Duties of Namibian Directors

We regularly receive queries pertaining to the duties of a director in terms of Namibian Law. This is usually associated with a question pertaining to the possible liability of a Namibian director.

The term director has been defined in the Namibian Companies Act 28 of 2004 (the “Companies Act”) as: “any person occupying the position of director or alternate director of a company, by whatever name that person may be designated”.

It should firstly therefore be noted that the Namibian Companies act has no distinction between independent and executive directors.  Therefore where an inquiry is made pertaining to a Namibian director in relation to negligence, reckless conduct or fraud, the legal rules are the same for all directors of a Namibian Company. The access to particular information and the justification for relying upon the reports received from others, might however be relevant factors to take into account, whether or not the person is to be classified as an "executive" or "non-executive" director.

Under common law directors must conduct the company’s affairs with care and skill.  If in the performance of his duties or functions a director fails to display either:

(a)          The same care as a reasonable man would display in the conduct of his own affairs; or

(b)          That degree of skill which may reasonably be expected from a person of his knowledge and experience – 

The director may be liable to the Namibian company for any damage it may in consequence have suffered. The standard is one of negligence, and not gross negligence.  The test whether a director of a Namibian Company has acted with reasonable care is an objective one, that is to say, it is not “limited by the director’s knowledge and experience or ignorance or inaction”.  In some circumstances the duty will require action.

A director of a Namibian Company is however not liable for mere errors of business judgment, and the court will normally be careful to take into account the fact that after the event “the knowledge of hindsight can be misleading and give rise to unfair criticism”.  The Namibian courts have recognised that directors must be allowed to make business judgments and business decisions in a spirit of enterprise untrammeled by the concerns of a conservative investment trustee; and that risks may be taken in the hope of commensurate rewards.

A director of a Namibian Company who also holds an office under the company will thereby undertake additional functions, so that, in this sense, there is a difference between the full-time or executive director (who participates in the day-to-day management of the company’s affairs) and the non-executive director who has not undertaken any special functions, the above standards of care and skill apply to both executive and non-executive directors.  Hence it is “unhelpful and even misleading to classify company directors as ‘executive’ and ‘non-executive’ for purposes of ascertaining their duties to the company or when any specific or affirmative action is required of them”.

The courts will take into account all relevant factors such as:

§   the nature of the company’s business,

§  any particular functions assigned by the board to the director whose conduct is being judged, and

§  whether he also holds a position under the company.

Director of a Namibian Company may by excluded by court from liability if he acted honestly and reasonably, and that, having regard to all the circumstances of the case.  This always subject to the director’s fiduciary duty to act in the best interest of the company of which he is a director.

Should you require further information pertaining to the duties of directors in Namibia, kindly contact us on the contact details stated hereunder.