A Reflective Discussion of the Directors’ Fiduciary Duties to Creditors under the South African Company Law

Authors

  • Howard Chitimira North-West University
  • Friedrich Hamadziripi North West University

Keywords:

company directors, fiduciary duty, corporate scandals, creditors, insolvency

Abstract

A company is a juristic entity possessing the legal capacity to acquire rights and obligations. However, since a company is an artificial person lacking a physical body, there are important functions that only natural persons will inevitably be required to perform on its behalf. A company usually acts through its directors or the board of directors. The interaction between company directors and other stakeholders creates various relationships between them and relevant legal subjects. In this regard, it is no longer debatable whether directors in South Africa owe fiduciary duties to the company or the shareholders as evident from section 76(3) of the Companies Act 71 of 2008 (Companies Act 2008). However, unprecedented global corporate scandals that occurred in the last two decades have triggered law reform in various jurisdictions like Australia and the United Kingdom (UK), to review directors’ duties and requiring them to become accountable to creditors. This article discusses the directors’ fiduciary duties to creditors under the South African company law in terms of both the Companies Act 2008 and the common law. The discussion of both the common law and the Companies Act 2008 is informed by the fact that the Companies Act 2008 has partially codified directors’ duties in South Africa and as such common law principles continue to apply. The article further discusses recent court jurisprudence, academic debates and the prescription of directors’ fiduciary duties to creditors in the context of insolvent companies in South African company law.

Author Biography

Howard Chitimira, North-West University

Associate Professor, Faculty of Law

References

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Published

2022-03-14

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Section

Studies and Articles