Abstract
The Companies Act 71 of 2008 has introduced into our company law an innovative provision which permits a wide range of persons to apply to court to declare a director delinquent. This provision is contained in section 162 of the Companies Act 71 of 2008. The effect of an order of delinquency is that a person is disqualified for a specified period from being a director of a company. In Gihwala v Grancy Property Limited [2016] ZASCA 35 the Supreme Court of Appeal was faced with some important questions surrounding the declaration of delinquency of a director. It was contended by the appellants that section 162(5)(c) of the Companies Act 71 of 2008 is unconstitutional on the grounds that it was retrospective in its application, and that there was no discretion vested in a court to refuse to make a delinquency order or to moderate the period of such order to less than seven years. It was further contended that section 162(5)(c) of the Companies Act 71 of 2008 infringed the constitutional right to dignity, the right to choose a trade, occupation or profession and the right of access to courts. In assessing these contentions, the SCA addressed and clarified some important questions surrounding the declaration of delinquency of a director. This note discusses and analyses the judgment of the SCA. It points out some anomalies in section 162 of the Companies Act 71 of 2008. This note contends that, in assessing the rationality of section 162(5) of the Companies Act 71 of 2008, the SCA ought to have considered the equivalent provisions in leading foreign jurisdictions that have influenced our Act, particularly since section 5(2) of the Companies Act 71 of 2008 permits a court where appropriate to consider foreign law in interpreting the Act. Further, this note analyses the test applied by courts in determining whether the offences set out in section 162(5) of the Companies Act 71 of 2008 have been committed, and argues that the courts ought to make more effective use of their power to impose ancillary conditions to declarations of delinquency. 
Highlights
In Gihwala v Grancy Property Limited 2016 ZASCA 35 the Supreme Court of Appeal was faced with some important questions pertaining to the declaration of delinquency of a director
An innovative provision of the Companies Act 71 of 2008 is that for the first time in South African law, provision is made for a court to declare a director delinquent or to have him placed under an order of probation
The Act came into operation on 1 May 2011, and the gist of the retrospectivity challenge to section 162(5) of the Act in Gihwala was whether or not the provision applied in regard to conduct which occurred prior to this date
Summary
An innovative provision of the Companies Act 71 of 2008 (hereafter the Act) is that for the first time in South African law, provision is made for a court to declare a director delinquent or to have him placed under an order of probation. The judgment is noteworthy as it addresses and clarifies certain important questions surrounding the declaration of delinquency of a director
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