Section 163 of the Companies Act offers a remedy to a shareholder or director who can show that any act or omission by the company or a related person has had a result that is oppressive, unfairly prejudicial to, or unfairly disregards the interests of the applicant. The test for the application of section 163 is twofold: (i) there must be relevant conduct (an act or omission, the conduct of business, or the exercise of powers by a director or related person), and (ii) that conduct must be objectively oppressive, unfairly prejudicial, or unfairly disregard the interests of the applicant. Importantly, in certain circumstances, it is not necessary for the applicant’s legal rights to have been infringed or for the conduct to have been unlawful for the remedy to be available; it is sufficient if the conduct is unfair in the context of the relationship, and the court may take account of the applicant’s wider interests and equitable considerations.¹ This is the case where a so-called ‘quasi-partnership’ exists, which is the subject of this case and will be explained in further detail below.

Background and facts

Liesl Ungerer and Keri Janet Ferreira were equal shareholders in two community scheme management companies. Their business relationship began in 2018, with each contributing equally to the start-up capital and sharing profits, management responsibilities and decision-making. Notably, the parties in this case operated without a formal shareholders’ agreement regulating their relationship. Ferreira was the sole director of both companies.

Tensions arose in 2024 when Ferreira, despite Ungerer’s objections, diverted business to Home and Equity Marketing Proprietary Limited (H&E Marketing) to avoid value-added tax registration. Ferreira is the sole director and shareholder of this entity. The relationship deteriorated further, culminating in Ferreira unilaterally excluding Ungerer from access to company bank accounts, emails, and internal communications, suspending her monthly drawings, and removing her from company letterheads. Disciplinary proceedings were also initiated against Ungerer, and all attempts at negotiating a fair exit strategy failed. Ungerer then approached the court seeking relief under section 163 of the Companies Act.

Court’s analysis and findings

Question 1: Was there a quasi-partnership?

A quasi-partnership, as described in both the judgment and by Cassim, refers to a small private company formed on the basis of an agreement, understanding, or intention that the shareholders will all participate in the management of the company, with a relationship of confidence and trust akin to that of partners. Cassim explains that a quasi-partnership company:

“[U]sually involves a small private company that is formed on the basis of an agreement, an understanding or an intention that the shareholders will generally all be directors and participate in the management of the company, for instance, because the return on investment is to take the form of directors’ remuneration rather than dividends on shares.”

As mentioned above, in these instances, a court may take “equitable considerations” into account in deciding whether the remedy under section 163 is available to the applicant, i.e., where such considerations “make it unfair for those conducting the affairs of the company to rely on their strict legal powers”.

In this case, several factors pointed to the existence of a quasi-partnership:

• equal financial contributions and shareholding by both parties;
• joint management and decision-making in practice, despite Ferreira being the sole director on paper;
• a mutual expectation of participation in the business;
• Ungerer’s active involvement in client recruitment and management;
• both parties being publicly presented as “co-owners”; and
• Ungerer’s access to the company’s bank accounts until her exclusion.

Question 2: Was the conduct unfairly prejudicial or did it unfairly disregard the interests of the applicant?

The court found that Ferreira’s conduct (excluding Ungerer from management, financial information, and company communications) was not only oppressive but also unfairly disregarded Ungerer’s legitimate expectations as a shareholder in a quasi-partnership. The court emphasised that, considering the manner in which the affairs of the scheme management companies had been conducted, there was clearly an informal arrangement that Ungerer would be involved in the management of these companies. As such, effectively shutting her out in this way was unfair and unfairly disregarded her interests.

Remedies and orders

The court, acknowledging that the list of orders that may be granted in terms of section 163(2) is non-exhaustive and open-ended, granted Ungerer full and unrestricted access to the financial and administrative records of the scheme management companies and H&E Marketing. It ordered that any monies diverted to H&E Marketing be repaid or credited appropriately. Importantly, the court imposed a structured exit mechanism, allowing either party to buy out the other’s shareholding through a fair process, and rejected Ferreira’s attempt to impose unfair conditions such as a restraint of trade.

Implications for business owners and shareholders

This judgment serves as a cautionary tale for business partners in private companies, especially where no formal shareholder agreement exists. The court’s willingness to look beyond the company’s formal structure and recognise the realities of a quasi-partnership means that parties cannot rely solely on their legal rights to justify exclusionary or oppressive conduct. Ideally, parties should negotiate clear, written agreements to regulate their relationships to avoid a situation like this, where the absence of formal documentation led to significant uncertainty and costly litigation.

Conclusion

Ungerer underscores the need for fairness, good faith, and transparency in the management of closely held companies. Business partners should ensure that their agreements and conduct reflect their true intentions and expectations, and be aware that the courts will protect shareholders from oppressive conduct, particularly in quasi-partnership scenarios.