Personal liability of directors under Companies Act

The Western Cape High Court recently confirmed that a director of a company may, in terms of the new Companies Act, be held personally liable for damages sustained by a third party creditor where the director in question acted in such a way so as to acquiesce in the carrying on of the company’s business despite knowing that it was being conducted in a reckless manner, with gross negligence, with intent to defraud any person, or for any fraudulent purpose. The statutory clause in question is not limited in its applicability, as contended by the directors in the case, to a claim by the Company against its directors. The Court confirmed that section 77(3)(b) of the Act can be the basis to found personal liability of a director in favour of a creditor of a company.

Blue Farm Fashion Limited v Rapitrade 6 (Pty) Ltd and Others (22288/2014) [2016] ZAWCHC 35 (1 April 2016)

Click here to read the judgment: http://www.saflii.org/za/cases/ZAWCHC/2016/35.html

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