REKP 674

COMPANIES ACT
*EXTRACT ONLY*

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Related and inter-related persons, and control

2. (1) For all purposes of this Act—

(a) an individual is related to another individual if they—
(i) are married, or live together in a relationship similar to a marriage; or 50
(ii) are separated by no more than two degrees of natural or adopted
consanguinity or affinity;
(b) an individual is related to a juristic person if the individual directly or
indirectly controls the juristic person, as determined in accordance with
subsection (2); and 55
(c) a juristic person is related to another juristic person if—
(i) either of them directly or indirectly controls the other, or the business of
the other, as determined in accordance with subsection (2);
(ii) either is a subsidiary of the other; or
(iii) a person directly or indirectly controls each of them, or the business of 60
each of them, as determined in accordance with subsection (2).

(2) For the purpose of subsection (1), a person controls a juristic person, or its
business, if—
(a) in the case of a juristic person that is a company—
(i) that juristic person is a subsidiary of that first person, as determined in
accordance with section 3(1)(a); or 5
(ii) that first person together with any related or inter-related person, is—
(aa) directly or indirectly able to exercise or control the exercise of a
majority of the voting rights associated with securities of that
company, whether pursuant to a shareholder agreement or other-
wise; or 10
(bb) has the right to appoint or elect, or control the appointment or
election of, directors of that company who control a majority of the
votes at a meeting of the board;
(b) in the case of a juristic person that is a close corporation, that first person owns
the majority of the members’ interest, or controls directly, or has the right to 15
control, the majority of members’ votes in the close corporation;
(c) in the case of a juristic person that is a trust, that first person has the ability to
control the majority of the votes of the trustees or to appoint the majority of
the trustees, or to appoint or change the majority of the beneficiaries of the
trust; or 20
(d) that first person has the ability to materially influence the policy of the juristic
person in a manner comparable to a person who, in ordinary commercial
practice, would be able to exercise an element of control referred to in
paragraph (a), (b) or (c).
(3) With respect to any particular matter arising in terms of this Act, a court, the 25
Companies Tribunal or the Panel may exempt any person from the application of a
provision of this Act that would apply to that person because of a relationship
contemplated in subsection (1) if the person can show that, in respect of that particular
matter, there is sufficient evidence to conclude that the person acts independently of any
related or inter-related person. 30

Subsidiary relationships

3. (1) A company is—

(a) a subsidiary of another juristic person if that juristic person, one or more other
subsidiaries of that juristic person, or one or more nominees of that juristic
person or any of its subsidiaries, alone or in any combination— 35
(i) is or are directly or indirectly able to exercise, or control the exercise of,
a majority of the general voting rights associated with issued securities of
that company, whether pursuant to a shareholder agreement or otherwise;
or
(ii) has or have the right to appoint or elect, or control the appointment or 40
election of, directors of that company who control a majority of the votes
at a meeting of the board; or

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(b) a wholly-owned subsidiary of another juristic person if all of the general

voting rights associated with issued securities of the company are held or
controlled, alone or in any combination, by persons contemplated in 45
paragraph (a).

(2) For the purpose of determining whether a person controls all or a majority of the
general voting rights associated with issued securities of a company—
(a) voting rights that are exercisable only in certain circumstances are to be taken
into account only— 50
(i) when those circumstances have arisen, and for so long as they continue;
or
(ii) when those circumstances are under the control of the person holding the
voting rights;
(b) voting rights that are exercisable only on the instructions or with the consent
or concurrence of another person are to be treated as being held by a nominee
for that other person; and
(c) voting rights held by—
(i) a person as nominee for another person are to be treated as held by that 5
other person; or
(ii) a person in a fiduciary capacity are to be treated as held by the beneficiary
of those voting rights.
(3) For the purposes of subsection (2), ‘hold’, or any derivative of it, refers to the
registered or direct or indirect beneficial holder of securities conferring a right to vote. 10

Solvency and liquidity test

4. (1) For any purpose of this Act, a company satisfies the solvency and liquidity test
at a particular time if, considering all reasonably foreseeable financial circumstances of
the company at that time—
(a) the assets of the company or, if the company is a member of a group of 15
companies, the aggregate assets of the company, as fairly valued, equal or
exceed the liabilities of the company or, if the company is a member of a
group of companies, the aggregate liabilities of the company, as fairly valued;
and
(b) it appears that the company will be able to pay its debts as they become due in 20
the ordinary course of business for a period of—
(i) 12 months after the date on which the test is considered; or
(ii) in the case of a distribution contemplated in paragraph (a) of the
definition of ‘distribution’ in section 1, 12 months following that
distribution. 25
(2) For the purposes contemplated in subsection (1)—
(a) any financial information to be considered concerning the company must be
based on—
(i) accounting records that satisfy the requirements of section 28; and
(ii) financial statements that satisfy the requirements of section 29; 30
(b) subject to paragraph (c), the board or any other person applying the solvency
and liquidity test to a company—
(i) must consider a fair valuation of the company’s assets and liabilities,
including any reasonably foreseeable contingent assets and liabilities,
irrespective of whether or not arising as a result of the proposed 35
distribution, or otherwise; and
(ii) may consider any other valuation of the company’s assets and liabilities
that is reasonable in the circumstances; and
(c) unless the Memorandum of Incorporation of the company provides otherwise,
a person applying the test in respect of a distribution contemplated in 40
paragraph (a) of the definition of ‘distribution’ in section 1 is not to be
regarded as a liability any amount that would be required, if the company were
to be liquidated at the time of the distribution, to satisfy the preferential rights
upon liquidation of shareholders whose preferential rights upon liquidation
are superior to the preferential rights upon liquidation of those receiving the 45
distribution.

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Categories of companies

8. (1) Two types of companies may be formed and incorporated under this Act,
namely profit companies and non-profit companies. 20
(2) A profit company is—
(a) a state-owned company; or
(b) a private company if—
(i) it is not a state-owned company; and
(ii) its Memorandum of Incorporation— 25
(aa) prohibits it from offering any of its securities to the public; and
(bb) restricts the transferability of its securities;
(c) a personal liability company if—
(i) it meets the criteria for a private company; and
(ii) its Memorandum of Incorporation states that it is a personal liability 30
company; or
(d) a public company, in any other case.
(3) No association of persons formed after 31 December 1939 for the purpose of
carrying on any business that has for its object the acquisition of gain by the association
or its individual members is or may be a company or other form of body corporate unless 35
it—
(a) is registered as a company under this Act;
(b) is formed pursuant to another law; or
(c) was formed pursuant to Letters Patent or Royal Charter before 31 May 1962.

Memorandum of Incorporation, shareholder agreements and rules of company

15. (1) Each provision of a company’s Memorandum of Incorporation—

(a) must be consistent with this Act; and
(b) is void to the extent that it contravenes, or is inconsistent with, this Act. 50
(2) The Memorandum of Incorporation of any company may—
(a) include any provision—
(i) dealing with a matter that this Act does not address; or
(ii) altering the effect of any alterable provision of this Act;
(b) contain any special conditions applicable to the company, and any require- 55
ment for the amendment of any such condition in addition to the requirements
set out in section 16; or

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(c) prohibit the amendment of any particular provision of the Memorandum of

Incorporation.
(3) Except to the extent that a company’s Memorandum of Incorporation provides
otherwise, the board of the company may make, amend or repeal any necessary or
incidental rules relating to the governance of the company in respect of matters that are 5
not addressed in this Act or the Memorandum of Incorporation, by—
(a) publishing a copy of those rules, in any manner required or permitted by the
Memorandum of Incorporation, or the rules of the company; and
(b) filing a copy of those rules.
(4) A rule contemplated in subsection (3)— 10
(a) must be consistent with this Act and the company’s Memorandum of
Incorporation, and any such rule that is inconsistent with this Act or the
company’s Memorandum of Incorporation is void to the extent of the
inconsistency;
(b) takes effect on a date that is the later of— 15
(i) 20 business days after the rule is published in terms of subsection (3)(a);
or
(ii) the date, if any, specified in the rule; and
(c) is binding—
(i) on an interim basis from the time it takes effect until it is put to a vote at 20
the next general shareholders meeting of the company; and
(ii) on a permanent basis only if it has been ratified by an ordinary resolution
at the meeting contemplated in subparagraph (i).
(5) If a rule that has been published in terms of subsection (3) is not subsequently
ratified as contemplated in subsection (4)(c), the company’s board may not make a 25
substantially similar rule within the ensuing 12 months, unless it has been approved in
advance by ordinary resolution at a shareholders meeting.
(6) A company’s Memorandum of Incorporation, and any rules of the company, are
binding—
(a) between the company and each shareholder; 30
(b) between or among the shareholders of the company; and
(c) between the company and—
(i) each director or prescribed officer of the company; or
(ii) any other person serving the company as a member of the audit
committee or as a member of a committee of the board, 35
in the exercise of their respective functions within the company.
(7) The shareholders of a company may enter into any agreement with one another
concerning any matter relating to the company, but any such agreement must be
consistent with this Act and the company’s Memorandum of Incorporation, and any
provision of such an agreement that is inconsistent with this Act or the company’s 40
Memorandum of Incorporation is void to the extent of the inconsistency.

Amending Memorandum of Incorporation

16. (1) A company’s Memorandum of Incorporation may be amended—

(a) in compliance with a court order in the manner contemplated in subsection
(4); 45
(b) in the manner contemplated in section 36(3) and (4); or
(c) at any other time if a special resolution to amend it—
(i) is proposed by—
(aa) the board of the company; or
(bb) shareholders entitled to exercise at least 10% of the voting rights 50
that may be exercised on such a resolution; and
(ii) is adopted at a shareholders meeting, or in accordance with section 60,
subject to subsection (3).
(2) A company’s Memorandum of Incorporation may provide different requirements
than those set out in subsection (1)(c)(i) with respect to proposals for amendments. 55
(3) Despite subsection (1)(c)(ii), if a non-profit company has no voting members—
(a) the board of that company may amend its Memorandum of Incorporation in
the manner contemplated in subsection (1)(c)(i)(aa); and
(b) the requirements of subsection (1)(c)(ii) do not apply to the company.

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(4) An amendment to a company’s Memorandum of Incorporation required by any

court order—
(a) must be effected by a resolution of the company’s board; and
(b) does not require a special resolution as contemplated in subsection (1)(c)(ii).
(5) An amendment contemplated in subsection (1)(c) may take the form of— 5
(a) a new Memorandum of Incorporation in substitution for the existing
Memorandum; or
(b) one or more alterations to the existing Memorandum of Incorporation by—
(i) changing the name of the company;
(ii) deleting, altering or replacing any of its provisions; 10
(iii) inserting any new provisions into the Memorandum of Incorporation; or
(iv) making any combination of alterations contemplated in this paragraph.
(6) If a profit company amends its Memorandum of Incorporation in such a manner
that it no longer meets the criteria for its particular category of profit company, the
company must also amend its name at the same time by altering the ending expression 15
as appropriate to reflect the category of profit company into which it now falls.
(7) Within the prescribed time after amending its Memorandum of Incorporation, a
company must file a Notice of Amendment together with the prescribed fee, and—
(a) the provisions of section 13(3) and (4)(a) and section 14, each read with the
changes required by the context, apply to the filing of the Notice of 20
Amendment; and
(b) if the amendment to a company’s Memorandum of Incorporation—
(i) has substituted a new Memorandum, as contemplated in subsection
(5)(a), the provisions of section 13 (2)(b), read with the changes required
by the context, apply to the filing of the Notice of Amendment; or 25
(ii) has altered the existing Memorandum, as contemplated in subsection
(5)(b)—
(aa) the company must include a copy of the amendment with the Notice
of Amendment; and
(bb) the Commission may require the company to file a full copy of its 30
amended Memorandum of Incorporation within a reasonable time.
(8) If a company’s amendment to its Memorandum of Incorporation includes a
change of the company’s name—
(a) the provisions of section 14(2) and (3), read with the changes required by the
context, apply afresh to the company; and 35
(b) if the amended name of the company—
(i) is reserved in terms of section 12 for that company, the Commission
must—
(aa) issue to the company an amended registration certificate; and
(bb) alter the name of the company on the companies register; or 40
(ii) is not reserved in terms of section 12 for that company, the Commission
must take the steps set out in subparagraph (i), unless the name is—
(aa) the registered name of another company, registered external
company, close corporation or co-operative; or
(bb) reserved in terms of section 12 for another person. 45
(9) An amendment to a company’s Memorandum of Incorporation takes effect from
the later of—
(a) the date on, and time at, which the Commission accepts the filing of the Notice
of Amendment; or
(b) the date, if any, set out in the Notice of Amendment. 50

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Validity of company actions

20. (1) If a company’s Memorandum of Incorporation limits, restricts or qualifies the

purposes, powers or activities of that company, as contemplated in section 19(1)(b)(ii)
—
25

(a) no action of the company is void by reason only that—

(ii) the action was prohibited by that limitation, restriction or qualification;
or
(ii) as a consequence of that limitation, restriction or qualification, the 30
directors had no authority to authorise the action by the company; and
(b) in any legal proceeding, other than proceedings between—
(i) the company and its shareholders, directors or prescribed officers; or
(ii) the shareholders and directors or prescribed officers of the company,
no person may rely on such limitation, restriction or qualification to assert that 35
an action contemplated in paragraph (a) is void.
(2) If a company’s Memorandum of Incorporation limits, restricts or qualifies the
purposes, powers or activities of that company, or limits the authority of the directors to
perform an act on behalf of the company, the shareholders, by special resolution, may
ratify any action by the company or the directors that is inconsistent with any such limit, 40
restriction or qualification, subject to subsection (3).
(3) An action contemplated in subsection (2) may not be ratified if it is in
contravention of this Act.
(4) One or more shareholders, directors or prescribed officers of a company, or a trade
union representing employees of the company, may take proceedings to restrain the 45
company from doing anything inconsistent with this Act.
(5) One or more shareholders, directors or prescribed officers of a company may take
proceedings to restrain the company or the directors from doing anything inconsistent
with any limitation, restriction or qualification contemplated in subsection (2), but any
such proceedings are without prejudice to any rights to damages of a third party who— 50

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(a) obtained those rights in good faith; and

(b) did not have actual knowledge of the limit, restriction or qualification.
(6) Each shareholder of a company has a claim for damages against any person who
fraudulently or due to gross negligence causes the company to do anything inconsistent
with— 5
(a) this Act; or
(b) a limitation, restriction or qualification contemplated in this section, unless
that action has been ratified by the shareholders in terms of subsection (2).
(7) A person dealing with a company in good faith, other than a director, prescribed
officer or shareholder of the company, is entitled to presume that the company, in making 10
any decision in the exercise of its powers, has complied with all of the formal and
procedural requirements in terms of this Act, its Memorandum of Incorporation and any
rules of the company unless, in the circumstances, the person knew or reasonably ought
to have known of any failure by the company to comply with any such requirement.
(8) Subsection (7) must be construed concurrently with, and not in substitution for, 15
any relevant common law principle relating to the presumed validity of the actions of a
company in the exercise of its powers.

Pre-incorporation contracts

21. (1) A person may enter into a written agreement in the name of, or purport to act
in the name of, or on behalf of, an entity that is contemplated to be incorporated in terms 20
of this Act, but does not yet exist at the time.
(2) A person who does anything contemplated in subsection (1) is jointly and
severally liable with any other such person for liabilities created as provided for in the
pre-incorporation contract while so acting, if—
(a) the contemplated entity is not subsequently incorporated; or 25
(b) after being incorporated, the company rejects any part of such an agreement or
action.
(3) If, after its incorporation, a company enters into an agreement on the same terms
as, or in substitution for, an agreement contemplated in subsection (1), the liability of a
person under subsection (2) in respect of the substituted agreement is discharged. 30
(4) Within three months after the date on which a company was incorporated the
board of that company may completely, partially or conditionally ratify or reject any
pre-incorporation contract or other action purported to have been made or done in its
name or on its behalf, as contemplated in subsection (1).
(5) If, within three months after the date on which a company was incorporated, the 35
board has neither ratified nor rejected a particular pre-incorporation contract, or other
action purported to have been made or done in the name of the company, or on its behalf,
as contemplated in subsection (1), the company will be regarded to have ratified that
agreement or action.
(6) To the extent that a pre-incorporation contract or action has been ratified or 40
regarded to have been ratified in terms of subsection (5)—
(a) the agreement is as enforceable against the company as if the company had
been a party to the agreement when it was made; and
(b) the liability of a person under subsection (2) in respect of the ratified
agreement or action is discharged. 45
(7) If a company rejects an agreement or action contemplated in subsection (1), a
person who bears any liability in terms of subsection (2) for that rejected agreement or
action may assert a claim against the company for any benefit it has received, or is
entitled to receive, in terms of the agreement or action.

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Reckless trading prohibited

22. (1) A company must not—

(a) carry on its business recklessly, with gross negligence, with intent to defraud
any person or for any fraudulent purpose; or
(b) trade under insolvent circumstances. 5
(2) If the Commission has reasonable grounds to believe that a company is engaging
in conduct prohibited by subsection (1), the Commission may issue a notice to the
company to show cause why the company should be permitted to continue carrying on
its business, or to trade, as the case may be.
(3) If a company to whom a notice has been issued in terms of subsection (2) fails 10
within 20 business days to satisfy the Commission that it is not engaging in conduct
prohibited by subsection (1), the Commission may issue a compliance notice to the
company requiring it to cease carrying on its business or trading, as the case may be.

Part C

Transparency, accountability and integrity of companies 15

Form and standards for company records

24. (1) Any documents, accounts, books, writing, records or other information that a
company is required to keep in terms of this Act or any other public regulation must be
kept— 25
(a) in written form, or other form or manner that allows that information to be
converted into written form within a reasonable time; and
(b) for a period of seven years, or any longer period of time specified in any other
applicable public regulation, subject to subsection (2).
(2) If a company has existed for a shorter time than contemplated in subsection (1)(b), 30
the company is required to retain records for that shorter time.
(3) Every company must maintain—
(a) a copy of its Memorandum of Incorporation, and any amendments or
alterations to it, and any rules of the company made in terms of section 15(3)
to (5); 35
(b) a record of its directors, including—
(i) details of any person who has served as a director of the company, for a
period of seven years after the person ceases to serve as a director; and
(ii) the information required by or in terms of subsection (5);
(c) copies of all— 40
(i) reports presented at an annual general meeting of the company, for a
period of seven years after the date of any such meeting;
(ii) annual financial statements required by this Act, for seven years after the
date on which each such particular statements were issued; and
(iii) accounting records required by this Act, for the current financial year and 45
for the previous seven completed financial years of the company;
(d) notice and minutes of all shareholders meetings, including—
(i) all resolutions adopted by them, for seven years after the date each such
resolution was adopted; and
(ii) any document that was made available by the company to the holders of 50
securities in relation to each such resolution;
(e) copies of any written communications sent generally by the company to all

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holders of any class of the company’s securities, for a period of seven years
after the date on which each such communication was issued; and
(f) minutes of all meetings and resolutions of directors, or directors’ committees,
or the audit committee, if any, for a period of seven years after the date—
(i) of each such meeting; or 5
(ii) on which each such resolution was adopted.
(4) In addition to the requirements of subsection (3), every profit company must
maintain—
(a) a securities register or its equivalent, as required by section 50; and
(b) the records required in terms of section 85, if that section applies to the 10
company.
(5) A company’s record of directors must include, in respect of each director, that
person’s—
(a) full name, and any former names;
(b) identity number or, if the person does not have an identity number, the 15
person’s date of birth;
(c) nationality and passport number, if the person is not a South African;
(d) occupation;
(e) date of their most recent election or appointment as director of the company;
(f) name and registration number of every other company or foreign company of 20
which the person is a director, and in the case of a foreign company, the
nationality of that company; and
(g) any other prescribed information.
(6) To protect personal privacy, the Minister, by notice in the Gazette, may exempt
from the application of subsection (5)(a) categories of names as formerly used by any 25
person—
(a) before attaining majority, or by persons who have been adopted, married,
divorced or widowed; or
(b) in other circumstances prescribed by the Minister.

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Financial year of company

27. (1) A company must have a financial year, ending on a date set out in the
company’s Notice of Incorporation, subject to any change made in terms of subsection 25
(4).
(2) The first financial year of a company—
(a) begins on the date that the incorporation of the company is registered, as
stated in its registration certificate; and
(b) ends on the date set out in the Notice of Incorporation, which may not be more 30
than 15 months after the date contemplated in paragraph (a).
(3) The second and each subsequent financial year of a company—
(a) begins when the preceding financial year ends; and
(b) ends on the first anniversary of the date contemplated in paragraph (a), unless
the financial year end has been changed as contemplated in subsection (4). 35
(4) The board of a company may change its financial year end at any time, by filing
a notice of that change, but—
(a) it may not do so more than once during any financial year;
(b) the newly established financial year end must be later than the date on which
the notice is filed; and 40
(c) the date as changed may not result in a financial year ending more than 15
months after the end of the preceding financial year.
(5) Despite subsection (2)(b) or (3), the financial year of a company that has changed
the date contemplated in subsection (1) ends on the date as changed.
(6) If, in a particular year, the financial year of a company ends on a Saturday, Sunday 45
or public holiday, that financial year will be regarded to have ended on the next
following business day.
(7) The financial year of the company is its annual accounting period.

Accounting records

28. (1) A company must keep accurate and complete accounting records in one of the 50
official languages of the Republic—
(a) as necessary to enable the company to satisfy its obligations in terms of this
Act or any other law with respect to the preparation of financial statements;
and

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(b) including any prescribed accounting records, which must be kept in the
prescribed manner and form.
(2) A company’s accounting records must be kept at, or be accessible from, the
registered office of the company.
(3) It is an offence for— 5
(a) a company—
(i) with an intention to deceive or mislead any person—
(aa) to fail to keep accurate or complete accounting records;
(bb) to keep records other than in the prescribed manner and form, if any;
or 10
(ii) to falsify any of its accounting records, or permit any person to do so; or
(b) any person to falsify a company’s accounting records.
(4) For greater certainty, the Commission may issue a compliance notice, as
contemplated in section 171, to a company in respect of any failure by the company to
comply with the requirements of this section, irrespective whether that failure 15
constitutes an offence in terms of subsection (3).

Financial statements

29. (1) If a company provides any financial statements, including any annual financial
statements, to any person for any reason, those statements must—
(a) satisfy the financial reporting standards as to form and content, if any such 20
standards are prescribed;
(b) present fairly the state of affairs and business of the company, and explain the
transactions and financial position of the business of the company;
(c) show the company’s assets, liabilities and equity, as well as its income and
expenses, and any other prescribed information; 25
(d) set out the date on which the statements were produced, and the accounting
period to which the statements apply; and
(e) bear, on the first page of the statements, a prominent notice indicating—
(i) whether the statements—
(aa) have been audited in compliance with any applicable requirements 30
of this Act;
(bb) if not audited, have been independently reviewed in compliance
with any applicable requirements of this Act; or
(cc) have not been audited or independently reviewed; and
(ii) the name, and professional designation, if any, of the individual who 35
prepared, or supervised the preparation of, those statements.
(2) Any financial statements prepared by a company, including any annual financial
statements of a company as contemplated in section 30, must not be—
(a) false or misleading in any material respect; or
(b) incomplete in any material particular, subject only to subsection (3). 40
(3) A company may provide any person with a summary of any particular financial
statements, but—
(a) any such summary must comply with any prescribed requirements; and
(b) the first page of the summary must bear a prominent notice—
(i) stating that it is a summary of particular financial statements prepared by 45
the company, and setting out the date of those statements;
(ii) stating whether the financial statements that it summarises have been
audited, independently reviewed, or are unaudited, as contemplated in
subsection (1)(e);
(iii) stating the name, and professional designation, if any, of the individual 50
who prepared, or supervised the preparation of, the financial statements
that it summarises; and
(iv) setting out the steps required to obtain a copy of the financial statements
that it summarises.
(4) Subject to subsection (5), the Minister, after consulting the Council, may make 55
regulations prescribing—

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(a) financial reporting standards contemplated in this Part; or

(b) form and content requirements for summaries contemplated in subsection (3).
(5) Any regulations contemplated in subsection (4)—
(a) must promote sound and consistent accounting practices;
(b) in the case of financial reporting standards, must be consistent with the 5
International Financial Reporting Standards of the International Accounting
Standards Board or its successor body; and
(c) may establish different standards applicable to—
(i) profit and non-profit companies; and
(ii) different categories of profit companies. 10
(6) Subject to section 214(2), a person is guilty of an offence if the person is a party
to the preparation, approval, dissemination or publication of—
(a) any financial statements, including any annual financial statements contem-
plated in section 30, knowing that those statements—
(i) do not comply with the requirements of subsection (1); or 15
(ii) are materially false or misleading, as contemplated in subsection (2); or
(b) a summary of any financial statements, knowing that—
(i) the statements that it summarises do not comply with the requirements of
subsection (1), or are materially false or misleading, as contemplated in
subsection (2); or 20
(ii) the summary does not comply with the requirements of subsection (3), or
is materially false or misleading.

Annual financial statements

30. (1) Each year, a company must prepare annual financial statements within six
months after the end of its financial year, or such shorter period as may be appropriate 25
to provide the required notice of an annual general meeting in terms of section 61(7).
(2) The annual financial statements must—
(a) be audited, in the case of a public company; or
(b) in the case of any other company—
(i) be audited, if so required by the regulations made in terms of subsection 30
(7) taking into account whether it is desirable in the public interest,
having regard to the economic or social significance of the company, as
indicated by—
(aa) its annual turnover;
(bb) the size of its workforce; or 35
(cc) the nature and extent of its activities; or
(ii) be either—
(aa) audited voluntarily at the option of the company; or
(bb) independently reviewed in a manner that satisfies the regulations
made in terms of subsection (7) unless exempted if it is a private 40
company and—
(AA) one person holds, or has all of the beneficial interest in,
all of the securities issued by the company; or
(BB) every person who is a holder of, or has a beneficial
interest in, any securities issued by the company is also 45
a director of the company unless the company has only
one director, and that director is a person contemplated
in section 69(12).
(3) The annual financial statements of a company must—
(a) include an auditor’s report, if the statements are audited; 50
(b) include a report by the directors with respect to the state of affairs, the business
and profit or loss of the company, or of the group of companies, if the
company is part of a group, including—
(i) any matter material for the shareholders to appreciate the company’s
state of affairs; and 55
(ii) any prescribed information;
(c) be approved by the board and signed by an authorised director; and

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(d) be presented to the first shareholders meeting after the statements have been
approved by the board.
(4) The annual financial statements of each company that is required in terms of this
Act to have its annual financial statements audited, must include particulars showing—
(a) the remuneration, as defined in subsection (6), and benefits received by each 5
director, or individual holding any prescribed office in the company;
(b) the amount of—
(i) any pensions paid by the company to or receivable by current or past
directors or individuals who hold or have held any prescribed office in
the company; 10
(ii) any amount paid or payable by the company to a pension scheme with
respect to current or past directors or individuals who hold or have held
any prescribed office in the company;
(c) the amount of any compensation paid in respect of loss of office to current or
past directors or individuals who hold or have held any prescribed office in the 15
company;
(d) the number and class of any securities issued to a director or person holding
any prescribed office in the company, or to any person related to any of them,
and the consideration received by the company for those securities; and
(e) details of service contracts of current directors and individuals who hold any 20
prescribed office in the company.
(5) The information to be disclosed under subsection (4) must satisfy the prescribed
standards, and must show the amount of any remuneration or benefits paid to or
receivable by persons in respect of—
(a) services rendered as directors or prescribed officers of the company; or 25
(b) services rendered while being directors or prescribed officers of the
company—
(i) as directors or prescribed officers of any other company within the same
group of companies; or
(ii) otherwise in connection with the carrying on of the affairs of the 30
company or any other company within the same group of companies.
(6) For the purposes of subsections (4) and (5), ‘remuneration’ includes—
(a) fees paid to directors for services rendered by them to or on behalf of the
company, including any amount paid to a person in respect of the person’s
accepting the office of director; 35
(b) salary, bonuses and performance-related payments;
(c) expense allowances, to the extent that the director is not required to account
for the allowance;
(d) contributions paid under any pension scheme not otherwise required to be
disclosed in terms of subsection (4)(b); 40
(e) the value of any option or right given directly or indirectly to a director, past
director or future director, or person related to any of them, as contemplated in
section 42;
(f) financial assistance to a director, past director or future director, or person
related to any of them, for the subscription of shares, as contemplated in 45
section 44; and
(g) with respect to any loan or other financial assistance by the company to a
director, past director or future director, or a person related to any of them, or
any loan made by a third party to any such person, as contemplated in section
45, if the company is a guarantor of that loan, the value of— 50
(i) any interest deferred, waived or forgiven; or
(ii) the difference in value between—
(aa) the interest that would reasonably be charged in comparable
circumstances at fair market rates in an arm’s length transaction;
and 55
(bb) the interest actually charged to the borrower, if less.
(7) The Minister may make regulations, including different requirements for different
categories of companies, prescribing—

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(a) the categories of any private companies that are required to have their
respective annual financial statements audited, as contemplated in subsection
(2)(b)(i); and
(b) the manner, form and procedures for the conduct of an independent review
other than an audit, as contemplated in subsection (2)(b)(ii)(bb), as well as the 5
professional qualifications, if any, of persons who may conduct such reviews.

Part D

Capitalisation of profit companies

Legal nature of company shares and requirement to have shareholders

35. (1) A share issued by a company is movable property, transferable in any manner
provided for or recognised by this Act or other legislation. 25
(2) A share does not have a nominal or par value, subject to item 6 of Schedule 5.
(3) A company may not issue shares to itself.
(4) An authorised share of a company has no rights associated with it until it has been 30
issued.
(5) Shares of a company that have been issued and subsequently—
(a) acquired by that company, as contemplated in section 48; or
(b) surrendered to that company in the exercise of appraisal rights in terms of
section 164, 35
have the same status as shares that have been authorised but not issued.
(6) Despite the repeal of the Companies Act, 1973 (Act No. 61 of 1973), a share
issued by a pre-existing company, and held by a shareholder immediately before the
effective date, continues to have all of the rights associated with it immediately before
the effective date, irrespective of whether those rights existed in terms of the company’s 40
Memorandum of Incorporation, or in terms of that Act, subject only to—
(a) amendments to that company’s Memorandum of Incorporation after the
effective date;
(b) the operation of subsection (5); and
(c) the regulations contemplated in item 6(3) of Schedule 5. 45

Authorisation for shares

36. (1) A company’s Memorandum of Incorporation—

(a) must set out the classes of shares, and the number of shares of each class, that
the company is authorised to issue;
(b) must set out, with respect to each class of shares— 50
(i) a distinguishing designation for that class; and

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(ii) the preferences, rights, limitations and other terms associated with that
class, subject to paragraph (d);
(c) may authorise a stated number of unclassified shares, which are subject to
classification by the board of the company in accordance with subsection
(3)(c); and 5
(d) may set out a class of shares—
(i) without specifying the associated preferences, rights, limitations or other
terms of that class;
(ii) for which the board of the company must determine the associated
preferences, rights, limitations or other terms; and 10
(iii) which must not be issued until the board of the company has determined
the associated preferences, rights, limitations or other terms, as
contemplated in subparagraph (ii).
(2) The authorisation and classification of shares, the numbers of authorised shares of
each class, and the preferences, rights, limitations and other terms associated with each 15
class of shares, as set out in a company’s Memorandum of Incorporation, may be
changed only by—
(a) an amendment of the Memorandum of Incorporation by special resolution of
the shareholders; or
(b) the board of the company, in the manner contemplated in subsection (3), 20
except to the extent that the Memorandum of Incorporation provides
otherwise.
(3) Except to the extent that a company’s Memorandum of Incorporation provides
otherwise, the company’s board may—
(a) increase or decrease the number of authorised shares of any class of shares; 25
(b) reclassify any classified shares that have been authorised but not issued;
(c) classify any unclassified shares that have been authorised as contemplated in
subsection (1)(c), but are not issued; or
(d) determine the preferences, rights, limitations or other terms of shares in a class
contemplated in subsection (1)(d). 30
(4) If the board of a company acts pursuant to its authority contemplated in subsection
(3), the company must file a Notice of Amendment of its Memorandum of Incorporation,
setting out the changes effected by the board.

Preferences, rights, limitations and other share terms

37. (1) All of the shares of any particular class authorised by a company have 35
preferences, rights, limitations and other terms that are identical to those of other shares
of the same class, except to the extent that the company’s Memorandum of
Incorporation provides otherwise.
(2) Each issued share of a company, regardless of its class, has associated with it one
general voting right, except to the extent provided otherwise by— 40
(a) this Act; or
(b) the preferences, rights, limitations and other terms determined by or in terms
of the company’s Memorandum of Incorporation in accordance with section
36.
(3) Despite anything to the contrary in a company’s Memorandum of Incorporation— 45
(a) every share issued by that company has associated with it an irrevocable right
of the shareholder to vote on any proposal to amend the preferences, rights,
limitations and other terms associated with that share; and
(b) if that company has established only one class of shares—
(i) those shares have a right to be voted on every matter that may be decided 50
by shareholders of the company; and
(ii) the holders of that class of shares are entitled to receive the net assets of
the company upon its liquidation.
(4) If a company’s Memorandum of Incorporation has established more than one class
of shares the Memorandum of Incorporation, in setting out the preferences, rights, 55
limitations and other terms of those classes of shares, must provide that—
(a) for each particular matter that may be submitted for a decision to shareholders
of the company, at least one class of the company’s shares has voting rights
that may be exercised on that matter; and

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(b) the holders of at least one class of the company’s shares, irrespective of
whether it is the same as any class contemplated in paragraph (a), are entitled
to receive the net assets of the company upon its liquidation.
(5) Subject to any other law, a company’s Memorandum of Incorporation may
establish, for any particular class of shares, preferences, rights, limitations or other terms 5
that—
(a) confer special, conditional or limited voting rights;
(b) provide for shares of that class to be redeemable, subject to the requirements
of sections 46 and 48, or convertible, as specified in the Memorandum of
Incorporation— 10
(i) at the option of the company, the shareholder, or another person at any
time, or upon the occurrence of any specified contingency;
(ii) for cash, indebtedness, securities or other property;
(iii) at prices and in amounts specified, or determined in accordance with a
formula; or 15
(iv) subject to any other terms set out in the company’s Memorandum of
Incorporation;
(c) entitle the shareholders to distributions calculated in any manner, including
dividends that may be cumulative, non-cumulative, or partially cumulative,
subject to the requirements of sections 46 and 47; or 20
(d) provide for shares of that class to have preference over any other class of
shares with respect to distributions, or rights upon the final liquidation of the
company.
(6) The Memorandum of Incorporation of a company may provide for preferences,
rights, limitations or other terms of any class of shares of that company to vary in 25
response to any objectively ascertainable external fact or facts.
(7) For the purpose of subsection (6)—
(a) ‘‘external fact or facts’’ includes the occurrence of any event, a variation in
any fact, benchmark or other point of reference, a determination or action by
the company, its board, or any other person, an agreement to which the 30
company is a party, or any other document; and
(b) the manner in which a fact affects the preferences, rights, limitations or other
terms of shares must be expressly determined by or in terms of the company’s
Memorandum of Incorporation, in accordance with section 36.
(8) If the Memorandum of Incorporation of a company has been amended to 35
materially and adversely alter the preferences, rights, limitations or other terms of a class
of shares, any holder of those shares is entitled to seek relief in terms of section 164 if
that shareholder—
(a) notified the company in advance of the intention to oppose the resolution to
amend the Memorandum of Incorporation; and 40
(b) was present at the meeting, and voted against that resolution.

Issuing shares

38. (1) The board of a company may resolve to issue shares of the company at any
time, but only within the classes, and to the extent, that the shares have been authorised
by or in terms of the company’s Memorandum of Incorporation, in accordance with 45
section 36.
(2) If a company issues shares—
(a) that have not been authorised in accordance with section 36; or
(b) in excess of the number of authorised shares of any particular class,
the issuance of those shares may be retroactively authorised in accordance with 50
section 36.
(3) If a resolution seeking to retroactively authorise an issue of shares, as
contemplated in subsection (2), is not adopted when it is put to a vote—
(a) the share issue is a nullity to the extent that it exceeds any authorisation;
(b) the company must return to any person the fair value of the consideration 55
received by the company in respect of that share issue to the extent that it is
nullified, together with interest in accordance with the Prescribed Rate of
Interest Act, 1975 (Act No. 55 of 1975), from the date on which the

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consideration for the shares was received by the company, until the date on
which the company complies with this paragraph;
(c) any certificate evidencing a share so issued and nullified, and any entry in a
securities register in respect of such an issue, is void; and
(d) a director of the company is liable to the extent set out in section 77(3)(e)(i) if 5
the director—
(i) was present at a meeting when the board approved the issue of any
unauthorised shares, or participated in the making of such a decision in
terms of section 74; and
(ii) failed to vote against the issue of those shares, despite knowing that the 10
shares had not been authorised in accordance with section 36.

Subscription of shares

39. (1) This section—

(a) does not apply to a public company or state-owned company, except to the
extent that the company’s Memorandum of Incorporation provides otherwise; 15
and
(b) applies to a private company or personal liability company with respect to any
issue of its shares, other than—
(i) shares issued—
(aa) in terms of options or conversion rights; or 20
(bb) as contemplated in section 40(5) to (7); or
(ii) capitalisation shares issued as contemplated in section 47.
(2) If a private company proposes to issue any shares, other than as contemplated in
subsection (1)(b), each shareholder of that private company has a right, before any other
person who is not a shareholder of that company, to be offered and, within a reasonable 25
time to subscribe for, a percentage of the shares to be issued equal to the voting power
of that shareholder’s general voting rights immediately before the offer was made.
(3) A private or personal liability company’s Memorandum of Incorporation may
limit, negate, restrict or place conditions upon the right set out in subsection (2), with
respect to any or all classes of shares of that company. 30
(4) Except to the extent that a private or personal liability company’s Memorandum
of Incorporation provides otherwise—
(a) in exercising a right in terms of subsection (2), a shareholder may subscribe
fewer shares than the shareholder would be entitled to subscribe under that
subsection; and 35
(b) shares not subscribed by a shareholder within the reasonable time contem-
plated in subsection (2), may be offered to other persons to the extent
permitted by the Memorandum of Incorporation.

Consideration for shares

40. (1) The board of a company may issue authorised shares only— 40
(a) for adequate consideration to the company, as determined by the board;
(b) in terms of conversion rights associated with previously issued securities of
the company; or
(c) as a capitalisation share as contemplated in section 47.
(2) Before a company issues any particular shares, the board must determine the 45
consideration for which, and the terms on which, those shares will be issued.
(3) A determination by the board of a company in terms of subsection (2) as to the
adequacy of consideration for any shares may not be challenged on any basis other than
in terms of section 76, read with section 77(2).
(4) Subject to subsections (5) to (7), when a company has received the consideration 50
approved by its board for the issuance of any shares—
(a) those shares are fully paid; and

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(b) the company must issue those shares and cause the name of the holder to be
entered on the company’s securities register in accordance with Part E of this
Chapter.
(5) If the consideration for any shares that are issued or to be issued is in the form of
an instrument that is not negotiable by the company at the time the shares are to be 5
issued, or is in the form of an agreement for future services, future benefits or future
payment by the subscribing party—
(a) the consideration for those shares is regarded as having been received by the
company at any time only to the extent—
(i) that the instrument is negotiable by the company; or 10
(ii) that the subscribing party to the agreement has fulfilled its obligations in
terms of the agreement; and
(b) upon receiving the instrument or entering into the agreement, the company
must—
(i) issue the shares immediately; and 15
(ii) cause the issued shares to be transferred to a third party, to be held in trust
and later transferred to the subscribing party in accordance with a trust
agreement.
(6) Except to the extent that a trust agreement contemplated in subsection (5)(b)
provides otherwise— 20
(a) voting rights, and appraisal rights set out in section 164, associated with
shares that have been issued but are held in trust may not be exercised;
(b) any pre-emptive rights associated with shares that have been issued but are
held in trust may be exercised only to the extent that the instrument has
become negotiable by the company or the subscribing party has fulfilled its 25
obligations under the agreement;
(c) any distribution with respect to shares that have been issued but are held in
trust—
(i) must be paid or credited by the company to the subscribing party to the
extent that the instrument has become negotiable by the company or the 30
subscribing party has fulfilled its obligations under the agreement; and
(ii) may be credited against the remaining value at that time of any services
still to be performed by the subscribing party, any future payment
remaining due, or the benefits still to be received by the company; and
(d) shares that have been issued but are held in trust— 35
(i) may not be transferred by or at the direction of the subscribing party
unless the company has expressly consented to the transfer in advance;
(ii) may be transferred to the subscribing party on a quarterly basis, to the
extent that the instrument has become negotiable by the company or the
subscribing party has fulfilled its obligations under the agreement; 40
(iii) must be transferred to the subscribing party when the instrument has
become negotiable by the company, or upon satisfaction of all of the
subscribing party’s obligations in terms of the agreement; and
(iv) to the extent that the instrument is dishonoured after becoming
negotiable, or that the subscribing party has failed to fulfil its obligations 45
under the agreement, must be returned to the company and cancelled, on
demand by the company.
(7) A company may not make a demand contemplated in subsection (6)(d)(iv)
unless—
(a) a negotiable instrument is dishonoured after becoming negotiable by the 50
company; or
(b) in the case of an agreement, the subscribing party has failed to fulfil any
obligation in terms of the agreement for a period of at least 40 business days
after the date on which the obligation was due to be fulfilled.

Shareholder approval for issuing shares in certain cases 55

41. (1) Subject to subsection (2), an issue of shares or securities convertible into
shares, or a grant of options contemplated in section 42, or a grant of any other rights

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exercisable for securities, must be approved by a special resolution of the shareholders

of a company, if the shares, securities, options or rights are issued to a—
(a) director, future director, prescribed officer, or future prescribed officer of the
company;
(b) person related or inter-related to the company, or to a director or prescribed 5
officer of the company; or
(c) nominee of a person contemplated in paragraph (a) or (b).
(2) Subsection (1) does not apply if the issue of shares, securities or rights is—
(a) under an agreement underwriting the shares, securities or rights;
(b) in the exercise of a pre-emptive right to be offered and to subscribe shares, as 10
contemplated in section 39;
(c) in proportion to existing holdings, and on the same terms and conditions as
have been offered to all the shareholders of the company or to all the
shareholders of the class or classes of shares being issued;
(d) pursuant to an employee share scheme that satisfies the requirements of 15
section 97; or
(e) pursuant to an offer to the public, as defined in section 95(1)(h), read with
section 96.
(3) An issue of shares, securities convertible into shares, or rights exercisable for
shares in a transaction, or a series of integrated transactions, requires approval of the 20
shareholders by special resolution if the voting power of the class of shares that are
issued or issuable as a result of the transaction or series of integrated transactions will be
equal to or exceed 30% of the voting power of all the shares of that class held by
shareholders immediately before the transaction or series of transactions.
(4) In subsection (3)— 25
(a) for purposes of determining the voting power of shares issued and issuable as
a result of a transaction or series of integrated transactions, the voting power
of shares is the greater of—
(i) the voting power of the shares to be issued; or
(ii) the voting power of the shares that would be issued after giving effect to 30
the conversion of convertible shares and other securities and the exercise
of rights to be issued;
(b) a series of transactions is integrated if—
(i) consummation of one transaction is made contingent on consummation
of one or more of the other transactions; or 35
(ii) the transactions are entered into within a 12-month period, and involve
the same parties, or related persons; and—
(aa) they involve the acquisition or disposal of an interest in one
particular company or asset; or
(bb) taken together, they lead to substantial involvement in a business 40
activity that did not previously form part of the company’s principal
activity.
(5) A director of a company is liable to the extent set out in section 77(3)(e)(ii) if the
director—
(a) was present at a meeting when the board approved the issue of any securities 45
as contemplated in this section, or participated in the making of such a
decision in terms of section 74; and
(b) failed to vote against the issue of those securities, despite knowing that the
issue of those securities was inconsistent with this section.
(6) In this section, ‘future director’ or ‘future prescribed officer’ does not include a 50
person who becomes a director or prescribed officer of the company more than six
months after acquiring a particular option or right.

Options for subscription of securities

42. (1) A company may issue options for the allotment or subscription of authorised
shares or other securities of the company. 55
(2) The board of a company must determine the consideration or other benefit for
which, and the terms upon which—
(a) any options are issued; and

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(b) the related shares or other securities are to be issued.

(3) A decision by the board that the company may issue—
(a) any options, constitutes also the decision of the board to issue any authorised
shares or other securities for which the options may be exercised; or
(b) any securities convertible into shares of any class, constitutes also the decision 5
of the board to issue the authorised shares into which the securities may be
converted.
(4) A director of a company is liable to the extent set out in section 77(3)(e)(iii) if the
director—
(a) was present at a meeting when the board approved the granting of an option or 10
a right as contemplated in this section, or participated in the making of such a
decision in terms of section 74; and
(b) failed to vote against the granting of the option or right, despite knowing that
any shares—
(i) for which the options could be exercised; or 15
(ii) into which any securities could be converted,
had not been authorised in terms of section 36.

Securities other than shares

43. (1) In this section—

(a) ‘‘debt instrument’’— 20
(i) includes any securities other than the shares of a company, irrespective of
whether or not issued in terms of a security document, such as a trust
deed; but
(ii) does not include promissory notes and loans, whether constituting an
encumbrance on the assets of the company or not; and 25
(b) ‘‘security document’’ includes any document by which a debt instrument is
offered or proposed to be offered, embodying the terms and conditions of the
debt instrument including, but not limited to, a trust deed or certificate.
(2) The board of a company—
(a) may authorise the company to issue a secured or unsecured debt instrument at 30
any time, except to the extent provided by that the company’s Memorandum
of Incorporation; and
(b) must determine whether each such debt instrument is secured or unsecured.
(3) Except to the extent that a company’s Memorandum of Incorporation provides
otherwise, a debt instrument issued by the company may grant special privileges 35
regarding—
(a) attending and voting at general meetings and the appointment of directors; or
(b) allotment of securities, redemption by the company, or substitution of the debt
instrument for shares of the company, provided that the securities to be
allotted or substituted in terms of any such privilege, are authorised by or in 40
terms of the company’s Memorandum of Incorporation in accordance with
section 36.
(4) Every security document must clearly indicate, on its first page, whether the
relevant debt instrument is secured or unsecured.
(5) A company may appoint any person, including a juristic person, as trustee for the 45
holders of the company’s debt instruments, if—
(a) the person—
(i) is not a director or prescribed officer of the company, or a person related
or inter-related to the company, a director or a prescribed officer; and
(ii) does not have any interest in, or relationship with, the company that 50
might conflict with the duties of a trustee; and
(b) the board is satisfied that the person has the requisite knowledge and
experience to carry out the duties of a trustee.
(6) Any new trustee appointed for the purpose of this section must—
(a) satisfy the requirements of subsection (5)(a); and 55

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(b) be approved by the holders of at least 75% by value of debt instruments

present at a meeting called for that purpose.
(7) Any provision contained in a trust deed for securing any debt instruments, or in
any agreement with the holders of any debt instruments secured by a trust deed, is void
to the extent that it would exempt a trustee from, or indemnify a trustee against, liability 5
for breach of trust, or failure to exercise the degree of care and diligence required of the
prudent and careful person, having regard to the provisions of the trust deed respecting
the powers, authorities or discretions of the trustee.
(8) Subsection (7) does not invalidate—
(a) any release validly given in respect of anything done or omitted to be done by 10
a trustee before the giving of the release; or
(b) any provision of a debt instrument—
(i) enabling a release to be given with the consent of the majority of not less
than three fourths in value of the holders of debt instruments present and
voting at a meeting called for the purpose; and 15
(ii) with respect to a specific act or omission, or of the trustee dying or
ceasing to act.

Financial assistance for subscription of securities

44. (1) In this section, ‘‘financial assistance’’ does not include lending money in the
ordinary course of business by a company whose primary business is the lending of 20
money.
(2) To the extent that the Memorandum of Incorporation of a company provides
otherwise, the board may authorise the company to provide financial assistance by way
of a loan, guarantee, the provision of security or otherwise to any person for the purpose
of, or in connection with, the subscription of any option, or any securities, issued or to 25
be issued by the company or a related or inter-related company, or for the purchase of
any securities of the company or a related or inter-related company, subject to
subsections (3) and (4).
(3) Despite any provision of a company’s Memorandum of Incorporation to the
contrary, the board may not authorise any financial assistance contemplated in 30
subsection (2), unless—
(a) the particular provision of financial assistance is—
(i) pursuant to an employee share scheme that satisfies the requirements of
section 97; or
(ii) pursuant to a special resolution of the shareholders, adopted within the 35
previous two years, which approved such assistance either for the
specific recipient, or generally for a category of potential recipients, and
the specific recipient falls within that category; and
(b) the board is satisfied that—
(i) immediately after providing the financial assistance, the company would 40
satisfy the solvency and liquidity test; and
(ii) the terms under which the financial assistance is proposed to be given are
fair and reasonable to the company.
(4) In addition to satisfying the requirements of subsection (3), the board must ensure
that any conditions or restrictions respecting the granting of financial assistance set out 45
in the company’s Memorandum of Incorporation have been satisfied.
(5) A decision by the board of a company to provide financial assistance contemplated
in subsection (2), or an agreement with respect to the provision of any such assistance,
is void to the extent that the provision of that assistance would be inconsistent with—
(a) this section; or 50
(b) a prohibition, condition or requirement contemplated in subsection (4).
(6) If a resolution or an agreement has been declared void in terms of subsection (5)
read with section 218(1), a director of a company is liable to the extent set out in section
77(3)(e)(iv) if the director—

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(a) was present at the meeting when the board approved the resolution or
agreement, or participated in the making of such a decision in terms of section
74; and
(b) failed to vote against the resolution or agreement, despite knowing that the
provision of financial assistance was inconsistent with this section or a 5
prohibition, condition or requirement contemplated in subsection (4).

Loans or other financial assistance to directors

45. (1) In this section, ‘‘financial assistance’’—

(a) includes lending money, guaranteeing a loan or other obligation, and securing
any debt or obligation; but 10
(b) does not include—
(i) lending money in the ordinary course of business by a company whose
primary business is the lending of money;
(ii) an accountable advance to meet—
(aa) legal expenses in relation to a matter concerning the company; or 15
(bb) anticipated expenses to be incurred by the person on behalf of the
company; or
(iii) an amount to defray the person’s expenses for removal at the company’s
request.
(2) Except to the extent that the Memorandum of Incorporation of a company 20
provides otherwise, the board may authorise the company to provide direct or indirect
financial assistance to a director or prescribed officer of the company or of a related or
inter-related company, or to a related or inter-related company or corporation, or to a
member of a related or inter-related corporation, or to a person related to any such
company, corporation, director, prescribed officer or member, subject to subsections (3) 25
and (4).
(3) Despite any provision of a company’s Memorandum of Incorporation to the
contrary, the board may not authorise any financial assistance contemplated in
subsection (2), unless—
(a) the particular provision of financial assistance is— 30
(i) pursuant to an employee share scheme that satisfies the requirements of
section 97; or
(ii) pursuant to a special resolution of the shareholders, adopted within the
previous two years, which approved such assistance either for the
specific recipient, or generally for a category of potential recipients, and 35
the specific recipient falls within that category; and
(b) the board is satisfied that immediately after providing the financial assistance,
the company would satisfy the solvency and liquidity test.
(4) In addition to satisfying the requirements of subsection (3), the board must ensure
that any conditions or restrictions respecting the granting of financial assistance set out 40
in the company’s Memorandum of Incorporation have been satisfied.
(5) If the board of a company adopts a resolution to do anything contemplated in
subsection (2), the company must provide written notice of that resolution to all
shareholders, unless every shareholder is also a director of the company, and to any trade
union representing its employees— 45
(a) within 10 business days after the board adopts the resolution, if the total value
of all loans, debts, obligations or assistance contemplated in that resolution,
together with any previous such resolution during the financial year, exceeds
one-tenth of 1% of the company’s net worth at the time of the resolution; or
(b) within 30 business days after the end of the financial year, in any other case. 50
(6) A resolution by the board of a company to provide financial assistance
contemplated in subsection (2), or an agreement with respect to the provision of any
such assistance, is void to the extent that the provision of that assistance would be
inconsistent with—
(a) this section; or 55
(b) a prohibition, condition or requirement contemplated in subsection (4).
(7) If a resolution or an agreement has been declared void in terms of subsection (6)
read with section 218(1), a director of a company is liable to the extent set out in section
77(3)(e)(v) if the director—

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(a) was present at the meeting when the board approved the resolution or
agreement, or participated in the making of such a decision in terms of section
74; and
(b) failed to vote against the resolution or agreement, despite knowing that the
provision of financial assistance was inconsistent with this section or a 5
prohibition, condition or requirement contemplated in subsection (4).

Distributions must be authorised by board

46. (1) A company must not make any proposed distribution unless—
(a) the distribution—
(i) is pursuant to an existing legal obligation of the company, or a court 10
order; or
(ii) the board of the company, by resolution, has authorised the distribution;
(b) it reasonably appears that the company will satisfy the solvency and liquidity
test immediately after completing the proposed distribution; and
(c) the board of the company, by resolution, has acknowledged that it has applied 15
the solvency and liquidity test, as set out in section 4, and reasonably
concluded that the company will satisfy the solvency and liquidity test
immediately after completing the proposed distribution.
(2) When the board of a company has adopted a resolution contemplated in subsection
(1)(c), the relevant distribution must be fully carried out, subject only to subsection (3). 20
(3) If the distribution contemplated in a particular board resolution, court order or
existing legal obligation has not been completed within 120 business days after the
board made the acknowledgement required by subsection (1)(c), or after a fresh
acknowledgement being made in terms of this subsection, as the case may be—
(a) the board must reconsider the solvency and liquidity test with respect to the 25
remaining distribution to be made pursuant to the original resolution, order or
obligation; and
(b) despite any law, order or agreement to the contrary, the company must not
proceed with or continue with any such distribution unless the board adopts a
further resolution as contemplated in subsection (1)(c). 30
(4) If a distribution takes the form of the incurrence of a debt or other obligation by
the company, as contemplated in paragraph (b) of the definition of ‘distribution’ set out
in section 1, the requirements of this section—
(a) apply at the time that the board resolves that the company may incur that debt
or obligation; and 35
(b) do not apply to any subsequent action of the company in satisfaction of that
debt or obligation, except to the extent that the resolution, or the terms and
conditions of the debt or obligation, provide otherwise.
(5) If, after considering the solvency and liquidity test as required by this section, it
appears to the company that the section prohibits its immediate compliance with a court 40
order contemplated in subsection (1)(a)(i)—
(a) the company may apply to a court for an order varying the original order; and
(b) the court may make an order that—
(i) is just and equitable, having regard to the financial circumstances of the
company; and 45
(ii) ensures that the person to whom the company is required to make a
payment in terms of the original order is paid at the earliest possible date
compatible with the company satisfying its other financial obligations as
they fall due and payable.
(6) A director of a company is liable to the extent set out in section 77(3)(e)(vi) if the 50
director—
(a) was present at the meeting when the board approved a distribution as
contemplated in this section, or participated in the making of such a decision
in terms of section 74; and
(b) failed to vote against the distribution, despite knowing that the distribution 55
was contrary to this section.

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Capitalisation shares

47. (1) Except to the extent that a company’s Memorandum of Incorporation provides
otherwise—
(a) the board of that company, by resolution, may approve the issuing of any
authorised shares of the company, as capitalisation shares, on a pro rata basis 5
to the shareholders of one or more classes of shares;
(b) shares of one class may be issued as a capitalisation share in respect of shares
of another class; and
(c) subject to subsection (2), when resolving to award a capitalisation share, the
board may at the same time resolve to permit any shareholder entitled to 10
receive such an award to elect instead to receive a cash payment, at a value
determined by the board.
(2) The board of a company may not resolve to offer a cash payment in lieu of
awarding a capitalisation share, as contemplated in subsection (1)(c), unless the board—
(a) has considered the solvency and liquidity test, as required by section 46, on 15
the assumption that every such shareholder would elect to receive cash; and
(b) is satisfied that the company would satisfy the solvency and liquidity test
immediately upon the completion of the distribution.

Company or subsidiary acquiring company’s shares

48. (1) The making of a demand, tendering of shares and payment by a company to a 20
shareholder in terms of a shareholder’s appraisal rights set out in section 164 do not
constitute an acquisition of its shares by the company within the meaning of this section.
(2) Subject to subsection (3)—
(a) a company may acquire its own shares, if the decision to do so satisfies the
requirements of section 46; and 25
(b) any subsidiary of a company may acquire shares of that company, but—
(i) not more than 10%, in aggregate, of the number of issued shares of any
class of shares of a company may be held by, or for the benefit of, all of
the subsidiaries of that company, taken together; and
(ii) no voting rights attached to those shares may be exercised while the 30
shares are held by the subsidiary, and it remains a subsidiary of the
company whose shares it holds.
(3) Despite any provision of any law, agreement, order or the Memorandum of
Incorporation of a company, the company may not acquire its own shares, and a
subsidiary of a company may not acquire shares of that company, if, as a result of that 35
acquisition, there would no longer be any shares of the company in issue other than—
(a) shares held by one or more subsidiaries of the company; or
(b) convertible or redeemable shares.
(4) An agreement with a company providing for the acquisition by the company of
shares issued by it is enforceable against the company, subject to subsections (2) and (3). 40
(5) If a company alleges that, as a result of the operation of subsection (2) or (3), it is
unable to fulfil its obligations in terms of an agreement contemplated in subsection (4)—
(a) the company must apply to a court for an order in terms of paragraph (c);
(b) the company has the burden of proving that fulfilment of its obligations would
put it in breach of subsections (2) or (3); and 45
(c) if the court is satisfied that the company is prevented from fulfilling its
obligations pursuant to the agreement, the court may make an order that—
(i) is just and equitable, having regard to the financial circumstances of the
company; and
(ii) ensures that the person to whom the company is required to make a 50
payment in terms of the agreement is paid at the earliest possible date

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compatible with the company satisfying its other financial obligations as

they fall due and payable.
(6) If a company acquires any shares contrary to section 46, or this section, the
company may, not more than two years after the acquisition, apply to a court for an order
reversing the acquisition, and the court may order— 5
(a) the person from whom the shares were acquired to return the amount paid by
the company; and
(b) the company to issue to that person an equivalent number of shares of the
same class as those acquired.
(7) A director of a company is liable to the extent set out in section 77(3)(e)(vii) if the 10
director—
(a) was present at the meeting when the board approved an acquisition of shares
contemplated in this section, or participated in the making of such a decision
in terms of section 74; and
(b) failed to vote against the acquisition of shares, despite knowing that the 15
acquisition was contrary to this section or section 46.

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Part F 10

Governance of companies

Interpretation and restricted application of Part

57. (1) In this Part, ‘‘shareholder’’ means a person who is entitled to exercise any
voting rights in relation to a company, irrespective of the form, title or nature of the
securities to which those voting rights are attached. 15
(2) If a profit company, other than a state-owned company, has only one
shareholder—
(a) that shareholder may exercise any or all of the voting rights pertaining to that
company on any matter, at any time, without notice or compliance with any
other internal formalities, except to the extent that the company’s Memoran- 20
dum of Incorporation provides otherwise; and
(b) sections 59 to 65 do not apply to the governance of that company.
(3) If a profit company, other than a state-owned company, has only one director—
(a) that director may exercise any power or perform any function of the board at
any time, without notice or compliance with any other internal formalities, 25
except to the extent that the company’s Memorandum of Incorporation
provides otherwise; and
(b) sections 71(3) to (7), 73 and 74 do not apply to the governance of that
company.
(4) If every shareholder of a particular company, other than a state-owned company, 30
is also a director of that company—
(a) any matter that is required to be referred by the board to the shareholders for
decision may be decided by the shareholders at any time after being referred
by the board, without notice or compliance with any other internal formalities,
except to the extent that the Memorandum of Incorporation provides 35
otherwise, provided that—
(i) every such person was present at the board meeting when the matter was
referred to them in their capacity as shareholders;
(ii) sufficient persons are present in their capacity as shareholders to satisfy
the quorum requirements set out in section 64; and 40
(iii) a resolution adopted by those persons in their capacity as shareholders
has at least the support that would have been required for it to be adopted
as an ordinary or special resolution, as the case may be, at a properly
constituted shareholder’s meeting; and
(b) when acting in their capacity as shareholders, those persons are not subject to 45
the provisions of section 73 to 78 relating to the duties, obligations, liabilities
and indemnification of directors.
(5) The board of a company that holds any securities of a second company may
authorise any person to act as its representative at any shareholders meeting of that
second company. 50
(6) A person authorised to act as a company’s representative, as contemplated in
subsection (5), may exercise the same powers as the authorising company could have
exercised if it were an individual holder of securities.

Shareholders acting other than at meeting

60. (1) A resolution that could be voted on at a shareholders meeting may instead be—
(a) submitted for consideration to the shareholders entitled to exercise voting
rights in relation to the resolution; and 50
(b) voted on in writing by shareholders entitled to exercise voting rights in
relation to the resolution within 20 business days after the resolution was
submitted to them.

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(2) A resolution contemplated in subsection (1)—

(a) will have been adopted if it is supported by persons entitled to exercise
sufficient voting rights for it to have been adopted as an ordinary or special
resolution, as the case may be, at a properly constituted shareholders meeting;
and 5
(b) if adopted, has the same effect as if it had been approved by voting at a
meeting.
(3) An election of a director that could be conducted at a shareholders meeting may
instead be conducted by written polling of all of the shareholders entitled to exercise
voting rights in relation to the election of that director. 10
(4) Within 10 business days after adopting a resolution, or conducting an election of
directors, in terms of this section, the company must deliver a statement describing the
results of the vote, consent process, or election to every shareholder who was entitled to
vote on or consent to the resolution, or vote in the election of the director, as the case
may be. 15
(5) For greater certainty, any business of a company that is required by this Act or the
company’s Memorandum of Incorporation to be conducted at an annual general meeting
of the company, may not be conducted in the manner contemplated in this section.

Shareholders meetings

61. (1) The board of a company, or any other person specified in the company’s 20
Memorandum of Incorporation or rules, may call a shareholders meeting at any time.
(2) Subject to section 60, a company must hold a shareholders meeting—
(a) at any time that the board is required by this Act or the Memorandum of
Incorporation to refer a matter to shareholders for decision;
(b) whenever required in terms of section 70(3) to fill a vacancy on the board; and 25
(c) when otherwise required—
(i) in terms of subsection (3) or (7); or
(ii) by the company’s Memorandum of Incorporation.
(3) Subject to subsection (5) and (6), the board of a company, or any other person
specified in the company’s Memorandum of Incorporation or rules, must call a 30
shareholders meeting if one or more written and signed demands for such a meeting are
delivered to the company, and—
(a) each such demand describes the specific purpose for which the meeting is
proposed; and
(b) in aggregate, demands for substantially the same purpose are made and signed 35
by the holders, as the earliest time specified in any of those demands, of at
least 10% of the voting rights entitled to be exercised in relation to the matter
proposed to be considered at the meeting.
(4) A company’s Memorandum of Incorporation may specify a lower percentage in
substitution for that set out in subsection (3)(b). 40
(5) A company, or any shareholder of the company, may apply to a court for an order
setting aside a demand made in terms of subsection (3) on the grounds that the demand
is frivolous, calls for a meeting for no other purpose than to reconsider a matter that has
already been decided by the shareholders, or is otherwise vexatious.
(6) At any time before the start of a shareholders meeting contemplated in subsection 45
(3)—
(a) a shareholder who submitted a demand for that meeting may withdraw that
demand; and
(b) the company must cancel the meeting if, as a result of one or more demands
being withdrawn, the voting rights of any remaining shareholders continuing 50
to demand the meeting, in aggregate, fall below the minimum percentage of
voting rights required to call a meeting.
(7) A public company must convene an annual general meeting of its shareholders—
(a) initially, no more than 18 months after the company’s date of incorporation;
and 55

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(b) thereafter, once in every calendar year, but no more than 15 months after the
date of the previous annual general meeting, or within an extended time
allowed by the Companies Tribunal, on good cause shown.
(8) A meeting convened in terms of subsection (7) must, at a minimum, provide for
the following business to be transacted: 5
(a) Presentation of—
(i) the directors’ report;
(ii) audited financial statements for the immediately preceding financial
year; and
(iii) an audit committee report; 10
(b) election of directors, to the extent required by this Act or the company’s
Memorandum of Incorporation;
(c) appointment of—
(i) an auditor for the ensuing financial year; and
(ii) an audit committee; and 15
(d) any matters raised by shareholders, with or without advance notice to the
company.
(9) Except to the extent that the Memorandum of Incorporation of a company
provides otherwise—
(a) the board of the company may determine the location for any shareholders 20
meeting of the company; and
(b) a shareholders meeting of the company may be held in the Republic or in any
foreign country.
(10) Every shareholders meeting of a public company must be reasonably accessible
within the Republic for electronic participation by shareholders in the manner 25
contemplated in section 63(2), irrespective of whether the meeting is held in the
Republic or elsewhere.
(11) If a company is unable to convene a meeting as required in terms of this section
because it has no directors, or because all of its directors are incapacitated—
(a) any other person authorised by the company’s Memorandum of Incorporation 30
may convene the meeting; or
(b) if no person has been authorised as contemplated in paragraph (a), the
Companies Tribunal, on a request by any shareholder, may issue an admini-
strative order for a shareholders meeting to be convened on a date, and subject
to any terms, that the Tribunal considers appropriate in the circumstances. 35
(12) If a company fails to convene a meeting for any reason other than as
contemplated in subsection (11)—
(a) at a time required in accordance with its Memorandum of Incorporation;
(b) when required by shareholders in terms of subsection (3); or
(c) within the time required by subsection (7), 40
a shareholder may apply to a court for an order requiring the company to convene
a meeting on a date, and subject to any terms, that the court considers appropriate
in the circumstances.
(13) The company must compensate a shareholder who applies to the Companies
Tribunal in terms of subsection (11), or to a court in terms of subsection (12), 45
respectively, for the costs of those proceedings.
(14) Any failure to hold a meeting as required by this section does not affect the
existence of a company, or the validity of any action by the company.

Notice of meetings

62. (1) The company must deliver a notice of each shareholders meeting in the 50
prescribed manner and form to all of the shareholders of the company as of the record
date for the meeting, at least—
(a) 15 business days before the meeting is to begin, in the case of a public
company or a non-profit company that has voting members; or
(b) 10 business days before the meeting is to begin, in any other case. 55
(2) A company’s Memorandum of Incorporation may provide for longer minimum
notice periods than required by subsection (1).

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(3) A notice of a shareholders meeting must be in writing, and must include—

(a) the date, time and place for the meeting, and the record date for the meeting;
(b) the general purpose of the meeting, and any specific purpose contemplated in
section 61(3)(a), if applicable;
(c) a copy of any proposed resolution of which the company has received notice, 5
and which is to be considered at the meeting, and a notice of the percentage of
voting rights that will be required for that resolution to be adopted;
(d) in the case of an annual general meeting of a company—
(i) a summarised form of the financial statements to be presented; and
(ii) directions for obtaining a copy of the complete annual financial 10
statements for the preceding financial year; and
(e) a reasonably prominent statement that—
(i) a shareholder entitled to attend and vote at the meeting is entitled to
appoint a proxy to attend, participate in and vote at the meeting in the
place of the shareholder, or two or more proxies if the Memorandum of 15
Incorporation of the company so permits;
(ii) a proxy need not also be a shareholder of the company; and
(iii) section 63(1) requires that meeting participants provide satisfactory
identification.
(4) If a company fails to give the required notice of a shareholders meeting, or if there 20
was a material defect in the giving of the notice, the meeting may proceed, subject to
subsection (5), if all of the persons who are entitled to exercise voting rights in respect
of each item on the agenda of the meeting—
(a) acknowledge actual receipt of the notice;
(b) are present at the meeting; 25
(c) waive notice of the meeting; or
(d) in the case of a material defect in the manner and form of giving notice, ratify
the defective notice.
(5) If a material defect in the form or manner of giving notice of a meeting relates only
to one or more particular matters on the agenda for the meeting— 30
(a) any such matter may be severed from the agenda, and the notice remains valid
with respect to any remaining matters on the agenda; and
(b) the meeting may proceed to consider a severed matter, if the defective notice
in respect of that matter has been ratified in terms of subsection (4)(d).
(6) An immaterial defect in the form or manner of giving notice of a shareholders 35
meeting, or an accidental or inadvertent failure in the delivery of the notice to any
particular shareholder to whom it was addressed, does not invalidate any action taken at
the meeting.
(7) A shareholder who is present at a meeting—
(a) is regarded to have received or waived notice of the meeting; 40
(b) has a right to—
(i) allege a material defect in the form of notice for a particular item on the
agenda for the meeting; and
(ii) participate in the determination whether to waive the requirements for
notice, or ratify a defective notice; and 45
(c) except to the extent set out in paragraph (b),
is regarded to have waived any right based on an actual or alleged material defect
in the notice of the meeting.

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Meeting quorum and adjournment

64. (1) Subject to subsections (2) to (8)—

(a) a shareholders meeting may not begin until sufficient persons are present at 30
the meeting to exercise, in aggregate, at least 25% of all of the voting rights
that are entitled to be exercised in respect of at least one matter to be decided
at the meeting; and
(b) a matter to be decided at the meeting may not begin to be considered unless
sufficient persons are present at the meeting to exercise, in aggregate, at least 35
25% of all of the voting rights that are entitled to be exercised on that matter
at the time the matter is called on the agenda.
(2) A company’s Memorandum of Incorporation may specify a lower or higher
percentage in place of the 25% required in either or both of subsection (1)(a) or (b).
(3) Despite the percentage figures set out in subsection (1), or in any applicable 40
provisions of a company’s Memorandum of Incorporation, if a company has more than
two shareholders, a meeting may not begin, or a matter begin to be debated, unless—
(a) at least three shareholders are present at the meeting; and
(b) the requirements of subsection (1) or the Memorandum of Incorporation, if
different, are satisfied. 45
(4) If, within one hour after the appointed time for a meeting to begin, the
requirements of subsections (1), or (3) if applicable,
(a) for that meeting to begin have not been satisfied, the meeting is postponed
without motion, vote or further notice, for one week;
(b) for consideration of a particular matter to begin have not been satisfied— 50
(i) if there is other business on the agenda of the meeting, consideration of
that matter may be postponed to a later time in the meeting without
motion or vote; or
(ii) if there is no other business on the agenda of the meeting, the meeting is
adjourned for one week, without motion or vote. 55

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(5) The person intended to preside at a meeting that cannot begin due to the operation
of subsection (1)(a), or (3) if applicable, may extend the one-hour limit allowed in
subsection (4) for a reasonable period on the grounds that—
(a) exceptional circumstances affecting weather, transportation or electronic
communication have generally impeded or are generally impeding the ability 5
of shareholders to be present at the meeting; or
(b) one or more particular shareholders, having been delayed, have communi-
cated an intention to attend the meeting, and those shareholders, together with
others in attendance, would satisfy the requirements of subsection (1), or (3)
if applicable. 10
(6) A company’s Memorandum of Incorporation or rules may specify a different time
in substitution for—
(a) the period of one hour contemplated in subsections (4) and (5), respectively;
or
(b) the period of one week contemplated in subsection (4). 15
(7) A company is not required to give further notice of a meeting that is postponed or
adjourned in terms of subsection (4), unless the location for the meeting is different
from—
(a) the location of the postponed or adjourned meeting; or
(b) a location announced at the time of adjournment, in the case of an adjourned 20
meeting.
(8) If, at the time appointed in terms of this section for a postponed meeting to begin,
or for an adjourned meeting to resume, the requirements of subsection (1), or (3) if
applicable, have not been satisfied, the members of the company present in person or by
proxy will be deemed to constitute a quorum. 25
(9) Unless the company’s Memorandum of Incorporation or rules provide otherwise,
after a quorum has been established for a meeting, or for a matter to be considered at a
meeting, the meeting may continue, or the matter may be considered, so long as at least
one shareholder with voting rights entitled to be exercised at the meeting, or on that
matter, is present at the meeting. 30
(10) A shareholders meeting, or the consideration of any matter being debated at the
meeting, may be adjourned from time to time without further notice, subject to
subsection (11), on a motion supported by persons entitled to exercise, in aggregate, a
majority of the voting rights—
(a) held by all of the persons who are present at the meeting at the time; and 35
(b) that are entitled to be exercised on at least one matter remaining on the agenda
of the meeting, or on the matter under debate, as the case may be.
(11) An adjournment of a meeting, or of consideration of a matter being debated at the
meeting, in terms of subsection (10)—
(a) may be either— 40
(i) to a fixed time and place; or
(ii) until further notice, as agreed at the meeting; and
(b) requires that a further notice be given to shareholders only if the meeting
determined that the adjournment was ‘‘until further notice’’, as contemplated
in paragraph (a)(ii). 45
(12) Subject to subsection (13), a meeting may not be adjourned beyond the earlier
of—
(a) the date that is 120 business days after the record date determined in
accordance with section 59; or
(b) the date that is 60 business days after the date on which the adjournment 50
occurred.
(13) A company’s Memorandum of Incorporation may provide for different
maximum periods of adjournment of meetings than those set out in subsection (12), or
for unlimited adjournment of meetings.

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Shareholder resolutions

65. (1) Every resolution of shareholders is either an ordinary resolution or a special

resolution.
(2) The board may propose any resolution to be considered by shareholders, and may
determine whether that resolution will be considered at a meeting, or by vote or written 5
consent in terms of section 60.
(3) Any two shareholders of a company—
(a) may propose a resolution concerning any matter in respect of which they are
each entitled to exercise voting rights; and
(b) when proposing a resolution, may require that the resolution be submitted to 10
shareholders for consideration—
(i) at a meeting demanded in terms of section 61(3);
(ii) at the next shareholders meeting; or
(iii) by written vote in terms of section 60.
(4) A proposed resolution is not subject to the requirements of section 6(4), but must 15
be—
(a) expressed with sufficient clarity and specificity; and
(b) accompanied by sufficient information or explanatory material to enable a
shareholder who is entitled to vote on the resolution to determine whether to
participate in the meeting and to seek to influence the outcome of the vote on 20
the resolution.
(5) At any time before the start of the meeting at which a resolution will be
considered, a shareholder or director who believes that the form of the resolution does
not satisfy the requirements of subsection (4) may seek leave to apply to a court for an
order— 25
(a) restraining the company from putting the proposed resolution to a vote until
the requirements of subsection (4) are satisfied; and
(b) requiring the company, or the shareholders who proposed the resolution, as
the case may be, to—
(i) take appropriate steps to alter the resolution so that it satisfies the 30
requirements of subsection (4); and
(ii) compensate the applicant for costs of the proceedings, if successful.
(6) Once a resolution has been approved, it may not be challenged or impugned by
any person in any forum on the grounds that it did not satisfy subsection (4).
(7) For an ordinary resolution to be approved by shareholders, it must be supported by 35
more than 50% of the voting rights exercised on the resolution.
(8) Except for an ordinary resolution for the removal of a director under section 71,
a company’s Memorandum of Incorporation may require—
(a) a higher percentage of voting rights to approve an ordinary resolution; or
(b) one or more higher percentages of voting rights to approve ordinary 40
resolutions concerning one or more particular matters, respectively,
provided that there must at all times be a margin of at least 10 percentage points
between the requirements for approval of an ordinary resolution, and a special
resolution, on any matter.
(9) For a special resolution to be approved by shareholders, it must be supported by 45
at least 75% of the voting rights exercised on the resolution.
(10) A company’s Memorandum of Incorporation may permit—
(a) a lower percentage of voting rights to approve any special resolution; or
(b) one or more lower percentages of voting rights to approve special resolutions
concerning one or more particular matters, respectively, 50
provided that there must at all times be a margin of at least 10 percentage points
between the requirements for approval of an ordinary resolution, and a special
resolution, on any matter.
(11) A special resolution is required to—
(a) amend the company’s Memorandum of Incorporation to the extent required 55
by section 16(1)(c);
(b) approve the voluntary winding-up of the company, as contemplated in section
80(1); or
(c) approve any proposed fundamental transaction, to the extent required by Part
A of Chapter 5. 60

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(12) A company’s Memorandum of Incorporation may require a special resolution to

approve any other matter not contemplated in subsection (11).

Board, directors and prescribed officers

66. (1) The business and affairs of a company must be managed by or under the
direction of its board, which has the authority to exercise all of the powers and perform 5
any of the functions of the company, except to the extent that this Act or the company’s
Memorandum of Incorporation provides otherwise.
(2) The board of a company must comprise—
(a) in the case of a private company, or a personal liability company, at least one
director; or 10
(b) in the case of a public company, or a non-profit company, at least three
directors.
(3) A company’s Memorandum of Incorporation may specify a higher number in
substitution for the minimum number of directors required by subsection (2).
(4) A company’s Memorandum of Incorporation— 15
(a) may provide for—
(i) the direct appointment and removal of one or more directors by any
person who is named in, or determined in terms of, the Memorandum of
Incorporation;
(ii) a person to be an ex offıcio director of the company as a consequence of 20
that person holding some other office, title, designation or similar status,
subject to subsection (5)(a); or
(iii) the appointment or election of one or more persons as alternate directors
of the company; and
(b) in the case of a profit company other than a state-owned company, must 25
provide for the election by shareholders of at least 50% of the directors, and
50% of any alternate directors.
(5) A person contemplated in subsection (4)(a)(ii)—
(a) may not serve or continue to serve as an ex offıcio director of a company,
despite holding the relevant office, title, designation or similar status, if that 30
person is or becomes ineligible or disqualified in terms of section 69; and
(b) who holds office or acts in the capacity of an ex offıcio director of a company
has all the—
(i) powers and functions of any other director of the company, except to the
extent that the company’s Memorandum of Incorporation restricts the 35
powers, functions or duties of an ex offıcio director; and
(ii) duties, and is subject to all of the liabilities, of any other director of the
company.
(6) The election or appointment of a person as a director is a nullity if, at the time of
the election or appointment, that person is ineligible or disqualified in terms of section 40
69.
(7) A person becomes a director of a company when that person—
(a) has been appointed or elected in accordance with this Part, or holds an office,
title, designation or similar status entitling that person to be an ex offıcio
director of the company, subject to subsection (5)(a); and 45
(b) has delivered to the company a written consent to serve as its director.
(8) Except to the extent that the Memorandum of Incorporation of a company
provides otherwise, the company may pay remuneration to its directors for their service
as directors, subject to subsection (9).
(9) Remuneration contemplated in subsection (8) may be paid only in accordance 50
with a special resolution approved by the shareholders within the previous two years.
(10) The Minister may make regulations designating any specific function or
functions within a company to constitute a prescribed office for the purposes of this Act.
(11) Any failure by a company at any time to have the minimum number of directors
required by this Act or the company’s Memorandum of Incorporation, does not limit or 55

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negate the authority of the board, or invalidate anything done by the board or the
company.

First director or directors

67. (1) Each incorporator of a company is a first director of the company, and serves
until sufficient other directors to satisfy the minimum requirements of this Act, or the 5
company’s Memorandum of Incorporation, have been—
(a) first appointed, as contemplated in section 66(4)(a)(i); or
(b) first elected in accordance with section 68 or the company’s Memorandum of
Incorporation.
(2) If the number of incorporators of a company, together with any ex offıcio directors, 10
or directors to be appointed as contemplated in section 66(4)(a)(i), is fewer than the
minimum number of directors required for that company in terms of this Act or the
company’s Memorandum of Incorporation, the board must call a shareholders meeting
within 40 business days after incorporation of the company for the purpose of electing
sufficient directors to fill all vacancies on the board at the time of the election. 15

Election of directors

68. (1) Subject to subsection (3), each director of a company, other than the first
directors or a director contemplated in section 66(4)(a)(i) or (ii), must be elected by the
persons entitled to exercise voting rights in such an election, to serve for an indefinite
term, or for a term as set out in the Memorandum of Incorporation. 20
(2) Unless the company’s Memorandum of Incorporation provides otherwise, in any
election of directors—
(a) the election is to be conducted as a series of votes, each of which is on the
candidacy of a single individual to fill a single vacancy, with the series of
votes continuing until all vacancies on the board at that time have been filled; 25
and
(b) in each vote to fill a vacancy—
(i) each voting right entitled to be exercised may be exercised once; and
(ii) the vacancy is filled only if a majority of the voting rights exercised
support the candidate. 30
(3) Unless the Memorandum of Incorporation of a company provides otherwise, the
board may appoint a person who satisfies the requirements for election as a director to
fill any vacancy and serve as a director of the company on a temporary basis until the
vacancy has been filled by election in terms of subsection (2), and during that period any
person so appointed has all of the powers, functions and duties, and is subject to all of 35
the liabilities, of any other director of the company.

Ineligibility and disqualification of persons to be director or prescribed officer

69. (1) In this section, ‘‘director’’ includes an alternate director, and—

(a) a prescribed officer; or
(b) a person who is a member of a committee of a board of a company, or of the 40
audit committee of a company,
irrespective of whether or not the person is also a member of the company’s board.
(2) A person who is ineligible or disqualified, as set out in this section, must not—
(a) be appointed or elected as a director of a company, or consent to being
appointed or elected as a director; or 45
(b) act as a director of a company.
(3) A company must not knowingly permit an ineligible or disqualified person to serve
or act as a director.
(4) A person who becomes ineligible or disqualified while serving as a director of a
company ceases to be a director immediately, subject to section 70(2). 50
(5) A person who has been placed under probation by a court in terms of section 162,

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or in terms of section 47 of the Close Corporations Act, 1984 (Act No. 69 of 1984), must
not serve as a director except to the extent permitted by the order of probation.
(6) In addition to the provisions of this section, the Memorandum of Incorporation of
a company may impose—
(a) additional grounds of ineligibility or disqualification of directors; or 5
(b) minimum qualifications to be met by directors of that company.
(7) A person is ineligible to be a director of a company if the person—
(a) is a juristic person;
(b) is an unemancipated minor, or is under a similar legal disability; or
(c) does not satisfy any qualification set out in the company’s Memorandum of 10
Incorporation.
(8) A person is disqualified to be a director of a company if—
(a) a court has prohibited that person to be a director, or declared the person to be
delinquent in terms of section 162, or in terms of section 47 of the Close
Corporations Act, 1984 (Act No. 69 of 1984); or 15
(b) subject to subsections (9) to (12), the person—
(i) is an unrehabilitated insolvent;
(ii) is prohibited in terms of any public regulation to be a director of the
company;
(iii) has been removed from an office of trust, on the grounds of misconduct 20
involving dishonesty; or
(iv) has been convicted, in the Republic or elsewhere, and imprisoned
without the option of a fine, or fined more than the prescribed amount, for
theft, fraud, forgery, perjury or an offence—
(aa) involving fraud, misrepresentation or dishonesty; 25
(bb) in connection with the promotion, formation or management of a
company, or in connection with any act contemplated in subsection
(2) or (5); or
(cc) under this Act, the Insolvency Act, 1936 (Act No. 24 of 1936), the
Close Corporations Act, 1984, the Competition Act, the Financial 30
Intelligence Centre Act, 2001 (Act No. 38 of 2001), the Securities
Services Act, 2004 (Act No. 36 of 2004), or Chapter 2 of the
Prevention and Combating of Corruption Activities Act, 2004 (Act
No. 12 of 2004).
(9) A disqualification in terms of subsection (8)(b)(iii) or (iv) ends at the later of— 35
(a) five years after the date of removal from office, or the completion of the
sentence imposed for the relevant offence, as the case may be; or
(b) at the end of one or more extensions, as determined by a court from time to
time, on application by the Commission in terms of subsection (10).
(10) At any time before the expiry of a person’s disqualification in terms of subsection 40
(8)(b)(iii) or (iv)—
(a) the Commission may apply to a court for an extension contemplated in
subsection (9)(b); and
(b) the court may extend the disqualification for no more than five years at a time,
if the court is satisfied that an extension is necessary to protect the public, 45
having regard to the conduct of the disqualified person up to the time of the
application.
(11) A court may exempt a person from the application of any provision of subsection
(8)(b).
(12) Despite being disqualified in terms of subsection (8)(b)(iii) or (iv), a person may 50
act as a director of a private company if all of the shares of that company are held by that
disqualified person alone, or by—
(a) that disqualified person; and
(b) persons related to that disqualified person, and each such person has
consented in writing to that person being a director of the company. 55

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(13) The Commission must establish and maintain in the prescribed manner a public
register of persons who are disqualified from serving as a director, or who are subject to
an order of probation as a director, in terms of an order of a court pursuant to this Act or
any other law.

Vacancies on board 5

70. (1) Subject to subsection (2), a person ceases to be a director, and a vacancy arises
on the board of a company—
(a) when the person’s term of office as director expires, in the case of a company
whose Memorandum of Incorporation provides for fixed terms, as contem-
plated in section 68(1); or 10
(b) in any case, if the person—
(i) resigns or dies;
(ii) in the case of an ex offıcio director, ceases to hold the office, title,
designation or similar status that entitled the person to be an ex offıcio
director; 15
(iii) becomes incapacitated to the extent that the person is unable to perform
the functions of a director, and is unlikely to regain that capacity within
a reasonable time, subject to section 71(3);
(iv) is declared delinquent by a court, or placed on probation under
conditions that are inconsistent with continuing to be a director of the 20
company, in terms of section 162;
(v) becomes ineligible or disqualified in terms of section 69, subject to
section 71(3); or
(vi) is removed—
(aa) by resolution of the shareholders in terms of section 71(1); 25
(bb) by resolution of the board in terms of section 71(3); or
(cc) by order of the court in terms of section 71(5) or (6).
(2) If, in terms of section 71(3), the board of a company has removed a director, a
vacancy on the board does not arise until the later of—
(a) the expiry of the time for filing an application for review in terms of section 30
71(5); or
(b) the granting of an order by the court on such an application,
but the director is suspended from office during that time.
(3) If a vacancy arises on the board, other than as a result of an ex offıcio director
ceasing to hold that office, it must be filled by— 35
(a) a new appointment, if the director was appointed as contemplated in section
66(4)(a)(i); or
(b) subject to subsection (4), by a new election conducted—
(i) at the next annual general meeting of the company, if the company is
required to hold such a meeting; or 40
(ii) in any other case, within six months after the vacancy arose—
(aa) at a shareholders meeting called for the purpose of electing the
director; or
(bb) by a poll of the persons entitled to exercise voting rights in an
election of the director, as contemplated in section 60(3). 45
(4) If, as a result of a vacancy arising on the board of a company there are no
remaining directors of a company, any holder of voting rights entitled to be exercised in
the election of a director may convene a meeting for the purpose of such an election.
(5) A person contemplated in subsection (4) may apply to a court for relief, and the
court may grant a supervisory order relating to a meeting convened in terms of that 50
paragraph if the court is satisfied that such an order is required to prevent the oppression,
or preserve the rights, of any shareholder.
(6) Every company must file a notice within 10 business days after a person becomes
or ceases to be a director of the company.

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Removal of directors

71. (1) Despite anything to the contrary in a company’s Memorandum of

Incorporation or rules, or any agreement between a company and a director, or between
any shareholders and a director, a director may be removed by an ordinary resolution
adopted at a shareholders meeting by the persons entitled to exercise voting rights in an 5
election of that director, subject to subsection (2).
(2) Before the shareholders of a company may consider a resolution contemplated in
subsection (1)—
(a) the director concerned must be given notice of the meeting and the resolution,
at least equivalent to that which a shareholder is entitled to receive, 10
irrespective of whether or not the director is a shareholder of the company;
and
(b) the director must be afforded a reasonable opportunity to make a presentation,
in person or through a representative, to the meeting, before the resolution is
put to a vote. 15
(3) If a company has more than two directors, and a shareholder or director has
alleged that a director of the company—
(a) has become—
(i) ineligible or disqualified in terms of section 69, other than on the grounds
contemplated in section 69(8)(a); or 20
(ii) incapacitated to the extent that the director is unable to perform the
functions of a director, and is unlikely to regain that capacity within a
reasonable time; or
(b) has neglected, or been derelict in the performance of, the functions of director,

the board, other than the director concerned, must determine the matter by resolution, 25
and may remove a director whom it has determined to be ineligible or disqualified,
incapacitated, or negligent or derelict, as the case may be.
(4) Before the board of a company may consider a resolution contemplated in
subsection (3), the director concerned must be given—
(a) notice of the meeting, including a copy of the proposed resolution and a 30
statement setting out reasons for the resolution, with sufficient specificity to
reasonably permit the director to prepare and present a response; and
(b) a reasonable opportunity to make a presentation, in person or through a
representative, to the meeting before the resolution is put to a vote.
(5) If, in terms of subsection (3), the board of a company has determined that a 35
director is ineligible or disqualified, incapacitated, or has been negligent or derelict, as
the case may be, the director concerned, or a person who appointed that director as
contemplated in section 66(4)(a)(i), if applicable, may apply within 20 business days to
a court to review the determination of the board.
(6) If, in terms of subsection (3), the board of a company has determined that a 40
director is not ineligible or disqualified, incapacitated, or has not been negligent or
derelict, as the case may be—
(a) any director who voted otherwise on the resolution, or any holder of voting
rights entitled to be exercised in the election of that director, may apply to a
court to review the determination of the board; and 45
(b) the court, on application in terms of paragraph (a), may—
(i) confirm the determination of the board; or
(ii) remove the director from office, if the court is satisfied that the director is
ineligible or disqualified, incapacitated, or has been negligent or derelict.
(7) An applicant in terms of subsection (6) must compensate the company, and any 50
other party, for costs incurred in relation to the application, unless the court reverses the
decision of the board.
(8) If a company has fewer than three directors—
(a) subsection (3) does not apply to the company;
(b) in any circumstances contemplated in subsection (3), any director or 55
shareholder of the company may apply to the Companies Tribunal, to make a
determination contemplated in that subsection; and

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(c) subsections (4), (5) and (6), each read with the changes required by the
context, apply to the determination of the matter by the Companies Tribunal.
(9) Nothing in this section deprives a person removed from office as a director in
terms of this section of any right that person may have at common law or otherwise to
apply to a court for damages or other compensation for— 5
(a) loss of office as a director; or
(b) loss of any other office as a consequence of being removed as a director.
(10) This section is in addition to the right of a person, in terms of section 162, to
apply to a court for an order declaring a director delinquent, or placing a director on
probation. 10

Board committees

72. (1) Except to the extent that the Memorandum of Incorporation of a company
provides otherwise, the board of a company may—
(a) appoint any number of committees of directors; and
(b) delegate to any committee any of the authority of the board. 15
(2) Except to the extent that the Memorandum of Incorporation of a company, or a
resolution establishing a committee, provides otherwise, the committee—
(a) may include persons who are not directors of the company, but—
(i) any such person must not be ineligible or disqualified to be a director in
terms of section 69; and 20
(ii) no such person has a vote on a matter to be decided by the committee;
(b) may consult with or receive advice from any person; and
(c) has the full authority of the board in respect of a matter referred to it.
(3) The creation of a committee, delegation of any power to a committee, or action
taken by a committee, does not alone satisfy or constitute compliance by a director with 25
the required duty of a director to the company, as set out in section 76.
(4) The Minister may by regulation prescribe that a company or a category of
companies must have a social and ethics committee, if it is desirable in the public
interest, having regard to—
(a) its annual turnover; 30
(b) the size of its workforce; or
(c) the nature and extent of its activities.

Board meetings

73. (1) A director authorised by the board of a company—

(a) may call a meeting of the board at any time; and 35
(b) must call such a meeting if required to do so by at least—
(i) 25% of the directors, in the case of a board that has at least 12 members;
or
(ii) two directors, in any other case.
(2) A company’s Memorandum of Incorporation may specify a higher or lower 40
percentage or number in substitution for those set out in subsection (1)(b).
(3) Except to the extent that this Act or a company’s Memorandum of Incorporation
provides otherwise—
(a) a meeting of the board may be conducted by electronic communication; or
(b) one or more directors may participate in a meeting by electronic communi- 45
cation,
so long as the electronic communication facility employed ordinarily enables all persons
participating in that meeting to communicate concurrently with each other without an
intermediary, and to participate effectively in the meeting.
(4) The board of a company may determine the form and time for giving notice of its 50
meetings, but—

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(a) such a determination must comply with any requirements set out in the
Memorandum of Incorporation, or rules, of the company; and
(b) no meeting of a board may be convened without notice to all of the directors,
subject to subsection (5).
(5) Except to the extent that the company’s Memorandum of Incorporation provides 5
otherwise—
(a) if all of the directors of the company—
(i) acknowledge actual receipt of the notice;
(ii) are present at a meeting; or
(iii) waive notice of the meeting, 10
the meeting may proceed even if the company failed to give the required
notice of that meeting, or there was a defect in the giving of the notice;
(b) a majority of the directors must be present at a meeting before a vote may be
called at a meeting of the directors;
(c) each director has one vote on a matter before the board; 15
(d) a majority of the votes cast on a resolution is sufficient to approve that
resolution; and
(e) in the case of a tied vote—
(i) the chair may cast a deciding vote, if the chair did not initially have or
cast a vote; or 20
(ii) the matter being voted on fails, in any other case.
(6) A company must keep minutes of the meetings of the board, and any of its
committees, and include in the minutes—
(a) any declaration given by notice or made by a director as required by section
75; and 25
(b) every resolution adopted by the board.
(7) Resolutions adopted by the board—
(a) must be dated and sequentially numbered; and
(b) are effective as of the date of the resolution, unless the resolution states
otherwise. 30
(8) Any minutes of a meeting, or a resolution, signed by the chair of the meeting, or
by the chair of the next meeting of the board, is evidence of the proceedings of that
meeting, or adoption of that resolution, as the case may be.

Directors acting other than at meeting

74. (1) Except to the extent that the Memorandum of Incorporation of a company 35
provides otherwise, a decision that could be voted on at a meeting of the board of that
company may instead be adopted by written consent of a majority of the directors, given
in person, or by electronic communication, provided that each director has received
notice of the matter to be decided.
(2) A decision made in the manner contemplated in this section is of the same effect 40
as if it had been approved by voting at a meeting.

Director’s personal financial interests

75. (1) In this section, ‘‘director’’ includes an alternate director, and—

(a) a prescribed officer; or
(b) a person who is a member of a committee of a board of a company, or of the 45
audit committee of a company,
irrespective of whether or not the person is also a member of the company’s board.
(2) This section does not apply—
(a) to a director of a company—
(i) in respect of a decision that may generally affect— 50
(aa) all of the directors of the company in their capacity as directors; or
(bb) a class of persons, despite the fact that the director is one member of
that class of persons, unless the only members of the class are the
director or persons related or inter-related to the director; or
(ii) in respect of a proposal to remove that director from office as con- 55
templated in section 71; or

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(b) to a company or its director, if one person—

(i) holds all of the beneficial interests of all of the issued securities of the
company; and
(ii) is the only director of that company.
(3) If a person is the only director of a company, but does not hold all of the beneficial 5
interests of all of the issued securities of the company, that person may not—
(a) approve or enter into any agreement in which the person or a related person
has a personal financial interest; or
(b) as a director, determine any other matter in which the person or a related
person has a personal financial interest, 10
unless the agreement or determination is approved by an ordinary resolution of the
shareholders after the director has disclosed the nature and extent of that interest to the
shareholders.
(4) At any time, a director may disclose any personal financial interest in advance, by
delivering to the board, or shareholders in the case of a company contemplated in 15
subsection (3), a notice in writing setting out the nature and extent of that interest, to be
used generally for the purposes of this section until changed or withdrawn by further
written notice from that director.
(5) If a director of a company, other than a company contemplated in subsection (2)(b)
or (3), has a personal financial interest in respect of a matter to be considered at a 20
meeting of the board, or knows that a related person has a personal financial interest in
the matter, the director—
(a) must disclose the interest and its general nature before the matter is considered
at the meeting;
(b) must disclose to the meeting any material information relating to the matter, 25
and known to the director;
(c) may disclose any observations or pertinent insights relating to the matter if
requested to do so by the other directors;
(d) if present at the meeting, must leave the meeting immediately after making
any disclosure contemplated in paragraph (b) or (c); 30
(e) must not take part in the consideration of the matter, except to the extent
contemplated in paragraphs (b) and (c);
(f) while absent from the meeting in terms of this subsection—
(i) is to be regarded as being present at the meeting for the purpose of
determining whether sufficient directors are present to constitute the 35
meeting; and
(ii) is not to be regarded as being present at the meeting for the purpose of
determining whether a resolution has sufficient support to be adopted;
and
(g) must not execute any document on behalf of the company in relation to the 40
matter unless specifically requested or directed to do so by the board.
(6) If a director of a company acquires a personal financial interest in an agreement or
other matter in which the company has a material interest, or knows that a related person
has acquired a personal financial interest in the matter, after the agreement or other
matter has been approved by the company, the director must promptly disclose to the 45
board, or to the shareholders in the case of a company contemplated in subsection (3),
the nature and extent of that interest, and the material circumstances relating to the
director or related person’s acquisition of that interest.
(7) A decision by the board, or a transaction or agreement approved by the board, or
by a company as contemplated in subsection (3), is valid despite any personal financial 50
interest of a director or person related to the director, if it—
(a) was approved in the manner contemplated in this section; or
(b) has been ratified by an ordinary resolution of the shareholders.
(8) A court, on application by any interested person, may declare valid a transaction
or agreement that had been approved by the board, or shareholders as the case may be, 55
despite the failure of the director to satisfy the requirements of this section.

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Standards of directors conduct

76. (1) In this section, ‘‘director’’ includes an alternate director, and—

(a) a prescribed officer; or
(b) a person who is a member of a committee of a board of a company, or of the
audit committee of a company, 5
irrespective of whether or not the person is also a member of the company’s board.
(2) A director of a company must—
(a) not use the position of director, or any information obtained while acting in the
capacity of a director—
(i) to gain an advantage for the director, or for another person other than the 10
company or a wholly-owned subsidiary of the company; or
(ii) to knowingly cause harm to the company or a subsidiary of the company;
and
(b) communicate to the board at the earliest practicable opportunity any
information that comes to the director’s attention, unless the director— 15
(i) reasonably believes that the information is—
(aa) immaterial to the company; or
(bb) generally available to the public, or known to the other directors; or
(ii) is bound not to disclose that information by a legal or ethical obligation
of confidentiality. 20
(3) Subject to subsections (4) and (5), a director of a company, when acting in that
capacity, must exercise the powers and perform the functions of director—
(a) in good faith and for a proper purpose;
(b) in the best interests of the company; and
(c) with the degree of care, skill and diligence that may reasonably be expected of 25
a person—
(i) carrying out the same functions in relation to the company as those
carried out by that director; and
(ii) having the general knowledge, skill and experience of that director.
(4) In respect of any particular matter arising in the exercise of the powers or the 30
performance of the functions of director, a particular director of a company—
(a) will have satisfied the obligations of subsection (3)(b) and (c) if—
(i) the director has taken reasonably diligent steps to become informed
about the matter;
(ii) either— 35
(aa) the director had no material personal financial interest in the subject
matter of the decision, and had no reasonable basis to know that any
related person had a personal financial interest in the matter; or
(bb) the director complied with the requirements of section 75 with
respect to any interest contemplated in subparagraph (aa); and 40
(iii) the director made a decision, or supported the decision of a committee or
the board, with regard to that matter, and the director had a rational basis
for believing, and did believe, that the decision was in the best interests
of the company; and
(b) is entitled to rely on— 45
(i) the performance by any of the persons—
(aa) referred to in subsection (5); or
(bb) to whom the board may reasonably have delegated, formally or
informally by course of conduct, the authority or duty to perform
one or more of the board’s functions that are delegable under 50
applicable law; and
(ii) any information, opinions, recommendations, reports or statements,
including financial statements and other financial data, prepared or
presented by any of the persons specified in subsection (5).

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(5) To the extent contemplated in subsection (4)(b), a director is entitled to rely on—
(a) one or more employees of the company whom the director reasonably
believes to be reliable and competent in the functions performed or the
information, opinions, reports or statements provided;
(b) legal counsel, accountants, or other professional persons retained by the 5
company, the board or a committee as to matters involving skills or expertise
that the director reasonably believes are matters—
(i) within the particular person’s professional or expert competence; or
(ii) as to which the particular person merits confidence; or
(c) a committee of the board of which the director is not a member, unless the 10
director has reason to believe that the actions of the committee do not merit
confidence.

Liability of directors and prescribed officers

77. (1) In this section, ‘‘director’’ includes an alternate director, and—

(a) a prescribed officer; or 15
(b) a person who is a member of a committee of a board of a company, or of the
audit committee of a company,
irrespective of whether or not the person is also a member of the company’s board.
(2) A director of a company may be held liable—
(a) in accordance with the principles of the common law relating to breach of a 20
fiduciary duty, for any loss, damages or costs sustained by the company as a
consequence of any breach by the director of a duty contemplated in section
75, 76(2) or 76(3)(a) or (b); or
(b) in accordance with the principles of the common law relating to delict for any
loss, damages or costs sustained by the company as a consequence of any 25
breach by the director of—
(i) a duty contemplated in section 76(3)(c);
(ii) any provision of this Act not otherwise mentioned in this section; or
(iii) any provision of the company’s Memorandum of Incorporation.
(3) A director of a company is liable for any loss, damages or costs sustained by the 30
company as a direct or indirect consequence of the director having—
(a) acted in the name of the company, signed anything on behalf of the company,
or purported to bind the company or authorise the taking of any action by or
on behalf of the company, despite knowing that the director lacked the
authority to do so; 35
(b) acquiesced in the carrying on of the company’s business despite knowing that
it was being conducted in a manner prohibited by section 22(1);
(c) been a party to an act or omission by the company despite knowing that the act
or omission was calculated to defraud a creditor, employee or shareholder of
the company, or had another fraudulent purpose; 40
(d) signed, consented to, or authorised, the publication of—
(i) any financial statements that were false or misleading in a material
respect; or
(ii) a prospectus, or a written statement contemplated in section 101, that
contained— 45
(aa) an ‘untrue statement’ as defined and described in section 95; or
(bb) a statement to the effect that a person had consented to be a director
of the company, when no such consent had been given,
despite knowing that the statement was false, misleading or untrue, as the
case may be, but the provisions of section 104(3), read with the changes 50
required by the context, apply to limit the liability of a director in terms
of this paragraph; or
(e) been present at a meeting, or participated in the making of a decision in terms
of section 74, and failed to vote against—
(i) the issuing of any unauthorised shares, despite knowing that those shares 55
had not been authorised in accordance with section 36;

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(ii) the issuing of any authorised securities, despite knowing that the issue of
those securities was inconsistent with section 41;
(iii) the granting of options to any person contemplated in section 42(4),
despite knowing that any shares—
(aa) for which the options could be exercised; or 5
(bb) into which any securities could be converted,
had not been authorised in terms of section 36;
(iv) the provision of financial assistance to any person contemplated in
section 44 for the acquisition of securities of the company, despite
knowing that the provision of financial assistance was inconsistent with 10
section 44 or the company’s Memorandum of Incorporation, to the extent
that the resolution or agreement has been declared void in terms of
section 44(5), read with section 218(1);
(v) the provision of financial assistance to a director for a purpose
contemplated in section 45, despite knowing that the provision of 15
financial assistance was inconsistent with that section or the company’s
Memorandum of Incorporation, to the extent that the resolution or
agreement has been declared void in terms of section 45(6), read with
section 218(1);
(vi) a resolution approving a distribution, despite knowing that the distribu- 20
tion was contrary to section 46, subject to subsection (4);
(vii) the acquisition by the company of any of its shares, or the shares of its
holding company, despite knowing that the acquisition was contrary to
section 46 or 48; or
(viii) an allotment by the company, despite knowing that the allotment was 25
contrary to any provision of Chapter 4, to the extent that the allotment or
an acceptance is declared void under section 109(1) read with section
218(1).
(4) The liability of a director in terms of subsection (3)(e)(vi) as a consequence of the
director having failed to vote against a distribution in contravention of section 46— 30
(a) arises only if—
(i) immediately after making all of the distribution contemplated in a
resolution in terms of section 46, the company does not satisfy the
solvency and liquidity test; and
(ii) it was unreasonable at the time of the decision to conclude that the 35
company would satisfy the solvency and liquidity test after making the
relevant distribution; and
(b) does not exceed, in aggregate, the difference between—
(i) the amount by which the value of the distribution exceeded the amount
that could have been distributed without causing the company to fail to 40
satisfy the solvency and liquidity test; and
(ii) the amount, if any, recovered by the company from persons to whom the
distribution was made.
(5) If the board of a company has made a decision in a manner that contravened this
Act, as contemplated in subsection (3)(e)— 45
(a) the company, or any director who has been or may be held liable in terms of
subsection (3)(e), may apply to a court for an order setting aside the decision
of the board; and
(b) the court may make—
(i) an order setting aside the decision in whole or in part, absolutely or 50
conditionally; and
(ii) any further order that is just and equitable in the circumstances, including
an order—
(aa) to rectify the decision, reverse any transaction, or restore any
consideration paid or benefit received by any person in terms of the 55
decision of the board; and
(bb) requiring the company to indemnify any director who has been or
may be held liable in terms of this section, including indemnifica-
tion for the costs of the proceedings under this subsection.
(6) The liability of a person in terms of this section is joint and several with any other 60
person who is or may be held liable for the same act.

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(7) Proceedings to recover any loss, damages or costs for which a person is or may be
held liable in terms of this section may not be commenced more than three years after the
act or omission that gave rise to that liability.
(8) In addition to the liability set out elsewhere in this section, any person who would
be so liable is jointly and severally liable with all other such persons— 5
(a) to pay the costs of all parties in the court in a proceeding contemplated in this
section unless the proceedings are abandoned, or exculpate that person; and
(b) to restore to the company any amount improperly paid by the company as a
consequence of the impugned act, and not recoverable in terms of this Act.
(9) In any proceedings against a director, other than for wilful misconduct or wilful 10
breach of trust, the court may relieve the director, either wholly or partly, from any
liability set out in this section, on any terms the court considers just if it appears to the
court that—
(a) the director is or may be liable, but has acted honestly and reasonably; or
(b) having regard to all the circumstances of the case, including those connected 15
with the appointment of the director, it would be fair to excuse the director.
(10) A director who has reason to apprehend that a claim may be made alleging that
the director is liable, other than for wilful misconduct or wilful breach of trust, may
apply to a court for relief, and the court may grant relief to the director on the same
grounds as if the matter had come before the court in terms of subsection (9). 20

Indemnification and directors’ insurance

78. (1) In this section, ‘‘director’’ includes a former director and an alternate director,
and—
(a) a prescribed officer; or
(b) a person who is a member of a committee of a board of a company, or of the 25
audit committee of a company,
irrespective of whether or not the person is also a member of the company’s board.
(2) Subject to subsections (4) to (6), any provision of an agreement, the Memorandum
of Incorporation or rules of a company, or a resolution adopted by a company, whether
express or implied, is void to the extent that it directly or indirectly purports to— 30
(a) relieve a director of—
(i) a duty contemplated in section 75 or 76; or
(ii) liability contemplated in section 77; or
(b) negate, limit or restrict any legal consequences arising from an act or omission
that constitutes wilful misconduct or wilful breach of trust on the part of the 35
director.
(3) A company may not directly or indirectly pay any fine that may be imposed on the
director of the company, or of a related company, who has been convicted of an offence
in terms of any national legislation.
(4) Except to the extent that a company’s Memorandum of Incorporation provides 40
otherwise, the company—
(a) may advance expenses to a director to defend litigation in any proceedings
arising out of the director’s service to the company; and
(b) may directly or indirectly indemnify a director for expenses contemplated in
paragraph (a), irrespective of whether it has advanced those expenses, if the 45
proceedings—
(i) are abandoned or exculpate the director; or
(ii) arise in respect of any liability for which the company may indemnify the
director, in terms of subsections (5) and (6).
(5) Except to the extent that the Memorandum of Incorporation of a company 50
provides otherwise, a company may indemnify a director in respect of any liability
arising other than as contemplated in subsection (6).
(6) A company may not indemnify a director in respect of—
(a) any liability arising—

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(i) in terms of section 77(3)(a), (b) or (c); or

(ii) from willful misconduct or willful breach of trust on the part of the
director; or
(b) any fine contemplated in subsection (3).
(7) Except to the extent that the Memorandum of Incorporation of a company 5
provides otherwise, a company may purchase insurance to protect—
(a) a director against any liability or expenses for which the company is permitted
to indemnify a director in accordance with subsection (5); or
(b) the company against—
(i) any expenses— 10
(aa) that the company is permitted to advance in accordance with
subsection (4)(a); or
(bb) for which the company is permitted to indemnify a director in
accordance with subsection (4)(b); or
(ii) any liability for which the company is permitted to indemnify a director 15
in accordance with subsection (5).
(8) A company is entitled to claim restitution from a director of the company or of a
related company for any money paid directly or indirectly by the company to or on
behalf of that director in any manner inconsistent with this section.

CHAPTER 3

ENHANCED ACCOUNTABILITY AND TRANSPARENCY

Part A

Application and general requirements of Chapter 40

Application of Chapter

84. (1) This Chapter applies to—

(a) every public company, subject to subsection (2) and section 94(1);
(b) every company that is a state-owned company—
(i) except to the extent that the company has been exempted from the 45
application of this Chapter, in terms of section 9; and
(ii) subject to subsection (3); and
(c) a private company, a personal liability company or a non-profit company, only
to the extent contemplated in section 34(2) or as otherwise required by this Act
to have its financial statements audited. 50

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(2) In the case of a public company whose securities are listed on an exchange, if there
is a conflict between any provision of Part B, C or D of this Chapter, and any provision
of the listing requirements of an exchange—
(a) the provisions of this Chapter and of the listing requirements apply
concurrently, to the extent that it is possible to apply and comply with one of 5
the inconsistent provisions without contravening the second; and
(b) to the extent that it is impossible to apply or comply with one of the
inconsistent provisions without contravening the second, the provisions of
this Act prevail.
(3) In the case of a state-owned company— 10
(a) if there is a conflict between a provision of this Chapter and a provision of the
Public Audit Act, 2004 (Act No. 25 of 2004), the provisions of that Act
prevail;
(b) despite the provisions of this Chapter to the contrary, the state-owned
company is not required to appoint an auditor for any financial year in respect 15
of which the Auditor-General has elected, in terms of the Public Audit Act,
2004 (Act No. 25 of 2004), to conduct an audit of that enterprise; and
(c) in any year in which the state-owned company is required by this Chapter to
appoint an auditor, any requirement in terms of the Public Audit Act, 2004
(Act No. 25 of 2004), to have the appointment of the company’s auditor 20
approved by the Auditor-General applies to that company, in addition to the
relevant provisions of this Chapter.
(4) Every company contemplated in subsection (1)(a) or (b) must appoint—
(a) a person to serve as company secretary, in the manner and for the purposes set
out in Part B; 25
(b) a person to serve as auditor, in the manner and for the purposes set out in Part
C; and
(c) an audit committee, in the manner and for the purposes set out in Part D.
(5) A person who is disqualified in terms of section 69(8) to serve as a director of any
particular company may not be appointed or continue to serve that company in any 30
capacity mentioned in subsection (4), irrespective of whether that appointment is
made—
(a) as required by this Chapter; or
(b) voluntarily, as contemplated in section 34(2).
(6) If the board of a public company or state-owned company fails to make an 35
appointment contemplated in subsection (4) in accordance with this Part—
(a) the Commission may issue a notice to that company to show cause why the
Commission should not proceed to convene a shareholders meeting for the
purpose of making that appointment; and
(b) if the company fails to respond to a notice contemplated in paragraph (a) or, 40
in responding, fails to satisfy the Commission that the board will make the
appointment, or convene a shareholders meeting to make the appointment,
within an acceptable period, the Commission may—
(i) give notice to the holders of the company’s securities of a general
meeting, and convene such a meeting, to make that appointment; and 45
(ii) assess a pro-rata share of the cost of convening the general meeting to
each director of the company who knowingly permitted the company to
fail to make the appointment in accordance with this Part.
(7) A company that has been given notice contemplated in subsection (6)(a), or a
director who has been assessed any portion of the costs of a meeting, as contemplated in 50
subsection (6)(b), may apply to the Companies Tribunal to set aside the notice, or the
assessment, in whole or in part.

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Registration of company secretary and auditor

85. (1) Every company that makes an appointment contemplated in section 84(4),
irrespective of whether the company does so as required by that section or voluntarily as
contemplated in section 34(2), must—
(a) maintain a record of its company secretaries and auditors, including, in respect 5
of each person appointed as company secretary or auditor of the company—
(i) the name, including any former name, of each such person; and
(ii) the date of every such appointment; and
(b) if a firm or juristic person is appointed—
(i) the name, registration number and registered office address of that firm or 10
juristic person; and
(ii) the name of any individual contemplated in section 90(3), if that section
is applicable; and
(c) any changes in the particulars referred to in paragraphs (a) and (b), as they
occur, with the date and nature of each such change. 15
(2) To protect personal privacy, the Minister, by notice in the Gazette, may exempt
from the application of subsection (1)(a) categories of names as formerly used by any
person—
(a) before attaining majority, or by persons who have been adopted, married,
divorced or widowed; or 20
(b) in other circumstances prescribed by the Minister.
(3) Within 10 business days after making an appointment contemplated in subsection
(1), or after the termination of service of such an appointment, a company must file a
notice of the appointment or termination, as the case may be, subject to subsection (4).
(4) The incorporators of a company may file a notice of the appointment of the 25
company’s first company secretary, auditor or audit committee as part of the company’s
Notice of Incorporation.

Part B

Company secretary

Mandatory appointment of company secretary 30

86. (1) A public company or state-owned company must appoint a person

knowledgeable or experienced in relevant laws as a company secretary.
(2) Every company secretary must be a permanent resident of the Republic, and must
remain so while serving in that capacity, irrespective of whether the appointment is
made as required by subsection (1), or voluntarily as contemplated in section 34(2). 35
(3) The first company secretary of a public company or state-owned company may be
appointed by—
(a) the incorporators of the company; or
(b) within 40 business days after the incorporation of the company, by either—
(i) the directors of the company; or 40
(ii) an ordinary resolution of the holders of the company’s securities.
(4) Within 60 business days after a vacancy arises in the office of company secretary,
the board must fill the vacancy by appointing a person whom the directors consider to
have the requisite knowledge and experience.

Juristic person or partnership may be appointed company secretary 45

87. (1) A juristic person or partnership may be appointed to hold the office of company
secretary, provided that—
(a) every employee of that juristic person who provides company secretary
services, or partner and employee of that partnership, as the case may be,
satisfies the requirements contemplated in section 84(5); and 50
(b) at least one employee of that juristic person, or one partner or employee of that
partnership, as the case may be, satisfies the requirements contemplated in
section 86.

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(2) A change in the membership of a juristic person or partnership that holds office as
company secretary does not constitute a casual vacancy in the office of company
secretary, if the juristic person or partnership continues to satisfy the requirements of
subsection (1).
(3) If at any time a juristic person or partnership holds office as company secretary of 5
a particular company—
(a) the juristic person or partnership must immediately notify the directors of the
company if the juristic person or partnership no longer satisfies the
requirements of subsection (1), and is regarded to have resigned as company
secretary upon giving that notice to the company; 10
(b) the company is entitled to assume that the juristic person or partnership
satisfies the requirements of subsection (1), until the company has received a
notice contemplated in paragraph (a); and
(c) any action taken by the juristic person or partnership in performance of its
functions as company secretary is not invalidated merely because the juristic 15
person or partnership had ceased to satisfy the requirements of subsection (1)
at the time of that action.

Duties of company secretary

88. (1) A company’s secretary is accountable to the company’s board.

(2) A company secretary’s duties include, but are not restricted to— 20
(a) providing the directors of the company collectively and individually with
guidance as to their duties, responsibilities and powers;
(b) making the directors aware of any law relevant to or affecting the company;
(c) reporting to the company’s board any failure on the part of the company or a
director to comply with the Memorandum of Incorporation or rules of the 25
company or this Act;
(d) ensuring that minutes of all shareholders meetings, board meetings and the
meetings of any committees of the directors, or of the company’s audit
committee, are properly recorded in accordance with this Act;
(e) certifying in the company’s annual financial statements whether the company 30
has filed required returns and notices in terms of this Act, and whether all such
returns and notices appear to be true, correct and up to date;
(f) ensuring that a copy of the company’s annual financial statements is sent, in
accordance with this Act, to every person who is entitled to it; and
(g) carrying out the functions of a person designated in terms of section 33(3). 35

Resignation or removal of company secretary

89. (1) A company secretary may resign from office by giving the company—
(a) one month written notice; or
(b) less than one month written notice, with the approval of the board.
(2) If the company secretary is removed from office by the board, the company 40
secretary may require the company to include a statement in its annual financial
statements relating to that financial year, not exceeding a reasonable length, setting out
the company secretary’s contention as to the circumstances that resulted in the removal.
(3) If the company secretary wishes to exercise the power referred to in subsection
(2), the company secretary must give written notice to that effect to the company by not 45
later than the end of the financial year in which the removal took place and that notice
must include the statement referred to in subsection (2).
(4) The statement of the company secretary referred to in subsection (2) must be
included in the directors’ report in the company’s annual financial statements.

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Part C

Auditors

Appointment of auditor

90. (1) Upon its incorporation, and each year at its annual general meeting, a public
company or state-owned company must appoint an auditor. 5
(2) To be appointed as an auditor of a company, whether as required by subsection (1)
or as contemplated in section 34(2), a person or firm—
(a) must be a registered auditor;
(b) in addition to the prohibition contemplated in section 84(5), must not be—
(i) a director or prescribed officer of the company; 10
(ii) an employee or consultant of the company who was or has been engaged
for more than one year in the maintenance of any of the company’s
financial records or the preparation of any of its financial statements;
(iii) a director, officer or employee of a person appointed as company
secretary in terms of Part B of this Chapter; 15
(iv) a person who, alone or with a partner or employees, habitually or
regularly performs the duties of accountant or bookkeeper, or performs
related secretarial work, for the company;
(v) a person who, at any time during the five financial years immediately
preceding the date of appointment, was a person contemplated in any of 20
subparagraphs (i) to (iv); or
(vi) a person related to a person contemplated in subparagraphs (i) to (v); and
(c) must be acceptable to the company’s audit committee as being independent of
the company, having regard to the matters enumerated in section 94(8), in the
case of a company that has appointed an audit committee, whether as required 25
by section 94, or voluntarily as contemplated in section 34(2).
(3) If a company appoints a firm as an auditor, the individual determined by that firm,
in terms of section 44(1) of the Auditing Profession Act, to be responsible for per-
forming the functions of auditor must satisfy the requirements of subsection (2).
(4) If a company that is required to appoint an auditor does not do so when it registers 30
the incorporation of the company, the directors of the company must appoint the first
auditor of the company within 40 business days after the date of incorporation of the
company.
(5) The first auditor of a company holds office until the conclusion of the first annual
general meeting of the company. 35
(6) A retiring auditor may be automatically reappointed at an annual general meeting
without any resolution being passed, unless—
(a) the retiring auditor is—
(i) no longer qualified for appointment;
(ii) no longer willing to accept the appointment, and has so notified the 40
company; or
(iii) required to cease serving as auditor, in terms of section 92;
(b) an audit committee appointed by the company in terms of this Act objects to
the reappointment; or
(c) the company has notice of an intended resolution to appoint some other person 45
or persons in place of the retiring auditor.
(7) If an annual general meeting of a company does not appoint or reappoint an
auditor the directors must fill the vacancy in the office in terms of the procedure
contemplated in section 91within 40 business days after the date of the meeting.

Resignation of auditors and vacancies 50

91. (1) The resignation of an auditor is effective when the notice is filed.
(2) Subject to subsection (3), if a vacancy arises in the office of auditor of a company,
the board of that company—

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(a) must appoint a new auditor within 40 business days, if there was only one
incumbent auditor of the company; and
(b) may appoint a new auditor at any time, if there was more than one incumbent,
but while any such vacancy continues, the surviving or continuing auditor
may act as auditor of the company. 5
(3) Before making an appointment in terms of subsection (2)—
(a) the board must propose to the company’s audit committee, within 15 business
days after the vacancy occurs, the name of at least one registered auditor to be
considered for appointment as the new auditor; and
(b) may proceed to make an appointment of a person proposed in terms of 10
paragraph (a) if, within five business days after delivering the proposal, the
audit committee does not give notice in writing to the board rejecting the
proposed auditor.
(4) If a company appoints a firm as its auditor, any change in the composition of the
members of that firm does not by itself create a vacancy in the office of auditor for that 15
year, subject to subsection (5).
(5) If, by comparison with the membership of a firm at the time of its latest
appointment, less than one half of the members remain after a change contemplated in
subsection (4), that change constitutes the resignation of the firm as auditor of the
company, giving rise to a vacancy. 20

Rotation of auditors

92. (1) The same individual may not serve as the auditor or designated auditor of a
company for more than five consecutive financial years.
(2) If an individual has served as the auditor or designated auditor of a company for
two or more consecutive financial years and then ceases to be the auditor or designated 25
auditor, the individual may not be appointed again as the auditor or designated auditor
of that company until after the expiry of at least two further financial years.
(3) If a company has appointed two or more persons as joint auditors, the company
must manage the rotation required by this section in such a manner that all of the joint
auditors do not relinquish office in the same year. 30

Rights and restricted functions of auditors

93. (1) The auditor of a company—

(a) has the right of access at all times to the accounting records and all books and
documents of the company, and is entitled to require from the directors or
prescribed officers of the company any information and explanations 35
necessary for the performance of the auditor’s duties;
(b) in the case of the auditor of a holding company, has the right of access to all
current and former financial statements of any subsidiary of that holding
company and is entitled to require from the directors or officers of the holding
company or subsidiary any information and explanations in connection with 40
any such statements and in connection with the accounting records, books and
documents of the subsidiary as necessary for the performance of the auditor’s
duties; and
(c) is entitled to—
(i) attend any general shareholders meeting; 45
(ii) receive all notices of and other communications relating to any general
shareholders meeting; and
(iii) be heard at any general shareholders meeting contemplated in this
paragraph on any part of the business of the meeting that concerns the
auditor’s duties or functions. 50
(2) An auditor may apply to a court for an appropriate order to enforce the rights set
out in subsection (1)(a) or (b), and a court may—
(a) make any order that is just and reasonable to prevent frustration of the
auditor’s duties by the company or any of its directors, prescribed officers or
employees; and 55

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(b) make an order of costs personally against any director or prescribed officer
whom the court has found to have wilfully and knowingly frustrated, or
attempted to frustrate, the performance of the auditor’s functions.
(3) An auditor appointed by a company may not perform any services for that
company— 5
(a) that would place the auditor in a conflict of interest as prescribed or
determined by the Independent Regulatory Board for Auditors in terms of
section 44(6) of the Auditing Profession Act; or
(b) as may be determined by the company’s audit committee in terms of section
94(7)(d). 10

Part D

Audit committees

Audit committees

94. (1) This section—

(a) applies concurrently with section 64 of the Banks Act, to any company that is 15
subject to that section of that Act, but subsections (2), (3) and (4) of this
section do not apply to the appointment of an audit committee by any such
company; and
(b) does not apply to a company that has been granted an exemption in terms of
section 64(4) of the Banks Act. 20
(2) At each annual general meeting, a public company or state-owned company, or
other company that has voluntarily determined to have an audit committee as
contemplated in section 34(2), must elect an audit committee comprising at least three
members, unless—
(a) the company is a subsidiary of another company that has an audit committee; 25
and
(b) the audit committee of that other company will perform the functions required
under this section on behalf of that subsidiary company.
(3) The first members of the audit committee may be appointed by—
(a) the incorporators of a company; or 30
(b) by the board, within 40 business days after the incorporation of the company.
(4) Each member of an audit committee of a company must—
(a) be a director of the company, who satisfies any applicable requirements
prescribed in terms of subsection (5);
(b) not be— 35
(i) involved in the day-to-day management of the company’s business or
have been so involved at any time during the previous financial year;
(ii) a prescribed officer, or full-time employee, of the company or another
related or inter-related company, or have been such an officer or
employee at any time during the previous three financial years; or 40
(iii) a material supplier or customer of the company, such that a reasonable
and informed third party would conclude in the circumstances that the
integrity, impartiality or objectivity of that director is compromised by
that relationship; and
(c) not be related to any person who falls within any of the criteria set out in 45
paragraph (b).
(5) The Minister may prescribe minimum qualification requirements for members of
an audit committee as necessary to ensure that any such committee, taken as a whole,
comprises persons with adequate relevant knowledge and experience to equip the
committee to perform its functions. 50
(6) The board of a company contemplated in section 84(1) must appoint a person to
fill any vacancy on the audit committee within 40 business days after the vacancy arises.
(7) An audit committee of a company has the following duties:
(a) To nominate, for appointment as auditor of the company under section 90, a
registered auditor who, in the opinion of the audit committee, is independent 55
of the company;

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(b) to determine the fees to be paid to the auditor and the auditor’s terms of
engagement;
(c) to ensure that the appointment of the auditor complies with the provisions of
this Act and any other legislation relating to the appointment of auditors;
(d) to determine, subject to the provisions of this Chapter, the nature and extent of 5
any non-audit services that the auditor may provide to the company, or that the
auditor must not provide to the company, or a related company;
(e) to pre-approve any proposed agreement with the auditor for the provision of
non-audit services to the company;
(f) to prepare a report, to be included in the annual financial statements for that 10
financial year—
(i) describing how the audit committee carried out its functions;
(ii) stating whether the audit committee is satisfied that the auditor was
independent of the company; and
(iii) commenting in any way the committee considers appropriate on the 15
financial statements, the accounting practices and the internal financial
control of the company;
(g) to receive and deal appropriately with any concerns or complaints, whether
from within or outside the company, or on its own initiative, relating to—
(i) the accounting practices and internal audit of the company; 20
(ii) the content or auditing of the company’s financial statements;
(iii) the internal financial controls of the company; or
(iv) any related matter;
(h) to make submissions to the board on any matter concerning the company’s
accounting policies, financial control, records and reporting; and 25
(i) to perform other functions determined by the board, including the develop-
ment and implementation of a policy and plan for a systematic, disciplined
approach to evaluate and improve the effectiveness of risk management,
control, and governance processes within the company.
(8) In considering whether, for the purposes of this Part, a registered auditor is 30
independent of a company, the audit committee of that company must—
(a) ascertain that the auditor does not receive any direct or indirect remuneration
or other benefit from the company, except—
(i) as auditor; or
(ii) for rendering other services to the company, to the extent permitted in 35
terms of subsection (6)(d);
(b) consider whether the auditor’s independence may have been prejudiced—
(i) as a result of any previous appointment as auditor; or
(ii) having regard to the extent of any consultancy, advisory or other work
undertaken by the auditor for the company; and 40
(c) consider compliance with other criteria relating to independence or conflict of
interest as prescribed by the Independent Regulatory Board for Auditors
established by the Auditing Profession Act,
in relation to the company, and if the company is a member of a group of
companies, any other company within that group. 45
(9) Nothing in this section precludes the appointment by a public company at its
annual general meeting of an auditor other than one nominated by the audit committee,
but if such an auditor is appointed, the appointment is valid only if the audit committee
is satisfied that the proposed auditor is independent of the company.
(10) Neither the appointment nor the duties of an audit committee reduce the 50
functions and duties of the board or the directors of the company, except with respect to
the appointment, fees and terms of engagement of the auditor.
(11) A company must pay all expenses reasonably incurred by its audit committee,
including, if the audit committee considers it appropriate, the fees of any consultant or
specialist engaged by the audit committee to assist it in the performance of its functions. 55

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Protection for whistle-blowers 40

159. (1) To the extent that this section creates any right of, or establishes any
protection for, an employee, as defined in the Protected Disclosures Act, 2000 (Act No.
26 of 2000)—
(a) that right or protection is in addition to, and not in substitution for, any right
or protection established by that Act; and 45
(b) that Act applies to a disclosure contemplated in this section by an employee,
as defined in that Act, irrespective whether that Act would otherwise apply to
that disclosure.
(2) Any provision of a company’s Memorandum of Incorporation or rules, or an
agreement, is void to the extent that it is inconsistent with, or purports to limit, set aside 50
or negate the effect of this section.
(3) This section applies to any disclosure of information by a person contemplated in
subsection (4) if—

(a) it is made in good faith to the Commission, the Companies Tribunal, the
Panel, a regulatory authority, an exchange, a legal adviser, a director,
prescribed officer, company secretary, auditor, board or committee of the
company concerned; and
(b) the person making the disclosure reasonably believed at the time of the 5
disclosure that the information showed or tended to show that a company or
external company, or a director or prescribed officer of a company acting in
that capacity, has—
(i) contravened this Act, or a law mentioned in Schedule 4;
(ii) failed or is failing to comply with any statutory obligation to which the 10

(iii) engaged in conduct that has endangered or is likely to endanger the

health or safety of any individual, or damage the environment;
(iv) unfairly discriminated, or condoned unfair discrimination, against any
person, as contemplated in section 9 of the Constitution and the 15
Promotion of Equality and Prevention of Unfair Discrimination Act,
2000 (Act No. 4 of 2000); or
(v) contravened any other legislation in a manner that could expose the
company to an actual or contingent risk of liability, or is inherently
prejudicial to the interests of the company. 20
20
(4) A shareholder, director, company secretary, prescribed officer or employee of a
company, a registered trade union that represents employees of the company or another
representative of the employees of that company, a supplier of goods or services to a
company, or an employee of such a supplier, who makes a disclosure contemplated in
this section— 25
(a) has qualified privilege in respect of the disclosure; and
(b) is immune from any civil, criminal or administrative liability for that
disclosure.

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(5) A person contemplated in subsection (4) is entitled to compensation from another

person for any damages suffered if the first person is entitled to make, or has made, a 30
disclosure contemplated in this section and, because of that possible or actual disclosure,
the second person—
(a) engages in conduct with the intent to cause detriment to the first person, and
the conduct causes such detriment; or
(b) directly or indirectly makes an express or implied threat, whether conditional 35
or unconditional, to cause any detriment to the first person or to another
person, and—
(i) intends the first person to fear that the threat will be carried out; or
(ii) is reckless as to causing the first person to fear that the threat will be
carried out, irrespective of whether the first person actually feared that 40
the threat would be carried out.
(6) Any conduct or threat contemplated in subsection (5) is presumed to have
occurred as a result of a possible or actual disclosure that a person is entitled to make,
or has made, unless the person who engaged in the conduct or made the threat can show
satisfactory evidence in support of another reason for engaging in the conduct or making 45
the threat.
(7) A public company and state-owned company must directly or indirectly—
(a) establish and maintain a system to receive disclosures contemplated in this
section confidentially, and act on them; and
(b) routinely publicise the availability of that system to the categories of persons 50
contemplated in subsection (4).

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CHAPTER 9

OFFENCES, MISCELLANEOUS MATTERS AND GENERAL PROVISIONS

Part A

Offences and penalties

Breach of confidence
25
213. (1) It is an offence to disclose any confidential information concerning the
affairs of any person obtained—
30

(a) in carrying out any function in terms of this Act; or

(b) as a result of initiating a complaint, or participating in any proceedings in
terms of this Act.
(2) Subsection (1) does not apply to information disclosed— 35
(a) as contemplated in section 206(2)(e)(i) or (ii) or 212(5) to (7);
(b) for the purpose of the proper administration or enforcement of this Act;
(c) for the purpose of the administration of justice;
(d) at the request of the Commission, the Panel, an inspector or investigator, the
Companies Tribunal, or a court entitled to receive the information; or 40
(e) when required to do so by any court or under any law.

False statements, reckless conduct and non-compliance

214. (1) A person is guilty of an offence if the person—

(a) is a party to the falsification of any accounting records of a company;
(b) with a fraudulent purpose, knowingly provided false or misleading informa- 45
tion in any circumstances in which this Act requires the person to provide
information or give notice to another person;
(c) was knowingly a party to—
(i) conduct prohibited by section 22(1); or

(ii) an act or omission by a business calculated to defraud a creditor,

employee or security holder of the company, or with another fraudulent
purpose; or
(d) is a party to the preparation, approval, dissemination or publication of—
(i) financial statements or summaries, to the extent set out in section 29(6); 5
(ii) a prospectus, or a written statement contemplated in section 101, that
contained an ‘untrue statement’ as defined and described in section 95.
(2) For the purposes of subsection (1)(d), a person is a party to the preparation of a
document contemplated in that subsection if—
(a) the document includes or is otherwise based on a scheme, structure or form of 10
words or numbers devised, prepared or recommended by that person; and
(b) the scheme, structure or form of words is of such a nature that the person
knew, or ought reasonably to have known, that its inclusion or other use in
connection with the preparation of the document would cause it to be false or
misleading. 15
(3) It is an offence to fail to satisfy a compliance notice issued in terms of this Act, but
no person may be prosecuted for such an offence in respect of a particular compliance
notice if the Commission or Panel, as the case may be, has applied to a court in terms of
section 171(7)(a) for the imposition of an administrative fine in respect of that person’s
failure to comply with that notice. 20

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