Governance carries a deeply historical meaning, which has developed and evolved within our legal framework. The word “governance” originates from the Greek term kybernan, meaning to steer or guide. Against this backdrop, corporate governance plays an integral role in any business or organisation.
As a concept, it can be described as a set of rules, practices, and processes used to direct and control an organisation. Directors are the custodians[1] within organisations that determine how these practices are applied and have a duty to ensure that these principles are upheld.
In South African, corporate governance has evolved significantly through the King Reports[2], which have been recognised globally as the benchmark for ethical and effective governance. We have seen the transition from King IV and King V.[3]
Notably, the King V does not completely change the rules of the King IV; it simply makes them clearer, more practical, and better suited to modern issues like sustainability, technological risks, and stakeholder expectation.[4] This is important, as, instead of having policies on paper, companies now need to show their governance actually works in practice, which ensures real accountability and ethical leadership, ultimately supporting the overall longevity of a business or organisation.
So, what is the importance and relevance in my business?
Great question! This speaks to a common misconception about the King Reports. Corporate governance is often viewed as applicable only to JSE-listed companies, large corporations, and major organisations. However, this understanding is misguided. Governance refers to the system by which an organisation is directed and controlled, underpinned by principles of accountability, transparency, and responsibility. Importantly, these principles apply to all organisations, regardless of their size or structure.
Your duties as a Director under the Companies Act
As a director of a company, you are subject to specific legal duties under the Companies Act 71 of 2008.[5] In terms of section 76(3), they must act in good faith, for a proper purpose, in the best interests of the company, and with the required care, skill, and diligence. Section 75 further regulates conflicts of interest, requiring disclosure and recusal where necessary.[6] These provisions give legal force to corporate governance principles, ensuring accountability, ethical conduct, and responsible decision-making within the business.
Governance across different businesses
Smaller businesses are not exempt from implementing governance; rather, corporate governance should be scaled appropriately to suit the size and complexities of an organisation. For instance, smaller enterprises and organisations require clear decision-making structures, financial accountability, legal compliance and ethical leadership. The absence of these elements often shows through inefficiencies, a lack of order, internal disputes, and an increased risk of litigation.
As a law firm that advises on these types of matters, we witness firsthand the impact that poor corporate governance has on businesses, as well as the number of disputes arising from it which often result in litigation.
Governance and Employment Law Principles
One can also measure corporate governance in a business in how well a company complies with employment laws such as the Labour Relations Act[7], Basic Conditions of Employment Act[8], and Employment Equity Act.[9] Non-compliance often speaks to weak board oversight, poor controls, and a lack of ethical leadership.
Issues like unfair dismissals, discrimination, or failure to meet and address targets are practical indicators of governance failure. Under King V, boards are responsible for ensuring legal compliance in all areas of a business, and employment law compliance is a clear, measurable test of governance effectiveness which a board must actively monitor and ensure compliance with.
Our courts have not been silent on this issue. Jurisprudence emerging from G.U.D. Holdings (Pty) Ltd v Companies and Intellectual Property Commission and Others (ZASCA 2026)[10] Msibithi Investments (Pty) Ltd v African Legend Investment (Pty) Ltd Attorneys and Others[11] and Limpopo Provincial Council v Chueu Incorporated[12] shows a consistent judicial emphasis on lawful decision-making, proper authority, and procedural compliance within both the corporate and institutional context. Collectively, these decisions emphasise that the exercise of statutory or contractual powers – whether by regulatory bodies such as the CIPC, corporates, or other institutions – must be lawful, rational, and procedurally fair, failing which such decisions are susceptible to judicial review. The courts reaffirm that corporate governance is not merely formalistic, but requires substantive adherence to enabling legislation, internal rules, and principles of administrative justice, particularly where decisions affect rights or legal standing.
Conclusion
In simple terms, corporate governance isn’t a one-size-fits-all approach. It must be tailored to suit the size and nature of your business. A small business won’t operate like a large corporation, and that’s perfectly acceptable. However, what doesn’t change is the need for the business to be run properly and responsibly.
At its core, this means that the people in charge, whether directors, trustees, or management must be open about their decisions, act honestly, take responsibility, and treat stakeholders fairly. In practice, it’s about ensuring that the way the business is run, and the policies it puts in place, reflect these principles. From a legal perspective, if these basics are ignored, it will lead to disputes, regulatory issues, and ultimately unnecessary litigation, something we unfortunately see all too often in practice.
Should you have any challenges relating to corporate governance or the structuring of your business, contact us at [email protected].
By addressing governance proactively, businesses can identify and rectify shortcomings before they develop into disputes or regulatory challenges.
[1] Custodian:” person or organization which has custody or guardianship of something or someone” Oxford University Press, 2026) https://languages.oup.com/google-dictionary-en/ accessed 6 May 2026. [2] The King Reports refer the King Codes which are influential, voluntary guidelines for corporate governance in South Africa, established by the King Committee to promote high standards of ethical leadership, sustainability, and transparency. [3] King V Report (2026) on Corporate Governance for South Africa available at: https://www.iodsa.co.za(Accessed: 5 May 2026) ‘official release on 31 October 2025 and applies to financial years commencing on or after 1 January 2026, replacing King IV’.
[4] King V report (2026). [5] S76 of the Companies Act 71 of 2008. [6] Companies Act 71 of 2008. [7] 66 of 1995. [8] 75 of 1997. [9] Act 55 of 1998. [10] (818/24) [2026] ZASCA 10 (4 February 2026). [11] (14 May 2025). [12] (459/22) [2023] ZASCA 112 (26 July 2023).Director
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.
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