First Court Order Declaring Director Delinquent

The Companies and Intellectual Property Commission (“CIPC”) has for the first time succeeded in having a court declare a director delinquent under the Companies Act.

The Act (section 162) providers companies, shareholders, directors and other interested persons with a remedy to approach the courts to have a director of a company declared delinquent.   There are a number of listed grounds upon which a court can grant such an order, including, but not limited to:

  • where a person acted as a director while being ineligible or disqualified to do so:
  • where a person acted as a director in contravention of an order of probation;
  • where a person acting as a director grossly abused the position of director;
  • where a person acting as a director intentionally or by gross negligence inflicted harm upon the company;
  • where a person acting as a director acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust in relation to the performance of the directors’ functions and duties.

Dependant on the ground relied upon by the court, a declaration of delinquency may either be unconditional and subsist for the lifetime of the person concerned, alternatively be conditional and subsist for 7 (seven) years from the date of order or such longer period as determined by the court.

In the case at hand, Owen Wienand, a director of Skyport Corporation Limited, was found to have allowed the company to continue operating whilst in an insolvent condition.   The director had further allowed cash to be extracted from the company’s bank account to pay directors’ fees and had continued with the business despite knowing that there was no business case for the company and while failing to maintain proper accounting systems.

Judge Dennis Davis declared the director to be delinquent for 7 (seven) years on the grounds of gross negligence and violation of his duties as a director.

This judgment serves as a harsh reminder to all directors of their duties towards a company which are not to be taken lightly.   It further provides reassurance to those who seek relief and remedy from delinquent directors.

Contact Sandy Scholtz in our Corporate and Commercial Law Department on (041) 501 9806 /  sandy@goldlaw.co.za .

Latest News

  • FINAL DE-REGISTRATION OF ENTITIES CONFIRMED BY CIPC17th January 2018 - 10:46 am

    CIPC (Companies and Intellectual Property Commission) has issued a notice (Notice 61 of 2017) confirming the final deregistration of certain Companies and Close Corporations effective 2 February 2018 due to non-compliance with filing of Annual Returns. The effect of this notice is that entities which are currently reflected as having the status of ‘Deregistration Process’ […]

  • PLOT-AND-PLAN: GREAT OPTION, JUST BEWARE THE BUILDING DEADLINE8th January 2018 - 10:19 am

    “Buy land, they’re not making it anymore” (Mark Twain) Buying a house is an important and exciting experience.  One of the first decisions you must make is whether to buy an existing house (the “turnkey” option) or to buy from a developer on a “plot-and-plan” (“off-plan”) basis. Which option is best for you only you […]

  • PROTECTING YOUR BUSINESS DURING A DIVORCE19th December 2017 - 8:45 am

    No one starts a marriage expecting it to end in a divorce (it is after all, “till death do us part” in the vows), but unfortunately divorce is reality of life. Most people consider the emotional toll a divorce will take, but there are additional financial consequences to be considered, and assets that require protection, […]

  • 6 REASONS WHY YOU SHOULD REVIEW AND UPDATE YOUR WILL13th December 2017 - 10:15 am

    Updating a Will is most often one of those personal matters that we never make time for. Once written and signed ones Will is often locked away and forgotten.  It is however good practice to review your Will every three to five years and to make the necessary amendments if required.  Here is a list […]

  • SELLING PROPERTY THIS FESTIVE SEASON? 3 TIPS FOR A SMOOTH TRANSFER12th December 2017 - 9:19 am

    The Festive Season can be a great time to sell property, and to buy it.  Warm weather, sunny gardens and bright rooms, lots of holidaying visitors, and more time on your hands generally all help to stimulate the property market. Just bear in mind that, Summer Holidays or not, whether you are selling a property […]

  • IT’S WEDDING SEASON! HERE’S WHY YOU NEED AN ANC (WHETHER YOU MARRY HERE OR OVERSEAS)11th December 2017 - 3:29 pm

      “He was a dreamer, a thinker, a speculative philosopher… or, as his wife would have it, an idiot” (Douglas Adams) Note:  Although by way of example we explore below the “international wedding” scenario, even if you are South Africans marrying in South Africa you need an ANC.  Read on… The Rand’s weakness notwithstanding, many […]

  • EMPLOYERS AND EMPLOYEES: HOW TO HANDLE SEXUAL HARASSMENT AT WORK7th December 2017 - 12:16 pm

      “…there is a new understanding and appreciation of the prevalence of sexual harassment in the workplace and of its devastating effects on the victim.  It has become, in effect, a systemic and recurring harm”…“It is the kind of conduct that is a scourge in the workplace, and must be rooted out of existence.” (Extracts […]

  • RIGHT OF FIRST REFUSAL5th December 2017 - 2:01 pm

    Many people have heard of “right of first refusal” on their property rental contracts, but what does that mean, and how does one exercise this “right”? In essence, it is a legal agreement between and Landlord and a tenant, that should the landlord ever decide to sell the property, the tenant has the first opportunity […]