SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
5. Shareholders 5.1 Relationship Between Companies and Shareholders The relationship between the company and its shareholders is statutory and contractual in nature, as it is generally regulated by the Com - panies Act and the company’s MOI, which gen - erally sets out rights attaching to shares. The relationship between shareholders and the com - pany may also be regulated by a shareholders’ agreement but the shareholders’ agreement must be consistent with the company’s MOI; any provision that is inconsistent with the MOI is void to the extent of such inconsistency. Generally, the principle of separate legal person - ality entails that shareholders are not liable for the company’s acts or omissions. Shareholders do not owe any legal duties under the common law or the Companies Act to the company. Only in exceptional circumstances can a court impose personal liability on shareholders who have flouted the common law principle of sep - arate corporate personality, or the court may invoke the Companies Act’s statutory mecha - nism to pierce the corporate veil in cases of “unconscionable abuse” of a company’s sepa - rate legal personality. Shareholders are entitled to a share of the com - pany’s distributed profits in proportion to their respective shareholdings and, in the event of a company winding-up, to the surplus assets after the company’s creditors have been fully paid. Typically, preference shareholders are entitled to receive their respective portions before ordinary shareholders upon the winding-up of a company.
director and prescribed officer in the company, the total remuneration in respect of the employ - ee with the highest total remuneration, the total remuneration in respect of the employee with the lowest total remuneration in the company, and the average total remuneration of all employees, median remuneration of all employees and the remuneration gap reflecting the ratio between the total remuneration of the top 5% highest paid employees and the total remuneration of the bottom 5% lowest paid employees of the company (also referred to as the “wage gap” ). The remuneration report must be prepared each year in respect of the previous financial year for presentation and approval at the AGM; if not approved at the AGM, then the remuneration committee ( “Remco” ) must, at the next AGM, present an explanation on the manner in which the shareholders’ concerns have been taken into account, and the non-executive directors serv - ing on the Remco must stand for re-election as members of the Remco at the AGM at which the explanation is presented. If at the AGM in the year immediately following the year contemplated above, the remuneration report in respect of the previous financial year is also not approved by an ordinary resolution of shareholders, then the non-executive directors who serve on the Remco may continue to serve as directors, provided they successfully stand for re-election at that AGM and will not be eli - gible to serve on the Remco for a period of two years thereafter.
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