The risk of personal liability for money damages under the South African Companies Act, 2008 and the possible impact on nonexecutive directors
The risk of personal liability for money damages under the South African Companies Act, 2008 and the possible impact on nonexecutive directors
Author: Amukelani Baloyi
ISSN: 2521-2575
Affiliations: Legal Commercial Manager, Rand Water
Source: Journal of Corporate and Commercial Law & Practice, Volume 9 Issue 2, 2023, p. 1 – 15
https://doi.org/10.47348/JCCL/V9/i2a1
Abstract
This article considers, critically, the risks associated with imposing personal liability for money damages under the South African Companies Act and the risks of willingness by non-executive directors to serve on the board of companies due to risks associated thereto. The article considers the legal position relating to liability as it is known under common law and as it was applied by the South African courts over the years. Further consideration is given to the legal positions of similar provisions in other jurisdictions practicing similar company law practices. The introduction of the provisions requiring imposition of monetary damages on directors in South Africa followed on a comparable practice globally, specifically, on those countries which share company law practices. However, it will be discussed what South African policymakers may possibly have not considered following the deliberations during the drafting stage – as was advised by the advisors who were appointed to carry out the drafting exercise. The impact of imposing money damages will be discussed and the use of other mechanisms to mitigate against the potential effect of the statutory provisions will be discussed. Through a detailed analysis of the rights associated with money damages, recommendations will be made on how to best deal with the effects of these provisions.