Abstract

In South African law, a company that wishes to provide financial assistance to one of its directors, a related juristic person, or to a person related to a director or related juristic person, must comply with the requirements contained in section 45 of the Companies Act 71 of 2008 to validly execute such a transaction. The Act contains no precise definition of the term “financial assistance”, causing commentators to speculate that the reach of section 45 may be extremely wide. However, in Constantia Insurance Co Ltd v Master, Johannesburg High Court 2023 5 SA 88 (SCA), the Supreme Court of Appeal interpreted “financial assistance” narrowly. In this contribution, the Court’s restrictive interpretation of the term is critically analysed. I argue that the Court’s decision was correct and that its interpretation of “financial assistance” is consistent with the objectives of South African company law because it is likely to improve business efficiency without unduly prejudicing a company’s stakeholders. I also propose that the necessity for related-party financial assistance provisions should be reconsidered.