Company directors liable

2018-10-31 06:00
Damian Viviers

Damian Viviers

Multimedia   ·   User Galleries   ·   News in Pictures Send us your pictures  ·  Send us your stories

Question:

A friend of mine has a good business concept, and he recently asked me to come on board as a partner.

He wants to set up a company in which we would be joint directors.

I want to be part of the business, but I am not sure about being a director and what my liability may be.

Answer:

A company is a reliable and well-known vehicle to use for a business.

That said, many company directors are not always aware of the nature and scope of their duties and their liability should these duties not be complied with.

A director of a company is a member of the board of directors.

In accordance with the Companies Act 71 of 2008 (the “Companies Act”) and the company’s Memorandum of Incorporation (“MOI”), the board is responsible for the management of the affairs of a company and must exercise all the power and perform all the functions of the company.

Directors must comply with the various duties they have in terms of the Companies Act. Failure to do so could expose them to potential liability.

The approach adopted by the Companies Act is that directors who fail to comply with their duties should be held personally liable for losses incurred by the company.

Directors are exposed to the following forms of potential liability:

  • Civil liability. A director who breaches his or her duties may be held jointly and severally (fully and equally) liable together with any other person for committing certain acts.
  • Criminal liability. Section 214 of the Companies Act provides for criminal liability of those directors trading a company in a manner which is calculated to defraud a creditor.
  • Breach of fiduciary duties. In the event that a director breaches his fiduciary duties to the company, such director may be held personally liable for any loss, damages or costs sustained by the company because of such breach.
  • Breach of the duty of care, skill and diligence. Directors may be held liable in terms of civil action for any loss, damages or costs sustained by the company because of the breach of a director’s duty of care, skill and diligence.
  • Liability for breaching the Companies Act. The Companies Act stipulates that a director will be liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having breached certain provisions of the Companies Act.
  • Liability towards the shareholders of the company. Directors of a company may potentially be held liable by the shareholders of the company for breach of their duties in certain circumstances.

Clearly, becoming a director is no casual decision.

It should not mean that you should shy away from becoming a director, but rather that it should make you aware that a thorough understanding of a director’s responsibility is vitally important.

A breach of your duties as director can hold serious consequences.

If you are still unsure about your decision, contact your attorney to discuss your concerns and responsibilities towards the business should you wish to take on the role of director in the new business venture.

– Damian Viviers, associate, Phatshoane Henney Attorneys

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
NEXT ON NEWS24X

Inside News24

 
/News
Traffic Alerts

Jobs in Cape Town [change area]

Jobs in Western Cape region

SQL Reporter

Cape Town
Communicate Cape Town IT
R10 000.00 - R12 000.00 Per Month

Reporting Accountant

Cape Town
Network Finance Professional / Prudential
R310 000.00 - R360 000.00 Per Year

HSE Manager

Cape Town
Tumaini Consulting
R550 000.00 - R650 000.00 Per Year

Property [change area]

There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.