Directors face personal liability for financial oversights, and “I didn’t know” isn’t a worthy defence. Financial literacy helps non-finance directors fulfil their duties, protect the company, and stay safe from legal issues.
The companies act 71 of 2008 holds directors accountable for financial accuracy. If you sit on a company’s board and approve flawed financials, you could face lawsuits or fines.
Knowing how to read a balance sheet helps spot errors, like overstated assets. Or, when a retailer proposes a R10M loan, understanding debt metrics lets you ask: “Can we repay this without defaulting?” – This protects you from approving risky moves.
How Finance Shields You from Board Liability:
Verifying Accuracy: Ensure reports align with IFRS avoiding regulatory trouble.
Mitigating Risks: Question high-stakes moves, like acquisitions or dividends, for financial soundness.
Meeting Duties: Fulfil your legal obligation to act with care and skill.
Liability isn’t theoretical. In one case study, a board faced penalties for overlooking financial irregularities in a supplier contract. Financial literacy could have prompted questions like, “Are our purchasing controls adequate?” As a director, you’re on the hook—finance is your shield.
If you sit on a nonprofit board, understanding cash reserves when approving a new programme ensures you’re not risking insolvency, meeting your duty to stakeholders.
Finance keeps you compliant and confident.
