So you've been offered a directorship, now what?

14 May 2021 ,  Albri VogesFanie Botes 801
With a new adventure ahead, qualities such as ambition, drive, leadership skills, eagerness to learn, creativity, innovation, strategic thinking and an “eye” for identifying good business opportunities, can complement your new position as a director.

However, it is important to be well aware of your duties and liabilities as a director. 

Duties

You (as a director of the company) will have a common law duty and - as partially codified in the Companies Act, 71 of 2008 (hereinafter “the Act”) read with the company’s Memorandum of Incorporation (“MOI”) - the duty to inter alia:

-  exercise care, skill and diligence 
-  act bona fide in the best interest of the company 
-  not accept benefits from third parties 
-  exercise independent judgement 
-  have a fiduciary duty and obligation to carry out your duties with the utmost good faith of care 
-  administer the company by practicing good corporate governance 
-  carry on the business without trading recklessly or under insolvent conditions, or with the -  intention to defraud any person, or for any fraudulent purpose 
-  keep company and accounting records

By failing the above, you could potentially be held personally liable for losses incurred by the company.

Liabilities

Ignorance of the law is no excuse and will not hold up as a defense for directors. In general, you as a director of the company could possibly be held liable in the following circumstances:

Criminal Liability 
-  should you commit a breach of confidence
-  make false statements or participate in reckless conduct
-  falsification of accounting records
-  knowingly and fraudulently provides false or misleading information;
-  act in a manner to defraud a creditor

Civil Liability 
-  breach of your fiduciary duty of care, skill and diligence, to the effect that you might be held personally liable for any loss, damages or costs sustained by the company as a result of such breach

Statutory Liability 
-  you might be held liable for any loss, damages or costs sustained by the company should you be in breach of your statutory obligations as stipulated in the Act 

Liability towards the shareholders
-  In certain circumstances you even might be held liable by the shareholders of the company for breach of your duties

By accepting directorship in a company you should be well aware of your duties and liabilities and even more so, the consequences should you be in breach thereof.

You are welcome to consult our Commercial Department should you require more clarity on this subject or any other company related enquiry. 

All the best on your exciting new business venture and your very important role as director of the company. 
 
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