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Now Creditors Can Apply for Directors to be Declared Delinquent – Why is That Important?

“He who is quick to borrow is slow to pay” (Old proverb) A recent High Court decision means that, for the first time, creditors of debtor companies are specifically cleared to apply for the company’s directors to be declared “delinquent” in certain circumstances. And that has significant implications for both directors and creditors. For directors – major long-term career risks Company directors need to manage a whole range of duties, responsibilities and risks, including being declared “delinquent” in terms of the Companies Act.

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Why You Need a Shareholders’ Agreement, and How to Structure It

Whether you are forming a new company or buying shares in an existing one, a formal shareholders’ agreement, tailored to suit your particular situation and needs, is essential. What is a shareholders’ agreement? It’s a contract between shareholders outlining the rights, responsibilities, and obligations of each shareholder, it provides a framework for the governance of the company, and it ensures a clear understanding between the shareholders about its management, operation and control. It’s not a legal requirement, but not having one is

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Directors – When Are They Personally Liable?

“… for the benefit of immunity from liability for its debts, those running the corporation may not use its formal identity to incur obligations recklessly, grossly negligently or fraudulently. If they do, they risk being made personally liable.” (Quoted in the judgment below) Particularly in hard times, it is not at all uncommon to find yourself unable to recover a debt from a company in financial straits whilst at the same time you know that its directors hold assets in their

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Directors at War: Terminating Email Access

“All is fair in love and war…and business is war.” (Jasmine Kundra) When company directors are locked in dispute, one of them may be tempted to cut off the other’s access to emails and to the business server – a tactic likely to have immediate and serious consequences for the director thus cut off. Its appeal as a tactic to force the other director to the negotiating table is obvious, but the question is whether the director thus deprived has any legal

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When Company Directors and Shareholders Come to Blows….

“…the mere exercise of majority shareholding voting rights does not amount to oppression…” (extract from judgment below) What happens when a company’s directors and shareholders fall out and cannot reconcile their differences?  “Relief from oppressive or prejudicial conduct” If you should find yourself in such an unfortunate situation, our Companies Act offers you several possible remedies.  Professional advice specific to your case is essential here but be aware of a particularly versatile remedy in the form of a court application for relief from “oppressive

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Directors, Trustees: Can You Hold Your AGMs and General Meetings on Zoom?

“O Wonder! …O Brave New World” (Shakespeare) Regrettably the pandemic still shows no sign of going away any time soon, and the social distancing it has brought to our “new normal” leaves companies with a dilemma. How can you comply – safely and lawfully – with the Companies Act’s stringent requirements for the holding of Annual General Meetings and (where needed) interim General Meetings? The good news is that our South African legislation has for many years allowed the holding of company

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Directors and Business Rescue in the Time of COVID-19

“A stitch in time saves nine” (wise old proverb) The COVID-19 pandemic and the resultant lockdown have opened up new avenues of profit for some businesses, but they have also subjected many others to the spectre of business failure.  Unfortunately we can expect the level of bankruptcies to surge for some time to come, and the domino effect will multiply the numbers until our economy turns the corner. If financial distress looms for your own company, bear in mind the very onerous duties

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Directors: Reckless Trading and Personal Liability in the Time of Coronavirus

“Better safe than sorry” (wise old proverb) The COVID-19 pandemic and its ongoing economic fallout have left many businesses struggling with cash flow and even viability challenges.  The result is that an increasing number of companies are either trading in insolvent circumstances, or in grave danger of doing so. Reckless trading and your risk of personal liability To quote from the Companies Act (section 22(1)): “A company must not carry on its business recklessly, with gross negligence, with intent to defraud any person or

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How to Stop an Ex-Director from Competing With You

“…the default position is that an executive director or a senior employee may not carry on business activities which fall within the scope of his company’s business during the time when he serves as director or works as employee.  The default position however changes on resignation.” (Extract from judgment below) What happens if relations between you and your fellow company directors sour to the extent that a director leaves? Can he or she immediately open up a new business in direct

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How to Stop an Ex-Director from Competing With You

“…the default position is that an executive director or a senior employee may not carry on business activities which fall within the scope of his company’s business during the time when he serves as director or works as employee.  The default position however changes on resignation.” (Extract from judgment below) What happens if relations between you and your fellow company directors sour to the extent that a director leaves? Can he or she immediately open up a new business in direct

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