Tag: gross negligence

FICA Compliance and Penalties are becoming critical considerations for South African businesses, as non-compliance can lead to severe financial and reputational consequences.

Testimony at the Zondo Commission relating to the prepayment of R1.68 billion to Tegeta, a company owned by the Gupta family, provoked strong words from Deputy Chief Justice Raymond Zondo. The whole incident illustrates how seriously directors should approach their duties. Justice Zondo suggested that the directors were negligent at best.

As a bare minimum, directors are required to act in a manner which benefits the company – that is, to act in the company's best interests. This is entrenched in section 76 of the Companies Act which requires all directors, alternate directors and prescribed officers to act in good faith, in the best interests of the company and with the necessary degree of care, skill and diligence and prevents such persons from (1) abusing their position; and (2) knowingly causing harm to the company.

On March 12, 2020, a plaintiff shareholder filed a securities class action lawsuit against Norwegian Cruise Line Holdings, alleging that the company was employing misleading sales tactics related to COVID-19 bookings and cancellations. Another D&O claim was lodged soon after against Inovio Pharmaceuticals relating to statements the company made about developing a vaccine for COVID-19.

Often ‘gross negligence’ is used as a carve-out from a no-liability clause. The Consumer Protection Act expressly provides that a supplier cannot exclude liability for gross negligence.

The fiduciary duties of a company director are found in section 76 of the Companies Act 71 of 2008 ("the Act”) and the common...