Abstract
The personal liability of managers and executives for damages arising out of fraudulent and reckless conduct of their employees is an emotive and important issue. The prestige that was once associated with holding a position in top management in a company is now overshadowed by the potential of increased personal vulnerability. The case of Fourie v FirstRand Bank Ltd ((578/2012) [2012] ZASCA 119 (18 September 2012)) sends out a strong message to those who occupy management positions and who conduct the affairs of a company in a fraudulent or reckless manner that such conduct will not be tolerated and that should they produce false and misleading financial statements regarding the affairs of their company they run the risk of being held personally liable for any damages that may be incurred. The Supreme Court of Appeal (SCA) stated that any damages that arise from such managers’ fraud or recklessness under section 424 of theCompanies Act 61 of 1973 will be paid by the perpetrators in their personal capacity.
Highlights
The personal liability of managers and executives for damages arising out of fraudulent and reckless conduct of their employees is an emotive and important issue
The case of Fourie v FirstRand Bank Ltd ((578/2012) [2012] ZASCA 119 (18 September 2012)) sends out a strong message to those who occupy management positions and who conduct the affairs of a company in a fraudulent or reckless manner that such conduct will not be tolerated and that should they produce false and misleading financial statements regarding the affairs of their company they run the risk of being held personally liable for any damages that may be incurred
Managers and executives who allow the affairs of the company to be conducted in a fraudulent and reckless manner or trade in situations of financial distress or insolvency and are responsible for providing and concocting misleading and false financial statements will run the risk of facing personal liability for damages that are incurred
Summary
The personal liability of managers and executives for damages arising out of fraudulent and reckless conduct of their employees is an emotive and important issue. The case of Fourie v FirstRand Bank Ltd ((578/2012) [2012] ZASCA 119 (18 September 2012)) sends out a strong message to those who occupy management positions and who conduct the affairs of a company in a fraudulent or reckless manner that such conduct will not be tolerated and that should they produce false and misleading financial statements regarding the affairs of their company they run the risk of being held personally liable for any damages that may be incurred. The Supreme Court of Appeal (SCA) stated that any damages that arise from such managers’ fraud or recklessness under section 424 of the Companies Act 61 of 1973 will be paid by the perpetrators in their personal capacity
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