SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
Consequences for Failing to Comply With Approval Requirements The company may not pay remuneration to its directors for their service as directors, except to the extent that the MOI provides otherwise. Remuneration may be paid only in accordance with a special resolution approved by the share - holders within the previous two years (note that this is not salary but payments to directors for their services as such). If the board of a company proceeds to remunerate its directors without first obtaining the requisite shareholder approval, such payment is unlawful (see 4.6 Legal Duties of Directors/Officers for further discussion) and could be liable to the company for any loss, damages or costs suffered by the company as a result. The shareholders could challenge the board decisions relating to director remuneration (see 5.4 Shareholder Claims and 4.4 Appoint- ment and Removal of Directors/Officers for further discussion). 4.11 Disclosure of Payments to Directors/Officers A company that is required to have its AFS audited in terms of the Companies Act (ie, pub - lic companies, state-owned companies and private companies with a PI Score in excess of 350) must disclose all remuneration and other benefits paid to its directors and prescribed officers in its AFS. This should be done on an individualised basis. Furthermore, the Companies Act requires that the AFS of a company contain the following par - ticulars relating generally to directors and pre - scribed officers: • their remuneration and benefits received; • the amount of any pensions paid to them by the company;
• an issue of shares if the class of shares being issued (including as a result of a transaction or series of transactions) will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately held before the transaction(s); • a decision by the board determining that the company may acquire a number of its own shares; and • a decision by the board for the company to provide financial assistance to a director or prescribed officer. Listings Requirements and King IV The Listings Requirements have endorsed the King IV recommendation that shareholder approval in respect of remuneration is to be pursued as follows: where either the remunera - tion policy or the implementation report, or both, were voted against by 25% or more of the non-binding advisory voting rights exercised at the AGM, King IV advocates that the following should be disclosed in the background state - ment of the remuneration report succeeding the voting: • persons whom the company engaged, and the manner and form of engagement to ascertain the motives for dissenting votes; and • the nature of steps taken to address legiti - mate and reasonable objections and con - cerns. It should also be noted that the Companies Amendment Act has introduced the require - ment for state-owned and public companies to present a remuneration policy and remuneration report.
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