SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
Removal of directors In terms of the Companies Act, directors can resign or be removed by shareholders or the
years after the act or omission that gave rise to the liability. 4.5 Rules/Requirements Concerning Independence of Directors Position Under the Companies Act Conflicts of interest Avoiding a conflict of interest is one of the cen - tral fiduciary duties of a director. The Companies Act provides that a director who has a material/ substantial personal financial interest in a mat - ter before the board, or who knows that “related person” has an interest, must disclose such interest to the board and recuse themselves from board deliberations on that matter. Family members within specific degrees of consanguin - ity or affinity, second entities of which the con - templated director is also a director, and organi - sations under the director’s control or influence are all regarded as “related persons” . In relation to the audit committee of a public or state-owned company, the test for independ - ence under the Companies Act is that the direc - tor must not be: • involved in the day-to-day management of the company’s business nor have been so involved at any time during the previous financial year; • a prescribed officer or full-time employee of the company and must not have held such office during the previous three financial years; • a material supplier or customer of the com - pany such that a reasonable and informed third party would conclude that the director’s integrity, impartiality or objectivity is compro - mised by that relationship; or • related to any person who falls within any of the above categories.
remainder of the board. Shareholder removal
The Companies Act contains an unalterable provision for the removal of directors from the board by an ordinary resolution of shareholders at a general meeting. Before this resolution is considered by the shareholders, the director(s) concerned must be given proper notice of the proposed meeting and the resolution, and the director(s) must be afforded a reasonable oppor - tunity to make a presentation to the sharehold - ers, either in person or through a representative. Board removal If a director becomes incapacitated, ineligible or disqualified, or has neglected or been derelict in the performance of their duties, the board will be able to remove the director in question. A com - pany’s MOI may indicate additional processes for the removal of a director. A shareholder, director, prescribed officer or company secretary can also approach the High Court to remove a director by: • invoking the oppression remedy in terms of the Companies Act; or • having a director declared a delinquent in accordance with the Companies Act, if they are in material or gross breach of their duties. The Second Amendment Act has amended the Companies Act to extend the time bar to declare a director delinquent from 24 to 60 months. This amendment further grants the court discretion to extend the period in respect of which proceed - ings to recover any loss, damages or costs may be commenced, which is currently within three
749 CHAMBERS.COM
Powered by FlippingBook