When is disclosure required?
Section 75 of the Companies Act (the Act) provides that if a director has a personal financial interest (PFI), or knows that a relatedperson has a PFI, in a matter to be considered at a board meeting, that director mustdisclose that interest and must subsequently recuse themselves from consideration of the relevant matter. Failure to do so may render a decision, agreement or transaction invalid.
A PFI, as defined in section 1 of the Act, in respect of a person, means"a direct material interest of that person of a financial, monetary or economic nature, or to which a monetary value may be attributed".
Section 75 of the Act extends the definition of "related person" in section 1 of the Act to include "a second company of which the director or a related person is also a director". Accordingly, a director does not need to control the relevant second company. It is sufficient that the director (or a related person) serves on that company's board for it to be regarded as a related person for purposes of section 75 of the Act. While the existence of a cross-directorship is generally straightforward to identify and disclose, the question arises whether this extends to foreign directorships. This question is of particular importance in the context of cross-border transactions which dealmakers encounter regularly.
Foreign directorships
Section 1 of the Act limits the definition of "company" to juristic persons incorporated under the Act. On a strict interpretation, section 75(1)(b) would therefore not apply to cross-directorships between a South African company and a foreign company. This gives rise to a potentially anomalous position, where disclosure of a PFI may be required where a cross-directorship relates to two South African companies, but not where the same decision, agreement or transaction involves a South African company and a foreign company.
Although there is no express statutory requirement to disclose a cross-directorship involving a foreign company, disclosure may nonetheless be required under common law, depending on the circumstances. These common law obligations should be carefully considered where directors sit on boards across multiple jurisdictions and should also be kept in mind when multi-national companies consider the composition of their boards.
Relationship between the common law and the Act
Directors' duties are partially codified in, among other provisions, section 75 of the Act. However, the common law continues to apply unless it is expressly excluded or in conflict with the Act.1
Section 75 deals with a director’s duty not to have a PFI in existing or proposed contracts with the company on whose board they serve, or in any matter in which the company has a material interest, and to disclose that interest and recuse themselves from voting on a matter where such PFI arises. Although not expressly codified as such, this captures, among other principles, the "secret profit rule" under the common law. This rule requires that directors must not make secret profits from their positionand must account to the company for any such profits. Specifically, a director should not obtain any financial benefit other than in terms of a contract with the company following full disclosure, or by virtue of their office (for example, remuneration). Such financial benefit will constitute a "secret profit" if the interests of the director and the company are in conflict.
At common law, a director is required to disclose a financial benefit and recuse themselves from decision-making where a conflict exists. A failure to do so does not automatically invalidate an agreement. Instead, the agreement is voidable at the election of the company, and the director may be required to account for any profit made. While this differs from section 75, where an agreement is automatically void but can be ratified, the practical consequences of the non-disclosure and failure to recuse are broadly similar.2
In multi-jurisdictional groups, it is important not to overlook potential disclosure obligations arising under common law, notwithstanding the restricted definition of "company" in the Act. The mere existence of a cross-directorship with a foreign company does not, in and of itself, trigger a disclosure obligation. However, disclosure becomes necessary where a matter arises in which the foreign company has a financial interest, or where a director’s fiduciary duties place them in a position of conflict. Whether disclosure is required must therefore be assessed on a case-by-case basis, with reference to the specific transaction, contract or decision under consideration. The consequences of failing to do so are far-reaching not only for directors themselves, who may face potential liability, but also for matters considered by the board of companies, where transactions or agreements may be voidable.
*This article was first published by DealMakers in its Q1 magazine here: DM Q1 2026 Disclosure obligations in | DealMakersSA
