Page 15 - Nexia SAB&T Business in South Africa Guide 2024

that they understand their responsibilities in terms of the Act. Not doing so puts
both the board and the prescribed officer at risk of non-compliance with the Act,
which in turn could lead to activities that may result in personal liability.
Directors and officers are subject to a codified standard of conduct set out in
Section 76 of the Act, and a duty not to use company information in such a way
as to act in conflict of interest with the company (Section 75).
Section 77: Liability of Directors and Prescribed Officers
Section 77 codifies liability for directors and prescribed officers. It sets out civil
liability (delict and breach of fiduciary duty), and then in sub-section 3, sets out
specific statutory liabilities.
Section 77 is applicable to an extended definition of director. The liability that
is incurred in terms of section 77 is joint and several with any other person who
may be held liable for the same act. Any person with a claim can bring it against
all the directors or any one particular director. A single director can therefore be
held liable for the totality of damages suffered by a third party as a result of a
breach of fiduciary duties. An action to recover loss, damages or costs may not
commence more than three years after the act or omission.
Specific Statutory Liability
Section 77(3) lists specific instances when a director is liable for loss, damages
or costs sustained by the company as a direct or indirect consequence of him
having acted in the name of the company despite knowing he did not have the
authority to do so, or agreeing to the carrying on of company’s business despite
knowing that it was being conducted recklessly, or being party to an act or
omission by the company despite knowing that it was calculated to defraud a
creditor, employee or shareholder, or had another fradulent purpose, or even for
signing or consenting to the publication of any financial statements that were
false or misleading in a material respect despite knowing that the statement
was false or misleading or untrue (conditions apply). He can also be held liable
for being present at a meeting of the board, and failing to vote against certain
actions which in are contravention of the provisions of the Act [as listed in
Section 77(3)(e)], such as voting in favour of providing financial assistance to
a director despite knowing that the providing of such financial assistance would
have been inconsistent with the Act or the company’s MOI.
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