Directors, Take Note: Understanding and Complying with Your Legal Duties Is Critical
If you are a company director in South Africa, the responsibilities you carry are significant. With recent amendments to the Companies Act, non-compliance with your legislated duties can result in serious consequences, including civil and criminal liability, personal fines, and even imprisonment.
The Companies and Intellectual Property Commission (CIPC) has issued its first Guideline for 2025, specifically to raise awareness of directors’ duties and the penalties for non-compliance. Here’s what every company director needs to know—and how we can help.
What Are Directors’ Duties Under the Companies Act?
In terms of the Companies Act 71 of 2008, every director must:
- Act in good faith and for a proper purpose
- Operate in the best interests of the company
- Avoid using their position to knowingly cause harm
- Exercise a level of care, skill, and diligence that is reasonably expected
Directors should be fully familiar with the following sections:
- Section 75 – Personal financial interests
- Section 76 – Standards of directors’ conduct
- Section 77 – Liability of directors and prescribed officers
- Section 78 – Indemnification and insurance
- Section 213–215 – Breach of confidence, false statements, and obstruction
What’s New? Recent Amendments Increase the Stakes
Recent updates to the Act focus on:
- Enforcing stricter fiduciary obligations
- Mandating transparency in director appointments
- Disqualifying individuals with a history of insolvency, criminal convictions, or director misconduct
These changes bring South African corporate governance standards in line with global best practices and increase the accountability of directors.
The Cost of Non-Compliance
Civil Liability
Directors can be held personally liable for company losses resulting from:
- Trading recklessly or while insolvent
- Authorising or participating in fraudulent activity
- Endorsing false or misleading financial disclosures
- Failing to vote against unlawful or non-compliant decisions
In a recent High Court judgment involving a major property fund, directors were declared delinquent due to reckless conduct and misuse of authority, resulting in personal financial penalties and long-term bans on holding directorships.
Criminal Liability
Under various sections of the Companies Act, directors may be held criminally liable for:
- Disclosing confidential company information
- Falsifying accounting records
- Fraud or misrepresentation
- Ignoring compliance notices
Penalties include substantial fines, up to 10 years’ imprisonment, or both.
Will Directors’ Insurance Protect You? Not Always
Directors and Officers (D&O) Liability Insurance may offer limited protection, but exclusions often apply for:
- Fraud and dishonesty
- Criminal acts
- Breaches of fiduciary duty
- Willful misconduct
Section 78 of the Companies Act sets out strict requirements for indemnification, and many directors are unaware of how limited coverage may actually be.
How BGR Helps Directors Stay Compliant
Understanding and complying with directors’ duties is no longer optional—it’s essential. At BGR, we support directors with:
- Clear interpretation of the Companies Act
- Ongoing guidance to ensure regulatory compliance
- Tailored advisory services to manage legal and reputational risk
We help directors navigate complexity with shrewd, intelligent solutions—so you can focus on driving sustainable value.