The board’s authority
The board of directors has the authority to exercise all the powers and perform any of the functions of the company to the extent permitted by the Companies Act, No 71 of 2008 (Companies Act) and the Memorandum of Incorporation (MOI) of the company. The Companies Act does place certain limitations and restrictions on the board, and it also allows the MOI of the company to further restrict the board’s authority.
Formal decisions made by the board take the form of written resolutions, known as directors’ resolutions. A directors’ resolution describes the act the company needs to perform as well as who may represent the company in the performance of such act and in what capacity (usually as directors). These official documents are a widely used and convenient way for the board to make decisions.
Resolution notice period
All directors must be given notice of board meetings. But how is the notice period handled for directors’ resolutions? Standard practice is for all the directors to sign the resolution and for the resolution to clearly state that the notice requirements are waived as per Section 73(5)(a) of the Companies Act.
Where the correct procedure has been followed, a resolution can be considered passed if the voting threshold has been met – unless the company’s MOI requires otherwise. It’s very important that adequate record be kept of the decision taken by the directors.
Fiduciary duties of directors
Each director has a fiduciary duty to perform their tasks and responsibilities in the best interests of the company. Section 77 of the Act prescribes certain liabilities that are placed upon directors – it’s worth noting that a director may be found liable for any loss or damages sustained as a consequence of their failure to adequately perform their duties. In this instance, the director will be held personally liable for any loss suffered by the company or any affected person.
As can clearly be seen from the above, it’s good practice to consult with a legal practitioner to ensure compliance with the formal requirements of the Companies Act.
Written by Wessel de Kock