‘Delinquent Directors’ and ‘Directors Under Probation’: A Unique South African Approach Regarding Disqualification of Company Directors

Abstract

This article explores the unique way in which the disqualification of company directors is provided for in the South African Companies Act 71 of 2008. Not only is the terminology of ‘delinquent director’ or ‘director under probation’ unique, but there are also several peculiar aspects regarding the orders that a court can make, and conditions that may be attached to these orders, when persons are declared ‘delinquent’ or put under ‘probation’ by a court. The article also explains in detail the rather complex nature of the disqualification provisions, and analyses all the cases dealing with ‘delinquency’. The focus is on the constitutionality of the delinquency orders that may be made by a court, which has been a pivotal aspect in most of the cases decided so far. The authors conclude that the core problem of the section providing for the disqualification of persons on application (s 162 of the Act) is its complexity. Different parties have standing to apply for delinquency or probation orders respectively, and the circumstances under which these parties can apply for such orders are also different and require careful interpretation to comprehend. It is unlikely that these provisions will be used to their full potential to achieve their ultimate goals, which are the protection of shareholders, creditors and the public against delinquent directors, and to provide opportunities for some directors to gain experience as directors in terms of court orders which place them ‘under probation’.