The myth of a central role by institutional shareholders in corporate governance

by | Nov 19, 2022 | JCCL, JCCL V8 I1

The myth of a central role by institutional shareholders in corporate governance

Author: Ntombizodwa Lucia Zikhali

ISSN: 2521-2575
Affiliations: Candidate Legal Practitioner, Gildenhuys Malatji Inc
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 1 – 20
https://doi.org/10.47348/JCCL/V8/i1a1

Abstract

The need for transparent and high standards of corporate governance is expressly highlighted in s 7 of the Companies Act 71 of 2008. There has been a wide call by those concerned with corporate governance for institutional investors to take a central role in ensuring corporate governance reform is successfully achieved. A number of concerns are highlighted that stand in contrast with this expectation of institutional investors taking on such a lead role. These concerns relate to competition in the investment market, performance incentives, short-termism, unwarranted interference with director authority, lack of expertise, the burden of investment and existing statutory mechanisms making this expectation unrealistic and a potential for more problems rather than a solution.

Personal liability of non-executive directors in South Africa: A global comparative analysis

by | Nov 19, 2022 | JCCL, JCCL V8 I1

Personal liability of non-executive directors in South Africa: A global comparative analysis

Author: Mutsa D Danha

ISSN: 2521-2575
Affiliations: Tutor and LLM candidate, Learning Space Tuition and Wits Law School
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 21 – 34
https://doi.org/10.47348/JCCL/V8/i1a2

Abstract

The South African Companies Act 71 of 2008 (SA Companies Act) contains extensive provisions detailing the circumstances under which directors may be held personally liable for their actions completed while carrying out their duties. These statutory provisions are a partial codification and modernisation of the existing commonlaw provisions that had previously regulated this area of company law. These provisions still apply to the extent that they comply with the Act’s statutory provisions. The common-law tradition in South African company law has its roots in the English common law, which has spawned many other legal traditions, from that applicable in Australia to the tradition that has emerged (and diverged) in the United States of America. This article examines whether, in applying the statutory provisions of the SA Companies Act, the manner in which personal liability may be ascribed to directors would amount to a standard more onerous than jurisdictions with similar legal traditions to South Africa and, as such, render the position of director in South Africa as (comparatively) undesirable. A further examination of whether a director is an executive or a non-executive director is relevant to establish whether liability will ensue and to confirm the position in South African law on this matter. Some of the distinctions between such directors are laid out in the seminal case of Kaimowitz v Delahunt. Overall, this article seeks to ascertain whether the trajectory of South African company law is aligned with the modern forms of the same law that have evolved in its ‘sibling jurisdictions’ (legally speaking). It further seeks to establish whether any variance thereof would result in unintended detriment to the aims of the concerned laws – that is, promoting good corporate governance, and thus attracting good corporate leaders to the Republic.

Co-existence of statutory provisions and common-law rules make the smooth application of the Companies Act of 2008 to be untenable in certain respects

by | Nov 19, 2022 | JCCL, JCCL V8 I1

Co-existence of statutory provisions and common-law rules make the smooth application of the Companies Act of 2008 to be untenable in certain respects

Author: Batool Hayath

ISSN: 2521-2575
Affiliations: Attorney of the High Court of South Africa
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 35 – 49
https://doi.org/10.47348/JCCL/V8/i1a3

Abstract

The Companies Act 71 of 2008 does not provide a complete codification of company law in South Africa, with the common law still having application. While the Act has done away with certain common-law rules, for instance, the common-law derivative action, it has, in other instances, maintained a co-existence of commonlaw rules and statutory provisions. This article discusses how the coexistence of common-law rules and statutory provisions impacts the smooth application of the Act in the context of the Turquand Rule, pre-incorporation contracts and the common-law stipulatio alteri, and the partial codification of directors’ duties in the Act.

Is directors’ liability under the Companies Act of 2008 a potentially dangerous trap in comparison to other jurisdictions?

by | Nov 19, 2022 | JCCL, JCCL V8 I1

Is directors’ liability under the Companies Act of 2008 a potentially dangerous trap in comparison to other jurisdictions?

Author: Joshua Horney

ISSN: 2521-2575
Affiliations: Candidate Attorney, Macgregor Erasmus Attorneys
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 50 – 66
https://doi.org/10.47348/JCCL/V8/i1a4

Abstract

Company law jurisprudence is still emerging in South Africa, especially with the birth of the comprehensive Companies Act 71 of 2008. Academics have focused on directorial duties, with harsh criticism on the shoulders of the legislature. This piece examines the role of non-executive directors specifically but directors holistically under South African law to potentially illustrate how red tape and compliance are strangling this role. Arriving at this conclusion, directorial duties under the common law and the Act are compared and scrutinised. In addition, directorial protective instruments are tested to analyse whether the Act has sufficiently protected directors enough to allow for entrepreneurship and risk-taking but also to hold overstepping directors accountable for extensive breaches of director duties.

A case for excluding foreign companies from the application of the Companies Act of 2008 is unconvincing

by | Nov 19, 2022 | JCCL, JCCL V8 I1

A case for excluding foreign companies from the application of the Companies Act of 2008 is unconvincing

Author: Iram Hayath

ISSN: 2521-2575
Affiliations: Attorney of the High Court of South Africa and LLM Candidate (Wits University)
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 67 – 85
https://doi.org/10.47348/JCCL/V8/i1a5

Abstract

The approach adopted in the Companies Act 71 of 2008 (2008 Companies Act) is to significantly limit the regulation of foreign companies conducting business (or non-profit activities) in South Africa that meet the registration requirements of the Act. The rationale behind this approach is understood as being s 7(c) of the Act – to promote innovation and investment in South African markets. This article argues that the general exclusion of external companies from the 2008 Companies Act inadvertently impedes the furtherance of several stated purposes of the Act – which, in turn, adversely impacts the ability to achieve innovation and investment in South African markets. This article also argues that external companies are effectively excluded from certain provisions that may benefit them (including corporate governance and business rescue provisions). The current position also results in some uncertainty and unpredictability in relation to the determination of whether a foreign company is required to adhere to the registration requirements in terms of s 23 of the Act, application of certain provisions, and conflict of laws on matters that remain ungoverned by the 2008 Companies Act regarding external companies. The general exclusion of external companies from the Act is a matter that requires future reconsideration (in a manner that ensures that the stated purposes of the Act are met and that the framework within which external companies operate in South Africa is not disregarded).