Directors’ Duties and the Business Judgment Rule in South African Company Law: An Analysis
Linda Muswaka

Abstract
The business judgment rule is provided for in the South African company law as part of the statement on the duty to act in the best interest of the company and the duty to act with care, skill and diligence. In terms of the rule, a director will be protected from allegations of breach of the duty to act in the best interests of the company and with care, skill and diligence in relation to a matter where that director has taken reasonably diligent steps to become informed about the matter; either had no conflict of interest in relation to the matter or complied with the rules on conflict of interests; and had a rational basis for believing, and did believe, that his decision was in the best interest of the company. This article provides an analysis of the directors’ duty to act with care, skill and diligence and the business judgment rule. It further seeks to advance the thesis that in determining compliance with the business judgment rule, not only compliance with legislation but also compliance with governance codes and good governance criteria is relevant.

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