No this is not my own work. It was written by Micel Schnehage and posted on Moneyweb's site. But I have edited it liberally and highlighted all the things that can happen to delinquent directors. Also note the (non-comprehensive) list of acts that carry consequences. I have also made it a little dramatic - please read the original article (link below).
JOHANNESBURG – The new Companies Act, which came into effect on May 1 2011, has imposed strict conditions on company directors with some facing the possibility of being declared delinquent.
Eric Levenstein, a director with Werksmans Attorneys, says company directors can be declared delinquent should they grossly abuse their position or inflict harm upon a company or a subsidiary of a company. This can also be implemented if a director has acted in a manner that amounts to gross negligence, wilful misconduct or breach of trust in relation to the performance of such director’s duties.
This will also apply if a director gains advantage for her or himself, or for another person other than the company or a wholly owned subsidiary of the company, or knowingly causes harm to the company or any of its subsidiaries. Levenstein says any organ of state responsible for the administration of any legislation may apply to court for an order declaring a director delinquent.
The courts will be obliged to declare a person to be a delinquent director if the person consented to taking up the position while ineligible or disqualified. In terms of the Act a person can be disqualified if found to be an unrehabilitated insolvent or has been removed from an office of trust on the grounds of misconduct involving dishonesty. If you have been convicted of fraud, theft or forgery or any conduct involving fraud, misrepresentation or dishonesty, you could also face the chop. You can also face the music if you flout statutes like the Insolvency Act, the Close Corporation Act, the Competition Act, the Financial Intelligence Centre Act, the Securities Act or the Prevention and Combating of Corrupt Activities Act.
A declaration of delinquency will be enforced for the lifetime of the person involved. A court may also decide to place a person under probation, which is similar to a suspended sentence. Levenstein says furthermore, the word “delinquency” carries criminal connotations as various dictionaries refer to it as being an offender, guilty of a crime or misdeed and/or a person guilty of serious antisocial or criminal conduct.
We've known for a while that there are very definite risks involved with being a director. A few other risks were listed by Willie Coetzee a few years ago
- the VAT Act which provides that directors who are regularly involved in the financial affairs of the company can be held personally liable for VAT penalties and interest payable by the company;
- the National Environmental Management Act which deems a director to be guilty of the same offence as the company in the event of pollution or degradation of the environment, unless the director can show that he took all reasonable steps to prevent the harm;
- the proposed amendments to the Competition Act (which have been signed by the President but are not in force - they might be, this article was written in July, 2009) which seek to hold liable directors who are aware of or fail to prevent prohibited practice
And the criticism persists at the number of black directors. There needs to be more maturity from the DTI on this issue - the risks are very real and simply appointing a person to a board because of the colour of their skin is a huge problem.
Actually coming to think of it - this must have a positive impact on the quality of directors, both black and otherwise.