SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
If the company appoints an audit committee with persons not considered “independent” in terms of the Companies Act, any functions undertaken by such audit committee will be considered as not having been performed by a suitably consti -
• fiduciary duties; and • the duty of care, skill and diligence. Position Under the Companies Act and the Common Law Fiduciary duties The Companies Act, in part, codified the com - mon law principles regulating fiduciary duties and mandates that all directors, alternate direc - tors, prescribed officers and members of board or audit committees must, amongst other things: • exercise their powers and functions in good faith, for a proper purpose, and in the “best interests of the company” ; • disclose personal financial interests in certain instances; and • not use their office or position to secure an advantage or knowingly cause harm to the company. Directors remain subject to their common law fiduciary duties to the extent that the Compa - nies Act does not specifically deal with particular duties. These common law duties encompass the fiduciary duties to: • act within designated powers; • maintain and exercise unfettered discretion and independent judgement; and • avoid conflicts of interest. Each director should act with the degree of care, skill and diligence that may reasonably be expected of a person: • carrying out the same functions in relation to the company as those carried out by that director; and • having the general knowledge, skill and expe - rience of that director.
tuted audit committee. Position Under King IV Independence and conflicts
King IV recommends that a majority of the com - pany’s non-executive directors should be inde - pendent and that the chair of the board should be independent. King IV sets out certain factors to consider when determining whether a director is considered “independent” , including whether: • the director holds any equity interest in the company or group that is material to their personal wealth; • the director holds directorships on a number of other group companies; • the director is a material lender or financier to the company; or • the director’s remuneration is in any way based on the performance of the company. Position Under the Takeover Regulations The Takeover Regulations (Chapter 5 of the Reg - ulations) (the “Takeover Regulations” ) require an independent board to be established in certain circumstances in relation to affected transac - tions, which include certain fundamental trans - actions, such as major disposals, schemes of arrangement and mergers, as well as the acqui - sition of control of a regulated company. 4.6 Legal Duties of Directors/Officers Directors and prescribed officers are subject to a number of duties under both the Companies Act and the common law. These duties can be traditionally categorised into two groups:
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