Webber Wentzel Represent Directors In Landmark Governance Cases

Webber Wentzel Represent Directors in Landmark Governance Cases

The leading law firm in South Africa, Webber Wentzel, provides insight into two recent landmark cases highlighting directors’ fiduciary duties and potential delinquency under the Companies Act.

SCA Decision in Msibithi Investments Pty Ltd v African Legend Investment Pty Ltd

In Msibithi Investments Pty Ltd and others v African Legend Investment Pty Ltd and others 2025, the Supreme Court of Appeal (SCA) examined directors’ fiduciary duties within a governance dispute involving African Legend Investments Proprietary Limited (ALI), affiliated entities including Off the Shelf Investments 56 (RF) Proprietary Limited (OTS56), and third parties.

The dispute concerned the validity of a board resolution approving the subscription of shares by the Astron Energy Employee Participation Plan Trust (Astron Trust). A former director and executive chairperson argued that the resolution was not for a proper purpose and intended to dilute his shareholding to facilitate his removal.

The SCA emphasised that directors must act in good faith and for proper purposes under Section 76(3) of the Companies Act. The court clarified that a dominant proper purpose governs, even if subsidiary purposes may be improper. The board’s primary goal — raising capital for commercial objectives — was deemed proper, and the director’s removal incidental.

The SCA also found that the director had misrepresented legal advice, caused contractual breaches and delays, misrepresented his position post-removal, and reneged on undertakings. He was declared delinquent for seven years under Section 162 of the Companies Act for gross negligence, willful misconduct, and breach of trust.

South Gauteng High Court Decision in Pillay v Stokes and Others

In Pillay v Stokes and Others 2025, the South Gauteng High Court reaffirmed the protective purpose of Section 162, designed to shield investors from directors’ serious misconduct.

The court declared two directors delinquent for failing to meet statutory and fiduciary standards, including wilful misconduct, breach of trust, and abuse of position. Misconduct included failure to hold annual general meetings, incomplete financial statements, denial of shareholder access to company information, non-compliance with contractual obligations, and insufficient due diligence on anticipated investments.

By Hafiesa Samsodien (Partner) and Mirren Sharp (Senior Associate)

Conclusion

These rulings reinforce that directors must act bona fide, for proper purposes, and with due diligence. Failure to do so can result in declarations of delinquency under the Companies Act, protecting investors and upholding corporate governance standards.

Webber Wentzel continues to provide leading guidance on directors’ duties and corporate governance, supporting clients in navigating complex compliance and fiduciary obligations.

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