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Section 178 of The Companies Act No. 17 of 2015: Loans etc: civil consequences for contravention

    

(1) This section applies to a transaction or arrangement entered into by a company in contravention of section 164, 165, 166 or 167.
(2) A transaction or arrangement to which this section applies is voidable on the initiative of the company, unless—
(a) restitution of any money or other asset that was the subject-matter of the transaction or arrangement is no longer possible;
(b) the company has been indemnified for any loss or damage resulting from the transaction or arrangement; and
(c) rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the transaction or arrangement would be affected by the avoidance.
(3) Whether or not the transaction or arrangement has been avoided, each of the persons specified in subsection (4)—
(a) is liable to account to the company for any gain that the person has made directly or indirectly by the transaction or arrangement; and
(b) is jointly and severally liable with any other person so liable under this section, to indemnify the company for any loss or damage resulting from the transaction or arrangement.
(4) The persons so liable are as follows—
(a) any director of the company or of its holding company with whom the company entered into the transaction or arrangement in contravention of section 164, 165, 166 or 168;
(b) any person with whom the company entered into the transaction or arrangement in contravention of any of those sections who is connected with a director of the company or of its holding company;
(c) the director of the company or its holding company with whom any such person is connected;
(d) any other director of the company who authorised the transaction or arrangement.
(5) Subsections (3) and (4) are subject to subsections (6) and (8).
(6) If a company has entered into a transaction with a person connected with a director of the company, or with a director of its holding company, in contravention of section 166, 167 or 168, the director is not liable because of subsection (4)(c) if the director establishes that all practicable steps were taken to secure the company's compliance with the section concerned.
(7) Subsection (8) applies to—
(a) a person referred to in subsection (4)(b); and (b) a director referred to in subsection (4)(d).
(8) A person to whom this subsection applies is not liable because of subsection(4) if the person establishes that, at the time the transaction or arrangement was entered into, the person was not aware, and had no reason to be aware, of the circumstances that constituted the contravention.
(9) This section does not preclude the operation of any other enactment or rule of law as a result of which a transaction or arrangement to which this section applies could be questioned, or a company involved in the transaction or arrangement could become liable.

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Disclaimer: This document is not to be taken as legal advise.

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