30 October 2025
|
As insolvency levels surge, South Africa's legal, insurance, and restructuring leaders convened in Parktown for a high-impact session titled "When D&O and Distressed Organisations Collide (D&O²)", hosted by leading firm of attorneys, Cox Yeats and the Insurance Institute of Gauteng (IIG). The event unpacked the legal, financial, and claims complexities facing directors and officers (D&Os) in distressed companies, highlighting the growing risk of personal liability, regulatory scrutiny, and insurance gaps with a focus on early intervention, directors’ statutory duties, potential personal exposure in distress, and insurance gaps affecting Business Rescue Practitioners (BRPs) and boards.
Wilmine Prinsloo, President of the IIG and Manager: Partner Operations at King Price, opened the session and reaffirmed the Institute's commitment to professional development and ethical leadership. "We're proud to convene these conversations," Prinsloo said. "The insurance industry must lead with integrity, insight, and accountability, especially in times of distress."
Mongezi Mpahlwa, Partner | Business Rescue, Restructuring, Insolvency and Insurance at Cox Yeats and moderator of the session, introduced the theme: "D&O liability is no longer theoretical. It's real, rising, and reshaping how boards must respond to financial distress. Today's session is about equipping leaders with the tools to act responsibly, decisively, and transparently."
Informal workouts - A lifeline or a liability?
The first segment explored informal workouts and corporate governance—often the first line of defence when companies face distress. While informal restructuring offers speed and flexibility, experts warned that it can quickly become a legal trap if not managed with diligence. Jo Mitchel-Marais, Partner | Africa Restructuring, Turnaround & Performance Improvement Leader at Deloitte, emphasised the protective power of governance: "Corporate governance is not just a compliance exercise, it's a shield. Directors who document decisions, follow sound processes, and act transparently are far better positioned to defend against liability."
Gareth Cremen, Partner | Business Rescue, Restructuring, Insolvency and Insurance at Cox Yeats, cautioned against delay: "Informal workouts are not a free pass. If directors pursue them for too long as insolvency deepens, they risk being held personally liable for reckless trading. Commercially sensible conduct is not optional; it's the legal standard. Directors must continuously assess solvency and liquidity, act in the best interests of the company, and take appropriate steps without delay where rescue is viable—or pivot responsibly when it is not."
Business Rescue and D&O – Who is covered? Who is exposed?
The second segment tackled the intersection of business rescue and insurance coverage, particularly the gaps between Directors & Officers (D&O) liability and Professional Indemnity (PI) insurance. Cremen explained: "Business rescue is a powerful tool, but it's not a magic wand. Directors must act early, support the practitioner, and ensure that D&O and PI coverages are aligned to protect all parties."
Mukondeleli Masiza, Complex Claims Handler at Allianz Commercial clarified: "BRPs operate as independent statutory officers with a mandate that extends beyond internal corporate governance. Given this professional, rather than managerial, scope of work, PI insurance remains the most appropriate form of cover ensuring BRPs are protected without compromising the intent of D&O policies."
Cremen added: "BRPs face similar risks to directors: negligence, mismanagement, breach of duty. However, most D&O policies narrowly define 'insured persons,' leaving BRPs exposed. Hybrid coverages and broader definitions are essential."
When rescue is no longer possible, are directors off the hook?
The final segment addressed the reality that not every company can be saved—and when business rescue fails, directors and BRPs must pivot quickly and responsibly. The final segment recognised that not every company can be saved. When it becomes apparent that business rescue will not achieve its objectives, directors and practitioners must pivot swiftly and lawfully to protect stakeholders and preserve value.
Zeenath Kajee, Specialist Liquidator and Insolvency Practitioner at GCW Administrators, addresses the options available to a liquidator to investigate directors’ conduct and the statutory tools available to hold them accountable. "In seeking to maximise a recovery for creditors, a liquidator can hold directors financially accountable for any missteps that contributed to the failure of the company."
In practice, this includes the liquidator’s ability to convene statutory enquiries, interrogate transactions, and pursue claims to unwind or recover value from voidable or impeachable dispositions and from those responsible for misconduct or breaches of duty.
Cremen reinforced the value of liquidation: "Liquidation is not a punishment. It is a forensic tool. It stabilises the estate, enables clawbacks, and protects creditors. Used correctly, it is often the most equitable path forward."
Cremen emphasised accountability alongside value recovery: "Liquidation is not a punishment. Properly used, it stabilises the estate, enables forensic investigation and clawbacks, and holds wrongdoers to account—often delivering the most equitable path for creditors when rescue is no longer achievable."
The bigger picture: rising insolvency and the need for reform
With global insolvency expected to rise by 11% in 2025, the session served as a wake-up call for boards, insurers, and regulators across Africa. The speakers called for:
- • Broader D&O definitions to include statutory officers
- • Hybrid policies that bridge PI and D&O gaps
- • Stronger governance frameworks and earlier interventions
- • Greater coordination between insurers, regulators, and restructuring professionals.
