Page 16 - Nexia SAB&T Business in South Africa Guide 2024

Section 20 (4) and (5): Restraining Orders
One or more shareholders, directors or prescribed officers or the trade union
representing employees of the company may apply to the High Court for an
appropriate order to restrain a company from doing anything inconsistent
with the Act, or from doing anything that is inconsistent with any of the limits,
restrictions or qualifications of the MOI.
Each shareholder may have a personal claim for damages against any person,
including a director, who intentionally, fraudulently or due to gross negligence
causes the company to do anything inconsistent with the Act, or to do anything
that is inconsistent with any of the limits, restrictions or qualifications of the
MOI (unless the action does not contravene the Act and has been ratified by
shareholders).
Section 218: Civil Actions
A shareholder (and any other stakeholder) can also have a claim against the
directors or any person who contravenes the Act for damages for any loss or
damaged suffered as a result of that contravention. The action does not need to
be fraudulent or carried out with gross negligence for a valid claim in terms of
this Section.
The Act does however provide some form of relief to directors – by way of
Indemnity and Insurance for Directors.
In terms of the Act, a possible defence is open to a director who asserts
that he/she had no financial conflict, was reasonably informed and made a
rational business decision in the circumstances. This is known as “the business
judgement rule”.
Sections 20 and 218 of the Act enable shareholders to sue directors/officers
for civil damages, or any losses suffered by them.
If a company is a personal liability company, the directors (including past
directors) are jointly and severally liable together with the company for any
debts and liabilities of the company that contracted during their respective
periods of office.

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