oa Comparative and International Law Journal of Southern Africa - Exemption from liability under section 247 of the Companies Act: to what extent does 'the prohibition' in this section apply in the South African context?



This article considers the various viewpoints on the controversial nature of section 247 of the Companies Act 61 of 1973. Section 70, sext of the 1926 Act, now section 247 of Act 61 of 1973, was introduced by Act 23 of 1939. It provides that: "Any provision, whether contained in the articles of a company or in any other contract with the company, and whether express or implied, which purports to exempt any director or officer or the auditor of the company from any liability which by law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company, or to indemnify him against any such liability, is void." The corresponding section in the English Act was section 205 (currently section 310 of the Companies Act 1985) which was first introduced to alter the existing law that articles could effectively exempt a director or other officer from liability for loss caused by breach of duty, unless the breach was dishonest or wilful. Whether these provisions prohibit exemption from liability only, or also invalidate provisions in the articles which, being consistent with the general law, reduce or abrogate any duty of a director or other officer, is controversial.


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