SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
4.3 Board Composition Requirements/ Recommendations The Companies Act prescribes a minimum number of directors for private and public com - panies, as set out in 4.1 Board Structure . A company’s MOI may require a higher number of directors than the minimum number required by the Companies Act. King IV recommends that a board of directors should possess the appropriate mix of skill, knowledge, expertise and experience, including the business, industry and commercial experi - ence needed to govern a company (see 4.1 Board Structure for further details). B-BBEE B-BBEE encourages companies to constitute diverse boards of directors as this has an impact on a company’s ability to conduct business or conclude contracts with the state or state- owned companies (see 2.2 ESG Considerations for further details on B-BBEE). 4.4 Appointment and Removal of Directors/Officers Position Under the Companies Act Appointment of directors Directors are generally elected to the board by a majority vote of the shareholders. The com - pany’s MOI can allow directors to be appointed directly by any party specified in it, or it can allow directors to serve as ex officio directors. The Companies Act specifically provides that at least 50% of the directors of a profit company (ie, a company incorporated for purposes of financial gain for its shareholders) must be elected by shareholders.
• diversity; and • the need for a sufficient number of members that qualify to serve on the committees of the board. In relation to committees, King IV recommends an audit committee (which is a statutory require - ment for some companies), a nominations com - mittee, a risk governance committee, a remu - neration committee and a social and ethics committee. The audit committee is primarily responsible for providing independent oversight of the integrity of the annual financial statements (AFS). The nominations committee is primarily responsible for the process of nominating, elect - ing and appointing the board of directors. 4.2 Roles of Board Members Position Under King IV King IV recommends that the board of direc - tors comprises a combination of executive, non-executive and independent non-executive directors. As a minimum requirement, King IV recommends that a chief executive officer (CEO) and one other executive – for example, a chief financial officer (CFO) – should be appointed to the board of directors of a company so as to ensure that the board of directors has more than one point of direct contact with management. In addition to the role of CEO (and CFO), it is recommended that the board of directors elects an independent non-executive director as chair to lead the board of directors in the effective and objective discharge of their governance role and responsibilities. The CEO leads the implemen - tation and performance of a board-approved strategy and policies, and should serve as the main link between management and the board of directors.
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