The Greatly Debated Companies Amendment Bill Signed Into Law
The Greatly Debated Companies Amendment Bill Signed Into Law
August 21, 2024
Corporate Commercial Law
Introduction
The much-anticipated Companies Amendment Act 16 of 2024 (“the Amendment Act”) were signed into law by the President on 26 July 2024, with the date of implementation yet to be announced. The Amendment Act were introduced with the aim to amend some provisions of the Companies Act 71 of 2008 (“the Act”).
These amendments will bring various changes in company law. The new provisions are set to address matters around public, state owned and private entities. The most material changes introduced by the Amendment Act relate to remuneration disclosures, firms are now required to disclose the remuneration of senior executives and justify reasonableness of the remuneration.
Some of the key provisions provided are as follows:
- Remuneration disclosure
Section 30 (4) of the Act is concerned with remuneration disclosures. It provides that where remuneration and benefits are received by a director or prescribed officer of an entity, that director or prescribed officer must be named in the company’s annual’s financial statements. This is to address public concerns regarding high levels of inequalities in the country. This move also aims to ensure accountability and transparency for companies.
Further to this, section 30A has been added in the Act. This provision imposes the duty to prepare and present a company’s remuneration policy for directors and prescribed officers.
The remuneration policy needs to be approved by shareholders at the annual general meeting by ordinary resolution. If not approved, it must be presented at the next annual general meeting or shareholder meeting of the company called for the purpose, until approved. Changes may not be implemented until approved.
There will also be an obligation on public and state-owned companies to prepare a remuneration report consisting of:
- a background statement;
- remuneration policy;
- implementation report (with details of remuneration and benefits of each director and officer);
- the total remuneration including salary and benefits of the highest paid employee;
- the total remuneration including salary and benefits of the lowest paid employee;
- the average and median remuneration of all employees; and
- the remuneration gap of the top 5% highest paid and the bottom 5% of lowest paid employees.
The remuneration report must be approved by the board of the company, presented to shareholders at the annual general meeting, and voted on by ordinary resolution. Where the implementation report is not approved, the remuneration or director committee for remuneration must present at the next annual general meeting to explain how shareholder concerns have been taken into account.
- Financial assistance to subsidiaries
Section 45 of the Act has been amended to exclude financial assistance afforded to an entity’s subsidiary. This clause otherwise requires that the giving of financial assistance to directors, officers and related and inter-related entities requires the passing of a special resolution, a solvency and liquidity and fair and reasonable board resolution and notice to shareholders and trade unions.
- Relaxation of a share buy-back
Another amendment worth noting is outlined in section 48 of the Act, concerning a buy-back. The aim of this new change is to reduce cost and time barriers when implementing a buy-back. This provision now provides as follows:
“a special resolution will not be required when a company is implementing a share buy-back by means of an offer made pro rata to all shareholders, including where directors, prescribed officers or persons related to a director of prescribed officer of the company holds shares which are the subject of the offer and will also not be required in respect of transactions effected on a recognised stock exchange.”
- Social and Ethic Committee
Section 61 of the Act now requires for the appointment of the social and ethics committee at the annual general meeting. Further to this, the amendment proposes for the social and ethics committee report and remuneration report to be presented at the annual general meeting.
Over the past years there have been numerous changes to the provisions of the Act dealing with social and ethics committees. However, these changes have not resulted in material adjustments. The committee is needed to monitor the company’s activities.
In accordance with the provision, all state-owned and listed companies as well as other companies with a public interest score of more than 500 must have such a committee in place.
Conclusion
The Amendment Act aim to address the issues of inequality and enhance transparency, as well as addressing public concerns regarding high levels of inequalities in the country. It also deals with administrative issues, ensuring that company law is clear, user friendly and consistent with well-established principles.
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