Journal of Corporate Commercial Law & Practice

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• Personal liability of non-executive directors in South Africa: A global comparative analysis

  The South African Companies Act 71 of 2008 (SA Companies Act) contains extensive provisions detailing the circumstances under which directors may be held personally liable for their actions completed while carrying out their duties. These statutory provisions are a partial codification and modernisation of the existing common-law provisions that had previously regulated this area of company law. These provisions still apply to the extent that they comply with the Act's statutory provisions. The common-law tradition in South African company law has its roots in the English common law, which has spawned many other legal traditions, from that applicable in Australia to the tradition that has emerged (and diverged) in the United States of America. This article examines whether, in applying the statutory provisions of the SA Companies Act, the manner in which personal liability may be ascribed to directors would amount to a standard more onerous than jurisdictions with similar legal traditions to South Africa and, as such, render the position of director in South Africa as (comparatively) undesirable. A further examination of whether a director is an executive or a non-executive director is relevant to establish whether liability will ensue and to confirm the position in South African law on this matter. Some of the distinctions between such directors are laid out in the seminal case of Kaimowitz v Delahunt. Overall, this article seeks to ascertain whether the trajectory of South African company law is aligned with the modern forms of the same law that have evolved in its 'sibling jurisdictions' (legally speaking). It further seeks to establish whether any variance thereof would result in unintended detriment to the aims of the concerned laws – that is, promoting good corporate governance, and thus attracting good corporate leaders to the Republic.

• Is directors’ liability under the Companies Act of 2008 a potentially dangerous trap in comparison to other jurisdictions?

  Company law jurisprudence is still emerging in South Africa, especially with the birth of the comprehensive Companies Act 71 of 2008. Academics have focused on directorial duties, with harsh criticism on the shoulders of the legislature. This piece examines the role of non-executive directors specifically but directors holistically under South African law to potentially illustrate how red tape and compliance are strangling this role. Arriving at this conclusion, directorial duties under the common law and the Act are compared and scrutinised. In addition, directorial protective instruments are tested to analyse whether the Act has sufficiently protected directors enough to allow for entrepreneurship and risk-taking but also to hold overstepping directors accountable for extensive breaches of director duties.

• The myth of a central role by institutional shareholders in corporate governance

  The need for transparent and high standards of corporate governance is expressly highlighted in s 7 of the Companies Act 71 of 2008. There has been a wide call by those concerned with corporate governance for institutional investors to take a central role in ensuring corporate governance reform is successfully achieved. A number of concerns are highlighted that stand in contrast with this expectation of institutional investors taking on such a lead role. These concerns relate to competition in the investment market, performance incentives, short-termism, unwarranted interference with director authority, lack of expertise, the burden of investment and existing statutory mechanisms making this expectation unrealistic and a potential for more problems rather than a solution.

• Co-existence of statutory provisions and common-law rules make the smooth application of the Companies Act of 2008 to be untenable in certain respects

  The Companies Act 71 of 2008 does not provide a complete codification of company law in South Africa, with the common law still having application. While the Act has done away with certain common-law rules, for instance, the common-law derivative action, it has, in other instances, maintained a co-existence of common-law rules and statutory provisions. This article discusses how the co-existence of common-law rules and statutory provisions impacts the smooth application of the Act in the context of the Turquand Rule, pre-incorporation contracts and the common-law stipulatio alteri, and the partial codification of directors' duties in the Act.

• A case for excluding foreign companies from the application of the Companies Act of 2008 is unconvincing

  The approach adopted in the Companies Act 71 of 2008 (2008 Companies Act) is to significantly limit the regulation of foreign companies conducting business (or non-profit activities) in South Africa that meet the registration requirements of the Act.[fn1] The rationale behind this approach is understood as being s 7(c) of the Act – to promote innovation and investment in South African markets.[fn2] This article argues that the general exclusion of external companies from the 2008 Companies Act inadvertently impedes the furtherance of several stated purposes of the Act – which, in turn, adversely impacts the ability to achieve innovation and investment in South African markets. This article also argues that external companies are effectively excluded from certain provisions that may benefit them (including corporate governance and business rescue provisions). The current position also results in some uncertainty and unpredictability in relation to the determination of whether a foreign company is required to adhere to the registration requirements in terms of s 23 of the Act, application of certain provisions, and conflict of laws on matters that remain ungoverned by the 2008 Companies Act regarding external companies. The general exclusion of external companies from the Act is a matter that requires future reconsideration (in a manner that ensures that the stated purposes of the Act are met and that the framework within which external companies operate in South Africa is not disregarded). footnote 1: F H I Cassim, M F Cassim & R Cassim et al Contemporary Company Law 2 ed (2012) 97–8. footnote 2: Ibid.

• Unveiling the contemporary arbitration regime in Tanzania: Anecdotes worth sharing, prospects and challenges

  This article critically discusses the new changes brought about by Tanzania's new Arbitration Act 2 of 2020 of Tanzania and its regulations and their implications for domestic and international arbitration and other related laws. The article finds that the establishment of the Tanzania Arbitration Centre; the requirement for accreditation of arbitrators; the introduction of a code of conduct for arbitrators; the ability of international arbitral tribunals to arbitrate investor–state disputes; the introduction of qualified immunity; and clarification of other grey areas are a long-awaiting milestone. The article also argues that the changes will have enormous and far-reaching implications on the arbitration framework in Tanzania, including propelling cross-border commerce and investments. It is further argued that despite its prospect, some areas in the novel arbitration regime need to be revisited to create a more credible framework for both international and domestic arbitration.

• Evaluation of the cause-and-effect relationship of internal controls on financial reporting in the Ministry of Health and Social Services, Namibia

  This article evaluates the effect of the internal control environment on the quality of financial reporting in the Ministry of Health and Social Services (MOHSS) in Namibia. The Internal Control-Integrated Conceptual Framework of the Committee of Sponsoring Organizations (COSO) of the Treadway Commission was applied as the standard of measurement against the variable internal control, and the Conceptual Framework for Financial Reporting of the International Financial Reporting Standards (IFRS) was used to measure the qualitative characteristics of the financial reporting process. A mixed research method was used to evaluate the cause and effect relationship between the key variables and to measure the perceptions of the respondents on the quality of the financial report. Probability sampling techniques were used on the 269 staff members of the MOHSS, and data were analysed using both descriptive and inferential statistics, using the SPSS software programme. The validity and reliability of data were computed using Cronbach's Alpha. The results of the study indicated that there is a positive relationship between the key variables although it is weak. Therefore, the study recommends the strengthening of governance systems to improve the safeguarding of financial resources.

• The challenges of anti-competitive practices and consumer protection in Nigeria

  This article critically examines the concepts and the challenges of price mechanisms, anti-competitive practices and consumer protection in Nigeria, and considers ways of promoting and protecting the interests of consumers in respect of products and services. The article evaluates and defines the concept of price mechanisms, and the concept of the consumer who needs to be protected. It discusses anticompetitive practices, such as monopolies, mergers and acquisitions, and restrictive trade practices, resale price maintenance agreements, misleading advertising, false sales and market values. It considers the protection of consumers and the legal frameworks applicable to the subject. In conclusion, the article recommends appropriate measures and a proactive, pragmatic approach to tackling the menace of false market sales and restrictive trade practices by calling on stakeholders and the government to regulate monopolies, mergers and uncompetitive business practices which are detrimental to the interests of the consumer. It calls for controls and restrictions on unfair trade practices and appropriate sanctions so that those who persistently prejudice consumers in this way are brought to book.

• The African Continental Free Trade Area Agreement: Aiding Intra-African trade towards deeper continental integration

  The signing of the African Continental Free Trade Area Agreement (AfCFTA) reflected many years of hard work by the continent's forefathers who include Kwame Nkrumah of Ghana, Julius Nyerere of Tanzania, Jomo Kenyatta of Kenya, Kenneth Kaunda of Zambia, Patrice Lumumba of Congo, Robert Mugabe of Zimbabwe and Frantz Fanon of Algeria, but to mention a few. The AfCFTA also depicts the novel work of the Organisation of African Unity (OAU), and later the African Union (AU), towards shaping a vision of continental integration, embedded in the vision of the African Economic Community (AEC), a by-product of the Abuja Treaty. Vision 2030 and the long-term continental vision of Agenda 2063: 'The Africa We Want' are also designed to contribute towards deeper and successful continental integration. However, by now the excitement over the AfCFTA signing has subsided. For each member state, the reality of being an AfCFTA party has started to sink in. Some member states have expressed concern and fear over problems such as opening their markets and accepting continental competition, allowing free movement of persons and trade across borders. Others find it too expensive to deal with the internal political fallout from their populace's scepticism regarding the agreement's effects on jobs (due to increased competition) and livelihoods. This article examines the AfCFTA to determine its impact and related advantages in respect of continental trade policies. It discusses the advantages of the AfCFTA and its potential challenges.

• An assessment of the success of the Convention on Choice of Court Agreements 2005 as an instrument of transnational commercial dispute resolution

  The Convention on Choice of Court Agreements (Convention), which was developed by the Hague Convention on Private International Law (HCCH) is a transnational litigation instrument adopted in 2005 and brought into force in 2015. By providing the required methods and tools to disputants in a commercial relationship, the objective of the Convention is to create an internationally uniform legal framework of dispute resolution that promotes cross-border trade and encourages judicial cooperation by recognising and enforcing foreign judgments that are given based on a choice of court agreement. This article assesses the existing successes of the Convention in achieving its specific commercial objectives, and considers whether it has been generally successful in transnational commercial dispute resolution. The article argues that the Convention has the tools needed to achieve its specific commercial objectives, and its success in this regard depends on the parties who choose to apply the tools provided in the Convention to resolve their commercial disputes by signing a choice of court agreement to that effect. I argue that although the Convention remained generally unsuccessful until 2015, due to its late enforcement and low rate of ratifications, since 2015 it has gradually become a success story as more states are ratifying the Convention. The future therefore looks bright.

Featured documents

• Mitigation of political risks in infrastructural project finance in African countries

  Political risks have adversely affected project financing in African countries. There are instances of risks in the state hosting project that may negatively affect the bankability of the project. They include nationalisation of assets, spontaneous changes in laws and regulations by the government, ...

• The impact of the capacity provisions in the Companies Act 71 of 2008 on the insolvency-remoteness of limited capacity special purpose vehicles used in securitisation schemes

  The insolvency-remoteness of a special purpose vehicle (SPV) used in a securitisation scheme is of critical importance, because insolvency of the SPV can interrupt the payment streams due to the investors in such schemes. Several contractual methods are implemented to achieve insolvency-remoteness. ...

• No reflective loss: The English approach reconsidered

  A company shareholder should have no difficulty in commencing a claim to recover the loss suffered due to a wrong done to their personal property. The right to the protection of property is a fundamental human right in English law. A wronged person whose property right is infringed will have the...

• A critical analysis of the competition authorities’ treatment of the element of causation in exclusionary abuse cases

  It is trite law that in order for an impugned act to be condemned in terms of the exclusionary abuse prohibition, entrenched under the Competition Act 89 of 1998, there must be evidence evincing that the said act caused some anti-competitive effect and that the anti-competitive effect caused by the ...

• ‘Knowledge’ as a mechanism to hold directors personally liable for adverse distributive decisions under the Companies Act 71 of 2008

  It has been almost a decade since the Companies Act 71 of 2008 became operational. However, the veracity of some of its provisions remains untested. As such, its purpose with regard to those provisions remains unravelled. In this regard, ss 46(6) and 77(3)(e)(vi) are a case in point. The intention...

• A critique of rescuing failing businesses: A legal perspective

  The South African legal field has a novel concept of business rescue. This concept is mainly premised on the management, by a business rescue practitioner, of transaction costs that cause business entities to get into financial distress. Through the use of three case studies, this article...

• Guarding against retirement funds’ arbitrary discretion when allocating death benefits: The urgent need for statutory guidelines

  This article discusses the enormous power enjoyed by retirement funds' boards to implement or reject deceased members' clearly expressed wishes in their nomination forms or wills when distributing their death benefits. It demonstrates that boards are vested with wide discretion to apportion death...

• The potential implications of introducing a carbon tax in South Africa

  This report analyses the potential implications of the proposed carbon tax for South Africa from an environmental and an economic perspective. A review of all the relevant literature on the topic was undertaken and a synthesis of the information available created, with the aim of objectively...

• The need to address the challenges regarding the transfer of assets between occupational retirement funds operating in the municipal sector

  There are several industries where employers participate in more than one retirement fund, such as the municipal sector. Retirement funds that operate in such industries continually try to increase their membership leading to fierce competition for members. They often use their rules to attract new ...

• Section 165(5)(b) of the Companies Act 71 of 2008: A discussion of the requirement of good faith

  In terms of s 165(5)(b) of the Companies Act 71 of 2008, 'the court must be satisfied that the applicant is acting in good faith'; that 'the proceedings involve the trial of a serious question of material consequence to the company'; and that it is 'in the best interests of the company' that the...