Section 1 of the Companies Act

“Agent” means any authorised representative who acts on behalf of his or her principal and includes a director, officer, employee or other person uthorised to act on behalf of his or her principal, and has a corresponding meaning;

“Dealing” includes—

(a) any promise, purchase, sale, barter, loan, charge, mortgage, lien, pledge, caveat, transfer, delivery, assignment, subrogation, transmission, gift, donation, trust, settlement, deposit, withdrawal, transfer between accounts or extension of credit;

“Foreign Public Official” means— 

(a) any person holding a legislative, administrative or judicial office of a foreign state;

(b) any person performing public functions for a foreign state, including any person employed by a board, commission, corporation or other body or authority that performs a function on behalf of the foreign state; or

(c) an official or agent of a public international organisation;

“Foreign State” means any country other than South Africa, and includes—

(a) any foreign territory;

(b) all levels and subdivisions of government of any such country or territory; or

(c) any agency of any such country or territory or of a political subdivision of any such country or territory;

“Induce” includes to persuade, encourage, coerce, intimidate or threaten or cause a person, and

“Inducement” has a corresponding meaning;

“Listed Company” means a company, the equity share capital of which is listed on a stock exchange as defined in section 1 of the Stock Exchanges Control Act, 1985 (Act No. 1 of 1985);

“Official” means any director, functionary, officer or agent serving in any capacity whatsoever in a public body, private organisation, corporate body, political party, institution or other employment, whether under a contract of service or otherwise, and whether in an executive capacity or not;

“Private Sector” means all persons or entities, including any—

(a) natural person or group of two or more natural persons who carries on a business;

(b) syndicate, agency, trust, partnership, fund, association, organisation or institution;

(c) company incorporated or registered as such;

(d) body of persons corporate or unincorporate; or

(e) any other legal person,

“Property” means money or any other movable, immovable, corporeal or incorporeal thing, whether situated in the Republic or elsewhere and includes any rights, privileges, claims, securities and any interest therein and all proceeds thereof;

“Valuable Security” means any document— 

(a) creating, transferring, surrendering or releasing any right to, in or over property;

(b) authorising the payment of money or delivery of any property; or

(c) evidencing the creation, transfer, surrender or release of any such right, the payment of money or delivery of any property or the satisfaction of any obligation.

Companies Act Section 2. Interpretation. —

(1) For purposes of this Act a person is regarded as having knowledge of a fact if— 

(a) that person has actual knowledge of the fact; or

(b) the court is satisfied that—

(i) the person believes that there is a reasonable possibility of the existence of that fact; and

(ii) the person has failed to obtain information to confirm the existence of that fact, and

“Knowing” shall be construed accordingly. Furthermore, the Act defines what is meant by a person “knowing” of such prohibited conduct. “Knowing” when used with respect to a person, and in relation to a particular matter, means that the person either had actual knowledge, or such person reasonably ought to have had actual knowledge or acquired it by having investigated the matter or by having taken other measures which would reasonably be expected to have provided the person with actual knowledge of the matter. The knowledge possessed by the company at the time of the act that his conduct would lead to a consequence which the legislature desired to prevent, is by a construction of the law regarded as intention to bring about this consequence. ‘Knowledge' in this context does not necessarily mean 'full and certain' knowledge that this consequence is inevitable but on the other hand it must be knowledge which reached a high degree of probability.

(2) For the purposes of this Act a person ought reasonably to have known or suspected a fact if the conclusions that he or she ought to have reached are those which would have been reached by a reasonably diligent and vigilant person having both—

(a) the general knowledge, skill, training and experience that may reasonably be expected of a person in his or her position; and

(b) the general knowledge, skill, training and experience that he or she in fact has.

(3) (a) A reference in this Act to accept or agree or offer to accept any gratification, includes to—

(i) demand, ask for, seek, request, solicit, receive or obtain;

(ii) agree to demand, ask for, seek, request, solicit, receive or obtain; or

(iii) offer to demand, ask for, seek, request, solicit, receive or obtain, any gratification.

(b) A reference in this Act to give or agree or offer to give any gratification, includes to—

(i) promise, lend, grant, confer or procure;

'Pattern Of Racketeering Activity' means the planned, ongoing, continuous or repeated participation or involvement in any offence referred to in Schedule 1 and includes at least two offences referred to in Schedule 1, of which one of the offences occurred after the commencement of this Act and the last offence occurred within 10 years (excluding any period of imprisonment) after the commission of such prior offence referred to in Schedule

“Unlawful Activity” means conduct which constitutes a crime or which contravenes any law whether such conduct occurred before or after the commencement of this Act and whether such conduct occurred in the Republic or elsewhere.

Section 3 of the Corruption Act 94 of 1992, General offence of corruption. —

Any person who, directly or indirectly—

(a) accepts or agrees or offers to accept any gratification from any other person, whether for the benefit of himself or herself or for the benefit of another person; or in order to act, personally or by influencing another person so to act, in a manner—

(i) that amounts to the—

(aa) illegal, dishonest, unauthorised, incomplete, or biased; or

(bb) misuse or selling of information or material acquired in the course of the, exercise, carrying out or performance of any powers, duties or functions arising out of a constitutional, statutory, contractual or any other legal obligation;

(ii) that amounts to—

(cc) the violation of a legal duty or a set of rules;

(iii) designed to achieve an unjustified result; or

(iv) that amounts to any other unauthorised or improper inducement to do or not to do anything,

is guilty of the offence of corruption.

The codified standard of conduct. Personal liability where a third party suffers loss or damage where a director or prescribed officer did not adhere to the standard of conduct.

The Companies Act codifies the standard of directors’ conduct in section 76

The Companies Act makes no distinction between executive, non-executive or independent non-executive directors. The standard, and consequent liability where the standard is not met, applies equally to all directors irrespective of whether or not that the person is also a member of Company’s board.

In good faith and for a proper purpose, In the best interest of the company, and with the necessary degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions and having the general knowledge, skill and experience of that director.

The intention of the legislature seems to be to encourage directors to act honestly and to bear responsibility for their actions - directors should be accountable to shareholders and other stakeholders for their decisions and their actions. “Preference Shareholders enjoy more protection and peace of mind as the Directors’ take joint liability”.

In terms of section 66 of the Companies Act, the business and affairs of a company must be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company. The directors are entrusted by the shareholders of with the ultimate responsibility for the functioning of the company. While some of the day-to-day running of the company is generally delegated to some level of management, the responsibility for the acts committed in the name of rests with the directors.

These actions include:

Being part of an act or omission while knowing that the intention was to defraud shareholders, employees or creditors. Signing financial statements that were false or misleading in a material respect, or issuing a prospectus that contained an untrue statement. The directors been a party to an act or omission by despite knowing that the intention was calculated to defraud a creditor, employee or shareholder of the company, or had another fraudulent purpose. As a consequence of the nature of a company, being a lifeless corporate entity, human intervention is required to direct its actions and therefore determine its identity.

The duties imposed under section 76 are in addition to, and not in substitution for, any duties of the director of a company under the common law. The traditional concept of fiduciary duties is not replaced by the codified standard of conduct.

The Companies Act also codifies the business judgment rule. In terms of this rule a director will have met the required standard if he or she has taken reasonable diligent steps to become informed about the subject matter, does not have a personal financial interest (or declared such a conflicting interest) and the director had a rational basis to believe that the decision was in the best interest of the company.

 Listed a catalogue of corruption, fraud, fraudulent misrepresentation, or intentional misrepresentation committed under the disguise of the company

***All allegations will be included with Sections 1, 2, of the Prevention and Combating of Corrupt Activities Act 12 of 2004, together with Section 3 of the Corruption Act 94 of 1992, ***