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      Home Columns Guest Contributor

      Company directors could be fined P20K for non-compliance with Companies Act

      One of the key pillars of corporate governance is the directors’ duty of care to the company.

      mm by Tshepo Motlhabi
      April 25, 2022
      in Guest Contributor
      Reading Time: 2 mins read
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      Company directors could be fined P20K for non-compliance with Companies Act
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      • hence the need for them to understand the Companies Act

      With the continuous drive for entrepreneurship in the country, more Batswana are becoming shareholders and directors of companies. However, conversations around corporate governance are limited to the confines of expensively furnished boardrooms and leave behind many budding entrepreneurs.

      Many business owners, some of whom are clients and employees of local banks, are left unaware of the corporate governance principles and provisions of the Companies Act that bind them as directors. One of the key pillars of corporate governance is the directors’ duty of care to the company. In Botswana, duty of care is codified in the Companies Act. Directors are required to discharge their duties honestly, in good faith and in the best interests of the company. In accordance with Sections 130(1)(c), (d) and 158(1) of the Companies Act, they are to act with a degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances

      The duty of care should lead one to pause and think before taking on the role of director. It should lead current directors to ponder about their responsibilities and whether they have been meeting the standard of care required of them. An easier question to ask themselves is, “Do I have P20,000 to spare?”

      This is because the conversation around duties of directors tends to become easier when fines are involved. The Companies Act has over 500 sections that companies are required to comply with. Some of those requirements carry fines for directors who violate them.

      The following are some provisions that directors may easily find themselves in contravention of and the fines involved:

      • Failure to ensure that the company’s name is clearly stated in its written communication: P10,000 per director.
      • Failure to send share certificates to a shareholders: P10,000 per director.
      • Failure to sign a certificate of solvency when declaring dividends: P20,000 per director.

      These few examples show how expensive non-compliance can be for directors. Compliance with the Companies Act begins with a basic comprehension of the Companies Act. Directors may achieve this by studying the Companies Act or by ensuring that they have access to a competent corporate governance professional.

      Tags: Companies Act

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