The extent of protection provided by section 76(4)(a) of the companies act, 2008 to directors against personal liability for breaches of sections 76(3)(b) and (c) of that act
Date
2021
Authors
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Journal ISSN
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Publisher
University of the Witwatersrand, Johannesburg
Abstract
This research report examines the extent to which section 76(4)(a) of the Companies Act, 71 of 2008 protects directors against personal liability for breaches of their duties to act in the best interests of the company and with due care, skill and diligence. The essential substantive elements of s 76(4)(a) create (as a minimum) a business judgment rule. Generally, that rule provides a director with a defence against liability for a breach of his duty of care, skill and diligence if, when he acted (or omitted to act), he did so reasonably, honestly, with no self-interest and in the interests of the company. In conducting an analysis of s 76(4)(a) as an embodiment of features of a traditional business judgment rule, this report considers (among other things) the legal nature of the protection created by s 76(4)(a), the requirements which a defendant director must meet in order to enjoy the protection of s 76(4)(a), the allocation of the burden of proof for the application of the provisions of s 76(4)(a), and a brief consideration of how a similar rule in Australia is drafted and has been applied in practice by courts there. The report concludes that, unlike the Australian counterpart, the provisions of s 76(4)(a) create a protection for directors that is more than the protection that is provided by a traditional business judgment rule. This conclusion is based on the extensive nature and scope of authority and powers which s 66(1) of the Act grants to directors. The substantive configuration and extensive ambit of s 76(4)(a) are thus anchored in, and justified by, s 66(1) of the Act and the carte blanche which the latter section grants to directors. Consequently, the protection given by s 76(4)(a) to directors is unusually wide, inasmuch as it shields directors against personal liability for breaches of a myriad of their duties and against liability risks arising from or created by the extensive powers and authority which s 66(1) of the Act gives SA directors. In the same breath, however, s 76(4)(a) manages to make directors appropriately accountable to the company’s stakeholders, in keeping with some of the fundamental objectives and purposes of the Act
Description
A research report submitted in partial fulfillment of the requirements for a degree of Master of Laws by Coursework and Research Report at the University of the Witwatersrand, Johannesburg
Keywords
UCTD, SECTION 76(4)(a), COMPANIES ACT, 2008, DIRECTORS, PERSONAL LIABILITY, SECTIONS 76(3)(b), (c) OF THAT ACT
Citation
Beja, Xolisa (2024). The extent of protection provided by section 76(4)(a) of the companies act, 2008 to directors against personal liability for breaches of sections 76(3)(b) and (c) of that act [Master’s dissertation , University of the Witwatersrand, Johannesburg].https://hdl.handle.net/10539/38595