A thorough examination regarding the standard of skill and care to be exercised by a director in terms of the common and statutory laws and an overview of the business judgement rule : a company law perspective.

Abstract

As a nationally and internationally recognised legal phenomenon the duty of a director to act within and adhere to a required standard of skill and care is of significant importance. Through a number of “tug of war” developments over the past few decades both the common law and statutory law standard of skill and care attached to a director in the midst of such director executing his office embraces somewhat of a settled nature. Subsequently, incorporating in its test both an objective and subjective element a standard of stringency is adopted when determining whether a director’s performance of such skill and care meets these objective and subjective requirements. The business judgement rule adopted (of late) in South Africa’s regulatory framework, in essence, attempts tirelessly to alleviate the stringent objective and subject tests that have been followed in our law wide eyed. In an attempt to break down and shun decades of developments initiated to improve the standard of skill and care according to which a director is tested the statutory business judgement rule finds its home within the four corners of South Africa’s Companies Act 71 of 2008¹ (the act) and thus encourages a means of defending directors from liability, safe harbouring them from their purported breach of the required skill and care that they should be exercising. Amidst to its significant importance at home there are a substantial and extensive number of second-guessing in respect of its application thus paving the way for sharp tongue criticisms to manifest and accumulate. The rationale attached to this dissertation therefore seeks to advance the knowledge of readers the important stance both the common law and statutory law tests play in South African company law, further and in relation to its importance to articulate that the business judgement rule attempts to counter against the stringent standard adopted despite its many years of development. 1 The Companies Act 71 of 2008.