Legal Implications relating to being "Entitled to Serve" as a Director: A South African–Australian Perspective

Keywords: De facto director, De jure director, director liability, board of directors, decisions of the board of directors, contractual condition, entitled to serve, written authority, estoppel

Abstract

This article focusses on an Australian piece of legislation and interesting case law, as well as on how the Federal Court of Australia has applied Australia's Corporations Act, 2001 to characterise a person as a de facto director – that is, as a professed director whose appointment as such was defective. In this regard, the decisions of that Court will, as envisaged in the Constitution of the Republic of South Africa, 1996 constitute persuasive authority. The Australian decision to be discussed in this article is significant in that the South African Companies Act 71 of 2008 does not contain substantively similar provisions to those of Australia's Corporations Act 2001. For example, section 66(7) of South Africa's Companies Act, 2008 contains the phrase "entitled to serve" as a director. This article explains the legal implications relevant to that expression, including whether it imposes a statutory condition precedent. This article also considers the validity of decisions taken by a person who is not "entitled to serve" as a director.

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References

Bibliography
Literature

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Case law
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Bell Resources Holdings Pty Ltd v Commissioner for Act Revenue (1990) 8 ACLC 533
British Asbestos Co Ltd v Boyd [1903] 2 Ch 439
Browne v La Trinidad (1887) 37 Ch D 1
Burstein v Yale 1958 1 SA 768 (W)
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Channel Collieries Trust Ltd v Dover St Margaret's & Martin Mill Light Railway Co [1914] 2 Ch 506 (CA)
Corporate Affairs Commission v Drysdale (1978) 141 CLR 236
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Dowjee Co Ltd v Waja 1929 TPD 66
Featherstone v Hambleton (As Liquidator of Ashala Pty (Ltd) (In Liq) [2015] QCA 43
Flegg v McCarthy & Flegg 1942 CPD 109
Foss v Harbottle (1843) 2 Hare 461, 67 ER 189
Francis v Sharp 2004 3 SA 230 (C)
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296
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Marrok Plase (Pty) Ltd v Advance Seed Co (Pty) Ltd 1975 3 SA 403 (A)
Menelaou v Gerber 1988 3 SA 342 (T)
L Suzman (Rand) Ltd v Yamoyani (2) 1972 1 SA 109 (W)
Morris v Kanssen [1946] AC 459 (HL) 471
Northside Developments Pty Ltd v Registrar General [1990] 170 CLR 146
Octavia Matshidiso Matloa v Multichoice South Africa (Gauteng Division) (unreported) case number 40731/2019 of 6 February 2020
Private Security Regulatory Authority v Commission for Conciliation Mediation and Arbitration 2012 33 ILJ 961 (LC)
R v Mall 1959 4 SA 607 (N)
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Legislation
Alienation of Land Act 68 of 1981
Corporations Act, 2001 (Australia)
Companies Act 31 of 1909
Companies Act 46 of 1926
Companies Act 61 of 1973
Companies Act 71 of 2008
Constitution of the Republic of South Africa, 1996
Companies Consolidation Act, 1908 (Ireland)
Real Estate Property Act 25 of 1900 (New South Wales)
Private Security Industry Regulation Act 56 of 2001
Companies Act, 1948 (United Kingdom)

Internet sources

Department of Trade and Industry 2007 Companies Bill 2007 http://www.uct.ac.za/usr/companylaw/downloads/legislation/Companies_Bill_2007.pdf accessed 2 April 2019

Lash M 2018 What is a De Facto Director and what are the Risks? https://legalvision.com.au/what-is-a-de-facto-director/ accessed 5 September 2019
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Published
2020-07-23
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