The duty of care, skill and diligence in terms of section 76(3)(c) of the Companies Act 71 of 2008

Abstract

The Companies Act 71 of 2008 came into force on 1 May 2011. Section 76(3)(c) of this Act requires that directors must fulfil their responsibilities and functions with the care, skill and diligence that may reasonably be expected from anyone exercising similar functions as that director and who possesses the same skills, knowledge and experience as that director. This common law standard of conduct originated from English law and has now been codified in the Companies Act 71 of 2008. As is the case with any newly codified legal principle, there is a need for an analysis to be made on this provision in order to formulate a guideline that will be used when interpreting the provision in the coming future. In light of this background, this study examines the duty of care, skill and diligence in light of all existing jurisprudence on the principle. This is achieved by investigating the background behind the formulation of the provision and any recent analysis done by both legal scholars and courts after the Act came into effect. Furthermore, this study takes into consideration all possible remedies that may be used for breach of the provision and all defences that exist. Lastly, this study concludes by making various recommendations that are aimed at ensuring a smooth interpretation of the section.