Considering the recent corporate scandals over the past couple years – VBS Mutual Bank, McKinsey & Trillian, Steinhoff, EOH and possibly Tongaat Hulett to name but a few – many shareholders may seek to hold the directors and management of such entities personally liable for their involvement or negligence. Especially where their actions were tantamount to fraud, they benefited in some way and or as a result the company, and possibly the shareholders, suffered damages. This is especially true when a company as consequence is liquidated and cannot institute action on its behalf. It is submitted that directors are rarely held personally liable for failing to fulfill their duties, let alone liable to the shareholders. The risk of failing to monitor internal controls or business risks, and to hold those acting on behalf of the company responsible and accountable for their actions, is dangerous due to the significant effect that such failure could have on the economy, for example the economic collapse with respect to the recent Steinhoff debacle. Whereas the earlier Companies Act 61 of 1973 did not necessarily ‘spell out’ directors’ duties in detail, the Companies 71 of 2008 comprehensibly records their statutory and common law duties. To this extent the board is held accountable and can ensure proper governance in the company’s internal affairs. Shareholders expect management to maximise the value of a company for the benefit of the shareholders and to act in their best interest. In achieving this, directors are required to act in the best interests of the company. However, directors may use their elevated position for their own personal gain and self-interests. Thus, in which circumstances will courts pierce the corporate veil, stepping aside from a company’s unique legal personality, to impute liability to the wrongdoers lurking behind? The relationship between directors, a company and its shareholders is a fiduciary one which imposes certain duties upon directors. However, it is well established in law that directors’ duties are owed to the company itself. Thus, considering common and statutory law, on what legal basis would shareholders be able to bring a claim against directors for the loss or damage they suffered due to an act of the directors? Considering the above, this paper seeks to explore directors’ liability to shareholders within South Africa’s common and statutory law, bearing in mind entrenched legal principles, such as the argument that fiduciary duties are duties owed to the company and not to individual shareholders; and that as a result only the company can impose liability on its directors. / Mini Dissertation (LLM (Corporate Law))--University of Pretoria, 2019. / Mercantile Law / LLM (Corporate Law) / Unrestricted

The company developed through an evolutionary process. Our conceptualization of the company and its position in law is determined by our philosophical approach to justice (our underlying system of belief), the resultant theory of law that we adopt and the underlying economic, political and social environment in which the company operates. Three broad philosophical approaches to justice are identified in this study. The first revolves around the idea of maximizing welfare, the second around the idea of respecting freedom and the third approach sees justice as bound up with virtue and the good life. It is argued in this thesis that we cannot detach arguments about justice and rights from arguments about virtue and the good life. It is not possible to devise a grand theory of the nature of the company. But from a normative perspective the communitarian theory and arguably the concession theory (more particularly the dual concession theory of Dine) is the most acceptable theory of the nature of the company. The real entity theory, as articulated by Dodd, is the preferred theory of the corporate personhood of the company. A company, especially a large company, is a public or quasi-public entity and a corporate citizen that should have the same legal, social and moral rights and responsibilities as a natural person. From a normative perspective the entity maximization and sustainability model (EMS model) and the stakeholder model are the most attractive models of corporate governance. It is generally accepted that the ultimate purpose of the company must be to serve society. Subject to this ultimate and supreme objective, the corporate objective on a narrower level must be to maximize and sustain the company as a separate legal entity. The aforesaid conceptualization of the company corresponds with the normative value system that underpins the Constitution of the Republic of South Africa, 1996 (the Constitution), and therefore also the Companies Act 71 of 2008 (the Companies Act of 2008). The Constitution encompasses a social democratic vision for South Africa in which commercial autonomy must be tempered by virtue, dignity and social and economic equality. The Companies Act of 2008 gives express recognition to bring company law within our constitutional framework. There has been a fundamental paradigm shift in the normative value system that underpins our company law since liberalism and laissez-faire reigned supreme in the eighteenth and nineteenth century Great Britain, from which country our company law originates. The underlying philosophy and approach of our company law is now more aligned with that of Canada. This also has an important effect on the rights, protections and remedies of creditors and employees of the company. / Thesis (LLD)--University of Pretoria, 2017. / Centre for Human Rights / LLD / Unrestricted