Page 17 - FOL2023

Corporate Governance

The Companies Act of 2011 includes statutory provisions of as a defence available to a director
directors’ duties. These provisions are modelled on the common of a company where the director
law fiduciary duties of directors and officers and on the duty to act was accused of breach of the duty of

with care, skill and diligence. On the fundamental duties of directors, good faith, and second, as a bar for
section 63(1) provides that a director of a company, when exercising courts to second-guess directors in
powers or performing duties, must act in good faith and on taking decisions for the company. If
reasonable grounds in the interests of the company. Section 63(2) the director can show that he or she
provides that, when exercising powers or performing duties as a acted reasonably and took diligent

director, must exercise the care, diligence and skill that a reasonable steps to inform himself or herself
director would exercise in the same circumstances taking into sufficiently before taking the decision
account the nature of business of the company, the nature of the and in circumstances where he or

decisionbeing taken, the position of the director and the nature of the she had no conflict of interest, then
responsibilities undertaken by that director. it would be the end of the matter; the
By virtue of section 2 of the General Law Proclamation of courts cannot inquire further. It is
29th May, 1884, read with section 4(1) of the Independence Order in further arguable that if indeed section
Council of 1966, Lesotho’s legal system has been closely intertwined 63(2) does import the business

with that of South Africa. judgment rule, the rule would apply
Arguably, section 63(2) imports a statutory business judgment in all instances where the director’s
rule. This rule has its roots in American case law where it acted, first, fiduciary duty of care, good faith and

diligence are called into question. It terms of section 61(3).
remains to be seen how the courts Legal regulation covers not only the common law of

will deal with this matter. companies and the Companies Act 2011 but also all manner of
Liability in terms of these legislation that have an impact on how directors, shareholders,
provisions is determined in management and investors (including credit-givers), employees,
accordance with the principles and other stakeholders conduct themselves vis-à-vis one another

of the common law relating to a in a host of situations including conflict of interest, disclosure of
breach of fiduciary duties or in delict information and other accountabilities in relation to the handling and
for a breach of the duty of care, management of the company’s assets and affairs. Reference is here
skill and diligence. Directors and generally made to legal compliance as one of the features of good

officers, including former directors corporate governance.
and officers, are also potentially Self-regulation
liable for any loss, damages or elf-regulation broadly refers to the regulation resulting
costs sustained by the company, its Sfrom commitments that a company voluntarily makes

shareholders and any third parties as which have a bearing on its corporate governance framework. These
a result of the directors’ or officers’ range from the company’s own policies and standards, professional
failure to comply with the duties standards and those imposed by corporate governance codes. All
spelt out above. Executive officers of these instruments are known as soft law to the extent that their

a company are settled with the same enforcement may not carry the sanction of the law of the country.
fiduciary duties under section 63, in Soft law is not founded on legislation, which would call for the state

18 FOL Quarterly Issue 2022