NAMIBIA Law and Practice Contributed by: Professor Michael Katz, Wolf Wohlers, Karin Malherbe and Stefanie Busch, ENS Namibia (incorporated as Lorentz Angula Inc.)
3.8 Breach of Directors’ Duties Enforcement
• Section 242 – duty to disclose interests in con - tracts; • Section 241 – prohibition against insider trading; • Section 234 – prohibition on making loans to direc - tors not in the best interests of the company; • Section 292 – duty to ensure proper accounting records are kept; and • Section 250 – duty to cause minutes of directors’ Directors have a fiduciary duty to conduct the compa - ny’s affairs honestly and in the interests of the compa - ny. They must act in good faith towards the company, exercise their powers for the benefit of the company and avoid conflicts between their own interests and those of the company. Directors would breach their fiduciary duties if they: meetings to be kept. Common Law Duties • fail to prevent a conflict of interest; • exceed the limitations of their power; • fail to maintain an unfettered discretion; and • fail to exercise their powers for the purpose for which they were conferred. Directors are required to exercise the degree of care and skill that can reasonably be expected of a person with their knowledge and experience. A director is not required to have special business acumen or exper - tise, or even experience in the business of the com - pany, but is expected to exercise reasonable care. 3.7 Responsibility/Accountability of Directors To Whom Do Directors Owe Their Duties? Directors owe their duties primarily to the company, not to individual shareholders. A general fiduciary duty rests on directors to promote the interests of all the members of the company, but no specific fiduciary relationship exists between a director and individual members. Stakeholder Interests Namibian law does not expressly require directors to take into account the interests of stakeholders other than shareholders (such as employees, creditors or the community) when making decisions, although directors may consider such interests insofar as they affect the interests of the company as a whole.
Breaches of directors’ duties may be enforced by the company itself, acting through its board of directors or shareholders. Section 274 of the Companies Act, 2004 permits a member of a company to apply to the Court for an order authorising the member to bring proceedings on behalf of the company (a derivative action) if the company refuses to do so. Consequences of Breach If a director breaches their fiduciary duty and the com - pany suffers a loss or the director is benefited, the amount of such loss or benefit may be recovered by the company and the transaction concerned may be set aside. Directors who negligently breach their duty of care may be personally liable to the company for any loss suffered as a result. Statutory Penalties The Companies Act, 2004 prescribes various penal - ties for breaches of statutory duties: • failure to disclose interests in contracts – fine not exceeding NAD4,000 or imprisonment for up to one year, or both; • insider trading – fine not exceeding NAD8,000 or imprisonment for up to two years, or both; and • prohibited loans to directors – fine not exceeding NAD4,000 or imprisonment for up to one year, or both. 3.9 Other Claims/Enforcement Against Directors/Officers Personal Liability Provisions The Companies Act, 2004 contains several provisions imposing personal liability on directors: • Section 56 – personal liability for failure to comply with requirements to use the company’s proper name on official documents, bills of exchange and other specified documents; • Section 180 (6) – joint and several liability of sub - scribers and directors for debts incurred before a certificate to commence business is issued; and • Section 430 – if any business of a company was or is being carried on recklessly or with intent to defraud creditors, the court may declare any
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