'Directors of closed firms must be sued'

Directors of foreign owned companies have legal duty to protect the well-being of their firms and must be sued if they cause their collapse, a Cabinet minister has said. The minister said directors must preserve the jobs of their workers by complying with the indigenisation law to avoid cancellation of non compliant firms' licences.

Youth Development, Indigenisation and Economic Empowerment Minister Patrick Zhuwao said fiduciary duty enjoins directors to firms in their personal capacity.

Minister Zhuwao said because of the legal obligation of fiduciaries to their principals, directors of foreign firms should be sued if they cause closure of their firms.

This comes after Cabinet resolved that firms that fail to submit plans by end of last month on how they intended to indigenise should have their licences cancelled.

Foreign owned firms valued from $500 000 ($1 for mining companies) are required to sell at least 51 percent of their share to indigenous people or State entities.

Fiduciary duty is a legal duty to act solely in another party's interests. Parties owing this duty are called fiduciaries. Persons to whom they owe a duty are principals.

Fiduciaries may not profit from their relationship with their principals unless such people have been able to obtain the principals' express informed consent.

Examples of fiduciary relationships include those between a lawyer and their client, a guardian and their ward, and a company director and their shareholders.

As such, minister Zhuwao said he will assist employees of firms that may be closed if their licence is revoked for failing to comply with the indigenisation law.

"I said if I was an employee and if you are an employee and if the director of the company that employs you does not comply with the law in such a manner that your job and livelihood are at risk, I would advise you to sue them," he said.

"I will be engaging with workers once I know that there is a company that has been affected. I will look for the workers council or committee and explain to them that the law provides for this and that. They may be paid a lot of money."

He said as empowerment minister, he would assist employees with legal advice on what they should do to get a good package from directors of any closed firms and including getting directors personal assets.

Indigenisation and economic empowerment of local people is a Government policy anchored by an Act of Parliament to bring previously marginalised black majority to participate in the mainstream economic activities of the country.

"If you become director of a company you have a fiduciary responsibility and that fiduciary responsibility enjoins you at a personal level as well," the minister said.

"All those directors know it fully well, but want to dilly dally," he added.

Minister Zhuwao said last week that licences of non compliant foreign owned firms should be cancelled once it has been established that their failure has no "just cause".