A critical and comparative analysis of delegation and reliance by company directors under the South African Companies Act 71 of 2008

Abstract

Delegation by directors and reliance on third parties is an important practical issue. Directors unlawfully delegating their powers or relying on third parties could face serious consequences, such as liability for breach of fiduciary duties, or even disqualification from acting as directors. Uncertainty over when a director may appropriately delegate to or rely on others could foster an overcautious approach to managing the company’s affairs and impede the company’s decision-making processes. This article critically analyses the principles of directors’ delegation and reliance on third parties under the South African Companies Act 71 of 2008. It contends that these principles lack clarity and are ambiguous. It compares these principles to the equivalent provisions of the Revised Model Business Corporations Act 1984 of the United States of America and the Corporations Act 2001 of Australia and makes recommendations to clarify and improve the law relating to delegation and reliance by company directors.