Finding Juridical Dispositions Germane to the Interpretative Context to be Attributed to ‘Reasonably’ under Section 4 of the Companies Act 71 of 2008

Abstract

This article takes the view that the inclusion of the term ‘reasonably’ under s 4 of the Companies Act 71 of 2008 has profound foundational importance. It satisfies an important constitutional mandate embodied in s 1(c) of the Constitution, 1996: that the principle of legality be observed in all decision-making. Because of this requirement, the actions of a company director are required to be scrutinised in the light of the Constitution. This may mean that the courts must determine decisions made by directors having regard for the country’s overall constitutional and economic objectives. Therefore, the inclusion of the term seems to be a validation, because the Constitutional Court has held in many cases that the principle of legality is fundamental to the South African constitutional legal order, as required by section 1(c) of the Constitution, 1996. Practically, as vanguards of the constitutional principles, the courts would be expected to infuse the principle of legality into their interpretative duties in order to instil in the company-law sphere an environment that will foster compliance with the Bill of Rights and ensure predictability and certainty. This article pertains specially to circumstances where a board of directors has erred in law by misdirecting itself or by falling short when considering and/or interpreting ‘reasonable circumstances’. This is particularly necessary since the legal meaning the Act contemplates by including the term ‘reasonably’ in s 4 requires urgent examination before directors proceed to distribute company money or property.