SA company directors need greater legal awareness of reckless trading provisions
In these tough times, directors need to be acutely aware of their fiduciary duties, particularly if trading in insolvent circumstances
In these turbulent economic times, and particularly with pressure on the rand and with the recent downgrade of SA to "junk status", directors of South African companies need to be fully aware of the reckless trading provisions applicable to them in terms of the 2008 Companies Act. Reckless trading and conducting a company’s business with the intention of defrauding creditors who supply the company with goods and services on credit, might result in creditors pursuing claims against directors who continue to accept the provision of credit knowing full well that such credit obligations cannot be met by the company. Section 22(1) of the Act states that a company must not carry on its business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose. Directors need to be aware of a situation where, due to increased economic pressures on the company, the company becomes financially distressed in a sense that it cannot pay its debts in the next six...
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