This blog is co-authored by Francisco Andrade-Nobrega and Zubenathi Ndlwana, candidate attorneys.

Introduction

In January 2025, the High Court delivered a judgment ordering personal liability of the directors of an employer that failed to pay over employees’ pension contributions to the relevant pension funds. 

The applicants sought payment of outstanding pension fund contributions from the second and third respondents, who were directors of the first respondent employer, (being a company in liquidation), in their personal capacities for the period of May 2020 to July 2020. The claim was based on section 13A of the Pension Fund Act (PFA). No order was sought as against the company on account of its liquidation.

Relevant Laws and Findings

Section 13A (1) of the PFA obliges the employers of fund members to pay the members’ contributions deducted from the members’ remuneration and any contribution for which the employer is liable in terms of the rules of the funds in full. Should there be non-compliance with the provisions of section 13A, sections 13A (8) and (9) impose personal liability on directors in control of or regularly involved in the management of the employer’s overall financial affairs.

At common law, the employees would only have a claim against their employer. However, section 13A(8)(a) of the PFA permits a fund to hold the employer’s directors personally liable for unpaid contributions without the need to pierce the corporate veil. Section 13A(8)(b) creates personal liability for persons who control or are regularly involved in the management of the employer’s overall financial affairs.

The court found that the company had paid its employees their net salaries minus their pension and provident fund contributions, but the deductions were never paid over to the funds. It was clear that the directors were involved in the management of the company’s financial affairs and that the obligations of section 13A had not been met. The directors were held personally liable for the outstanding pension fund contributions.

The directors submitted that the imposition of personal liability under the PFA ought to have regard to circumstances where there is a failure to meet section 13A obligations due to reasons beyond a director’s control. They argued that the company was unable to meet its obligations under section 13A (8) due to the Covid-19 pandemic. The court held that this explanation was not plausible and given the serious prejudicial consequences of the failure to comply with section 13A, the directors were not entitled to excuse themselves from their obligations.

Conclusion

The directors were ordered to pay, in their personal capacities, the outstanding pension fund contributions to the applicants. This judgment serves to remind management and directors of a participating employer to ensure that employers are satisfying their payment obligations under the PFA, failing which there is a real risk of personal liability for such managers or directors where payment is not made and the employer is unable to make good.