contract of employment, such termination does not constitute a fair dismissal for purposes of the LRA. The director/employee will then be well within his rights to proceed to the CCMA on the grounds of unfair dismissal.

 

Accordingly an automatic termination clause will not assist in the removal as director and employee and the procedure described in points 1 and 2 will have to be used so as to avoid the director and employee alleging that he was unfairly dismissed.

 

Can the company then furnish and/or provide alternate reasons for the dismissal of the employee and removal of the director? There are no specific clauses in the LRA which govern same, however, this would not be recommended. The reason being is that should the matter proceed to the CCMA it will be difficult to explain why the individual was removed as a director for X reason but dismissed for Y and the employer is likely to be penalized extensively at the CCMA (i.e. the Commissioner is likely to award a hefty compensation in favour of the employee).

 

What can be recommended is that the reason for the removal as a director be based on a breakdown of the trust relationship. This ground for removal is so broad that it constitutes a “catch all phrase” and which would be in line with the reasons for the dismissal of the employee.

 

Cohabitation agreements

Written by Cherise Hansen on May 6th, 2014. Posted in ante-nuptial contracts, cohabitation, cohabitation agreements, living together, marriage

Written by Samantha-Jo Bothma

There is a growing trend to cohabitate with one’s partner instead of marrying in today’s society. The mere fact that the two parties live together for a number of years, does not afford the parties legal protection and/or any rights to the other parties’ assets should the relationship end.

The question is then how can parties, who have no intention to marry, protect themselves in the event “the wheels fall off the bus”? The answer lies in what is called a cohabitation agreement. 

A cohabitation agreement is much like an antenuptial contract in that it determines, from the outset, whose assets are whose, and how assets purchased jointly will be divided upon termination of the cohabitation. The agreement is recognised by High Court and can be enforced should either party act in breach thereof.

What is important to note is that a cohabitation agreement can and will never define the parties as spouses, for obvious reasons. The fact thereof is that under no circumstances will either spouse have any claim whatsoever to the other’s pension benefit.

In the absence of the cohabitation agreement neither party will have any financial protection and/or recourse against the other party on dissolution of the relationship. It is therefore imperative that parties conclude a cohabitation agreement to protect themselves in the event they do not intend marrying one another.

Related articles: Living together: What it means to you.

A PARENT’S RIGHT OF ACCESS

Written by Cherise Hansen on August 12th, 2013. Posted in care, child maintenance, children, cohabitation, contact, divorce, living together, maintenance, marriage, marriages, seperation

Written by Lanka Krugel

google images
google images

When two people decide to divorce each other, decisions have to be made regarding the care of any children who may be affected by the divorce. It has to be decided with which parent the children will live, when and how often the children will see and speak to the parent with whom they do not live, and whether either of the parents will be liable for paying maintenance. This also applies to parents who were living together when a child was born or even when a child was born to parents who were not living together or were married.

After much fiery debate on the subject of a father’s right to access of his child, the Children’s Act, Act 38 of 2005, has provided some certainty regarding parents’ rights of access and custody of children in South Africa. The Children’s Act came into effect on 1 April 2010.

Rights of unmarried fathers

In the past, where parents were not married to each other, an unmarried father did not have an automatic right to contact his child.  Unmarried mothers had an automatic right to contact and the child would normally live with its mother whilst the unmarried father would have to approach the court for an order allowing him to have contact with his child.

[Note: The Children’s Act replaced the common law concept of “custody” with “care” and “access” with “contact”, as defined in section 1 of the Children’s Act.]

The definition of “parent” in the Children’s Act now includes unmarried fathers and adoptive parents, but excludes the following three classes of biological parents:

  • a  man whose paternity arises from rape of or incest with the mother;
  • a  person who is biologically related to the child by reason only of being a  gamete donor   for purposes of artificial fertilisation;
  • a  person whose parental rights and responsibilities have been terminated.

Parental responsibilities and rights 

Section 1 of the Children’s Act defines a concept of “parental responsibilities and rights” to mean the responsibility and right:

(a)  to care for the child;

(b)  to maintain contact with the child;

(c)  to act as the guardian of the child; and

(d)  to contribute to the maintenance of the child.

A biological father of a child has full parental responsibilities and rights in respect of a child if:

  • He is married to the child’s mother; or
  • He was married to the child’s mother at the time of the child’s conception or birth, or any time in between conception and birth.

Section 21 of the Children’s Act provides that the biological father of a child who does not have parental responsibilities and rights in respect of a child as a result of any of the aforementioned situations, may acquire such if:

  • at the time of the child’s birth he is living with the mother in a permanent life-partnership; or
  • regardless of whether he has or is living with the mother, he consents to be identified as the father or successfully applies for a court order declaring him as such. In this instance, he must have been contributing to the child’s upbringing and maintenance “for a reasonable period”.

Best Interests of child standard

The concept of “best interests” means that the court should have regard to the best interests of the child when making a decision regarding the care and contact of that child by his parents. Our Bill of Rights provides for the “best interests” concept, and the Children’s Act has now also reiterated that approach.

Section 7 of the Children’s Act provides a list of the factors to be taken into account “where relevant” when applying the best interests standard. Some of the factors that should be considered include:

  • the nature of the personal relationship between the child and his respective parents;
  • the attitude of the parents towards the child, as well as their attitude towards the exercise of their parental rights and responsibilities regarding the child;
  • the capacity of the parents to care for the child’s needs;
  •  the child’s gender,  age and level of maturity;
  • the need for the child to be brought up within a stable family environment, or, where that is not possible, in an environment resembling as closely as possible a caring family environment.

Child’s Opinion

If the court feels that the child is old enough and mature enough, then the court will also listen to the child’s opinion and take into account where the child wishes to stay.

Two other substantial changes brought about by the Children’s Act

Two other substantial changes brought about by the Children’s Act which also have a bearing on the topic on hand are:

  • Illegitimate children are no longer differentiated from legitimate children; and
  • The age of majority was changed to 18 years and is no longer 21 years.

In conclusion, the Children’s Act has assisted in providing unmarried fathers the right to have contact with their children, where in the past such fathers could only obtain such a right by virtue of a court order. While the Children’s Act widens the definition of who has an automatic right to contact with regards to a child, it also places strict limitations on who may not automatically have a right of contact to a child. The Children’s Act stipulates that the courts should always keep the best interests of the child in mind when making decisions regarding the care and contact of that child, and that the court must take certain factors into consideration when making such decisions.

 

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