|dc.description.abstract||The purpose of this mini-dissertation is to explore the labour law consequences when a director of a company is dismissed. The underlying
questions that come forward are: What legislation protects the director in his various roles? What remedies are available? Is a director an employee and can his office as director be distinguished from his post as employee? A company as a separate entity is compelled to perform its corporate functions by means of its directors, officials and employees. The mere fact that a person is the director of a company does not mean that he is a representative or an employee. A director will be an employee once he enters into a contract of employment. A director that performs personal services and is responsible to the board 1s held to be an employee. The company statutes regulate the appointment and removal of a director, thus the shareholders are responsible for the decision. In terms of the common law the appointment of a company director is complete when a person with the competence to appoint a director makes the appointment and the appointee accepts the offer. The removal of a director must be substantively fair, the true and valid reasons for the removal must thus be given. The removal must also be procedurally fair, this entails that certain steps must be taken. Failure to comply with this makes the dismissal unfair. The dismissal of a senior employee is not an exception to the rule; that a fair hearing procedure must still be complied with. I shall briefly discuss several cases on the courts' view of a director as an employee of the company.
In PG Group (Pty) Ltd v Mbambo NO & others 2005 1 BLLR 71 (LC) the labour court found that section 213 of the Labour Relations Act 66 of 1995
is formulated wide enough to encompass most directors. In Oak Industries (SA)(Pty) Ltd v John NO & Another 1987 8 ILJ 756 the court ruled that there is no absolute rule stating that a director cannot be an employee; notwithstanding any definition of the word employee in legislature. In Sage v Fourwinds Transporl CO (Pty) Ltd 1994 8 BLLR 114 (IC) the Industrial court ruled that an employee is an employee in spite of his status in the organisation. Lastly in Pearson v Sheerbonnet South Africa (Pty) Ltd 1999 7 BLLR 703 (LC) was the director held to be an employee on the grounds
that he had an employment contract with the company. The entity towards which the director owes fiduciary duties is the company. There is no standard of competence, rights or duties attached to the office of director. These are determined by the companies' statutes. memorandum of association, the common law and the applicable contract. The common law requires the director to exercise his duties in good faith and to the advantage of the company and he also has a duty to take reasonable care. The director's common law and statutory duties exist as one. There is no prescript in the statute or clause in a contract that can free a director of responsibility towards the company that develops out of his negligence, failure or dereliction of duty. Section 248 of the Company Act 61 of 1973 frees a director where it appears that he acted honestly and reasonably. The mere fact that the court disagrees with the director is not a
ground for responsibility. The director is responsible for the company damages when he does not use the necessary skill and care. Any legal competent person can be a company director. Section 218(l)(d)(iii) of the Company Act 61 of 1973 compels the court to refuse to grant permission to a person to act as a company director if the person was found guilty of theft, fraud, perjury or any crime that includes dishonesty in terms of the founding or management of a company and is sent to jail with or without the option of a fine or is fined more than R100.||