Contents
Living Hands v Ditz .......................................................................................................................3
Do shareholders owe fiduciary duties to the company?..............................................................4
Old Mutual v Moyo .......................................................................................................................6
Distinction Between Executive and Non-Executive Directors ......................................................7
Interaction Between Company Law, Labour Law, and Contract Law Regarding Mr. Moyo as CEO .9
Extended Definitions in Corporate Governance........................................................................ 11
How Conflicts Led to Dismissal............................................................................................... 11
Statutory Position in Section 75 ............................................................................................... 11
NUSCA V DA PONTE ................................................................................................................... 13
What is a dishonest crime ....................................................................................................... 15
When will court relax disqualification maybe under s69(11) ..................................................... 16
Gihwala v Grancy ....................................................................................................................... 18
Confirmed the constitutionality of Section 162 ........................................................................ 20
OUTA V MYENI ........................................................................................................................... 21
Overview of Judgment Relating to S157(1)(d) of the Companies Act .......................................... 21
Justification of s162(6) Order of Delinquency ........................................................................... 23
VACANCIES AND DISMISSAL OF DIRECTORS .............................................................................. 25
Pretorius v Timcke ...................................................................................................................... 25
Should reasons be granted to director when dismissed? .......................................................... 27
Miller v Natmed Defence ............................................................................................................ 29
Should reasons be granted to director when dismissed? .......................................................... 31
Swerdlow v Cohen ..................................................................................................................... 32
Can a director prevent their own dismissal? ............................................................................ 34
De Bruyn v Steinhoff ................................................................................................................... 35
Duties Owed Of A Director And Legal Principles ...................................................................... 38
Reflective Loss Principle ..................................................................................................... 38
Proper Plaintiff Principle ...................................................................................................... 38
Hlumisa v Kirkinis....................................................................................................................... 39
Duties imposed on directors are owed to whom....................................................................... 41
Reflective Loss and Proper Plaintiff Principles ...................................................................... 41
Visser Sitrus v Goede Hoop Citrus .............................................................................................. 43
, S76(3)(b) – to be read with 76(4) and 76(5) ............................................................................... 45
Relationship with Section 163 ................................................................................................. 45
Rationality vs. Reasonableness ............................................................................................... 46
Da Silva v CH Chemicals ............................................................................................................ 47
How does one determine what business of company is ........................................................... 49
Regal (Hastings) Ltd v Gulliver .................................................................................................... 51
Evidence of Strictness in Application ....................................................................................... 54
Arguments Regarding the Court's Findings ............................................................................... 55
Agreement with the Court's Findings .................................................................................... 55
Disagreement with the Court's Findings ............................................................................... 55
Dorbyl v Vorster.......................................................................................................................... 57
Easier than Regal decision. Why? ............................................................................................ 59
Atlas Park Holdings (Pty) Ltd v Tailifts South Africa (Pty) Ltd .......................................................... 61
Statutory Position in Section 75 ............................................................................................... 63
Prohibitions on reckless trading .................................................................................................. 65
Philotex v Snyman ...................................................................................................................... 65
Reckless test partially objective and partially subjective .......................................................... 67
The court clarified the distinction between negligence and gross negligence in the context of
directors' duties. .................................................................................................................... 68
It underscored that trading while insolvent does not automatically equate to personal liability for
directors. ............................................................................................................................... 70
Cooper v Myburgh ...................................................................................................................... 71
Section 424 only available in formal liquidation today .............................................................. 73
Could shareholders be held liable? ......................................................................................... 74
Application of Section 115 of the Companies Act ................................................................. 75
Judicial Precedents ............................................................................................................. 75
Venator Africa (Pty) Ltd v Watts ................................................................................................... 76
Do creditors still have direct claim? ......................................................................................... 78
,Living Hands v Ditz
The question here is whether shareholders owe the company/one another fiduciary
duties
Background
This case involves a legal dispute centered around the actions of Investec Bank Limited
and other parties regarding the sale of shares in a trust context. The case highlights
issues of duty of care and wrongful conduct in financial transactions.
Parties Involved
• Plaintiff: Various beneficiaries and trustees of the trust.
• Defendant: Investec Bank Limited and several other parties involved in the
transaction.
Key Facts
Situation Overview
1. The case arose from a sale of shares agreement involving a significant
transaction valued at R93 million.
2. Investec implemented the sale without ensuring the seller, Fidentia, could fulfill
payment obligations.
3. Concerns were raised about the potential risk to trust funds if the transaction
proceeded.
Relevant Details
1. Investec was aware of the financial instability of Fidentia prior to the transaction.
2. The plaintiffs alleged that Investec acted recklessly in allowing the sale to
proceed.
3. The court had to consider the implications of public policy on the actions of the
defendants.
Legal Issues
Questions at Hand
1. Did Investec owe a duty of care to the beneficiaries of the trust?
2. Was there wrongful conduct in allowing the sale of shares without proper due
diligence?
Arguments Presented
, Plaintiff’s Arguments
1. Asserted that Investec acted recklessly regarding the handling of trust funds.
2. Claimed that Investec failed to conduct necessary checks to ensure compliance
with the sale terms.
3. Argued that the sale exposed the trust to significant financial risk.
Defendant’s Arguments
1. Contended that they fulfilled their obligations under the sale agreement.
2. Argued that the plaintiffs did not prove that Investec's actions constituted a
breach of duty.
3. Maintained that they acted within the bounds of the law and standard business
practices.
Significance:
Do shareholders owe fiduciary duties to the company?
The court has established that shareholders do not owe fiduciary duties to the company
or to each other based on several legal principles. Here are the key reasons:
Separation of Legal Entities
1. Distinct Legal Status: A company is recognized as a separate legal entity
distinct from its shareholders. This principle underpins the reasoning that
shareholders do not owe fiduciary duties to the company as they are not the
same legal entity.
2. Lack of General Duty: It is settled in jurisdictions such as England, Australia,
and New Zealand that shareholders do not have a general duty or fiduciary
obligations to the company merely by virtue of their shareholding.
Nature of Shareholder Responsibilities
1. Limited Liability: Shareholders typically engage in investment without assuming
personal responsibility for the company's debts or liabilities, emphasizing their
role as investors rather than fiduciaries.
2. Policy Implications: Extending fiduciary duties to shareholders could create
indeterminate liability, deterring investment and complicating corporate
governance.
Specific Legal Precedents
Living Hands v Ditz .......................................................................................................................3
Do shareholders owe fiduciary duties to the company?..............................................................4
Old Mutual v Moyo .......................................................................................................................6
Distinction Between Executive and Non-Executive Directors ......................................................7
Interaction Between Company Law, Labour Law, and Contract Law Regarding Mr. Moyo as CEO .9
Extended Definitions in Corporate Governance........................................................................ 11
How Conflicts Led to Dismissal............................................................................................... 11
Statutory Position in Section 75 ............................................................................................... 11
NUSCA V DA PONTE ................................................................................................................... 13
What is a dishonest crime ....................................................................................................... 15
When will court relax disqualification maybe under s69(11) ..................................................... 16
Gihwala v Grancy ....................................................................................................................... 18
Confirmed the constitutionality of Section 162 ........................................................................ 20
OUTA V MYENI ........................................................................................................................... 21
Overview of Judgment Relating to S157(1)(d) of the Companies Act .......................................... 21
Justification of s162(6) Order of Delinquency ........................................................................... 23
VACANCIES AND DISMISSAL OF DIRECTORS .............................................................................. 25
Pretorius v Timcke ...................................................................................................................... 25
Should reasons be granted to director when dismissed? .......................................................... 27
Miller v Natmed Defence ............................................................................................................ 29
Should reasons be granted to director when dismissed? .......................................................... 31
Swerdlow v Cohen ..................................................................................................................... 32
Can a director prevent their own dismissal? ............................................................................ 34
De Bruyn v Steinhoff ................................................................................................................... 35
Duties Owed Of A Director And Legal Principles ...................................................................... 38
Reflective Loss Principle ..................................................................................................... 38
Proper Plaintiff Principle ...................................................................................................... 38
Hlumisa v Kirkinis....................................................................................................................... 39
Duties imposed on directors are owed to whom....................................................................... 41
Reflective Loss and Proper Plaintiff Principles ...................................................................... 41
Visser Sitrus v Goede Hoop Citrus .............................................................................................. 43
, S76(3)(b) – to be read with 76(4) and 76(5) ............................................................................... 45
Relationship with Section 163 ................................................................................................. 45
Rationality vs. Reasonableness ............................................................................................... 46
Da Silva v CH Chemicals ............................................................................................................ 47
How does one determine what business of company is ........................................................... 49
Regal (Hastings) Ltd v Gulliver .................................................................................................... 51
Evidence of Strictness in Application ....................................................................................... 54
Arguments Regarding the Court's Findings ............................................................................... 55
Agreement with the Court's Findings .................................................................................... 55
Disagreement with the Court's Findings ............................................................................... 55
Dorbyl v Vorster.......................................................................................................................... 57
Easier than Regal decision. Why? ............................................................................................ 59
Atlas Park Holdings (Pty) Ltd v Tailifts South Africa (Pty) Ltd .......................................................... 61
Statutory Position in Section 75 ............................................................................................... 63
Prohibitions on reckless trading .................................................................................................. 65
Philotex v Snyman ...................................................................................................................... 65
Reckless test partially objective and partially subjective .......................................................... 67
The court clarified the distinction between negligence and gross negligence in the context of
directors' duties. .................................................................................................................... 68
It underscored that trading while insolvent does not automatically equate to personal liability for
directors. ............................................................................................................................... 70
Cooper v Myburgh ...................................................................................................................... 71
Section 424 only available in formal liquidation today .............................................................. 73
Could shareholders be held liable? ......................................................................................... 74
Application of Section 115 of the Companies Act ................................................................. 75
Judicial Precedents ............................................................................................................. 75
Venator Africa (Pty) Ltd v Watts ................................................................................................... 76
Do creditors still have direct claim? ......................................................................................... 78
,Living Hands v Ditz
The question here is whether shareholders owe the company/one another fiduciary
duties
Background
This case involves a legal dispute centered around the actions of Investec Bank Limited
and other parties regarding the sale of shares in a trust context. The case highlights
issues of duty of care and wrongful conduct in financial transactions.
Parties Involved
• Plaintiff: Various beneficiaries and trustees of the trust.
• Defendant: Investec Bank Limited and several other parties involved in the
transaction.
Key Facts
Situation Overview
1. The case arose from a sale of shares agreement involving a significant
transaction valued at R93 million.
2. Investec implemented the sale without ensuring the seller, Fidentia, could fulfill
payment obligations.
3. Concerns were raised about the potential risk to trust funds if the transaction
proceeded.
Relevant Details
1. Investec was aware of the financial instability of Fidentia prior to the transaction.
2. The plaintiffs alleged that Investec acted recklessly in allowing the sale to
proceed.
3. The court had to consider the implications of public policy on the actions of the
defendants.
Legal Issues
Questions at Hand
1. Did Investec owe a duty of care to the beneficiaries of the trust?
2. Was there wrongful conduct in allowing the sale of shares without proper due
diligence?
Arguments Presented
, Plaintiff’s Arguments
1. Asserted that Investec acted recklessly regarding the handling of trust funds.
2. Claimed that Investec failed to conduct necessary checks to ensure compliance
with the sale terms.
3. Argued that the sale exposed the trust to significant financial risk.
Defendant’s Arguments
1. Contended that they fulfilled their obligations under the sale agreement.
2. Argued that the plaintiffs did not prove that Investec's actions constituted a
breach of duty.
3. Maintained that they acted within the bounds of the law and standard business
practices.
Significance:
Do shareholders owe fiduciary duties to the company?
The court has established that shareholders do not owe fiduciary duties to the company
or to each other based on several legal principles. Here are the key reasons:
Separation of Legal Entities
1. Distinct Legal Status: A company is recognized as a separate legal entity
distinct from its shareholders. This principle underpins the reasoning that
shareholders do not owe fiduciary duties to the company as they are not the
same legal entity.
2. Lack of General Duty: It is settled in jurisdictions such as England, Australia,
and New Zealand that shareholders do not have a general duty or fiduciary
obligations to the company merely by virtue of their shareholding.
Nature of Shareholder Responsibilities
1. Limited Liability: Shareholders typically engage in investment without assuming
personal responsibility for the company's debts or liabilities, emphasizing their
role as investors rather than fiduciaries.
2. Policy Implications: Extending fiduciary duties to shareholders could create
indeterminate liability, deterring investment and complicating corporate
governance.
Specific Legal Precedents
