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Codified Liability
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.
■ The Second Amendment Act provides that in addition, the Court may, on good
cause shown, extend the period of three years, regardless of whether such period
has expired, or the act or omission that resulted in the loss, damages or costs
contemplated in this section occurred prior to promulgation of the Companies
Second Amendment Act.
Specific Statutory Liability
A director is liable for loss, damages or costs sustained by the company as a direct or
indirect consequence of the director having:
■ Section 77(3)(a) – acted in the name of the company despite knowing he did not
have the authority to do so
■ Section 77(3)(b) – acquiescing to carrying on of company’s business despite
knowing that it was being conducted recklessly
■ Section 77(3)(c) – 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 fraudulent purpose
■ Section 77(3)(d) – for signing or consenting to the publication of any financial
statements that were false or misleading in a material respect or a prospectus which
contained an untrue statement, despite knowing that the statement was false,
misleading or untrue (conditions apply)
■ Section 77(3)(e) being present at a meeting of the board, or participating in the
making of a decision in terms of Section 74, and failing to vote against:
■ the issuing of unauthorised shares, despite knowing that those shares had not
been authorised in accordance with Section 36
■ the issuing of authorised securities despite knowing that such issue was
inconsistent with Section 41

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