Artificial intelligence (“AI“) is no longer a futuristic concept reserved for technology companies. From automated reporting and customer service tools to AI-assisted legal drafting and financial forecasting, businesses across South Africa are increasingly integrating AI into their day-to-day operations.

While the commercial opportunities are significant, the legal and governance implications are often overlooked.

The Intersection of AI and Fiduciary Duty

For company directors, the rise of AI presents an important question: how do directors fulfil their fiduciary duties under the Companies Act, 2008, in an environment where decision-making is increasingly influenced by automated systems and AI-generated outputs?

Under South African company law, directors remain responsible for exercising independent judgment, acting with due care and skill, and acting in the best interests of the company. Importantly, reliance on technology does not remove these obligations.

AI tools may assist decision-making, but they cannot replace proper oversight.

Key Risks: Overreliance and Data Protection

One of the key risks is overreliance on AI-generated information. AI systems are capable of producing convincing outputs that may nevertheless contain inaccuracies, incomplete information or biased conclusions. Directors and management teams who rely uncritically on AI-generated advice, particularly in financial, legal or compliance contexts, may expose both the company and themselves to unnecessary risk.

Confidentiality and data protection also present growing concerns. Many AI tools process information through external platforms, raising significant risks regarding intellectual property leaks, the exposure of trade secrets , and non-compliance with the Protection of Personal Information Act, 2013.

Businesses should carefully consider whether employees are uploading confidential documents, contracts or personal information into public AI platforms without adequate safeguards or internal policies in place. Many companies’ policies have not yet been updated to deal with this ever-changing landscape, and this is an important governance safeguard that should be attended to.

Cybersecurity and Corporate Governance

Cybersecurity risks are equally relevant. As companies adopt more AI-driven systems, the potential impact of data breaches, system manipulation and operational disruptions becomes increasingly significant. Directors are expected to take reasonable steps to ensure that appropriate cybersecurity and governance measures are implemented.

Importantly, AI governance is not solely a technology issue — it is a boardroom issue.

Key Considerations for the Board

As directors take ultimate responsibility for the management of the company, they should begin considering:

• whether the company has a formalised  AI ethics and usage policy. If such policy exists, is it sufficient to protect the company in this ever-changing environment;
• how confidential and personal information is being protected;
• whether AI-generated outputs are independently verified;
• what internal approval and oversight mechanisms exist; and
• whether employees are adequately trained on acceptable AI use.

South African law has not yet developed a comprehensive regulatory framework specifically governing AI. However, existing legal principles relating to directors’ duties, negligence, confidentiality, data protection and corporate governance already apply.

The companies that will be best positioned in the coming years are not necessarily those that adopt AI the fastest, but those that adopt it responsibly. For directors, this means ensuring that innovation is accompanied by proper governance, oversight and accountability.

How We Can Help

While your management team handles the operational adoption of AI, our expertise lies in protecting your board from the accompanying legal risks. We provide targeted director briefings and training focused on navigating fiduciary duties, managing oversight, and mitigating personal liability under the Companies Act. Contact us to ensure your board is equipped to govern this transition safely and responsibly.

Contact us today to secure your governance framework.