If you’re running a business or sitting on a board, there’s a new reality you need to be aware of – South Africa’s corporate ADR policy is changing how companies deal with corruption and misconduct, and it’s putting directors and executives under the spotlight.
This isn’t about courtroom drama or drawn-out investigations. It’s about companies stepping forward, admitting wrongdoing, and working with authorities to fix it. That’s good news for the organisation, but it can be risky for the people involved.
What is corporate ADR policy?
Corporate ADR stands for Corporate Alternative Dispute Resolution. It’s a legal mechanism that allows companies to self-report corruption, cooperate with regulators, and avoid prosecution if they take meaningful steps to correct the problem.
Inspired by similar policies in the US and UK, South Africa’s corporate ADR policy is designed to encourage transparency and accountability. It gives businesses a chance to survive reputational damage and legal fallout. But, and this is important, it doesn’t protect individuals.
If directors, executives, or employees were involved in misconduct, they can still be held personally liable. In fact, the company’s cooperation may provide the very evidence needed to prosecute them.
Why corporate ADR policy matters for directors and executives
Many directors assume they’re protected by the company or by D&O (Directors & Officers) insurance. But under the corporate ADR policy, those assumptions don’t always hold up.
When a company enters into an ADR agreement, it must hand over detailed records like board minutes, internal emails, and financial reports. If those records show that someone failed to act responsibly, they could face serious consequences.
And here’s the catch: D&O insurance usually doesn’t cover deliberate misconduct. Even non-executive directors, who aren’t involved in day-to-day operations, can be held accountable if they didn’t exercise proper oversight.
Good governance is your best defence
In this new environment, while governance does mean compliance, it is becoming that much more crucial for protection.
To show that you’ve fulfilled your duties, you need clear, auditable records of decisions, risk assessments, and board discussions. Vague minutes or missing documentation won’t help you if questions arise.
That’s where a Digitised Governance Framework (DGF) comes in. A DGF captures governance activities in real time, creating a verified record that supports both the company’s Corporate ADR policy cooperation and your personal accountability — essentially, having the evidence to show you did the right thing.
Legal duties under PRECCA
South Africa’s Prevention and Combating of Corrupt Activities Act (PRECCA) adds another layer of responsibility. Under Section 34, anyone in a position of authority, including directors and senior managers, must report certain offences (like fraud or corruption over R100,000) to the police. Not doing so is a criminal offence.
Section 34A goes further. If someone connected to your business (like a contractor) engages in corruption, your company can be held liable, unless you can prove you had “reasonable measures” in place to prevent it.
While the law doesn’t define “reasonable measures” precisely, a DGF helps you demonstrate that you’ve taken proactive steps to manage risk, monitor governance, and maintain transparency.
What we’re seeing in practice
South Africa has already seen the corporate ADR policy in action. In the ABB/Kusile case, the company paid around R4 billion in fines, while senior executives faced criminal charges. In the SAP case, restitution of R200 million was made, but certain employees were still prosecuted.
Globally, similar stories are playing out:
- Airbus paid $3.9 billion in settlements; executives were dismissed.
- Petrobras paid $2.95 billion; senior managers faced charges.
- Glencore paid over $1 billion; key staff were investigated.
These cases show that while companies may recover, individuals often face lasting consequences, proving that the corporate ADR policy is a wake-up call.
Five things boards should do now in terms of corporate ADR policy
If you’re a director, executive, or business owner, here’s how to protect yourself and your organisation:
- Understand the corporate ADR policy — know what it covers, what it doesn’t, and how it could affect you.
- Digitise your governance records — use a DGF to capture decisions, oversight, and risk management in a way that’s easy to verify.
- Review your D&O insurance — make sure you understand what’s covered—and what’s excluded.
- Strengthen internal controls — clear reporting lines, regular audits, and transparent processes reduce risk and improve accountability.
- Educate your leadership team — everyone in a position of authority should understand their legal duties under PRECCA and how the ADR process works.
Only transparency builds trust
The corporate ADR policy is reshaping how businesses respond to misconduct. It encourages companies to take responsibility, but it also demands that individuals do the same.
At Loxton Forensics, we help businesses build strong governance frameworks, conduct forensic reviews, and prepare for ADR cooperation with confidence, because when it comes to protecting your reputation, your finances, and your future, clarity and accountability are today’s new essentials.
Need help navigating corporate ADR or strengthening your governance practices?
Contact our team for expert advice tailored to your business.