DIRECTOR'S GUIDE 2011

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Directors and Audit committees per King 111●●King 111 – if differences of opinion should arise between the board andthe audit committee, where the audit committee’s statutory functions areconcerned, the audit committee’s decision will prevail.Additional sections in Act relating to enhanced accountability andtransparency requirements:●●Section 159: Confidential disclosures●●A public company or SOC Ltd company must directly or indirectly –◆◆◆◆Establish and maintain a system to receive confidential disclosures ofany person as contemplated in Section 159 and act on them; andRoutinely publicise the availability of that system to directors,secretaries, other officers, employees, registered trade unions of thecompany, a supplier of goods or services to a company or an employeeof such a supplier.Social and Ethics Committee●●●●●●●●●●This is compulsory for those companies prescribed by the Regulation 43 tohave a Social and Ethics Committee (see page 20), unless:a) It is a subsidiary of another company that has a social and ethicscommittee which will perform the functions required by the regulationon behalf of that subsidiary company, orb) Has been exempted by the Tribunal on application.[Revocableexemptions for five years at a time are allowed on grounds ofredundancy or no basis for public interest considering the company’sactivities or because the company already has a formal mechanismwithin its structures that substantially performs the same functions].The committee must comprise not less than three directors or prescribedofficers of the company, at least one of whom must be a director who is notinvolved in the day-to-day management of the company’s business, andmust not have been so involved within the previous three financial years;A company required to have a Social and Ethics Committee is required toelect members to that Committee at each Annual General Meeting of thecompany;The board must appoint an advisory panel to the committee who representthe community and public interest having regard to the location and natureof the company’s activities;Regulation 43(5) sets out the functions of the committee in detail.12. RECKLESS TRADINGSection 22 (as amended by Section 14 of the Amendment Act): “Acompany must not carry on its business recklessly, with gross negligencewith intent to defraud any person or for any fraudulent purpose”.Administrative consequences: – Compliance Notices:●●Section 22(2) and (3): If the Commission has reasonable grounds tobelieve that a company is engaging in reckless conduct or is unable topay its debts as they become due and payable in the normal course ofbusiness, it may issue a notice to show cause, and the person who has26
●●●●●●●●received such notice is required to provide information to the Commissionwithin 20 business days of having received it (Regulation 19), on receipt ofwhich, the Commission can either accept the information and confirm thecompany’s right to continue carrying on business, or issue a compliancenotice to the company requiring it to cease carrying on its business ortrading, as the case may be, if the company has failed to satisfy theCommission that it is not engaging in conduct prohibited by this Section;Section 171(7): The Commission may only refer the matter to the NationalProsecuting Authority (NPA) as an offence in terms of Section 214(3)if it has first issued a notice to show cause, and a compliance noticeand the company has failed to comply with the compliance notice (seeconsequences and penalties relating to prosecution for criminal liabilitysection on page 30);The Commission could alternatively institute proceedings in Court toimpose an administrative fine, but cannot do both in respect of anyparticular compliance notice;A director could still be subject to significant civil liabilities for any loss,damage or cost suffered by the company as a result of a contravention ofSection 22;Directors have a duty to initiate voluntarily Business Rescue proceedingswhere it seems the company will become insolvent, so as to avoid theserious consequences contemplated in this Section.13. REMEDIES AND PROTECTION OFWHISTLE‐BLOWERSThe Act introduces a new regime to protect whistle-blowers and introduces newstatutory remedies and Regulatory bodies in Chapter 7. The remedies availablecan be summarised as follows:1 Right to seek specific remediesa) Company names – application to Companies Tribunal or Human RightsCommission;b) Rights of securities holders – application to Court to protect rights;c) Directors – application to Court to declare a director delinquent or onprobation (see Tables A and B which also list which stakeholders maybring such an application);d) Relief from oppressive or prejudicial conduct – application to court bya director or shareholder for relief.2. Voluntary resolution of disputes – filing of complaint to Company Tribunalor Alternative Dispute Resolution Agent (accredited entity);●●King 111 – Directors should endeavour to resolve disputes by wayof ADR so as to preserve business relationships – an emerging goodgovernance trend.3. Complaints to Commission or Take-Over Regulation Panel – a personcan file a complaint with the Panel (relating to fundamental transactions,takeovers and offers) or Commission (regarding any other matter arisingin terms of the Act) who may direct that an investigator conducts aninvestigation.27
Page 1: DIRECTOR’S GUIDE 2011
Page 4: NOTES ON THE GUIDE TO DIRECTORS IN
Page 7 and 8: 2. DEFINITION OF DIRECTOR EXTENDED
Page 9 and 10: ●●●●●●King 111 recommen
Page 11 and 12: 4. PROBATION AND DELINQUENCYThe Act
Page 13 and 14: C Authorisation of distributions (S
Page 15: ●●●●●●S24(4): In additi
Page 18 and 19: I.2 Compliance with legislationAddi
Page 20 and 21: The company’s MOI can also list a
Page 22 and 23: 9. THE BOARD, COMMITTEES AND MEETIN
Page 24 and 25: Section 30: Annual financial statem
Page 26 and 27: 11. ENHANCED ACCOUNTABILITY, AUDIT
Page 30 and 31: Administrative FinesA court, on app
Page 32 and 33: 15. LIABILITY OF DIRECTORSThe Act s
Page 34 and 35: the company’s board. Any person w
Page 36 and 37: c) meetings of shareholders or dire
Page 38 and 39: 20. KEY ASPECTS OF KING 1111. Effec
Page 40 and 41: Rights●●●●●●Receive all
Page 42 and 43: Table APROBATIONARY DIRECTORSSectio
Page 44 and 45: Table CCODIFIED REGIME OF DIRECTORS
Page 46 and 47: Table ERELATED AND INTER-RELATED PE
Page 48 and 49: ●●and where every director is a
Page 50 and 51: Table IREQUIREMENTS TO QUALIFY AS M

DIRECTOR'S GUIDE 2011

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