A critical analysis of the fiduciary duties of directors and evaluation of the development of these duties in terms of the common law and statutory law.

Abstract

Corporate law is based on the premise that directors are fiduciaries of their companies. This is an unbending duty which has to be adhered to at all cost by individuals appointed as directors of a company. Previously the director’s duties were governed by the common law which often relied on the interpretation of the courts on a case by case basis. Therefore the courts would often arrive at different conclusions based on a similar set of facts. The advent of the 2008 Companies Act (Act 71 of 2008)1 brought about a major evolution in South African company law by partially codifying the fiduciary duties of the directors. Understanding fiduciary duties of a director is of significant importance in the modern democracy based on the fact that directors engage on the international spectrum. Company directors have discretionary power which may be abused if they are not familiar with the fiduciary duties. This study seeks to comprehend fully the fiduciary duties of a director of a company. These are the duty to act bona fide, the duty to act for a proper purpose, the duty to avoid conflicts of interest and the duty not to use a corporate opportunity and information for personal profit. This task will be undertaken both in terms of the common law as well as statute (Companies Act 2008 Act). The study will delineate the fundamental consequences of partial codification of these duties and set out the current legal position of the common law which operates in tandem with the statute. In addition, it will deal with whether the common law provisions are still applicable side by side with the statutes. The duties of a company director represent a subject that is not merely academic in nature, but one that is of vital importance in our ever changing commercial world. More and more people are appointed as company directors every day and often they do not know or understand the implications of what they have agreed to.