Governance


DIRECTORS

The Directors of AfricaSIF.org are guided by their duties and expectations, as advised by our legal counsel.


Directors (March 2013)

  • Deon Smith
  • Mandisa Zungu
  • Graham Sinclair
  • TBC
  • TBC

Public Officer
  • Keith Comline
DUTIES

The Companies Act 71 of 2008 ("the Act") regulates the appointment of directors.  Directors of a Non Profit Company can be appointed by a person who is named or determined in the Memorandum of Incorporation ("MOI").

The MOI provides that directors must be elected and appointed at a duly convened members' meeting called for this purpose. Please refer to articles 3.3, 3.4 and 4.1.3, 4.1.4, 4.1.5, 4.1.6 which describe the process.

A members' meeting may be conducted entirely by electronic communication.  Please refer to Article 3.5 of the MOI which describes the process.

The quorum requirement for a members' meeting to begin is set out in article 3.6 of the MOI.

The company is required within 10 business days of a person becoming a director, to file a notice with the Companies Intellectual Property Commission ("CIPC"). This is done on a prescribed form that notifies the CIPC of the change of directors.

The Act requires delivery to the company of a written consent to act as director by the newly elected director.
SUMMARY OF THE DUTIES OF DIRECTORS OF A SOUTH AFRICAN COMPANY


1.    Duties of directors   

1.2    fiduciary duties   

1.3    duties of skill and care   

1.4    additional duties    



    Duties of directors

            The 2008 Companies Act regulates the standards of conduct required of directors and specifies liabilities for breach of duties, as well as identifies persons who may bring suit to enforce those standards.  The common law on directors' duties and liabilities continues to apply to the extent that it is not amended by, or in conflict with, the 2008 Companies Act.  At common law, a director owes two types of duties to the company, namely:

                fiduciary duties;  and

                duties of skill and care.

            These duties are owed to the company (i.e. the body of members as a whole) and not to individual members of the company’s group.  

        fiduciary duties

A director is subject to various duties by virtue of his fiduciary relationship to the company (a relationship of trust).  The fiduciary duties owed by a director encompass:

            a duty not to exceed his power

A director has a duty at common law not to act ultra vires or beyond any limits placed on his powers by the company's MOI, applicable statutes or the common law.  If a director breaches this duty and the company suffers any loss, then damages can be claimed.

            a duty to exercise powers for a proper purpose

This duty is set out in the Act and requires a director to act in good faith and for a proper purpose.

At common law a director must exercise his powers only for the purposes for which they are conferred.  This includes:

                the duty to exercise his power bona fide in the interests of the company

The Act specifically requires a director to act in the best interests of the company.

A director must act in a way which he perceives to be for the benefit of the company as a whole.  A director may not exercise his power for the purpose of defeating the interests of the company or furthering his own interests.

                the duty not to exercise his power for an unauthorised or collateral purpose

What constitutes a proper or improper purpose turns upon the purposes for which the director's powers are conferred on them by the company's MOI.  Where an exercise of a director's powers at common law is challenged on the grounds of improper purpose, the court will determine what the primary purpose for the action was.  Where the primary purpose was improper, the director will have breached this duty, notwithstanding that he acted for other purposes which were proper.  Where a director has acted improperly and without the knowledge of the board, the transaction may be voidable at the instance of the company.  If the company suffers loss as a result of the director's breach of this duty, the company may claim the damages suffered from the director.

            a duty to exercise independent and unfettered discretion

A director must not allow his judgment to be influenced and must apply his mind in an objective manner to the affairs of the company.  A director who is nominated for appointment by a member to represent its interests is nevertheless obliged to exercise his discretion objectively and must act positively to protect the interests of the company as a whole, even where those interests  conflict with the interests of the shareholders who nominated him.

            a duty to avoid conflicts of interest

A director must not put himself in a position where there is an actual or potential conflict between his duty to the company and his personal interests.  A number of particular duties flow from this general rule:

                self-dealing and a duty to disclose personal financial interests

                    A director may not act on behalf of the company in any matter in which he has an interest that conflicts with his duties to the company.  A director may, however, act on behalf of the company in a contract in which he has an interest if he obtains the consent of the company’s members in a general meeting to do so, after making full disclosure of the interest in the contract.  The requirement for disclosure is to ensure that honesty and integrity are observed.

                    A director must not put himself in a position where there is an actual or potential conflict between his duty to the company and his personal interests.

                    If a director of a company has a personal financial interest in respect of a matter to be considered at a meeting of the board or knows that a related person has a personal financial interest in the matter, the director:

                        must disclose the interest and its general nature before the matter is considered at the meeting;

                        must disclose to the meeting any material information relating to the matter and known to the director;

                        may disclose any observations or pertinent insights relating to the matter if requested to do so by the other directors;

                        if present at the meeting must leave the meeting immediately after making any disclosures;

                        must not take part in the consideration of the matter except to make disclosures;

                        while absent from the meeting (i) is to be regarded as being present at the meeting for the purpose of determining whether sufficient directors are present to constitute the meeting; and (ii) is not to be regarded as being present at the meeting for the purpose of determining whether a resolution has sufficient support to be adopted;  and

                        must not execute any document on behalf of the company in relation to the matter unless specifically requested or directed to do so by the board.

                    A director may disclose a personal financial interest other than at a meeting of the board by a notice in writing addressed to the board, setting out the nature and extent of that interest.  This notice may be used so as to comply with the duty of disclosure until the notice is changed or withdrawn by further written notice from that director.

                    If a director of a company acquires a personal financial interest or knows that a related person has acquired a personal financial interest after approval by the board, the director must promptly disclose to the board the nature and extent of that interest and the material circumstances relating to the director or related person's acquisition of that interest.

                    Any decision of the board or any transaction or agreement approved by the board will be valid despite a personal financial interest only if it was approved following disclosure in the manner required by the Act of the financial interest or, if it is approved without prior disclosure, if it is ratified by the shareholders by ordinary resolution following disclosure of the interest.

                    The court is given the power to declare valid any transaction or agreement approved by the board or ratified by the members' even if the disclosure requirements were not complied with.

                    In the absence of approval of the court or approval by the board or member as referred to in paragraphs 1.2.4.1.6 and 1.2.4.1.7, an agreement approved by a board where there has not been proper disclosure of directors' personal financial interests will be invalid.

                the duty not to acquire secret or incidental profits

A director must account to the company for all profits acquired by him unless acquired or retained with the full knowledge and consent of the company.  Liability arises from the fact that profit has been made; the existence of fraud is irrelevant.  The purpose of this rule is to prevent directors from placing themselves in a position where they may be tempted to prefer their own interests to those of the company.

                confidential information

                    A director is under a duty not to disclose any confidential information relating to the company and its affairs.  This duty continues even after the termination of the director's office.  A director acting in breach of this duty will be liable for any profits he makes or for damages in respect of any loss suffered by the company.

                    Under the Act, a director’s duties in respect of confidential information is broadened in that a director must not use the position of director, or any information obtained while acting in the capacity of a director:

                        to gain an advantage for the director, or for another person other than the company.

                        to knowingly cause harm to the company

                    The Act expressly obliges a director to communicate to the board at the earliest practicable opportunity any information that comes to the director's attention, unless the director:

                        reasonably believes that the information is immaterial to the company or generally available to the public or known to the other directors; or

                        is bound not to disclose that information by a legal or ethical obligation of confidentiality.

                    With respect to 1.2.4.3.3.1, the Act does not specify whether the disclosure should take any particular form or to whom it should be made, but it is clearly preferable for a director to make a written disclosure, receipt of which is acknowledged by the company.

                    As regards 1.2.4.3.3.2, no guidance is given in the Act as to what an "ethical" obligation is but it could, for example, apply to a director who is also an attorney and who has obtained confidential information as an attorney and is under an ethical duty to keep that information confidential.  That director nevertheless is not permitted to use the information for a personal advantage.  A further point of interest is that a director does not under the common law owe fiduciary duties to a subsidiary or wholly-owned subsidiary.  The Act therefore appears to introduce a new concept of owing obligations to group companies in regard to corporate advantage.  A director who serves on the board of more than one company should consider entering into a confidentiality agreement with each company which precludes the director from disclosing confidential information.

        duties of skill and care

            A director is required to exercise due skill and care when performing his duties.  In particular:

                a director is expected to exercise whatever skill he possesses with reasonable care; and

                a director must show the degree of skill that may reasonably be expected from a person with his particular knowledge and experience.

            The Act makes no distinction between an executive and non-executive director.  Instead it focuses on the functions carried out by a director, as well as the experience and levels of skills of a particular director.  The broader the experience and the greater the level of skill a particular director possesses will result in the conduct of that director being judged by a higher standard than a director with less experience and fewer skills.

        additional duties

            Whilst this note focuses on what are traditionally regarded as the principal duties of directors, the Act imposes a number of additional duties on directors in relation to specific matters.
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