Importation of a Statutory Business Judgment Rule into South African Company Law: Yes or No

Sulette Lombard

Research output: Contribution to journalArticlepeer-review

Abstract

The recent spate of high profile corporate collapses across the world1 brought the
issue of directors' personal liability to the fore once again.2 Increased emphasis
on the personal liability of directors in case of their corporations failing due to
mismanagement, could be advantageous in many respects. Corporate creditors
would obviously be the first to benefit from this, as they would have a better
opportunity of having their claims settled where they have an additional source
to look to for doing so, other than the insolvent corporation. A second possible
benefit would be that directors, aware of the greater danger of personal liability
for corporate debts, would be more prudent in managing the affairs of the corporation,
which would in turn result in fewer of these spectacular collapses.
On the downside, however, increased personal liability could lead to competent
persons being unwilling to take up directorships.3 Furthermore, even if
companies are able to find persons willing to serve on boards despite the increased
threat of personal liability hanging over their heads, the question remains
whether it is desirable that directors should be more "careful" when managing
the business of a corporation. Successful ventures require directors to take calculated
business risks. Should directors be hamstrung in doing so out of fear of
personal liability, profitability might be sacrificed. It is a widely acknowledged
fact that this result would not be desirable. 4
Original languageEnglish
Pages (from-to)614-627
Number of pages14
JournalTydskrif vir die Hedendaagse Romeins-Hollandse Reg (Journal of Contemporary Roman Dutch Law)
Volume68
Issue number4
Publication statusPublished - 2005
Externally publishedYes

Keywords

  • corporate collapse
  • personal liability
  • Company Law

Fingerprint Dive into the research topics of 'Importation of a Statutory Business Judgment Rule into South African Company Law: Yes or No'. Together they form a unique fingerprint.

Cite this