Directors must exercise reasonable care

Pretoria, 15 February 2011 - The new Companies Act, 71 of 2008, introduces new duties for directors in-the-way-of exercising reasonable care. These duties are in addition to the existing fiduciary and common law duties of company directors. 

These new duties, which are primarily focused on ethical conduct and transparency, require directors to always act in good faith and for a proper purpose when representing an entity. They are further required to always act in the best interest of the company and with the necessary degree of care, skill and diligence that may reasonably expected from a person of their skill and experience - commonly known as the reasonable man/woman test. Failure to comply with these requirements will be considered a breach of duties.

The Acting Chief Executive Officer, Mr Lungile Dukwana of the Companies and Intellectual Property Registration Office (CIPRO) explained:  "The new Act is characterised by flexibility, simplicity, transparency, corporate efficiency and regulatory certainty. Companies are given much more flexibility to change certain requirements to suit their specific circumstances. Directors are also committed to being completely transparent and ethical in all their responsibilities and dealings."

Legal responsibilities of directors

All directors, prescribed company officers and board committee members have the following responsibilities and obligations to the company:

• A director will be held liable for: the breaching of fiduciary duty or civil legal obligations,  acting without authority, supplying false or misleading information about the company,  or making of an untrue statement in a prospectus;
• A director must disclose any personal financial interests in any matter which involves the company;
• A director may not use their position, or any privileged  information gained there-from,  to make a secret profit or to gain an advantage for themselves or any related person, or to cause harm or detriment to the company;
• Directors,  or people directly related to them,  must also disclose any financial interests acquired, as a result of an agreement or matter being approved by the company;
• A sole director, who discloses a personal financial interest in a company agreement, may acquire approval to enter into that agreement by passing an ordinary resolution of the shareholders.

The new Commission

The Companies and Intellectual Property Commission (CIPC) will commence on 1 April 2011, by the merging of CIPRO with the Office of Companies and Intellectual Property Enforcement (OCIPE). The Commission will have significantly expanded functions and powers.

Administrative functions currently assigned to the Minister under the Companies Act, are to be de-politicised and placed within the jurisdiction of the Commission. The Commission will therefore act as an autonomous statutory body outside the public service and will be led by a commissioner and deputy commissioner.

To be assisted by CIPRO's well-trained team, call their Customer Contact Centre at 0861 843 384 for national callers and +27 11 254 9405 for international callers. Alternatively, visit their website at www.cipro.gov.za.

Statement issued by Dr Elsabé Conradie, CIPRO, February 15 2011

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