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“A director must… act in good faith and for a proper purpose; in the best interests of the company; and with the degree of care, skill and diligence that may reasonably be expected…” (Companies Act of 2008)

The first Guideline for 2025 issued by the CIPC (Companies and Intellectual Property Commission) aimed to “sensitise directors on the consequences for non-compliance with their duties to a company.”

Here’s a quick overview of these duties and what could happen if directors don’t comply.

What are the duties of directors?

A director must exercise the powers and perform the functions of a director:

• In good faith and for proper purpose
• In the best interest of the company
• Without using the position to knowingly cause harm to the company
• With the degree of care, skill and diligence that may reasonably be expected of him/her

This means that directors should carefully understand the provisions of the Companies Act that relate to the governance of companies, including, but not limited to:

• Section 75: Directors’ personal financial interests
• Section 76: Standards of directors’ conduct
• Section 77: Liability of directors and prescribed officers
• Section 78: Indemnification and directors’ insurance
• Section 213: Breach of confidence
• Section 214: False statements, reckless conduct and non-compliance
• Section 215: Hindering administration of the Act

Recent amendments

In the last few months, amendments to the Companies Act have introduced significant new changes that have further increased the responsibility and risk that directors shoulder.

Focusing on accountability, transparency, and alignment with international governance standards, the changes include stricter fiduciary duties to prioritise company and stakeholder interests, mandatory transparency in director appointments, and new director criteria disqualifying individuals with a record of insolvency, criminal convictions, or prior misconduct from serving as directors.

Consequences of non-compliance: Civil liability

The Companies Act emphasises that a director of a company in his/her personal capacity may incur civil liability for loss or damage incurred by the company due to the director:

• Acting on behalf of the company without the necessary authority
• Trading recklessly or under insolvent circumstances
• Being a party to an act or omission by a company calculated to defraud
• Being a party to false and misleading financial statements
• Being a party to a prospectus or written statement that contains an untrue statement
• Failing to vote against an unauthorised or inconsistent provision of the Companies Act during a meeting or decision-making process

In a recent High Court case, the court found that directors of a property fund had grossly abused their positions and engaged in reckless conduct that severely harmed the company. The judge declared these directors delinquent and ordered them to compensate the fund for losses incurred due to their actions, including the costs of forensic investigation and reputational harm.

A delinquency declaration can also result in a ban from holding directorships for a specified period or even permanently, as it did for SAA’s Chairperson Duduzile Myeni.

Consequences of non-compliance: Criminal liability

A director may be also held criminally liable in his/her personal capacity in terms of various sections of the Act for:

• Disclosing confidential information concerning the affairs of any person obtained in carrying out any function in terms of the Companies Act
• Falsification of the company’s accounting records
• Trading recklessly or under insolvent circumstances
• Providing false and misleading information
• Being party to an act or omission by a company that is calculated to defraud
• Being party to a prospectus or written statement that contains an untrue statement
• Failing to satisfy a compliance notice

Some of these contraventions may result in a fine or imprisonment for a period not exceeding 10 years (or to both a fine and imprisonment) while others carry lesser (but still nasty) penalties.

Don’t be fooled: Insurance won’t always save you

A “Directors and Officers Liability” policy protects directors against claims arising from decisions made in their official capacity. However, breaches of fiduciary duty, dishonesty, fraud, criminal acts and wilful misconduct are common policy exclusions.

In addition, Section 78 of the Companies Act clearly sets out the requirements of indemnification and directors’ insurance. Even so, the CIPC says that directors of companies often fail to fully appreciate the requirements of this section: there are loads of requirements to qualify for indemnification.

• 07 July – Monthly PAYE submissions and payments

• 25 July – Value Added Tax (VAT) manual submissions and payments

• 30 July – Excise duty payments

• 31 July – VAT electronic submissions and payments, Corporate Income Tax (CIT) Provisional Tax payments where applicable.

“We accept the responsibility to achieve the 2025/26 revenue estimate presented by the Finance Minister Mr Enoch Godongwana.” (SARS Commissioner Edward Kieswetter)

Removing the contentious proposed VAT increases from Budget 3.0 led to a shortfall in revenue that necessitated new revenue sources.

One of these is the inflation-linked fuel levy increases of 16c for petrol and 15c for diesel, which became effective on 4 June and will impact all individuals and entities in the country.

Another alternative revenue source is going to come from SARS’ upping its collection of outstanding tax debt – with Treasury expecting an additional R20 billion to R50 billion per year from intensified debt collection efforts.

The tax measures contained in Budget 3.0 will raise an additional R18bn in 2025/26. A further R20bn in as-yet-unknown tax measures are postponed to Budget 2026 – unless SARS collects an extra R35bn in outstanding taxes.

SARS has accepted the challenge and Budget 3.0 allocated a further R4 billion to SARS to fund the debt recovery. (In addition to the R3.5bn previously allocated to the cause.)

‘Project AmaBillions’?

In what the media refers to as “Project AmaBillions” and what SARS calls its “compliance programme”, an intensified effort will be made to collect a greater slice of the estimated R800 billion in unpaid taxes – the so-called “tax gap”.

SARS reported that just over R400 billion of the tax gap consists of undisputed uncollected debt. The rest is made up of a further R100 billion in debt currently under dispute, more than 54 million returns outstanding dating back several years, and 156,000 South Africans with substantial economic activity who are not registered taxpayers, or are not filing their tax returns. SARS says that it will focus on the undisputed debt, while accelerating work on collecting all debt by dutifully implementing its compliance programme.

In the last financial year SARS recruited and trained more than 800 new employees to collect debt, mainly via telephone calls and legal instruments. These efforts, says SARS, must result in a minimum collection of R20 billion.

To meet its revised revenue estimate this year, SARS is:

• Closing the tax gap, with a focus on undisputed debt.
• Broadening the tax base, targeting hard-to-tax sectors in the informal economy, particularly small enterprises and self-employed individuals.
• Using advanced data analytics and artificial intelligence to detect tax-compliance risks and improve overall compliance rates.
• Combating the illicit economy.

How does it affect me? 

As SARS significantly steps up its revenue collection efforts, those eligible to pay tax – whether registered taxpayers or not – can expect less lenience and more SARS queries, verifications, audits and collection efforts.

In fact, the South African Institute of Chartered Accountants (SAICA) has been quoted in the media warning that the pressure on SARS to collect significantly more tax this year may result in “heavy-handedness” by SARS in its treatment of taxpayers.
SARS confirms that it upholds the rights of taxpayers to exercise their rights in law, which include among others, asking for payments to be deferred or paid in instalments, or to dispute the debt.

Taxpayers must also be wary of scams – the well-publicised increase in debt collection activity at SARS will be matched by an increase in financial scams by fraudsters pretending to be SARS employees or appointed debt collectors.

How we protect your interests 

Even with SARS’ well-funded and intensified focus on compliance and debt collections, our specialist tax team will continue to ensure that your interests remain protected.

Our up-to-date tax expertise and best practices ensure you have clarity on your specific tax obligations, and that all these tax commitments are met accurately and timeously.

We can confirm the legitimacy of any SARS communications to protect you from scams and respond promptly and professionally to legitimate enquiries on your behalf. This includes swiftly rectifying any non-compliance issues, and handling demands for outstanding tax debts correctly.

We also monitor that SARS follows the correct legal processes – including adhering to timeframes and procedures in respect of assessments, refunds, dispute resolution, and instituting debt collection measures such as unauthorised bank account withdrawals – to ensure your taxpayer rights are respected.

“Too many businesses only realise the value of intellectual capital when a key person leaves – or a competitor copies what they’ve built.” (Alicia Mendes, author of Futureproofing Through People)

In the rush to raise capital, improve profitability or streamline efficiency, business owners often miss what truly drives their success: the knowledge, relationships, and systems that power everything behind the scenes.

Whether you’re a one-person start-up or a growing enterprise, your intellectual capital is the secret key to your future triumphs. It is therefore vital that this intangible resource is protected before it vanishes. Doing so could be the most profitable decision you ever make.

Understanding intellectual capital

Intellectual capital is grouped into three categories: human capital (skills and experience), structural capital (systems, intellectual property (IP), databases) and relational capital (customer relationships, brand reputation and partnerships).

A recent study by Ocean Tomo revealed that intellectual capital now constitutes approximately 90% of the S&P 500’s market value – a significant increase from 68% in 1995. That includes patents, know-how, trade secrets, brand equity, and team knowledge.

With numbers like this, it’s absolutely essential that you audit your intellectual capital just as you would your balance sheet. What processes are unique to you? Who on your team holds key relationships or institutional memory? Are your best ideas captured anywhere, or do they leave when someone resigns?

Culture and contracts

You have to understand that your people are the carriers of knowledge. Their experience, relationships with clients, and systems know-how can be invaluable. Unless you plan carefully, when someone leaves they often take that intellectual capital with them.

Retention doesn’t just come from compensation. It comes from fostering a culture of recognition, curiosity, and inclusion. The 2023 Gallup “State of the Global Workplace Report” stated that, “employees who have had opportunities to learn and grow are 2.9 times more likely to be engaged.” It is therefore essential that you ask your accountant to make space in your budget for learning programs, and other leadership developing initiatives.

But culture alone isn’t enough. It’s important to also back up your culture with a legal framework that protects you. This includes NDAs (non-disclosure agreements), IP assignment agreements, and clear clauses in employment contracts covering confidentiality and ownership of work.

Capture knowledge before it walks

Most businesses operate through a web of undocumented processes from verbal know-how, to “we’ve always done it this way” workflows. That’s risky.

Developing internal playbooks, knowledge bases, and SOPs (standard operating procedures) is one of the most effective ways to turn intellectual capital into something transferrable and scalable.

Use tools like Notion, Confluence, or even simple shared drives to document repeatable knowledge. Then embed this into your onboarding and training cycles.

Nurture innovation and learning

Intellectual capital isn’t static. Like any asset, it can appreciate or depreciate. One of the best ways to nurture it is by creating space for learning, experimentation, and cross-pollination of ideas.

Encourage teams to attend industry events, run internal hackathons, and allocate budget to learning and development. Even better, reward creative problem-solving that moves the business forward.

Make intellectual capital part of your valuation

It’s vital that your intellectual capital becomes a cornerstone of your company valuation. Whether you’re pitching to investors, selling your business, or applying for funding, it’s important that you document your competitive advantages. Have you built a repeatable system others can’t match? Developed internal tools that boost efficiency? Retained staff with rare skills? All of this translates into value.

Only by showing how your business can thrive even if the best individuals leave, can you give future investors the knowledge they need to trust you.

Protect what really drives value

Tangible assets can be insured. Cash can be raised. But your intellectual capital requires conscious attention and care. Whether you’re building your first business or scaling your fifth, now is the time to treat your brainpower like the goldmine it is.

• 06 June – PAYE submissions and payments
• 25 June – VAT manual submissions and payments
• 27 June – Excise duty payments
• 30 June – VAT electronic submissions and payments, & CIT Provisional Tax payments where applicable.