The judicial determination of fair value for the purposes of section 164 of the Companies Act 71 of 2008

Abstract

Section 164 of the Companies Act 71 of 2008 introduced the statutory appraisal remedy into South African company law, affording dissenting shareholders a no-fault exit mechanism when opposing certain fundamental corporate actions. Central to the operation of this remedy is the judicial determination of “fair value” of the appraisal shares, a concept left undefined by the legislature. Recent South African case law has revealed significant uncertainty regarding the appropriate valuation methodologies to determine fair value and the appointment of expert appraisers. This dissertation critically examines the judicial determination of fair value under section 164, with particular emphasis on the role of the courts once the appraisal right has been perfected. It adopts a comparative approach, analysing the appraisal remedy as developed under Delaware law in the United States and under the Japanese Companies Act, both of which represent mature yet distinct responses to the valuation challenges inherent in shareholder appraisal proceedings. Through doctrinal analysis and comparative evaluation, this study identifies shortcomings in the current South African approach and proposes targeted reforms aimed at enhancing certainty, fairness and efficiency in fair value determinations.