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Directors are exposed to the following forms of potential liability:
• Civil liability. A director who breaches his or her duties may be held jointly
and severally (fully and equally) liable together with any other person for
commiting certain acts.
• Criminal liability. Section 214 of the Companies Act provides for criminal
liability of those directors trading a company in a manner which is calculated
to defraud a creditor.
• Breach of fiduciary duties. In the event that a director breaches his fiduciary
duties to the company, such director may be held personally liable for any
loss, damages or costs sustained by the company as a result of such breach.
• Breach of the duty of care, skill and diligence. Directors may be held liable Commercial
in terms of civil action for any loss, damages or costs sustained by the
company as a result of the breach of a director’s duty of care, skill
and diligence.
• Liability for breaching the Companies Act. The Companies Act stipulates
that a director will be liable for any loss, damages or costs sustained by the
Company as a direct or indirect consequence of the director having
breached certain provisions of the Companies Act.
• Liability towards the shareholders of the company. Directors of a company
may potentially be held liable by the shareholders of the company for
breach of their duties in certain circumstances.

Clearly, becoming a director is no casual decision. It should not mean that you
should shy away from becoming a director, but rather that it should make you
aware that a thorough understanding of the responsibility of being a director
is vitally important, as a breach of your duties as director can hold serious
consequences. If you are still unsure about your decision, contact your attorney
to discuss your concerns and responsibilities towards the business should you
wish to take on the role of director in the new business venture.

When do you have to appoint an auditor for
your company?

Johnny Davis
August 2018

“I’ve just started my own private IT company. As a new business, I want to limit
unnecessary expenses. I know there will be accounting costs but am not sure
if I already have to appoint an auditor for the business. I would like to avoid
this cost if I can?”

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