Directors' fiduciary duties under our future company-law regime

• Jurisdiction: South Africa
• Published date: 25 May 2019
• Citation: (1997) 9 SA Merc LJ 310
• Author: Michele Havenga
• Date: 25 May 2019
• Pages: 310-324

Directors' Fiduciary Duties Under

Our Future Company-law Regime*

MICHELE HAVENGA**

University of South Africa

1 Introduction

As a separate legal entity or juristic person which exists apart from its

management and shareholders, a company must necessarily act through

individuals.' The functions and responsibilities of corporate directors,

who are entrusted with its management,

2

arise by virtue of this nature of

a company. Company management can only be effective if those who

manage are allowed a certain measure of freedom and discretion in the

exercise of their function. Contrarily, effective control of management is

vital in the interests of the company itself and its various stakeholders.

This philosophy underpinning corporate governance is illustrated by the

recognition by the King Committee that in the context of corporate

governance, a proper balance needs to be established between freedom to

manage, accountability and the interests of the different stakeholders.

3

Company directors are therefore subject to various duties. Their onerous

common-law fiduciary responsibilities exist in addition to the various

statutory duties contained in the Companies Act,

4

their obligations of

care and skill, and any duties which a company's articles of association or

a separate agreement may specify. South African company law has always

relied heavily on the English law for the formulation of legal principles in

this respect. This is not surprising, since not only is the incorporated

company of our law modelled after its English counterpart,

5

but the

* This article formed the basis of my inaugural lecture at the University of South Africa on 26

August 1997.

** BA LLB (Pret) LLM LLD (Unisa). Professor of Law, Department of Mercantile Law,

Faculty of Law, University of South Africa.

1

See HS Cilliers, ML Benade, JJ Henning & JJ du Plessis

Corporate Law

2 ed (1992) at 3.

2

Although the Legislature places no obligation on companies to assign any particular task to

the board of directors, it exists conceptually to undertake the management of the company, or, at

the least, to assume responsibility for it: Cilliers et al op cit note 1 at 133; MS Blackman

'Companies' in: WA Joubert (ed)

The Law of South Africa

vol 4(1) (1995) par 161. Thus, it is usual

for the articles to provide that the business of the company shall be managed by the directors (see

art 59 of Table A and art 60 of Table B in Schedule 1 of the Companies Act 61 of 1973).

3

The Institute of Directors in Southern Africa

The King Report on Corporate Governance

(1994)

pars 1.2, 1.13 and 1.16. See also the English

Report of the Committee on the Financial Aspects of

Corporate Governance

('the Cadbury Report') (1992) par 7.2.

See JJ du Plessis 'Direkteure se Vertrouenspligte en die Grondslag van Aanspreeklikheid vir

die Verbreking Daarvan' (1993) 56

THRHR

11; JSA Fourie 'Vertrouenspligte en Intrakorpor

atiewe Verhoudings' (1985) 10

Journal for Juridical Science

119 at 127 and authorities cited in n57.

Some sections of the Companies Act, notably ss 37, 38, 226 and 228, enforce some aspects of the

overriding fiduciary duty. In this regard, see JS McLennan 'Directors Fiduciary Duties and the

Companies Act' (1983) 100

SALJ

417. For a comprehensive list of directors' statutory duties, see

JL van Dorsten

Rights, Powers and Duties of Directors

(1992) at 233ff.

5

See Elmarie de la Rey 'Aspekte van die Vroeë Maatskappyereg: 'n Vergelykende Oorsig'

(1986) 4

Codicillus

18ff; SJ Naudé

Die Regsposisie van die Maatskappydirekteur met Besondere

310

(1997) 9 SA Merc LJ 310

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