The Companies Act gives certain persons the right to apply for a court order to declare a Director as delinquent and whereafter imposing restrictive conditions on said Director.
According to Section 162(2) those who may apply for an order to declare a Director delinquent are:
- A shareholder;
- A Director;
- A company Secretary;
- Prescribed officer;
- A registered Trade Union;
- An Organ of State or;
- CIPC itself.
There are certain reasons or categories of behaviour in which the Director must act to classify himself/herself as a delinquent this would be one of the following but not limited to:
- Where the Director consented to act when he/ she was disqualified;
- When he/she was under an order of probation;
- Where a Director grossly abused their position;
- Where they took personal advantage of information or by intentional or by gross negligence caused harm to the company;
- Has been convicted of the same offence twice before or subjected to an administrative penalty before
In the event where the court finds that an order of delinquency is too harsh then the court may rather declare an order of probation. Some of the grounds of probation are but are not limited to:
- Where the Director was present at a meeting and failed to vote;
- Acting in such a way that is inconsistent with their duties; or
- Where the director acts oppressively or unfairly.
A director who has been declared a delinquent may have an order that is conditional or unconditional and the conditions may last from 7 years or longer depending on the nature of the conduct of the director. Certain conditions could include a payment of damages or being supervised by a mentor or alternatively being disqualified as a director altogether.
According to the Act if a Director has been qualified as a delinquent Director then after a period of three years he/she can apply to the court to suspend the order or apply to substitute same to an order of probation.
What is the public register?
In many cases people are not honest about their past history with those they get into business with. This is the reason why the Companies Act requires CIPC to have and maintain a public register of disqualified persons from serving as Directors.
It matters not what type of business is created the Companies Act allows for liability of Directors in all businesses and although the Act has allowed many freedoms it makes sure that misconduct is dealt with strictly.