OUTA takes a stand: Legal action to close loophole for corrupt SOE executives

The Organisation Undoing Tax Abuse (OUTA) has gone to the Pretoria High Court, asking judges to close a legal gap it says lets corrupt executives at state-owned enterprises escape true accountability.

It argues there is a mismatch between the Companies Act and the Public Finance Management Act (PFMA).

Section 162 of the Companies Act allows a court to declare a director delinquent, a mandatory remedy where a director has failed in their duties, but that power applies only to boards of registered companies.

Many SOEs are not registered as companies and instead fall under the PFMA, where OUTA says the law offers a weaker, internal disciplinary route.

Advocate Stefanie Fick, OUTA’s executive director of accountability, warned in her founding affidavit that under the PFMA “the only sanctions for financial misconduct are dismissal, suspension, or undefined ‘sanctioning”.

Fick contrasted that with the Companies Act: “Under section 162 of the Companies Act, a court must (the court has no discretion) declare a company director delinquent if the director has failed to discharge a director’s duties under the Companies Act.”

OUTA is asking the court to declare sections 83(4) and 84 of the PFMA unconstitutional because they impose a lower standard of accountability on accounting authorities of public entities that are not registered companies.

The organisation wants Parliament to be given two years to fix the PFMA. Meanwhile OUTA asks the court to order that section 162 of the Companies Act apply to all accounting authorities of public entities, regardless of their corporate form and that the interim application remain if Parliament does not act.

The respondents are the Minister of Finance; the Minister of Trade, Industry and Competition; the Department of Trade, Industry, and Competition; and the Companies and Intellectual Property Commission.

OUTA says the practical consequences are stark. Its 2020 win declaring former SAA chair Dudu Myeni a delinquent director for life.

This ruling was later upheld by the Supreme Court of Appeal, which was possible only because SAA is a registered company.

“Had Myeni been an accounting authority of an SOE not registered as a company, this remedy would not have been available to OUTA. Most likely, she would not have been held accountable for her gross abuse of office and breach of her fiduciary duties during her tenure at SAA and for the enormous damage she caused,” said Fick.

OUTA argues the current divide “is unjustifiable and violates the constitutional rights of equality and access to courts, as well as the constitutional values of accountability and transparency that public entities are required to hold,” said Fick in her affidavit.

Closing the gap, OUTA says, would stop compromised officials being quietly recycled through the state.

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