A critical examination of ‘nominee directors’ in South Africa

Authors Lovanya Moodley

ISSN: 2521-2575
Affiliations: Attorney of the High Court of South Africa
Source: Journal of Corporate and Commercial Law & Practice, The, Volume 2 Issue 2, 2016, p. 42 – 76


This article considers nominee directors: their fiduciary duties, liability for breach thereof and whether they should be entitled to directors’ fees for their services rendered as a director. The position of nominee directors in relation to their fiduciary duties is a precarious one. They are appointed with the purpose of performing an oversight function on behalf of their appointer, but could face personal liability for breach of fiduciary duties if they act in the furtherance of their appointer’s interests to the detriment of the nominee company. In the event of a nominee director wanting to receive remuneration by way of directors’ fees for services rendered as a director, there needs to be an express agreement of that entitlement in place or a shareholders’ resolution. Finally, and as a consequence of nominee directors lack of complete unfettered independence, this article finds that the Companies Act 71 of 2008 does not sufficiently accommodate the split loyalties of nominee directors and suggests that companies should avoid utilising them altogether in favour of the alternatives provided in King III, such as Lead Independent Directors or independent non-executive directors, in view of exercising good corporate governance.