The Companies Second Amendment Act 17 of 2024: Ameliorating the Time-Barring Regime Under Sections 77 and 162 of the Companies Act

• Jurisdiction: South Africa
• DOI: 10.10520/ejc-btclq_v15_n3_a3
• Author: Milton Seligson Seligson,Matthew Blumberg
• Pages: 9-22
• Date: 01 September 2024
• Published date: 01 September 2024
• Published By: Siber Ink

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© Juta and Company (Pty) Ltd

The Companies Second

Amendment Act 17 of 2024:

AMELIORATING THE TIME-BARRING REGIME UNDER

SECTIONS 77 AND 162 OF THE COMPANIES ACT

MILTON SELIGSON SC* AND MATTHEW BLUMBERG SC†

ABSTRACT

A director owes duties to the company of which he or she is director. These

include, in the main, a f‌i duciary duty and a duty to exercise reasonable care,

skill and diligence. This is the position at common law, as well as under the

Companies Act.

Sections 77 and 162 of the Companies Act contain the two principal

remedies for breach of these duties. Section 77 provides for the director

concerned to be liable for loss sustained by the company as a consequence

of the breach. Section 162 provides for the director to be declared delin-

quent or under probation. Both sections have time-barring provisions. In

terms of the existing section77(7), proceedings by the company concerned

to recover loss from the director may not be commenced more than three

years after the act or omission that gave rise to the liability — i e irrespective

of when the company did, or could have, acquired knowledge of the act or

omission in question. In terms of the existing section162(2)(a), stakeholders

in a particular company wishing to bring delinquency proceedings against an

individual who was, but no longer is, a director of the company, are required

to do so within 24months of the date on which the individual ceased to be

a director — i e, even if the stakeholder concerned did not have knowledge of

the delinquent conduct, and could not reasonably have acquired it, within the

stipulated 24-month period.

These time-barring provisions have the potential to operate harshly — and

so it has been contended, unconstitutionally. In light thereof, and following

recommendations by the Zondo Commission, the time-periods have been

revisited, and substantially ameliorated, in the recently enacted Companies

Second Amendment Act. As part of these amendments, a discretion is now

conferred on the court, in the context of both remedies, to extend the relevant

time-period on good cause shown.

The article analyses the existing time-barring regime (i e, that are currently in

place and which will remain in place until the Companies Second Amendment

Act comes into operation); identif‌i es the def‌i ciencies in that regime and the

likely rationale for amendment thereof; and explores the pros and cons of

the more f‌l exible time-barring regime introduced by the Companies Second

Amendment Act.

* Honorary Member, Cape Bar.

† Member, Cape Bar.

2024 15(3) BTCLQ 9

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