Boards can’t simply quit en masse | Business | M&G

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COMMENT: The decision to resign should not always be perceived from a director’s unilateral lens. Directors should be mindful of their importance in a company.

Recent scandals in the private and public sectors have focused attention on the duties of directors to the companies they serve, the shareholders and employees, and the public.

Regulators such as the Companies and Intellectual Property Commission or other interested parties may also apply to a court to have a director declared delinquent, thereby disqualifying them from being appointed to any other board.In 2006, the high court in Johannesburg did so in the case of MIn this case, all directors at Stilfontein resigned after the company had repeatedly failed to comply with the directives issued by the department.

The judge said that directors were the human agents through which a company acts. Except in certain limited circumstances, a company is usually unable to act without a board. The Stilfontein case concerned a public company, but the general principles laid out by the court find equal application to SOEs. When contemplating a mass resignation, the board members of an SOE must consider the following:

The board must also consider whether the SOE can function without a board and how complex the process of replacing the board is. Of course, these considerations apply to a lesser extent in a scenario where the minister wishes to remove the board and requests the directors to resign.

 

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