The Gauteng High Court (Johannesburg) recently declared Farzeen Bhana – a director of non-profit company Breadline Africa – dishonest and therefore delinquent.

Bhana gave in a falsified CV during her interview for a position to the board of the company. She claimed to have degrees from Wits University and the London School of Economics, and other postgraduate qualifications. None of this was true.

She also submitted a false reference at her interview.

Bhana went to international board meetings of the company while she was a director, where she made false presentations about the work she was doing to further the company’s objectives. She also tried to defraud the company.

In an analysis of the judgment on The Conversation site, Unisa’s company law professor, Rehana Cassim, says the concept of a court declaring a director delinquent is a significant innovation of the Companies Act, introduced when SA’s corporate law regime was reviewed about 10 years ago.

 ‘It has been used increasingly by stakeholders over the past 10 years and has attracted a great deal of litigation and publicity.’

She cites the former CEO of Old Mutual Peter Moyo’s unsuccessful application to declare the entire company board delinquent.

Noting a delinquency order bans a person from being a director for at least seven years, she says a court can lengthen this period and even extend it to the director’s lifetime.

In Organisation Undoing Tax Abuse v Myeni, the court declared former SAA director and chairperson Dudu Myeni a delinquent director for life.

Cassim says for a court to declare directors delinquent, they must be guilty of serious misconduct – they must grossly abuse their position, take personal advantage of information or an opportunity, harm the company intentionally, or be guilty of gross negligence, wilful misconduct, or breach of trust.

‘Poor decision-making or ordinary commercial misjudgment is not enough for a delinquency order.’

Cassim says the Bhana case shows that directors of non-profit companies are dishonest, courts will not hesitate to declare them delinquent.

‘As the court said, the integrity of non-profit companies is their agency to ensure that funds are donated so that they can fulfil their objectives.’

Cassim adds: ‘Boards of directors of non-profit companies must be vigilant about who they appoint as directors. They must take steps to properly screen potential directors before they appoint them.’

Full analysis on The Conversation site