Advantages and disadvantages of partial codification of directors’ duties in the South African Companies Act 71 of 2008

Abstract

This article offers a critical examination of partial codification and its effect on the interpretation of the directors’ standard of conduct provision. Previously, the fiduciary duties and the duty of care and skill were regulated by the common law and case law. In May 2004, the Department of Trade and Industry released a policy document entitled South African company law for the 21st century: Guidelines for corporate law reform. The policy document acknowledged that South Africa had no extensive statutory dispensation that covered the duties of directors. The policy document recognised the need to bring South African company law in line with international trends and to reflect and accommodate the changing environment for businesses locally and internationally. For the first time in South Africa’s corporate law history, the Companies Act 71 of 2008 partially codifies the fiduciary duties of directors, the duty of care and skill, and introduces the business judgement rule (also referred to as the ‘safe-harbour provisions’) into South African company law. The Companies Act 71 of 2008 prescribes certain duties and its extent, but the content of those duties, such as bona fides, is still determined by the common law.