Director’s responsibilities and a shareholder's rights

‘When drafting various corporate documents where individuals are shareholders, directors and employees, it is important to consider carefully the provisions in both the Shareholders Agreement and the Executive Employment Agreement. Understanding the rights as a shareholder against the roles, duties and responsibilities as a director and employee is of paramount importance.’ In an analysis on the Legalbrief Today site on the recent judgment in Big Catch Fishing Tackle (Pty) Ltd and Others v Kemp and Others, Baker McKenzie’s Dean Joffe and Ashlin Perumall point out that the court held that a director or senior employee may not carry on business activities which fall within the scope of the company's business during the time when she/he served as a director or employee. ‘However, the position changes on resignation, and in the absence of a special circumstance … the director or employee does not commit a breach of their fiduciary duty where he takes steps to ensure that – on ceasing to be a director or employee – he continues to earn a living, even by setting up, or joining, a competitor.’ The court pointed out that the shareholders had obligations in terms of the Shareholders Agreement to treat each other as partners during the subsistence of the agreement and their relationship to the company. According to the authors, the balance of convenience weighed decisively against the applicants and they failed to make out a case for interim interdictory relief. ‘The court illustrated that where a director or employee ceases to work for a company, their fiduciary duties survive the termination of the relationship with the company, but that duty does not remain the same after resignation. The duty will only be breached where a director or employee was required to protect the company's protectable interests in contract or law but failed to do so after termination of the relationship.’

Full analysis on the Legalbrief Today site

Big Catch Fishing Tackle proprietary Limited and Others v Kemp and Others