The new Companies Act No. 71 of 2008 (the Act) came into force on 1 May 2011. It significantly expands the duties incumbent upon company directors, a number of which may also be employees.

The Act purports to partially codify and enhance a director’s existing common law obligations. Inter alia, it stipulates that a director has a duty to act in good faith; in the best interests of the company; and for a proper purpose. These obligations are not new when it comes to employment law. However, in addition to these, directors must now also act with a degree of care, skill and diligence that may be reasonably expected of a person carrying out the same functions in relation to the company as those carried out by that director and having the general knowledge, skill and experience of that director.

Written by Jacques van Wyk, Director, and Andre van Heerden, Candidate Attorney at Werksmans Attorneys.