Frightened of Becoming a Director?

group of people in dress suits

Photo by Marily Torres on

I learnt a lot of being a director from the Institute of Directors of South Africa, and I am a Certified Director.
Headlines like “Ziegler SA goes after SA Express board members in their personal capacity” can strike fear into the heart of anyone considering becoming a board member.
According to Section 76 of the COMPANIES ACT 71 OF 2008 directors must “must exercise the powers and perform the functions of director in good faith and for a proper purpose; in the best interests of the company; and with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions in relation to the company as those carried out by that director; and having the general knowledge, skill and experience of that director.”
Section 76 is difficult, and no one should take the role of director lightly. If directors do not follow section 76, they can be found liable.
The facts, as stated in the article, do not make it clear that the directors did not follow section 76. Thus, I find it unlikely that the court will find the board members liable.
Section 22 (Reckless Trading) of the companies act implies that Companies and Intellectual Property Commission may “issue a compliance notice to the company requiring it to cease carrying on its business or trading if the company is not able to pay its debts as they become due and payable in the normal course of business.” This is what Ziegler SA seems to be asking for.
The word delinquency is also mentioned in the article. A director can be found to be delinquent “when a director grossly abused the position of director; took personal advantage of information or an opportunity, intentionally, or by gross negligence, inflicted harm upon the company or a subsidiary of the company, acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust in relation to the performance of the director’s functions within, and duties to, the company; has repeatedly been personally subject to a compliance notice or similar enforcement mechanism, for substantially similar conduct, in terms of any legislation.”
So, when a headline frightens you, do a bit of research. You will find there is more protection for directors doing well than you thought.

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