Director delinquency ruling

May 29, 2020 | CoSec Blog

IoDSA welcomes delinquency ruling and calls for directors to commit to education

Recent High Court of South Africa judgement has seen former SAA Chair, Dudu Myeni, being declared a delinquent director in terms of the Companies Act.

Judge Ronel Tolmay found that Ms Myeni had comprehensively failed to fulfil her duties as a director and ordered that she be declared a delinquent director for life, and she was further ordered to pay punitive costs. The Judge also referred the judgment and evidence to the National Prosecuting Authority for investigation regarding possible criminal conduct.

Judge Tolmay’s far-reaching judgment is timely for a number of reasons, not least because it finally tests in court the IoDSA’s long-standing contention that directors must inform themselves properly about the nature and extent of their duties towards the organisation, or put themselves in peril. It is also clear from the evidence led that the courts will rely not only on legislation but also the King Reports on Corporate Governance — together, these provide a sound framework to guide directors in fulfilling their duties satisfactorily. Directors have a critical role to play, and they can only do it if they are fully conversant with what their legal and fiduciary obligations entail.

The judgment also made the important point that directors cannot use collective decision-making as a way to evade individual responsibility and liability.

The case shows how important it is for organisations to appoint suitably qualified people to boards, and to ensure that they keep up to date with latest thinking and are regularly appraised. In the words of the judgment at 276: “To serve on a Board of an SOE should not be a privilege of the politically connected. Government has, as custodian of the common good, an obligation to ensure that suitably qualified people, with integrity are appointed in these positions.”

The same point holds true for the private sector as well. For many years, the IoDSA highlighted the need to professionalise directorship through its Chartered Director (SA) and Certified Director designations.

We believe this judgment should act as a clarion call for directors and prospective directors to take steps to ensure they are appropriately knowledgeable and experienced.”

View the full judgement here | judgement

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