As stated by Judge Innes in the 1920 Appellate Division case of Dadoo Ltd vs Krugersdorp Municipal Council, a registered company is a legal persona distinct from the members who compose it. In terms of section 19(2) of the Companies Act, 71, of 2008, a person is not, solely by reason of being an incorporator, a shareholder or a director of a company, answerable for any liabilities or obligations of the company. However, there are instances in our law, especially in respect of environmental legislation, where directors of companies could be held personally liable.

Any person convicted of an offence in terms of the Mineral and Petroleum Resources Development Act, 28, of 2002 (MPRDA) could be liable, depending on the offence, to a fine ranging between R10 000 and R500 000 or to a prison term ranging from six months to ten years, or to both, or, in certain cases, to a penalty that may be imposed in a magistrate’s court for a similar offence.

Section 24N(8) of the National Environmental Management Act, 107, of 1998 (Nema) provides that, notwithstanding the Companies Act or the Close Corporations Act, 69 of 1984, the directors of a company or members of a close corporation are jointly and severally liable for any negative impact on the environment, whether advertently or inadvertently caused by the company or close corporation they represent, including damage, degradation or pollution.

Section 34(7) of Nema relates to criminal proceedings and stipulates that any person who is or was a director of a firm at the time of the commission of an offence by that firm under any provision listed in Schedule 3 shall himself or herself be guilty of the offence and liable, on conviction, to the penalty specified in the relevant law, if the offence resulted from the failure of the director to take all the reasonable steps necessary under the circumstances to prevent the commission of the offence, provided that proof of the offence by the firm shall constitute prima facie evidence that the director is guilty.

Schedule 3 of Nema lists various pieces of national and provincial legislation, under which an offence would trigger the provisions of Section 34(7) of Nema. It is noteworthy that Schedule 3 does not only refer to mining legislation, but also includes, inter alia, the Animals Protection Act, 71, of 1962, the Dumping at Sea Control Act, 73, of 1980 and the National Forests Act, 84, of 1998. Accordingly, nonmining companies could also be caught by the provisions of section 34(7) of Nema, read with Schedule 3, depending on the activities of such companies.

A person convicted of an offence in terms of Nema could be liable to a fine not exceeding R10-million or to imprisonment for a period not exceeding ten years, or to both.

The National Water Act, 36, of 1998 (NWA) and the National Environmental Management: Air Quality Act, 39, of 2004 also provide that a person is guilty of an offence and liable to a fine and/or imprisonment if certain provisions of those statutes are contravened.

Case Law

In the unreported cases, S vs Anker Coal & Mineral Holdings (Ermelo regional court, case ESH 8/11, Sheepmoor CAS 26/06/2009), S vs Golfview Mining (Ermelo regional court, case ESH 82/11, Ermelo CAS 462/07/2009) and S vs Blue Platinum Ventures 16 and others (Naphuno regional court case RN126/2013), the courts enforced contraventions of environmental legislation. In the Blue Platinum case, a criminal complaint was laid against the company by a community-based organisation and the company and its directors were charged with acting in contravention of 14 different environmental provisions of the MPRDA, Nema, the NWA and the regulations on the use of water under the NWA.

The MD of the company plead guilty to contravening Section 24(F)(1) of Nema – undertaking listed activities without an environmental authorisation. The court sentenced the MD to five years’ imprisonment, wholly suspended for five years, on condition that he is not convicted of contravening the provisions of Section 24(F)(1) of Nema during the suspension and that he rehabilitates all the areas damaged by the mining activities within a certain period.

The case law demonstrates that the State (as well as nongovernmental organisations) are enforcing environmental legislation against noncompliant companies and that the ‘polluter pays’ principle is not only enforceable against the polluting company, but also against the directors of such companies.