Escolar Documentos
Profissional Documentos
Cultura Documentos
TOPIC OUTLINE
1. INTRODUCTION
2.1 Liability for breach of the duty to exercise reasonable care and skill
- These are generally owned only to the company and therefore only they are
allowed to sue unless derivative
- The remedies for a duty are sui generis
- Firstly the there is a claim for any profits/benefits
- Or a claim for damages
- If the breach involved the director entering into a transaction with a 3rd party
that transaction will be voidable at the instance of the company provided that
the 3rd party was aware of the breach or reasonably ought to have been aware
1
3. STATUTORY LIABILITY FOR FRAUDULENT OR RECKLESS TRADING
- Normally applications are brought when the company has incurred a large amount of
debts and has been declared insolvent
- It is in this situation where the creditors go after the directors
2
company’s businesss in similar circumstances’- it would include dolus eventualis and
gross negligence
- An example would be where the business is incurring debts continuously and a
reasonable person would have realised that this was AFFECTING the company
- The test for intent to defraud is entirely subjective- would require a form of dolus either
directus or indirectus
- There is not much case law on what a ‘ fraudulent prupose is’
3
'A company must not –
(a) carry on its business recklessly, with gross negligence, with intent to
defraud any person or for any fraudulent purpose; or
(b) trade under insolvent circumstances.'
(b) The provisions of s 77(3)(b)- this is the liability bit
- It is a general liability section- covers breach off s 77 general duties
And it covers liability for specific wrongs
- And it deals with liable for breaching s 22(1)
- If any person either acquiesced in or was knwolingly a party to a breach of s 22(1) is
laible for any loss, damage or costs sustained by the company as a direct or indirect
consequence
- IN some respects these are wider than s 424 and in other respects narrower
-
(a) Application of s 77
- Same as s 76
4
(c) Liability for breach of the statutory duty to exercise reasonable care,
skill and diligence
- Section 77(2)(b) relevant- it says that the follwoign breaches will give rise to delictual
liability in terms of the common law principles of delict
o Failure to exercise reasonable care, skill and diligence as set out in s 76(3)
o Breach of any other provision of the 2008 Act- this is a general delictual
provision
o Breach of any provision in the Company’s MOI
- The liability will take the form of damages
- The general rule is that this laibiliuty will be in favour of the company itself unless
there is derivative action
- It also imposes liability for specific offences and requirements
- The SS’s that are relevant are 3 and 4
-
- It makes it an offence for anyone to disclose personal information that they have
obtained in the proceedings of the company
- It is a well established principle of our law that a company can ratify the breach of duty
- Ratification means to release the director from liability for a particular breach- it is a
decision by the ocompany to bring any end to the company’s rights against that
director for that brach
- It DOES NOT mean the same as VALIDATION
- A director who breaches a duty commits a legal wrong- nothing company can do to
turn it into a right- only thing they can do is remove liability for it
- It can only be given for a specific particular breach of duty – a company cannot give a
blanket release for a breach of duty
- The power to ratify usually rests with the GM where shareholders decide to sue or
ratify
- Only exception would be where the CO’s constitution gives the directors authority to
ratify and this has to be done by the independent, non breaching directors of the
board
-
-
(1) Subject to the provisions of subsection (2), any provision, whether contained in the
articles of a company or in any contract with a company, and whether expressed or
6
implied, which purports to exempt any director or officer or the auditor of the company
from any liability which by law would otherwise attach to him in respect of any negligence,
default, breach of duty or breach of trust of which he may be guilty in relation to the
company or to indemnify him against any such liability, shall be void: Provided that this
subsection shall not be applicable to insurance taken out and kept by the company as
indemnification against any liability of any director or officer towards the company in
respect of any negligence, default, breach of duty or breach of trust.
(2) The provisions of subsection (1) shall not be construed as prohibiting a company
from indemnifying any director, officer or auditor in respect of any liability incurred by
him in defending any proceedings, whether civil or criminal, in which judgment is given
in his favour or in which he is acquitted or in respect of any such proceedings
which are abandoned or in connection with any application under section 248 in which
relief is granted to him by the Court.'
- Directors can ask the court to relieve them of liability for the a breach
- Requirements
- He or she must have acted honestly
- Must have acted reasonably in the circumstances and
- It must be fair
-
- These sections allow the court to relieve them if they acted honestly and reaosnbly
- SS 10 now also says that if the director thinks that he is about to be sued then he can
go to the court for a order that excuses him from liability even if the claim has not
come about yet
-