“BUSINESS BUBBLE OF WISDOM”

Nelson Mandela once said, I never lose, I either win or I learn. Considering the Companies Act No, 71 of 2008, it is imperative that the Board of Directors within companies are constantly learning and keeping abreast with the legislative changes, as well as all the duties and liabilities that are imposed upon them.


The Act provides that the business and affairs of a company must be managed under the direction of its board of directors, which has the authority to exercise all the powers and perform all the functions of the company, except to the extent that the Act or the company’s Memorandum of Incorporation (MOI) provide otherwise.


The shareholders are ultimately responsible for the composition of the board and it is in their own interests to ensure that the board is properly constituted from the viewpoint of skill and representivity.


The roles of directors whether executive, non-executive or independent can be extremely challenging. Beyond the various knowledge and skills set that are required, there are several individual characteristics that can contribute to an effective director:

1. Strong interpersonal skills

2. Energy

3. Industry Experience

4. Financial knowledge

5. Strategic thinker

6. Steadiness under pressure


As a director, you must:

1. Act within your powers.

2. Promote the success of the company.

When considering what is most likely to promote the success of the company, the director must have regard to:

  • the likely consequences of any decision in the long term

  • the interests of the company’s employees

  • the need to foster the company’s business relationships with suppliers, clients, and others.

  • the desirability of the company maintaining a reputation for high standards of business conduct.

  • the need to act fairly between shareholders of the company.

This list is not exhaustive but is designed to highlight areas of particular importance to responsible business behaviour. Other relevant factors should also be properly considered.

3. Avoid conflicts of interest.

4. Not accept benefits from third parties

5. Exercise reasonable care, skill, and diligence


It is imperative that Directors are aware of their increased obligations and potential exposure to liability as set out in the Act. The level of insurance required to cover for potential claims is also recommended as a priority for the Directors to consider.


This article has been compiled solely for information purposes and as such may not be construed as legal advice. Should you require assistance kindly contact our offices.


Article By:

Tiffany Reed: HR Consultant - Compliance Hub

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