SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
The Companies Amendment Act has introduced key provisions governing SECs. A SEC must comprise no fewer than three members; for public and state-owned companies, the majority must be non-executive direc - tors who held that role during the previous three finan - cial years. For other companies required to have a SEC (private companies with a PI Score exceeding 500), at least one member must be a non-executive director. King V provides that the chairperson of the Board may be a member but may not chair the SEC. Public and state-owned companies must appoint their SECs at each AGM and present an SEC report to shareholders. Shareholders Ownership and control of a company vests with the shareholders, whose primary governance role relates to monitoring and holding the Board accountable (see 2.2 Types of Decisions , 2.3 Decision-Making Pro- cesses , 4.1 Companies and Shareholders and 4.2 Role of Shareholders ). Other Stakeholders King V endorses a “stakeholder-inclusive approach”, in which the Board takes into account the legitimate needs, interests and expectations of all material stake - holders. Employees are afforded the right to apply to a court to prevent a company from acting inconsist - ently with the Companies Act, and a trade union or employee representative may invoke the statutory derivative action. 2.2 Types of Decisions A company’s MOI ordinarily designates the decision- making powers to the Board (although there are some decisions that are reserved for shareholder considera - tion). The main decisions made at each level of the management of the company are as follows: • Board– the Board makes the majority of decisions customarily related to a company’s strategy and general management. In this regard, the business and affairs of a company must be managed by or under the direction of its Board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the
extent that the Companies Act or the company’s MOI provides otherwise. • Management – in instances where the Board is different to the management team, the latter will make decisions on a company’s day-to-day opera - tions within the ambit of the powers delegated to management by the Board. • Shareholders – in accordance with the Companies Act, there are a number of decisions specifically reserved for shareholders and which can only be passed by either a special or ordinary shareholder resolution (see 2.3 Decision-Making Processes for further details). A company’s MOI might include matters in addition to those prescribed by the Companies Act. In certain instances, the share - holders’ approval relates to decisions of directors. 2.3 Decision-Making Processes The Board, management team and shareholders ordi - narily make decisions as follows. Board The Board acts through Board resolutions and makes decisions by majority vote, with each director normal - ly carrying one vote (this may be varied in the MOI). Board meetings must be called on reasonable notice, and the quorum necessitates the presence of a major - ity of directors at the meeting. A company’s MOI may require unanimous or another consent threshold. The Board can also make decisions via “round robin” writ - ten resolutions requiring majority approval. The Board may appoint as many committees as it deems nec - essary and assign any of its authority to them (while maintaining ultimate accountability). See 1.2 Corpo- rate Governance Legislation and Regulation regard - ing the mandatory committees for public companies. Management The management team implements Board decisions within its delegated authority. Management may include prescribed officers (see 2.1 Principal Bodies or Functions ). The Shareholders The following matters require shareholder approval by special resolution (generally 75%, subject to MOI variation provided it is 10% higher than the ordinary resolution threshold):
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