Delinquent Director Applications

Holding directors accountable for serious misconduct, or defending an application brought against you.

Section 162 of the Companies Act allows a court to declare a director delinquent or place them under probation. A delinquent person may not serve as a director of any company for the period of the order. These applications are a powerful remedy for shareholders, fellow directors and companies, and a serious threat to any director facing one.

Grounds for a delinquency order

  • Acting as a director while ineligible or disqualified, or while under probation in breach of its conditions.
  • Grossly abusing the position of director.
  • Taking personal advantage of company information or opportunities, contrary to the Companies Act.
  • Intentionally, or by gross negligence, causing harm to the company or its subsidiary.
  • Acting with gross negligence, wilful misconduct or breach of trust in performing their functions.
  • Being party to reckless trading, fraud or other conduct described in section 77(3)(a) to (c).

Who can apply?

The company, a shareholder, a director, the company secretary or a prescribed officer, a registered trade union or other employee representative, the Companies and Intellectual Property Commission (CIPC) and the Takeover Regulation Panel can apply, depending on the grounds.

How long does it last?

Depending on the grounds, a delinquency order lasts either until the conditions in the order are met or for at least seven years. In some cases the director can apply to have it suspended or set aside after three years.

Common situations

We act for:

  • Shareholders whose company has been looted or mismanaged.
  • Directors trying to remove a co-director who has acted dishonestly.
  • Companies recovering losses after a former director’s misconduct.
  • Business rescue practitioners and liquidators investigating directors’ conduct.
  • Directors defending a delinquency application.
  • Directors applying to suspend or set aside an existing order.

How the process works

From evidence to court order.

  1. Assessment
    We review the facts and evidence against the grounds in section 162 and advise on prospects and strategy.
  2. Preserving evidence
    Company records, financial statements, emails and board minutes are secured. Where assets are at risk, urgent interim relief may be needed.
  3. Application
    The application is brought in the High Court on affidavit, while the person is a director or within 24 months after they ceased to be one.
  4. Opposition and argument
    The director may oppose. The court considers the evidence and argument and decides whether an order must be made.
  5. Order and registration
    A delinquency or probation order is recorded by CIPC on its register of disqualified directors, and the person must step down from all directorships.

A delinquency application is often brought together with other relief, such as a claim for damages under section 77, an application for relief from oppressive conduct under section 163, or the removal of a director under section 71.

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What to prepare

Helpful documents for your matter.

  • The company’s MOI and any shareholders’ agreement.
  • Board and shareholder minutes and resolutions.
  • Financial statements, management accounts and bank statements.
  • Emails and messages showing the conduct complained of.
  • A timeline of events and the losses suffered.

Common Questions

No. If the court finds that one of the grounds in section 162(5) is proved, it must declare the director delinquent. The court has more discretion when deciding whether to place a director under probation.
Yes, if the application is brought within 24 months after they ceased to be a director, for conduct while they were in office.
Yes. A delinquent person is disqualified from serving as a director of any company in South Africa for the period of the order.
A director under probation may serve only under conditions set by the court, for example supervision or remedial training. Probation generally lasts up to five years.
Yes. Directors can be held personally liable under section 77 of the Companies Act for losses caused by breaches of duty, fraud or reckless trading. This claim is usually pursued alongside or after the delinquency application.

DEALING WITH DIRECTOR MISCONDUCT?

We act decisively for shareholders and companies, and robustly for directors facing serious allegations.

Read more: Director and shareholder disputes · Directors’ duties and personal liability

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This page is general information and not legal advice.

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