Is Your Business Legally Accountable? A Look at SA Company Law

Introduction

South Africa’s corporate governance landscape continues to experience a seismic shift. The aftermath of the Zondo commission and the AML grey listing has sparked a renewed focus on transparency, ethical leadership, and enhanced oversight mechanisms across corporate South Africa. The Companies Act 71 of 2008 has been extensively amended in 2024 and earlier this year. These changes are designed to strengthen governance frameworks, promote accountability, and prevent South African companies from being vulnerable to abuse of power.

Regardless of the size of the business you are involved in, these amendments should be noted and embraced, particularly in terms of accountability and leadership ethics.

Enhanced Director Accountability and Streamlined Processes 

Enhanced director accountability strengthens corporate governance by ensuring that directors act transparently, responsibly, and in the best interests of the company and its stakeholders. Clear duties, regular performance oversight, and consequences for misconduct foster trust with investors, employees, and the public. This approach not only reduces the risk of fraud and mismanagement but also promotes sustainable business growth and long-term value creation.

One of the significant changes is the extension of directors’ liability timeframes, ensuring that directors are held accountable for damaging decisions or actions:

• The prescriptive period to apply for a delinquent or probationary director order has been extended from 24 to 60 months (five years).
• Courts may now extend this period retrospectively upon good cause shown.
• In addition, courts are empowered to extend the three-year limit for holding directors liable for damages or losses under Section 77(7) of the Companies Act.

Whether appointing a director or being appointed, it is more important than ever to ensure duties in the Act, as well as outlined in the Companies Memorandum of Incorporation and Director agreements, are clearly understood and complied with.

Another interesting development is the support of group structures and the streamlining of business operations. Financial assistance from a holding company to its subsidiaries is now exempt from the requirement for special resolutions of shareholders and a board resolution, provided it aligns with normal business practice. This is recognised as standard practice in group structures for the flow of funds within the group. The amendments make this process less burdensome. However, it goes without saying that the solvency and liquidity tests remain essential.

Similarly, share buybacks have become less burdensome, particularly when related party shares are bought back (e.g., directors), requiring only a special resolution. The solvency and liquidity test still remains mandatory to protect creditors and shareholders.

This shows an enhanced delicate balance between business and compliance.

King IV: The Conscience Behind the Code 

While the Companies Act sets out the statutory requirements, King IV remains the moral guide for South African governance.

Its “apply and explain” philosophy encourages organisations to view governance as a value-based practice rather than merely a box-ticking task. This aligns with the broader movement towards corporate citizenship, where organisations are accountable to all stakeholders — not just shareholders.

Companies are now expected to:

• Embed integrity and transparency into their cultures.
• Adopt a stakeholder-focused approach, balancing profit with societal impact.
• Incorporate ESG principles (Environmental, Social, and Governance) to promote sustainability and long-term value.

This is not just a moral duty — it’s a strategic one. Organisations that lead with ethics and stakeholder awareness will be more resilient and competitive over time.

Conclusion

South African corporate governance is entering a defining chapter. Legislative reforms, combined with a renewed focus on ethics, are shaping a new era — one where:

• Directors are truly accountable.
• Transparency is the norm.
• Ethical leadership is non-negotiable.
• Stakeholders — not just shareholders — have a say.

This shift goes beyond ticking compliance boxes. It is about rebuilding trust, safeguarding integrity, and fostering a business culture that delivers lasting value for society as a whole.

At SchoemanLaw Inc, we help businesses navigate this evolving landscape with confidence. Contact us for all your company’s legal needs.

For further assistance, consult an attorney at SchoemanLaw.