Directors’ Duties and Responsibilities!

Posted by Think Tank on 06 November 2018.

Directors of companies enjoy a privileged position in that they are responsible for the running and administration of the entity entrusted to them.  This includes being aware of the common law duties applicable to them as well as the statutory duties required of them by the Companies Act.

Prior to the introduction of the new Companies Act of 2008 (hereinafter referred to as the “Act”), the duties of directors were governed by common law in South Africa. The Act now codifies the common law position with some additions and extends the duties of directors while increasing the accountability of directors to the shareholders of the company.

Experience shows us that most directors are not familiar with their duties and responsibilities as they ought to be.   Failure to properly perform the common law or statutory duties may render a director personally liable to pay monetary damages! 

Section 76 of the Act requires directors to act:

  • 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 carried out by that director, and having the general knowledge, skill and experience of that director.

In further compliance with this section, the director is required to communicate to the board, at the earliest practicable opportunity, any material information that comes to his or her attention, unless he or she reasonably believes that the information is publicly available or known to the other directors or they are bound by a legal or ethical obligation of confidentiality.

In terms of section 77 of the Act, a director of a company may be held liable (in accordance with the principles of the common law relating to the breach of a fiduciary duty) for any loss, damages or costs sustained by the company as a consequence of any breach by the director of the duties contemplated, inter alia, in section 76 of the Act.  In addition, a director of a company will be held liable where that director:

  • purports to bind the company or authorise the taking of any action by or on behalf of the company without the requisite authority; or
  • acts in the name of the company in a way that is false or misleading; or
  • knowingly or recklessly signs or consents to the publication of a financial statement which is false or misleading; or
  • trades recklessly or conducts the company’s business with the intention of defrauding a creditor (section 22 of the Act states that a company must not carry on its business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose) i.e. may not be delinquent.

There are numerous other responsibilities applicable to directors such as:

  • Implementing and maintaining proper record-keeping in the company;
  • Filing the company’s annual accounts and annual return on time.
  • Ensuring the company details are up to date.

It’s important to note that similar duties are applicable to member of a close corporation!

Do you want to know more about your duties and responsibilities as director?  Do you want to know how to appoint and remove directors?  Do you want to know how often to hold meetings and what procedures need to be followed?  Do you want to know how to structure your company to be as tax-efficient as possible? For answers to these questions and more contact us at