Phumzile Tshelane. Picture: SUPPLIED
Phumzile Tshelane. Picture: SUPPLIED

The cost of corporate governance failures at state-owned companies is getting heftier, with CEOs and directors being called to account for noncompliance with the Companies Act.

On Wednesday, the High Court in Pretoria heard an application brought by the Companies and Intellectual Property Commission (CIPC) against the longstanding CEO of Nuclear Energy Corporation of SA (Necsa), Phumzile Tshelane for unlawfully using his company vehicle and driver for his private benefit and doing so without the approval of the institution’s board.

The CIPC wants him to be placed on probation for five years for acting "in a manner materially inconsistent with his duties as director of Necsa".

According to Section 162 of the Companies Act, interested and related persons, including qualifying organs of state, can apply for an order declaring a director of a company delinquent or placing him/her under an order of probation, an action that has negative consequences once granted, including that of exposure to liability.

In November 2016, the CIPC took South African Airways board chairwoman Dudu Myeni to task after it found she had lied to the public enterprises minister about the number of airbuses her board had decided to sell, forcing her to retract the statement as she faced possible prosecution.

Myeni has still to account for her conduct in a pending court case brought by the Organisation for Undoing Tax Abuse, which wants her to be declared a delinquent director.

If the case is successful, it would bar her from serving on company boards.

While the ramifications that Tshelane could face are not as dire if the CIPC’s application succeeds, his legal representatives still had to explain to the court why he had not reimbursed Necsa for the private use of the luxury Lexus vehicle, as directed by the old board.

Advocate Paul Farlam, appearing for Necsa and Tshelane, said the case could be in breach of employment policy but was not "materially inconsistent" with fiduciary duties as argued by the CIPC.

He said the "consequences of probation are serious and on par with delinquency".

The court also had to consider an affidavit submitted at the eleventh hour by Necsa’s new board declaring it had resolved just over a week ago to set aside the findings of the old board that Tshelane had "improperly made use of a company vehicle".

The resolution had been taken in 2013 and was the basis of complaints submitted to CIPC by now former Necsa directors.

In court papers, Tshelane challenged the version of events relied upon by the CIPC.

Judgment was reserved.

mahlakoanat@businesslive.co.za

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