Important lessons for directors in NW Cricket case - and Cricket SA

News reports indicate that the suspended board of North West Cricket might be facing an application by parent body, Cricket South Africa, to have them declared delinquent directors. While the facts of the matter have yet to be tested in court, being declared delinquent is a serious issue and all directors should take note, says Advocate Fay Mukaddam, Chartered Director and Technical Advisor at the Institute of Directors in South Africa (IoDSA).

“On the face of it, this seems to be an issue that does not appear to revolve around looting or corruption such as we see on vivid display at the Zondo Commission. Rather, the issue here seems to be maladministration and the misappropriation of funds,” she explains. “This was only possible if the board failed in its primary responsibility to exercise oversight effectively, and that’s why it and its chairman may potentially be held liable.”

The basic facts are that Cricket South Africa made funds available for upgrading a stadium. An investigation by Deloitte showed that R2.2 million of the R10 million received had been used not on the stadium but on operational matters.[1]
According to Advocate Mukaddam, this misappropriation of funds should have been picked up by the board in the course of its normal oversight activities.

“In other words - and this is a point the IoDSA has always stressed - directors need to have the right skills in order to discharge their fiduciary duties. Being a successful businessperson or professional, or just a good person, is no guarantee you will be a good director,” she says. “Directors bring their existing skills, experience and personal qualities to the table, to be sure, but they also need to learn how to be directors. It’s for that reason that we introduced our Certified Director and Chartered Director designations to provide directors with a way to acquire the necessary directorial skills.

“Directors don’t have to be bad apples to be held liable for not fulfilling their duties—if they can’t or don’t do their job, they can also be held liable.”

Cricket South Africa placed North West Cricket under administration in 2018 on the basis that its administrative, governance and financial functions were not satisfactory,[2] a lack for which the board is ultimately responsible.

If found to be delinquent, directors face the prospect of fines or even jail time and being barred from serving on a governing body for a length of time or forever.

[1] Tiisetso Malepa, “North West Cricket board directors could be declared delinquent”, TimesLive (16 March 2021), available at https://www.timeslive.co.za/sport/cricket/2021-03-16-north-west-cricket-board-directors-face-delinquency/.

[2] Cricket South Africa press release, “CSA appoints administrator for North West Cricket”(13 December 2018), available at https://cricket.co.za/news/27470/CSA-appoints-administrator-for-North-West-Cricket.

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