Category Archives: Corporate & Commercial

Directors have no right to participate in daily management of companies

Directors Management Rights

The presumption that directors should participate in the daily management of a company’s affairs, and that they enjoy an unfettered right of access to a company’s premises, was successfully challenged recently in the Western Cape High Court.

The court held that in the absence of provisions in the memorandum of incorporation a director’s obligations to perform his functions as contemplated by the Companies Act did not require involvement in daily management operations or meetings, and that a director could be refused access to the company’s premises provided he was not prevented from fulfilling his role as a director.

Drawing on Australian examples the court confirmed that directors are required to take reasonable steps to place themselves in a position to monitor the management of a company by way of a general understanding of the business of the company and the effect which a change in the economy may have on the business of the company, all designed to ensure that the overall management of the company can be properly supervised, this did not include the power to involve themselves in the day to day operations of the company.

The court drew a distinction between the day to day management of a company and the overall supervisory role of the board which the legislation specifically tasked with the management of the company and allowed for the daily management to be delegated.

The case highlights the need for consideration to be taken when drafting the company’s constitution, the memorandum of incorporation. It may sometimes be appropriate to ensure directors have access and rights to attend to in management, but in the absence of specific provisions, directors may find otherwise themselves isolated from daily management.

Kaimowitz v Delahunt and Others 2017 (3) SA 201 (WCC)

Ship arrest provisions break away from practice of Commonwealth jurisdictions

Ship arrest provisions

In a split decision by the Supreme Court of Appeal the majority judgment diverted from the long standing practice underpinning protective writs derived from English law.

The associated ship, the Seaspan Grouse, had changed ownership between the issuing of the protective writ and the actual service thereof, arrests had been previously upheld despite the change of ownership in accordance with the principles articulated in the Monica S adopted from English law.

The majority judgment, however, interpreted the arrest provisions of the Admiralty Jurisdiction Regulation Act 105 of 1983 to be incompatible with the Monica S and held that although a protective writ could still be issued it gave no protection to a claimant against an intervening bona fide change of ownership.

The minority judgment argued that this could not have been the intention of the legislature considering the unique difficulties facing the enforcement of maritime claims; even where it may have been argued that right against arbitrary deprivation of property was unconstitutional, this would probably have been justified in the context of maritime claims.

The minority concluded that if such a radically different trajectory in admiralty law from the Commonwealth jurisdictions had been contemplated by the legislature it would have been unambiguously provided for and that no reason existed to divert from the prevailing practice.

MV Seaspan Grouse: Seaspan Holdco 1 Ltd v MS Mare Traveller Schiffahrts GmbH (376/18) [2019] ZASCA 02 (1 February 2019)