Directors play a crucial role in the management and governance of companies. Director’s rights and responsibilities are primarily governed by the Companies Act 71 of 2008 (“the Act”), which outlines the standards of conduct and duties expected of directors. Here is an overview of certain key rights and responsibilities that every director should take cognisance of.

Directors have the right to access company records and financial information (Section 26). This ensures they can make informed decisions and fulfill their duties effectively. They also have the right to participate in board meetings and contribute to strategic discussions. Decisions are usually made collectively, and directors have a say in major company decisions.
Companies are allowed to indemnify directors for certain liabilities incurred while acting in their capacity as directors, except in cases of willful misconduct or gross negligence (Section 78). Companies may also provide insurance to protect directors from financial losses arising from their roles. Directors can delegate certain responsibilities to other qualified individuals or committees, provided that such delegation is reasonable and does not absolve them of their overall accountability.

Directors are obliged to act in good faith and in the best interests of the company (Section 76). This includes avoiding conflicts of interest, acting with integrity, and putting the company’s interest above personal gain. Directors are required to perform their duties with the degree of care, skill, and diligence that would be expected from someone in their position (Section 76(3)). They must make informed decisions and exercise reasonable judgment. Directors must disclose any personal financial interest in matters affecting the company (Section 75). Failure to disclose such interests could lead to dire legal and financial consequences.

Directors are responsible for ensuring that the company complies with relevant laws and regulations, including tax laws, labor laws, and industry-specific legislation. They must ensure that the company maintains proper financial records, prepares accurate financial statements, and adheres to financial reporting standards. Directors may be held personally liable for reckless trading or insolvency (Section 22).

The Companies Act provides that directors may be held personally liable for losses or damages incurred by the company due to breaches of their duties. Personal liability is specifically addressed, including situations where directors act recklessly or fraudulently, sign off on misleading financial statements, or fail to act in the best interests of the company (Section 77).

Being a director can be a daunting task which should not be taken lightly. It is expected of any director to be well acquainted with and understand the implications of the office which they hold within a company. Understanding the rights and responsibilities of directors is essential for effective corporate governance and compliance. It is advisable to act proactively if you are a director and ask the necessary compliance questions, rather than rectifying mistakes made. Whether you are a seasoned director or new to the role, we can help you navigate your legal obligations with confidence.

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