SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
Social and Ethics Committee (SEC) These committees are statutory governance structures in South African company law gov - erned by the Companies Act and the Regula - tions. The SEC is not a sub-committee of the board and therefore does not enjoy all of the common law powers that a sub-committee of the board would otherwise enjoy. It is, however, entitled to require any information or explanation from any director or prescribed officer, and may: • request from any employee any information or explanation necessary for the performance of its functions; • attend any annual general meeting (AGM) of shareholders and receive all notices and other communications relating thereto; and • be heard at AGMs on any part of the business of the meeting that concerns the committee’s functions. Its functions are limited to those set out in the Regulations, which are, inter alia: • to monitor the company’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice; • to ensure good corporate citizenship; • to draw matters within its mandate to the attention of the board as occasion requires; and • to report, through one of its members, to the shareholders of a company at the AGM on the matters within its mandate. The Companies Amendment Act has amended the Companies Act by introducing key provi - sions governing SECs. In terms of the com - position requirements, an SEC must comprise no fewer than three members (ie, not limited to directors); in the case of public and state-
owned companies, the majority of the members must be non-executive directors and must have been non-executive directors during the pre - vious three financial years and, in the case of any other company, the members must consist of no fewer than three directors or prescribed officers, at least one of whom must be a non- executive director and who must have been a non-executive director within the previous three financial years. In addition, public and state-owned companies must appoint their SECs at each AGM and, for other companies required to have an SEC (ie, private companies with a public interest score (PI Score) in excess of 500), the SEC must be appointed annually by the board of directors. Public and state-owned companies must now also present an SEC report to their sharehold - ers at their AGMs or annually at a shareholders meeting, or with a resolution as contemplated in Section 60 (ie, round robin resolutions). Shareholders Ownership and control of a company vests with the shareholders, whose primary governance role relates to monitoring and holding the board accountable (see 3.2 Decisions Made by Par- ticular Bodies , 3.3 Decision-Making Process- es , 5.1 Relationship Between Companies and Shareholders and 5.2 Role of Shareholders in Company Management for further details). Other Stakeholders King IV endorses “stakeholder-inclusive approach” , in which the board takes into account the legitimate and reasonable needs, interests and expectations of all material stakeholders in exercising its duties in the best interests of the organisation. Employees are viewed as a key constituency of a company and are afforded
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