The web site is now storing only essential cookies on your computer. If you don't allow cookies, you may not be able to use certain features of the web site including but not limited to: log in, buy products, see personalized content, switch between site cultures. It is recommended that you allow all cookies.

The Prescribed Officer

The Prescribed Officer is a relatively new term, introduced by the Companies Act, 71 of 2008 (the Act). The introduction of the term has resulted in much debate as to who qualifies as a prescribed officer. It is clear in the Companies Act Regulations that a prescribed officer is not necessarily a director, but rather anyone who

  • exercises general executive control over and management of the whole, or a significant portion, of the business and activities of the company
  • regularly participates to a material degree in the exercise of general executive control over and management of the whole, or significant portion, of the business and activities of the company
The regulation goes on to say that this definition applies to such persons contemplated above irrespective of any particular title given by the company to:
  • an office held by the person in the company
  • a function performed by the person for the company

This is an all-encompassing definition and could be used to describe any number of senior employees within a company.
 
The Act often refers to “Directors and Prescribed Officers” simultaneously, often attaching the same rules and responsibilities given to that of directors to that of prescribed officers. This means that not only are prescribed officers held to the same fiduciary duties and responsibilities held by directors, but they could be held equally liable for failure to comply with these duties.

This arguably increases the level of exposure for senior employees within a company as they could be held jointly and severally liable for loss or damage suffered by the company, unless it can be shown that they acted in an honest manner, commensurate with that of the reasonable man. 
 
This inevitably means that anyone who holds a senior position within a company should educate him/herself on the prescribed offences and penalties imposed by the act, noting that "acting on orders from the directorship" is no longer an accepted defence.

The Act actively instils the notion that all senior employees should ask themselves whether their actions are in the best interests of the company, and should the answer result in the negative, all reasonable steps should be taken to bring this to the boards attention.