Page 15 - Profmark BSA Guide 2025

It is very important that the board is able to identify who the prescribed officers are.
Equally important is that the prescribed officers know who they are, and that they
understand their responsibilities in terms of the Act. Not doing so puts both the board
and the prescribed officer at risk of non-compliance with the Act, which in turn could
lead to activities that may result in personal liability.
Directors and officers are subject to a codified standard of conduct set out in Section
76 of the Act, and a duty not to use company information in such a way as to act in
conflict of interest with the company (Section 75).
Section 77: Liability of Directors and Prescribed Officers
Section 77 codifies liability for directors and prescribed officers. It sets out civil
liability (delict and breach of fiduciary duty), and then in sub-section 3, sets out
specific statutory liabilities.
Section 77 is applicable to an extended definition of director. The liability that is
incurred in terms of section 77 is joint and several with any other person who may
be held liable for the same act. Any person with a claim can bring it against all the
directors or any one particular director. A single director can therefore be held liable
for the totality of damages suffered by a third party as a result of a breach of fiduciary
duties. An action to recover loss, damages or costs may not commence more than
three years after the act or omission.
Specific Statutory Liability
Section 77(3) lists specific instances when a director is liable for loss, damages or
costs sustained by the company as a direct or indirect consequence of him having
acted in the name of the company despite knowing he did not have the authority to
do so, or agreeing to the carrying on of company’s business despite knowing that it
was being conducted recklessly, or being party to an act or omission by the company
despite knowing that it was calculated to defraud a creditor, employee or shareholder,
or had another fradulent purpose, or even for signing or consenting to the publication
of any financial statements that were false or misleading in a material respect despite
knowing that the statement was false or misleading or untrue (conditions apply). He
can also be held liable for being present at a meeting of the board, and failing to
vote against certain actions which in are contravention of the provisions of the Act [as
listed in Section 77(3)(e)], such as voting in favour of providing financial assistance
to a director despite knowing that the providing of such financial assistance would
have been inconsistent with the Act or the company’s MOI.

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