The Duties and Responsibilities of a Director of a Non-Profit Company in South Africa
A Practical Guide
By Leon Terblanche, LL.M (International Law)
Introduction
Appointment as a director of a Non-Profit Company (NPC) is both an honour and a significant legal responsibility. Whether the organisation is a charitable foundation, a public benefit organisation, an industry representative body or another form of non-profit entity, directors occupy a position of trust. They are responsible for ensuring that the organisation is properly governed, financially sustainable and operates in accordance with its founding purpose.
Many directors accept appointment because of their knowledge, passion or commitment to a particular cause. However, it is important to appreciate that, once appointed, directors assume legal duties under the Companies Act 71 of 2008 (“the Companies Act”) that are substantially the same as those imposed on directors of commercial companies.
Unlike shareholders of a private company, the members of an NPC cannot receive profits or distributions. The directors therefore become custodians of the organisation’s assets and reputation, acting in the interests of the organisation and its public purpose rather than any individual stakeholder.
This article provides a practical overview of the principal duties and responsibilities of directors of South African NPCs and highlights governance principles drawn from the Companies Act, King IV and the recently published King V Code on Corporate Governance, effective for financial years commencing on or after 1 January 2026.
- Directors are Fiduciaries
Perhaps the most important concept for any director to understand is that a director is a fiduciary.
A fiduciary is a person who is entrusted to act in the interests of another.
Section 76(3) of the Companies Act requires every director to:
- act in good faith;
- act for a proper purpose;
- act in the best interests of the company; and
- exercise the degree of care, skill and diligence reasonably expected of a person carrying out those functions.
These duties apply equally to directors of commercial companies and NPCs.
For NPC directors, “the best interests of the company” means protecting the organisation’s purpose and ensuring that its assets are used solely to further that purpose.
Best Practice
Always ask:
“Is this decision in the best interests of the organisation rather than any individual member, donor, director or stakeholder?”
- Understanding the Organisation’s Purpose
Every NPC has a Memorandum of Incorporation (MOI) setting out its objects.
Unlike a commercial company, an NPC exists to achieve a public, charitable or community purpose rather than to generate profits for shareholders.
Directors should regularly review the MOI and ensure that Board decisions remain aligned with those stated objectives.
King IV and King V both emphasise that the governing body should provide ethical leadership while ensuring that strategy remains aligned with organisational purpose.
- Acting with Care, Skill and Diligence
Section 76(3)(c) introduces what is commonly known as the duty of care and skill.
This does not require directors to know everything.
It does require directors to:
- prepare for meetings;
- read Board papers;
- ask questions;
- seek professional advice where necessary;
- make informed decisions.
Passive attendance at meetings is not sufficient.
A director who simply “goes along with the majority” without understanding the issues may still incur liability.
- The Business Judgment Rule
Fortunately, the Companies Act recognises that directors sometimes need to make difficult commercial or strategic decisions.
Section 76(4) provides protection where directors:
- act in good faith;
- have no material personal interest;
- become reasonably informed; and
- honestly believe their decision is in the company’s best interests.
This protection is commonly referred to as the Business Judgment Rule.
For NPC directors this means they are not expected to be infallible.
They are expected to follow a sound decision-making process.
- Avoiding Conflicts of Interest
One of the most important responsibilities of any director is avoiding conflicts between personal interests and the interests of the company.
Section 75 of the Companies Act requires directors to disclose personal financial interests in matters before the Board.
Where a conflict exists, the director should generally:
- declare the conflict;
- leave the meeting while the matter is discussed;
- refrain from voting.
Best Practice
Maintain an annual Register of Directors’ Interests and update it whenever circumstances change.
- Financial Stewardship
Directors are responsible for safeguarding the financial sustainability of the organisation.
Their responsibilities include:
- approving budgets;
- monitoring expenditure;
- reviewing financial statements;
- ensuring proper accounting records;
- ensuring statutory filings are made.
Although directors may appoint accountants or auditors, responsibility remains with the Board.
King V reinforces that the governing body should oversee sustainable financial performance and appropriate internal controls.
- Compliance is a Board Responsibility
Corporate governance extends well beyond the Companies Act.
Depending on the nature of the NPC, directors may also need to ensure compliance with:
- POPIA;
- PAIA;
- tax legislation;
- labour legislation;
- sector-specific legislation;
- CIPC filing requirements.
For many NPCs this also includes:
- Beneficial Ownership reporting;
- Annual Returns;
- Financial Accountability Supplement;
- Information Officer registration;
- PAIA annual reporting.
Compliance cannot simply be delegated and forgotten.
- Ethical Leadership
King IV introduced the concept of ethical and effective leadership.
King V continues this principle while placing greater emphasis on organisational culture, sustainability and stakeholder confidence.
The tone is set by the Board.
Employees, volunteers and members generally follow the example established by directors.
Good governance therefore begins with ethical leadership.
- Risk Management
Directors should identify risks before they become crises.
Typical risks include:
- cybersecurity;
- financial fraud;
- reputational damage;
- regulatory non-compliance;
- conflicts of interest;
- operational failure.
King V recommends that Boards integrate risk management into strategic planning rather than treating it as a separate exercise.
- Board Independence
Healthy Boards encourage constructive disagreement.
Independent thinking strengthens governance.
Directors should feel comfortable asking:
- Have all risks been considered?
- Are sufficient facts available?
- Does this advance our objectives?
- Could this decision damage the organisation’s reputation?
Consensus should follow discussion—not replace it.
- Board Confidentiality
Directors frequently receive confidential information.
This may include:
- commercial negotiations;
- membership applications;
- complaints;
- disciplinary matters;
- donor information.
Confidentiality survives resignation from the Board.
- Lessons from Steinhoff
Few South African corporate failures have highlighted the importance of governance more dramatically than Steinhoff International Holdings N.V.
While the litigation surrounding Steinhoff involved numerous legal and accounting issues, one lesson stands out for every director:
Boards must never become passive.
A Board exists to challenge management, ask difficult questions and require satisfactory explanations.
No director should assume that another director has already investigated an issue.
Effective governance depends upon active participation.
- Guidance from the Courts
South African courts have repeatedly confirmed that directors owe fiduciary duties to the companies they serve.
In Howard v Herrigel and Another 1991 (2) SA 660 (A), the Appellate Division confirmed that directors owe fiduciary duties and must act in the interests of the company rather than for personal advantage. The case remains a leading authority on directors’ fiduciary obligations.
In Fisheries Development Corporation of SA Ltd v Jorgensen 1980 (4) SA 156 (W), the court explained that directors are expected to exercise the degree of care, skill and diligence reasonably expected from someone occupying their position. Importantly, the required standard depends upon the circumstances and the nature of the director’s responsibilities.
These principles are now reflected in section 76 of the Companies Act.
- Practical Governance Tips
Every Board meeting should include:
- a declaration of conflicts of interest;
- review of previous resolutions;
- financial update;
- compliance update;
- risk review;
- strategic matters;
- action items.
Maintain:
- accurate minutes;
- Board resolutions;
- statutory registers;
- policy documents.
Review governance documents annually.
- Additional Considerations for NPC Directors
Directors of NPCs should remember that they are custodians of an organisation established to serve a broader public or industry purpose.
Unlike directors of a small private company, they are often accountable to a wider range of stakeholders, including:
- members;
- beneficiaries;
- donors;
- regulators;
- funding organisations;
- government departments; and
- the public.
Accordingly, transparency, accountability and fairness assume even greater importance.
The Board should regularly ask whether its decisions further the organisation’s stated objectives and preserve public confidence in its activities.
Conclusion
Good corporate governance is not achieved through lengthy policies alone. It is achieved through directors who understand their responsibilities, ask the right questions and act with integrity.
The Companies Act establishes the legal duties of directors, while King IV and King V provide a practical framework for ethical and effective governance. Together, they encourage directors to lead with accountability, transparency and foresight.
For directors of Non-Profit Companies, these responsibilities carry an additional dimension. They are entrusted not merely with managing an organisation, but with advancing a purpose that benefits members, beneficiaries and society.
The most effective Boards are not those that avoid difficult questions—they are those that welcome them.
Strong governance protects the organisation, strengthens stakeholder confidence and ultimately enables the organisation to fulfil the purpose for which it was established.
References
- Companies Act 71 of 2008, particularly sections 75, 76 and 77.
- Institute of Directors in South Africa, King IV Report on Corporate Governance for South Africa (2016).
- Institute of Directors in South Africa, King V Code on Corporate Governance, effective for financial years commencing on or after 1 January 2026.
- Howard v Herrigel and Another 1991 (2) SA 660 (A).
- Fisheries Development Corporation of SA Ltd v Jorgensen 1980 (4) SA 156 (W).
