Auditing

Legislation and Standards

Second Edition
 Auditing
Legislation and Standards
Second Edition
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The King IV Report on Corporate Governance for South Africa, 2016 is published with the kind permission of the Institute of Directors in Southern Africa.

© 2016
King IV Report on Corporate Governance for South Africa, 2016 © 2016 Institute of Directors in Southern Africa

First published 2012

ISBN softcover 978 0 409 11981 7

e-book 978 0 409 11989 3

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 Contents

Page

PART A Legislation
Companies Act No. 71 of 2008
Act ........................................................................................................................................................................................................ A-5
Regulations........................................................................................................................................................................................... A-109
Index .................................................................................................................................................................................................... A-287
Close Corporations Act No. 69 of 1984
Act ........................................................................................................................................................................................................ A-299
Index .................................................................................................................................................................................................... A-319
Auditing Profession Act No. 26 of 2005
Act ........................................................................................................................................................................................................ A-325
Index .................................................................................................................................................................................................... A-341
Public Finance Management Act No. 1 of 1999
Act ........................................................................................................................................................................................................ A-347
Index .................................................................................................................................................................................................... A-383

PART B King IV Report on Corporate Governance for South Africa 2016

Foreword .................................................................................................................................................................................................... 3
Part 1 Glossary of terms ........................................................................................................................................................................... 8
Part 2 Fundamental concepts.................................................................................................................................................................... 19
Part 3 King IV application and disclosure................................................................................................................................................ 34
Part 4 King IV on a page .......................................................................................................................................................................... 39
Part 5 King IV Code on Corporate Governance ....................................................................................................................................... 42
Part 5.1: Leadership, ethics and corporate citizenship ......................................................................................................................... 43
Part 5.2: Strategy, performance and reporting ..................................................................................................................................... 47
Part 5.3: Governing structures and delegation ..................................................................................................................................... 49
Part 5.4: Governance functional areas.................................................................................................................................................. 61
Part 5.5: Stakeholder relationships ....................................................................................................................................................... 71
Part 6 Sector supplements ........................................................................................................................................................................ 74
Part 6.1: Introduction to sector supplements ........................................................................................................................................ 75
Part 6.2: Supplement for municipalities ............................................................................................................................................... 79
Part 6.3: Supplement for non-profit organisations ............................................................................................................................... 87
Part 6.4: Supplement for retirement funds ........................................................................................................................................... 95
Part 6.5: Supplement for small and medium enterprises ...................................................................................................................... 103
Part 6.6: Supplement for state-owned entities ...................................................................................................................................... 111
Part 7 Content development process and King Committee ...................................................................................................................... 118

v
 Part A
Legislation
 Companies Act
No. 71 of 2008

EDITORIAL NOTE

Please note that although the old Companies Act, Act No. 61 of 1973, has been repealed it is still
extensively referred to throughout this Act. Please refer to s. 224 and Schedule 5 of Act No. 71
of 2008, dealing with transitional arrangements, for a better understanding of the provisions of
Companies Act No. 61 of 1973 that are still applicable.
A-5 Companies Act No. 71 of 2008 Arrangement of sections

COMPANIES ACT CHAPTER 2

FORMATION, ADMINISTRATION AND DISSOLUTION OF
NO. 71 OF 2008 COMPANIES
[ASSENTED TO 8 APRIL 2009] Part A
[DATE OF COMMENCEMENT: 1 MAY 2011] Reservation and registration of company names
(Unless otherwise indicated) 11. Criteria for names of companies
12. Reservation of name and defensive names
(English text signed by the President)
Part B
as amended by Incorporation and legal status of companies
Companies Amendment Act, No. 3 of 2011 13. Right to incorporate company or transfer registration of
foreign company
Financial Markets Act, No. 19 of 2012
[with effect from 3 June 2013]
14. Registration of company
15. Memorandum of Incorporation,
shareholder agreements and rules of company
16. Amending Memorandum of Incorporation
17. Alterations, translations and consolidations of Memoran-
ACT dum of Incorporation
To provide for the incorporation, registration, organisation 18. Authenticity of versions of Memorandum of Incorpora-
and management of companies, the capitalisation of profit tion
companies, and the registration of offices of foreign companies 19. Legal status of companies
carrying on business within the Republic; to define the rela- 20. Validity of company actions
tionships between companies and their respective shareholders
21. Pre-incorporation contracts
or members and directors; to provide for equitable and effi-
22. Reckless trading prohibited
cient amalgamations, mergers and takeovers of companies; to
provide for efficient rescue of financially distressed companies; Part C
to provide appropriate legal redress for investors and third Transparency, accountability and integrity of companies
parties with respect to companies; to establish a Companies 23. Registration of external companies and registered office
and Intellectual Property Commission and a Takeover Regula- 24. Form and standards for company records
tion Panel to administer the requirements of the Act with 25. Location of company records
respect to companies, to establish a Companies Tribunal to 26. Access to company records
facilitate alternative dispute resolution and to review decisions
27. Financial year of company
of the Commission; to establish a Financial Reporting Stand-
28. Accounting records
ards Council to advise on requirements for financial record-
keeping and reporting by companies; to repeal the Companies 29. Financial statements
Act, 1973 (Act No. 61 of 1973), and make amendments to the 30. Annual financial statements
Close Corporations Act, 1984 (Act No. 69 of 1984), as necessary 31. Access to financial statements or related information
to provide for a consistent and harmonious regime of business 32. Use of company name and registration number
incorporation and regulation; and to provide for matters 33. Annual return
connected therewith. 34. Additional accountability requirements for certain
BE IT ENACTED by the Parliament of the Republic of South companies
Africa, as follows:— Part D
Capitalisation of profit companies
ARRANGEMENT OF SECTIONS
35. Legal nature of company shares and requirement to have
(Editorial Note: The wording of certain sections in the Arrange- shareholders
ment of Sections below have been changed from the original words 36. Authorisation for shares
published in the Gazette to reflect the actual section headings that 37. Preferences, rights, limitations and other share terms
appear within the Act.) 38. Issuing shares
39. Subscription of shares
CHAPTER 1 40. Consideration for shares
INTERPRETATION, PURPOSE AND 41. Shareholder approval for issuing shares in certain cases
APPLICATION 42. Options for subscription of securities
Part A 43. Securities other than shares
Interpretation 44. Financial assistance for subscription of securities
1. Definitions 45. Loans or other financial assistance to directors
46. Distributions must be authorised by board
2. Related and inter-related persons, and control
47. Capitalisation shares
3. Subsidiary relationships
48. Company or subsidiary acquiring company’s shares
4. Solvency and liquidity test
5. General interpretation of Act Part E
6. Anti-avoidance, exemptions and Securities registration and transfer
substantial compliance 49. Securities to be evidenced by certificates or uncertificated
50. Securities register and numbering
Part B 51. Registration and transfer of certificated securities
Purpose and application 52. Registration of uncertificated securities
7. Purposes of Act 53. Transfer of uncertificated securities
8. Categories of companies 54. Substitution of certificated or
9. Modified application with respect to state-owned compa- uncertificated securities
nies 55. Liability relating to uncertificated
10. Modified application with respect to securities
non-profit companies 56. Beneficial interest in securities
Arrangement of sections Auditing: Legislation and Standards A-6

Part F 103. Variation of agreement mentioned in

Governance of companies prospectus
57. Interpretation and application of Part 104. Liability for untrue statements in
58. Shareholder right to be represented by proxy prospectus
59. Record date for determining shareholder rights 105. Liability of experts and others
60. Shareholders acting other than at meeting 106. Responsibility for untrue statements in prospectus
61. Shareholders meetings 107. Time limit for allotment or acceptance
62. Notice of meetings 108. Restrictions on allotment
63. Conduct of meetings 109. Voidable allotment
64. Meeting quorum and adjournment 110. Minimum interval before allotment or acceptance
65. Shareholder resolutions 111. Conditional allotment if prospectus states securities to be
66. Board, directors and prescribed officers listed
67. First director or directors
68. Election of directors of profit companies CHAPTER 5
69. Ineligibility and disqualification of persons to be director FUNDAMENTAL TRANSACTIONS,
or prescribed officer TAKEOVERS AND OFFERS
70. Vacancies on board
71. Removal of directors Part A
72. Board committees Approval for certain fundamental transactions
73. Board meetings 112. Proposals to dispose of all or greater part of assets or
74. Directors acting other than at meeting undertaking
75. Director’s personal financial interests 113. Proposals for amalgamation or merger
76. Standards of directors’ conduct 114. Proposals for scheme of arrangement
77. Liability of directors and prescribed officers 115. Required approval for transactions
78. Indemnification and directors’ insurance contemplated in Part
116. Implementation of amalgamation or
Part G merger
Winding-up of solvent companies and
deregistering companies Part B
79. Winding-up of solvent companies Authority of Panel and Takeover Regulations
80. Voluntary winding-up of solvent company 117. Definitions applicable to this Part, Part C and Takeover
81. Winding-up of solvent companies by court order Regulations
82. Dissolution of companies and removal from register 118. Application of this Part, Part C and Takeover Regulations
83. Effect of removal of company from register 119. Panel regulation of affected transactions
120. Takeover Regulations
CHAPTER 3
ENHANCED ACCOUNTABILITY AND TRANSPARENCY Part C
Part A Regulation of affected transactions and offers
Application and general requirements of Chapter 121. General requirement concerning
84. Application of Chapter transactions and offers
85. Registration of company secretary and auditor 122. Required disclosure concerning certain share transactions
123. Mandatory offers
Part B 124. Compulsory acquisitions and squeeze out
Company secretary 125. Comparable and partial offers
86. Mandatory appointment of company secretary 126. Restrictions on frustrating action
87. Juristic person or partnership may be appointed company 127. Prohibited dealings before and during an offer
secretary
88. Duties of company secretary
89. Resignation or removal of company CHAPTER 6
secretary BUSINESS RESCUE AND COMPROMISE WITH CREDITORS

Part C Part A
Auditors Business rescue proceedings
90. Appointment of auditor 128. Application and definitions applicable to Chapter
91. Resignation of auditors and vacancies 129. Company resolution to begin business rescue proceedings
92. Rotation of auditors 130. Objections to company resolution
93. Rights and restricted functions of auditors 131. Court order to begin business rescue proceedings
132. Duration of business rescue proceedings
Part D 133. General moratorium on legal proceedings against compa-
Audit committees ny
94. Audit committees 134. Protection of property interests
135. Post-commencement finance
CHAPTER 4 136. Effect of business rescue on employees and contracts
PUBLIC OFFERINGS OF COMPANY 137. Effect on shareholders and directors
SECURITIES
Part B
95. Application and interpretation of Chapter Practitioner’s functions and terms of appointment
96. Offers that are not offers to public 138. Qualifications of practitioners
97. Standards for qualifying employee share schemes 139. Removal and replacement of practitioner
98. Advertisements relating to offers 140. General powers and duties of practitioner
99. General restrictions on offers to public 141. Investigation of affairs of company
100. Requirements concerning prospectus 142. Directors of company to co-operate with and assist
101. Secondary offers to public practitioner
102. Consent to use of name in prospectus 143. Remuneration of practitioner
A-7 Companies Act No. 71 of 2008 Arrangement of sections

Part C Part F
Rights of affected persons during business rescue proceedings Companies Tribunal adjudication procedures
144. Rights of employees 180. Adjudication hearings before Tribunal
145. Participation by creditors 181. Right to participate in hearing
146. Participation by holders of company’s 182. Powers of Tribunal adjudication hearing
securities 183. Rules of procedure
147. First meeting of creditors 184. Witnesses
148. First meeting of employees’
representatives CHAPTER 8
149. Functions, duties and membership of REGULATORY AGENCIES AND
committees of affected persons ADMINISTRATION OF ACT

Part D Part A
Development and approval of business rescue plan Companies and Intellectual Property Commission
150. Proposal of business rescue plan 185. Establishment of Companies and
Intellectual Property Commission
151. Meeting to determine future of company
186. Commission objectives
152. Consideration of business rescue plan
187. Functions of Commission
153. Failure to adopt business rescue plan 188. Reporting, research, public information and relations with
154. Discharge of debts and claims other regulators
Part E 189. Appointment of Commissioner
Compromise with creditors 190. Minister may direct policy and require investigation
155. Compromise between company and 191. Establishment of specialist committees
creditors 192. Constitution of specialist committees
Part B
CHAPTER 7 Companies Tribunal
REMEDIES AND ENFORCEMENT 193. Establishment of Companies Tribunal
194. Appointment of Companies Tribunal
Part A 195. Functions of Companies Tribunal
General principles
156. Alternative procedures for addressing Part C
complaints or securing rights Takeover Regulation Panel
157. Extended standing to apply for remedies 196. Establishment of Takeover Regulation Panel
158. Remedies to promote purpose of Act 197. Composition of Panel
159. Protection for whistle-blowers 198. Chairperson and deputy chairpersons
199. Meetings of Panel
Part B 200. Executive of Panel
Rights to seek specific remedies 201. Functions of Panel
160. Disputes concerning reservation or 202. The Takeover Special Committee
registration of company names Part D
161. Application to protect rights of securities holders Financial Reporting Standards Council
162. Application to declare director delinquent or under 203. Establishment and composition of Council
probation 204. Functions of Financial Reporting
163. Relief from oppressive or prejudicial Standards Council
conduct or from abuse of separate juristic personality of
company Part E
164. Dissenting shareholders appraisal rights Administrative provisions applicable to agencies
165. Derivative actions 205. Qualifications for membership
206. Conflicting interests of agency members
Part C 207. Resignation, removal from office and
Voluntary resolution of disputes vacancies
166. Alternative dispute resolution 208. Conflicting interests of employees
167. Dispute resolution may result in consent order 209. Appointment of inspectors
210. Finances
Part D 211. Reviews and reports to Minister
Complaints to Commission or Panel 212. Confidential information
168. Initiating a complaint
169. Investigation by Commission or Panel CHAPTER 9
170. Outcome of investigation OFFENCES, MISCELLANEOUS MATTERS AND GENERAL
171. Issuance of compliance notices PROVISIONS
172. Objection to notices
Part A
173. Consent orders
Offences and penalties
174. Referral of complaints to court 213. Breach of confidence
175. Administrative fines 214. False statements, reckless conduct and non-compliance
Part E 215. Hindering administration of Act
Powers to support investigations and inspections 216. Penalties
176. Summons 217. Magistrate’s Court jurisdiction to impose penalties
177. Authority to enter and search under Part B
warrant Miscellaneous matters
178. Powers to enter and search 218. Civil actions
179. Conduct of entry and search 219. Limited time for initiating complaints
Arrangement of sections–s 1 Auditing: Legislation and Standards A-8

220. Serving documents CHAPTER 1

221. Proof of facts INTERPRETATION, PURPOSE AND
222. State liability APPLICATION

Part C Part A
Regulations, consequential matters and Interpretation
commencement 1. Definitions.—In this Act, unless the context indicates other-
223. Regulations wise—
224. Consequential amendments, repeal of laws and transition-
al arrangements “accounting records” means information in written or electronic
form concerning the financial affairs of a company as required in
225. Short title and commencement terms of this Act, including but not limited to, purchase and sales
records, general and subsidiary ledgers and other documents and
SCHEDULE 1 books used in the preparation of financial statements;
PROVISIONS CONCERNING NON-PROFIT COMPANIES [Definition of “accounting records” inserted by s. 1 (1) (a) of Act No. 3
1. Objects and policies of 2011.]
2. Fundamental transactions
“acquiring party”, when used in respect of a transaction or pro-
3. Incorporators of non-profit company posed transaction, means a person who, as a result of the transaction,
4. Members would directly or indirectly acquire or establish direct or indirect
5. Directors control or increased control over all or the greater part of a compa-
ny, or all or the greater part of the assets or undertaking of a compa-
SCHEDULE 2 ny;
CONVERSION OF CLOSE CORPORATIONS TO COMPANIES [Definition of “acquiring party” inserted by s. 1 (1) (a) of Act No. 3 of
2011.]
1. Notice of conversion of close corporation
2. Effect of conversion on legal status “advertisement” means any direct or indirect communication
transmitted by any medium, or any representation or reference
written, inscribed, recorded, encoded upon or embedded within any
SCHEDULE 3
medium, by means of which a person seeks to bring any information
AMENDMENT OF LAWS
to the attention of all or part of the public;
A: Close Corporations Act, 1984
1. Amendments to definitions of Close Corporations Act “agreement” includes a contract, or an arrangement or under-
standing between or among two or more parties that purports to
2. Limitation of period to incorporate close corporations or
create rights and obligations between or among those parties;
convert companies
3. Legal status of close corporations “all or the greater part of the assets or undertaking”, when
4. Names of corporations used in respect of a company, means—
5. Transparency and accountability of close corporations (a) in the case of the company’s assets, more than 50% of its
6. Rescue of financially distressed close corporations gross assets fairly valued, irrespective of its liabilities; or
7. Dissolution of corporations (b) in the case of the company’s undertaking, more than 50%
8. Deregistration of corporations of the value of its entire undertaking, fairly valued;
B: Consequential Amendments to certain other Acts listed in [Definition of “all or the greater part of the assets or undertaking” insert-
ed by s. 1 (1) (b) of Act No. 3 of 2011.]
Schedule 4
“alterable provision” means a provision of this Act in which it is
SCHEDULE 4 expressly contemplated that its effect on a particular company may
LEGISLATION TO BE ENFORCED BY be negated, restricted, limited, qualified, extended or otherwise
COMMISSION altered in substance or effect by that company’s Memorandum of
Incorporation;
SCHEDULE 5 “alternate director” means a person elected or appointed to
TRANSITIONAL ARRANGEMENTS serve, as the occasion requires, as a member of the board of a
1. Interpretation company in substitution for a particular elected or appointed director
of that company;
2. Continuation of pre-existing companies
3. Pending matters “amalgamation or merger” means a transaction, or series of
4. Memorandum of Incorporation and rules transactions, pursuant to an agreement between two or more compa-
nies, resulting in—
5. Pre-incorporation contracts
6. Par value of shares, treasury shares, capital accounts and (a) the formation of one or more new companies, which
share certificates together hold all of the assets and liabilities that were held
by any of the amalgamating or merging companies imme-
7. Company finance and governance
diately before the implementation of the agreement, and
8. Company names and name reservations the dissolution of each of the amalgamating or merging
9. Continued application of previous Act to winding-up and companies; or
liquidation
(b) the survival of at least one of the amalgamating or merging
10. Preservation and continuation of court proceedings and companies, with or without the formation of one or more
orders new companies, and the vesting in the surviving company
11. General preservation of regulations, rights, duties, notices or companies, together with any such new company or
and other instruments companies, of all of the assets and liabilities that were held
12. Transition of regulatory agencies by any of the amalgamating or merging companies imme-
13. Continued investigation and enforcement of previous Act diately before the implementation of the agreement;
14. Regulations [Para. (b) substituted by s. 1 (1) (c) of Act No. 3 of 2011.]
A-9 Companies Act No. 71 of 2008
“amalgamated or merged company” means a company that
either—
(a) was incorporated pursuant to an amalgamation or merger
agreement; or
(b) was an amalgamating or merging company and continued
in existence after the implementation of the amalgamation
or merger agreement,
and holds any part of the assets and liabilities that were held by any
of the amalgamating or merging companies immediately before the
implementation of the agreement;
“amalgamating or merging company” means a company that is
a party to an amalgamation or merger agreement;
“annual general meeting” means the meeting of a public com-
pany required by section 61 (7);
“audit” has the meaning set out in the Auditing Profession Act,
but does not include an “independent review” of annual financial
statements, as contemplated in section 30 (2) (b) (ii) (bb);
[Definition of “audit” substituted by s. 1 (1) (d) of Act No. 3 of 2011.]
“Auditing Profession Act” means the Auditing Profession Act,
2005 (Act No. 26 of 2005);
“auditor” has the meaning set out in the Auditing Profession
Act;
[Definition of “auditor” substituted by s. 1 (1) (e) of Act No. 3 of 2011.]
“Banks Act” means the Banks Act, 1990 (Act No. 94 of 1990);
[Definition of “Banks Act” substituted by s. 1 (1) (f) of Act No. 3 of
2011.]
“beneficial interest”, when used in relation to a company’s secu-
rities, means the right or entitlement of a person, through ownership,
agreement, relationship or otherwise, alone or together with another
person to—
(a) receive or participate in any distribution in respect of the
company’s securities;
(b) exercise or cause to be exercised, in the ordinary course,
any or all of the rights attaching to the company’s securi-
ties; or
(c) dispose or direct the disposition of the company’s securi-
ties, or any part of a distribution in respect of the securi-
ties,
but does not include any interest held by a person in a unit trust or
collective investment scheme in terms of the Collective Investment
Schemes Act, 2002 (Act No. 45 of 2002);
“board” means the board of directors of a company;
“business days” has the meaning determined in accordance with
section 5 (3);
“Cabinet” means the body of the national executive described in
section 91 of the Constitution;
“central securities depository” has the meaning set out in sec-
tion 1 of the Financial Markets Act, 2012;
[Definition of “central securities depository” substituted by s. 111 of Act
No. 19 of 2012.]
“close corporation” means a juristic person incorporated under
the Close Corporations Act, 1984 (Act No. 69 of 1984);
“Commission” means the Companies and Intellectual Property
Commission established by section 185;
“Commissioner” means the person appointed to or acting in the
office of that name, as contemplated in section 189;
“Companies Tribunal” means the Companies Tribunal estab-
lished in terms of section 193;
“companies register” means the register required to be estab-
lished by the Commission in terms of section 187 (4);
“company” means a juristic person incorporated in terms of this
Act, a domesticated company, or a juristic person that, immediately
before the effective date—
s1
(a) was registered in terms of the—
(i) Companies Act, 1973 (Act No. 61 of 1973), other
than as an external company as defined in that Act;
or
(ii) Close Corporations Act, 1984 (Act No. 69 of 1984),
if it has subsequently been converted in terms of
Schedule 2;
(b) was in existence and recognised as an “existing company”
in terms of the Companies Act, 1973 (Act No. 61 of 1973); or
(c) was deregistered in terms of the Companies Act, 1973 (Act
No. 61 of 1973), and has subsequently been re-registered
in terms of this Act;
[Definition of “company” amended by s. 1 (1) (g) of Act No. 3 of 2011.]
“Competition Act”, means the Competition Act, 1998 (Act
No. 89 of 1998);
“consideration” means anything of value given and accepted in
exchange for any property, service, act, omission or forbearance or
any other thing of value, including—
(a) any money, property, negotiable instrument, securities,
investment credit facility, token or ticket;
(b) any labour, barter or similar exchange of one thing for
another; or
(c) any other thing, undertaking, promise, agreement or
assurance, irrespective of its apparent or intrinsic value, or
whether it is transferred directly or indirectly;
“Constitution” means the Constitution of the Republic of South
Africa, 1996;
“convertible”, when used in relation to any securities of a com-
pany, means securities that may, by their terms, be converted into
other securities of the company, including—
(a) any non-voting securities issued by the company and
which will become voting securities—
(i) on the happening of a designated event; or
(ii) if the holder of those securities so elects at some
time after acquiring them; and
(b) options to acquire securities to be issued by the company,
irrespective of whether those securities may be voting
securities, or non-voting securities contemplated in para-
graph (a);
[Definition of “convertible”, previously “convertible securities”,
substituted by s. 1 (1) (h) of Act No. 3 of 2011.]
“co-operative” means a juristic person as defined in the Co-
operatives Act, 2005 (Act No. 14 of 2005);
“Council” means the Financial Reporting Standards Council
established by section 203;
“director” means a member of the board of a company, as con-
templated in section 66, or an alternate director of a company and
includes any person occupying the position of a director or alternate
director, by whatever name designated;
“distribution” means a direct or indirect—
(a) transfer by a company of money or other property of
the company, other than its own shares, to or for the bene-
fit of one or more holders of any of the shares, or to the
holder of a beneficial interest in any such shares, of that
company or of another company within the same group of
companies, whether—
(i) in the form of a dividend;
(ii) as a payment in lieu of a capitalisation share, as
contemplated in section 47;
(iii) as consideration for the acquisition—
(aa) by the company of any of its shares, as
contemplated in section 48; or
(bb) by any company within the same group of
companies, of any shares of a company within
that group of companies; or
[Sub-para. (iii) amended by s. 1 (1) (i) (ii) of Act No. 3 of 2011.]
s1 Auditing: Legislation and Standards
(iv) otherwise in respect of any of the shares of that
company or of another company within the same
group of companies, subject to section 164 (19);
[Para. (a) amended by s. 1 (1) (i) (i) of Act No. 3 of 2011.]
(b) incurrence of a debt or other obligation by a company for
the benefit of one or more holders of any of the shares of
that company or of another company within the same
group of companies; or
(c) forgiveness or waiver by a company of a debt or other
obligation owed to the company by one or more holders of
any of the shares of that company or of another company
within the same group of companies;
[Para. (c) substituted by s. 1 (1) (i) (iii) of Act No. 3 of 2011.]
but does not include any such action taken upon the final liquidation
of the company;
“domesticated company” means a foreign company whose reg-
istration has been transferred to the Republic in terms of section 13
(5) to (11);
[Definition of “domesticated company” inserted by s. 1 (1) (j) of
Act No. 3 of 2011.]
“effective date”, with reference to any particular provision of this
Act, means the date on which that provision came into operation in
terms of section 225;
“electronic communication” has the meaning set out in section 1
of the Electronic Communications and Transactions Act;
“Electronic Communications and Transactions Act” means
the Electronic Communications and Transactions Act, 2002 (Act
No. 25 of 2002);
“employee share scheme” has the meaning set out in sec-
tion 95 (1) (c);
“exchange” when used as a noun, has the meaning set out in
section 1 of the Financial Markets Act, 2012;
[Definition of “exchange” substituted by s. 111 of Act No. 19 of 2012.]
“exercise”, when used in relation to voting rights, includes voting
by proxy, nominee, trustee or other person in a similar capacity;
“ex officio director” means a person who holds office as a direc-
tor of a particular company solely as a consequence of that person
holding some other office, title, designation or similar status speci-
fied in the company’s Memorandum of Incorporation;
“external company” means a foreign company that is carrying
on business, or non-profit activities, as the case may be, within the
Republic, subject to section 23 (2);
“file”, when used as a verb, means to deliver a document to the
Commission in the manner and form, if any, prescribed for that
document;
“financial reporting standards”, with respect to any particular
company’s financial statements, means the standards applicable to
that company, as prescribed in terms of section 29 (4) and (5);
“financial statement” includes—
(a) annual financial statements and provisional annual finan-
cial statements;
(b) interim or preliminary reports;
(c) group and consolidated financial statements in the case of
a group of companies; and
(d) financial information in a circular, prospectus or provi-
sional announcement of results, that an actual or prospec-
tive creditor or holder of the company’s securities, or the
Commission, Panel or other regulatory authority, may
reasonably be expected to rely on;
“foreign company” means an entity incorporated outside the
Republic, irrespective of whether it is—
(a) a profit, or non-profit, entity; or
(b) carrying on business or non-profit activities, as the case
may be, within the Republic;
A-10
“general voting rights” means voting rights that can be exer-
cised generally at a general meeting of a company;
“group of companies” means a holding company and all of its
subsidiaries;
[Definition of “group of companies” substituted by s. 1 (1) (k) of Act
No. 3 of 2011.]
“holding company”, in relation to a subsidiary, means a juristic
person that controls that subsidiary as a result of any circumstances
contemplated in section 2 (2) (a) or 3 (1) (a);
[Definition of “holding company” substituted by s. 1 (1) (l) of Act No. 3
of 2011.]
“Human Rights Commission” means the South African Human
Rights Commission established in terms of Chapter 9 of the Consti-
tution;
“incorporator”, when used—
(a) with respect to a company incorporated in terms of this
Act, means a person who incorporated that company, as
contemplated in section 13; or
(b) with respect to a pre-existing company, means a person
who took the relevant actions comparable to those contem-
plated in section 13 to bring about the incorporation of that
company;
“individual” means a natural person;
“inspector” means a person appointed as such in terms of sec-
tion 209 (1);
[Definition of “inspector” substituted by s. 1 (1) (m) of Act No. 3 of
2011.]
“inter-related”, when used in respect of three or more persons,
means persons who are related to one another in a linked series of
relationships, such that two of the persons are related in a manner
contemplated in section 2 (1), and one of them is related to the third
in any such manner, and so forth in an unbroken series;
[Definition of “inter-related” substituted by s. 1 (1) (o) of Act No. 3 of
2011.]
“investigator” means a person appointed as such in terms of
section 209 (3);
[Definition of “investigator” deleted by s. 1 (1) (n) and inserted
by s. 1 (1) (p) of Act No. 3 of 2011.]
“juristic person” includes—
(a) a foreign company; and
(b) a trust, irrespective of whether or not it was established
within or outside the Republic;
“knowing”, “knowingly” or “knows”, when used with respect to
a person, and in relation to a particular matter, means that the person
either—
(a) had actual knowledge of the matter; or
[Para. (a) substituted by s. 1 (1) (q) of Act No. 3 of 2011.]
(b) was in a position in which the person reasonably ought to
have—
(i) had actual knowledge;
(ii) investigated the matter to an extent that would have
provided the person with actual knowledge; or
(iii) taken other measures which, if taken, would reason-
ably be expected to have provided the person with
actual knowledge of the matter;
“listed securities” has the meaning set out in section 1 of the
Financial Markets Act, 2012;
[Definition of “listed securities” substituted by
s. 111 of Act No. 19 of 2012.]
“Master” means the officer of the High Court, referred to in
section 2 of the Administration of Estates Act, 1965 (Act No. 66 of
1965), who has jurisdiction over a particular matter arising in terms
of this Act;
[Definition of “Master” substituted by s. 1 (1) (r) of Act No. 3 of 2011.]
“material”, when used as an adjective, means significant in the
circumstances of a particular matter, to a degree that is—
(a) of consequence in determining the matter; or
A-11 Companies Act No. 71 of 2008
(b) might reasonably affect a person’s judgement or decision-
making in the matter;
“member”, when used in reference to—
(a) a close corporation, has the meaning set out in section 1 of
the Close Corporations Act, 1984 (Act No. 69 of 1984); or
(b) a non-profit company, means a person who holds member-
ship in, and specified rights in respect of, that non-profit
company, as contemplated in Schedule 1; or
(c) any other entity, means a person who is a constituent part
of that entity;
[Definition of “member” substituted by s. 1 (1) (s) of Act No. 3 of
2011.]
“Memorandum”, or “Memorandum of Incorporation”, means
the document, as amended from time to time, that sets out rights,
duties and responsibilities of shareholders, directors and others
within and in relation to a company, and other matters as contem-
plated in section 15 and by which—
(a) the company was incorporated under this Act, as contem-
plated in section 13;
(b) a pre-existing company was structured and governed
before the later of the—
(i) effective date; or
(ii) date it was converted to a company in terms of
Schedule 2; or
(c) a domesticated company is structured and governed;
[Definition of “Memorandum”, or “Memorandum of Incorporation”,
previously “Memorandum of Incorporation”, substituted by s. 1 (1) (t) of
Act No. 3 of 2011.]
“Minister” means the member of the Cabinet responsible for
companies;
“nominee” means a person that acts as the registered holder of
securities or an interest in securities on behalf of other persons;
[Definition of “nominee” substituted by s. 111 of Act No. 19 of 2012.]
“non-profit company” means a company—
(a) incorporated for a public benefit or other object as required
by item 1 (1) of Schedule 1; and
(b) the income and property of which are not distributable to
its incorporators, members, directors, officers or persons
related to any of them except to the extent permitted by
item 1 (3) of Schedule 1;
“Notice of Incorporation” means the notice to be filed in terms
of section 13 (1), by which the incorporators of a company inform
the Commission of the incorporation of that company, for the pur-
pose of having it registered;
“official language” means a language mentioned in section 6 (1)
of the Constitution;
“ordinary resolution” means a resolution adopted with the sup-
port of more than 50% of the voting rights exercised on the resolu-
tion, or a higher percentage as contemplated in section 65 (8)—
(a) at a shareholders meeting; or
(b) by holders of the company’s securities acting other than at
a meeting, as contemplated in section 60;
[Definition of “ordinary resolution” substituted by
s. 1 (1) (u) of Act No. 3 of 2011.]
“organ of state” has the meaning set out in section 239 of the
Constitution;
“Panel” means the Takeover Regulation Panel, established by
section 196;
“participant” has the meaning set out in section 1 of the Finan-
cial Markets Act, 2012;
[Definition of “participant” substituted by s. 111 of Act No. 19 of 2012.]
“person” includes a juristic person;
s1
“personal financial interest”, when used with respect to any
person—
(a) means a direct material interest of that person, of a financial,
monetary or economic nature, or to which a monetary value
may be attributed; but
(b) does not include any interest held by a person in a unit
trust or collective investment scheme in terms of the Col-
lective Investment Schemes Act, 2002 (Act No. 45 of
2002), unless that person has direct control over the in-
vestment decisions of that fund or investment;
“personal liability company” means a profit company that satis-
fies the criteria in section 8 (2) (c);
[Definition of “personal liability company” substituted by s. 1 (1) (v) of
Act No. 3 of 2011.]
“pre-existing company” means a company contemplated in
paragraph (a), (b) or (c) of the definition of “company” in this
section;
“pre-incorporation contract” means a written agreement en-
tered into before the incorporation of a company by a person who
purports to act in the name of, or on behalf of, the proposed comp-
any, with the intention or understanding that the proposed company
will be incorporated, and will thereafter be bound by the agreement;
[Definition of “pre-incorporation contract” substituted by s. 1 (1) (w) of
Act No. 3 of 2011.]
“premises” includes land, or any building, structure, vehicle, ship,
boat, vessel, aircraft or container;
“prescribed” means determined, stipulated, required, authorised,
permitted or otherwise regulated by a regulation or notice made in
terms of this Act;
“prescribed officer” means a person who, within a company,
performs any function that has been designated by the Minister in
terms of section 66 (10);
[Definition of “prescribed officer” substituted by
s. 1 (1) (x) of Act No. 3 of 2011.]
“present at a meeting” means to be present in person, or able to
participate in the meeting by electronic communication, or to be
represented by a proxy who is present in person or able to partici-
pate in the meeting by electronic communication;
“private company” means a profit company that—
(a) is not a public, personal liability, or state-owned company;
and
[Para. (a) substituted by s. 1 (1) (y) of Act No. 3 of 2011.]
(b) satisfies the criteria set out in section 8 (2) (b);
“profit company” means a company incorporated for the pur-
pose of financial gain for its shareholders;
“public company” means a profit company that is not a state-
owned company, a private company or a personal liability company;
“public regulation” means any national, provincial or local gov-
ernment legislation or subordinate legislation, or any licence, tariff,
directive or similar authorisation issued by a regulatory authority or
pursuant to any statutory authority;
“records”, when used with respect to any information pertaining
to a company, means any information contemplated in section
24 (1);
“record date” means the date established under section 59 on
which a company determines the identity of its shareholders and
their shareholdings for the purposes of this Act;
“registered auditor” has the meaning set out in the Auditing
Profession Act;
“registered external company” means an external company that
has registered its office as required by section 23, and has been
assigned a registration number in terms of that section;
“registered office” means the office of a company, or of an ex-
ternal company, that is registered as required by section 23;
s1 Auditing: Legislation and Standards
“registered trade union” means a trade union registered in terms
of section 96 of the Labour Relations Act, 1995 (Act No. 66 of
1995);
“registration certificate”, when used with respect to a—
(a) company incorporated on or after the effective date, means
the certificate, or amended certificate, issued by the Com-
mission as evidence of the incorporation and registration of
that company;
(b) pre-existing company registered in terms of—
(i) the Companies Act, 1973 (Act No. 61 of 1973),
means the certificate of incorporation or registration
issued to it in terms of that Act;
(ii) the Close Corporations Act, 1984 (Act No. 69 of
1984), and converted in terms of Schedule 2 to this
Act, means the certificate of incorporation issued to
the company in terms of that Schedule, read with
section 14; or
(iii) any other law, means any document issued to the
company in terms of that law as evidence of the
company’s incorporation; or
(c) registered external company, means the certificate of
registration issued to it in terms of this Act or the Compa-
nies Act, 1973 (Act No. 61 of 1973); or
[Para. (c) amended by s. 1 (1) (z) (i) of Act No. 3 of 2011.]
(d) a domesticated company, means the certificate issued to it
upon the transfer of its registration to the Republic in terms
of section 13 (5) to (11);
[Para. (d) inserted by s. 1 (1) (z) (ii) of Act No. 3 of 2011.]
“registry” means a depository of documents required to be kept
by the Commission in terms of section 187 (4);
“regulated person or entity” means a person that has been
granted authority to conduct business by a regulatory authority;
“regulation” means a regulation made under this Act;
“regulatory authority” means an entity established in terms of
national or provincial legislation responsible for regulating an
industry, or sector of an industry;
“related”, when used in respect of two persons, means persons
who are connected to one another in any manner contemplated in
section 2 (1) (a) to (c);
“relationship” includes the connection subsisting between any
two or more persons who are related or inter-related, as determined
in accordance with section 2;
“rules” and “rules of a company” means any rules made by a
company as contemplated in section 15 (3) to (5);
“securities” means any shares, debentures or other instruments,
irrespective of their form or title, issued or authorised to be issued
by a profit company;
[Definition of “securities” substituted by s. 1 (1) (aa) of Act No. 3 of
2011.]
“securities register” means the register required to be established
by a profit company in terms of section 50 (1);
[Definition of “securities register” inserted by s. 1 (1) (bb) of Act No. 3
of 2011.]
“series of integrated transactions” has the meaning set out in
section 41 (4) (b);
[Definition of “series of integrated transactions” inserted by s. 1 (1) (bb)
of Act No. 3 of 2011.]
“share” means one of the units into which the proprietary interest
in a profit company is divided;
“shareholder”, subject to section 57 (1), means the holder of a
share issued by a company and who is entered as such in the
certificated or uncertificated securities register, as the case may be;
“shareholders meeting”, with respect to any particular matter
concerning a company, means a meeting of those holders of that
A-12
company’s issued securities who are entitled to exercise voting
rights in relation to that matter;
“solvency and liquidity test” means the test set out in sec-
tion 4 (1);
“special resolution” means—
(a) in the case of a company, a resolution adopted with the
support of at least 75% of the voting rights exercised on
the resolution, or a different percentage as contemplated in
section 65 (10)—
(i) at a shareholders meeting; or
(ii) by holders of the company’s securities acting other
than at a meeting, as contemplated in section 60; or
(b) in the case of any other juristic person, a decision by the
owner or owners of that person, or by another authorised
person, that requires the highest level of support in order to
be adopted, in terms of the relevant law under which that
juristic person was incorporated;
[Definition of “special resolution” substituted by
s. 1 (1) (cc) of Act No. 3 of 2011.]
“state-owned company” means an enterprise that is registered in
terms of this Act as a company, and either—
(a) is listed as a public entity in Schedule 2 or 3 of the Public
Finance Management Act, 1999 (Act No. 1 of 1999); or
[Para. (a) substituted by s. 1 (1) (dd) of Act No. 3 of 2011.]
(b) is owned by a municipality, as contemplated in the Local
Government: Municipal Systems Act, 2000 (Act No. 32 of
2000), and is otherwise similar to an enterprise referred to
in paragraph (a);
“subsidiary” has the meaning determined in accordance with
section 3;
“Takeover Regulations” means the regulations made by the
Minister in terms of sections 120 and 223;
“this Act” includes the Schedules and regulations;
“unalterable provision” means a provision of this Act that does
not expressly contemplate that its effect on any particular company
may be negated, restricted, limited, qualified, extended or otherwise
altered in substance or effect by a company’s Memorandum of
Incorporation or rules;
“uncertificated securities” means any securities defined as such
in section 1 of the Financial Markets Act, 2012;
[Definition of “uncertificated securities” substituted by s. 111 of
Act No. 19 of 2012.]
“uncertificated securities register” means the record of uncer-
tificated securities administered and maintained by a participant or
central securities depository, as determined in accordance with the
rules of a central securities depository, and which forms part of the
relevant company’s securities register established and maintained in
terms of Part E of Chapter 2;
“voting power”, with respect to any matter to be decided by a
company, means the voting rights that may be exercised in connec-
tion with that matter by a particular person, as a percentage of all
such voting rights;
“voting rights”, with respect to any matter to be decided by a
company, means—
(a) the rights of any holder of the company’s securities to vote
in connection with that matter, in the case of a profit com-
pany; or
(b) the rights of a member to vote in connection with the
matter, in the case of a non-profit company;
“voting securities”, with respect to any particular matter, means
securities that—
(a) carry voting rights with respect to that matter; or
(b) are presently convertible to securities that carry voting
rights with respect to that matter; and
A-13 Companies Act No. 71 of 2008
“wholly-owned subsidiary” has the meaning determined in
accordance with section 3 (1) (b).
2. Related and inter-related persons, and control.—(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
(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 deter-
mined in accordance with subsection (2); and
(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 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 sec-
tion 3 (1) (a); or
(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 com-
pany, whether pursuant to a shareholder
agreement or otherwise; or
(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’ inter-
est, or controls directly, or has the right to 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
(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 para-
graph (a), (b) or (c).
(3) With respect to any particular matter arising in terms of this
Act, a court, the 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 particu-
lar matter, there is sufficient evidence to conclude that the person
acts independently of any related or inter-related person.
3. Subsidiary relationships.—(1) A company is—
(a) a subsidiary of another juristic person if that juristic
person, one or more other subsidiaries of that juristic per-
son, or one or more nominees of that juristic person or any
of its subsidiaries, alone or in any combination—
(i) is or are directly or indirectly able to exercise, or
control the exercise of, a majority of the general vot-
ing rights associated with issued securities of that
ss 1–4
company, whether pursuant to a shareholder agree-
ment or otherwise; or
(ii) has or have 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; or
(b) a wholly-owned subsidiary of another juristic person if all
of the general voting rights associated with issued securi-
ties of the company are held or controlled, alone or in any
combination, by persons contemplated in 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 circum-
stances are to be taken into account only—
(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 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.
4. Solvency and liquidity test.—(1) For any purpose of this
Act, a company satisfies the solvency and liquidity test at a particu-
lar time if, considering all reasonably foreseeable financial circum-
stances of the company at that time—
(a) the assets of the company, as fairly valued, equal or exceed
the liabilities of the company, as fairly valued; and
[Para. (a) substituted by s. 2 (a) of Act No. 3 of 2011.]
(b) it appears that the company will be able to pay its debts as
they become due in the ordinary course of business for a
period of—
(i) 12 months after the date on which the test is consid-
ered; or
(ii) in the case of a distribution contemplated in para-
graph (a) of the definition of “distribution” in sec-
tion 1, 12 months following that distribution.
(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;
(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 fore-
seeable contingent assets and liabilities, irrespective
of whether or not arising as a result of the proposed
distribution, or otherwise; and
(ii) may consider any other valuation of the company’s
assets and liabilities that is reasonable in the circum-
stances; and
(c) unless the Memorandum of Incorporation of the company
provides otherwise, when applying the test in respect of a
distribution contemplated in paragraph (a) of the definition
of “distribution” in section 1, a person is not to include as a
ss 4–6 Auditing: Legislation and Standards
liability any amount that would be required, if the com-
pany were to be liquidated at the time of the distribution, to
satisfy the preferential rights upon liquidation of share-
holders whose preferential rights upon liquidation are
superior to the preferential rights upon liquidation of those
receiving the distribution.
[Para. (c) substituted by s. 2 (b) of Act No. 3 of 2011.]
5. General interpretation of Act.—(1) This Act must be inter-
preted and applied in a manner that gives effect to the purposes set
out in section 7.
(2) To the extent appropriate, a court interpreting or applying this
Act may consider foreign company law.
(3) When, in this Act, a particular number of “business days” is
provided for between the happening of one event and another, the
number of days must be calculated by—
(a) excluding the day on which the first such event occurs;
(b) including the day on or by which the second event is to
occur; and
(c) excluding any public holiday, Saturday or Sunday that falls
on or between the days contemplated in paragraphs (a) and
(b), respectively.
(4) If there is an inconsistency between any provision of this Act
and a provision of any other national legislation—
(a) the provisions of both Acts apply concurrently, to the
extent that it is possible to apply and comply with one
of 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—
(i) any applicable provisions of the—
(aa) Auditing Profession Act;
(bb) Labour Relations Act, 1995 (Act No. 66 of
1995);
(cc) Promotion of Access to Information Act, 2000
(Act No. 2 of 2000);
(dd) Promotion of Administrative Justice Act, 2000
(Act No. 3 of 2000);
(ee) Public Finance Management Act, 1999 (Act
No. 1 of 1999);
(ff) Financial Markets Act, 2012;
[Item (ff) substituted by s. 3 (a) of Act No. 3 of 2011 and by s. 111 of
Act No. 19 of 2012.]
(gg) Banks Act;
[Item (gg) substituted by s. 3 (a) of Act No. 3 of 2011 (English only).]
prevail in the case of an inconsistency involving any
of them, except to the extent provided otherwise in
sections 30 (8) or 49 (4); or
(hh) Local Government: Municipal Finance
Management Act, 2003 (Act No. 56 of 2003);
or
[Item (hh) added by s. 3 (b) of Act No. 3 of 2011.]
(ii) Section 8 of the National Payment System
Act, 1998 (Act No. 78 of 1998.)
[Sub-para. (i) amended by s. 3 (c) of Act No. 3 of 2011. Item (ii) added
by s. 3 (b) of Act No. 3 of 2011.]
(ii) the provisions of this Act prevail in any other case,
except to the extent provided otherwise in subsection
(5) or section 118 (4).
(5) If there is a conflict between a provision of Chapter 8 and a
provision of the Public Service Act, 1994 (Proclamation No. 103 of
1994), the provisions of that Act prevail.
(6) If there is a conflict between any provision of this Act and a
provision of the listing requirements of an exchange—
(a) the provisions of both this Act and the listing requirements
apply concurrently, to the extent that it is possible to apply
and comply with one of the inconsistent provisions without
contravening the second; and
A-14
(b) to the extent that it is impossible to apply and comply with
one of the inconsistent provisions without contravening the
second, the provisions of this Act prevail, except to the ex-
tent that this Act expressly provides otherwise.
[Sub-s. (6) inserted by s. 3 (d) of Act No. 3 of 2011.]
6. Anti-avoidance, exemptions and substantial compliance.—
(1) A court, on application by the Commission, Panel or an ex-
change in respect of a company listed on that exchange, may declare
any agreement, transaction, arrangement, resolution or provision of
a company’s Memorandum of Incorporation or rules—
(a) to be primarily or substantially intended to defeat or reduce
the effect of a prohibition or requirement established by or
in terms of an unalterable provision of this Act; and
(b) void to the extent that it defeats or reduces the effect of a
prohibition or requirement established by or in terms of an
unalterable provision of this Act.
[Sub-s. (1) amended by s. 4 (a) of Act No. 3 of 2011.]
(2) A person may apply to the Companies Tribunal for an admin-
istrative order exempting an agreement, transaction, arrangement,
resolution or provision of a company’s Memorandum of Incorpora-
tion or rules from any prohibition or requirement established by or
in terms of an unalterable provision of this Act, other than a provi-
sion that falls within the jurisdiction of the Panel.
(3) The Companies Tribunal may make an administrative order
contemplated in subsection (2) if it is satisfied that—
(a) the agreement, transaction, arrangement, resolution or
provision serves a reasonable purpose other than to defeat
or reduce the effect of that prohibition or requirement; and
(b) it is reasonable and justifiable to grant the exemption,
having regard to the purposes of this Act and all relevant
factors, including—
(i) the purpose and policy served by the relevant
prohibition or requirement; and
(ii) the extent to which the agreement, transaction,
arrangement, resolution or provision infringes or
would infringe the relevant prohibition or require-
ment.
(4) The producer of a prospectus, notice, disclosure or document
that is required, in terms of this Act, to be published, produced or
provided to a potential investor, a company’s creditor or potential
creditor, a holder of a company’s securities, a member of a non-
profit company, an employee of a company or a representative of
any employees of a company, must publish, produce, or provide that
prospectus, notice, disclosure or document—
(a) in the prescribed form, if any, for that prospectus, notice,
disclosure or document, or;
(b) in plain language, if no form has been prescribed for that
prospectus, notice, disclosure or document.
(5) For the purposes of this Act, a prospectus, notice, disclosure
or document is in plain language if it is reasonable to conclude that a
person of the class of persons for whom the prospectus, notice,
disclosure or document is intended, with average literacy skills and
minimal experience in dealing with company law matters, could be
expected to understand the content, significance and import of the
prospectus, notice, disclosure or document without undue effort,
having regard to—
(a) the context, comprehensiveness and consistency of the
prospectus, notice, disclosure or document;
(b) the organisation, form and style of the prospectus, notice,
disclosure or document;
(c) the vocabulary, usage and sentence structure of the
prospectus, notice, disclosure or document; and
(d) the use of any illustrations, examples, headings or other
aids to reading and understanding in the prospectus, notice,
disclosure or document.
(6) The Commission may publish guidelines for methods of
assessing whether a prospectus, notice, disclosure or document
satisfies the requirements of subsection (4) (b).
A-15 Companies Act No. 71 of 2008
(7) An unaltered electronically or mechanically generated repro-
duction of any document, other than a share certificate, may be
substituted for the original for any purpose for which the original
could be used in terms of this Act, if that reproduction satisfies any
applicable prescribed requirements as to the form or manner of
reproduction.
[Sub-s. (7) substituted by s. 4 (b) of Act No. 3 of 2011.]
(8) If a form of document, record, statement or notice is pre-
scribed in terms of this Act for any purpose—
(a) it is sufficient if the person required to prepare or complete
such a document, record, statement or notice does so in a
form that satisfies all of the substantive requirements of the
prescribed form; and
(b) any deviation from the design or content of the prescribed
form does not invalidate the action taken by the person
preparing or completing that document, record, statement
or notice, unless the deviation—
(i) negatively and materially affects the substance of the
document, record, statement or notice; or
(ii) is such that it would reasonably mislead a person
reading the document, record, statement or notice.
(9) If a manner of delivery of a document, record, statement or
notice is prescribed in terms of this Act for any purpose—
(a) it is sufficient if the person required to deliver such a
document, record, statement or notice does so in a manner
that satisfies all of the substantive requirements as pre-
scribed; and
(b) any deviation from the prescribed manner does not invali-
date the action taken by the person delivering that docu-
ment, record, statement or notice, unless the deviation—
(i) materially reduces the probability that the intended
recipient will receive the document, record, state-
ment or notice; or
(ii) is such as would reasonably mislead a person to
whom the document, record, statement or notice is,
or is to be, delivered.
(10) If, in terms of this Act, a notice is required or permitted to
be given or published to any person, it is sufficient if the notice is
transmitted electronically directly to that person in a manner and
form such that the notice can conveniently be printed by the recipi-
ent within a reasonable time and at a reasonable cost.
(11) If, in terms of this Act, a document, record or statement,
other than a notice contemplated in subsection (10), is required—
(a) to be retained, it is sufficient if an electronic original or
reproduction of that document is retained as provided for
in section 15 of the Electronic Communications and Trans-
actions Act; or
(b) to be published, provided or delivered, it is sufficient if—
(i) an electronic original or reproduction of that docu-
ment, record or statement is published, provided or
delivered by electronic communication in a manner
and form such that the document, record or state-
ment can conveniently be printed by the recipient
within a reasonable time and at a reasonable cost; or
(ii) a notice of the availability of that document, record
or statement, summarising its content and satisfying
any prescribed requirements, is delivered to each in-
tended recipient of the document, record or state-
ment, together with instructions for receiving the
complete document, record or statement.
(12) If a provision of this Act requires a document to be signed or
initialled—
(a) by or on behalf of a person, that signing or initialling may
be effected in any manner provided for in the Electronic
Communications and Transactions Act; or
ss 6–7
(b) by two or more persons, it is sufficient if—
(i) all of those persons sign a single original of the
document, in person or as contemplated in paragraph
(a); or
(ii) each of those persons signs a separate duplicate
original of the document, in person or as contem-
plated in paragraph (a), and in such a case, the sev-
eral signed duplicate originals, when combined,
constitute the entire document.
(13) The Commission may—
(a) establish a system, using any means of electronic commu-
nication, to facilitate the automated—
(i) reservation of names in terms of Part A of Chapter 2
or in terms of any other legislation listed in Schedule
4;
(ii) incorporation and registration of companies or close
corporations; or
(iii) filing of any information contemplated by this Act
or by any legislation listed in Schedule 4; or
(b) accredit an established system that—
(i) is capable of facilitating any activity contemplated in
paragraph (a); and
(ii) satisfies any prescribed requirements.
(14) The Minister may—
(a) make regulations relating to the standards of operation,
accessibility, technical requirements, service quality, and
fees for the use of any system contemplated in subsection
(13); and
[Para. (a) substituted by s. 4 (c) of Act No. 3 of 2011.]
(b) declare any system established or accredited by the
Commission to be an acceptable mechanism for the filing
of any particular document, in lieu of any other require-
ments set out in legislation relating to the filing of that
document.
(15) To the extent that the specific content, or a particular effect,
of any provision of a company’s Memorandum of Incorporation—
(a) is required of the company by or in terms of any applicable
public regulation, or by the listing requirements of an
exchange; and
(b) has the effect of negating, restricting, limiting, qualifying,
extending or otherwise altering the substance or effect of
an unalterable provision of the Act,
that provision of the company’s Memorandum of Incorpo-
ration must not be construed as being contrary to sec-
tion 15 (1) (a).
[Sub-s. (15) inserted by s. 4 (d) of Act No. 3 of 2011.]
Part B
Purpose and application
7. Purposes of Act.—The purposes of this Act are to—
(a) promote compliance with the Bill of Rights as provided for
in the Constitution, in the application of company law;
(b) promote the development of the South African economy
by—
(i) encouraging entrepreneurship and enterprise effi-
ciency;
(ii) creating flexibility and simplicity in the formation
and maintenance of companies; and
(iii) encouraging transparency and high standards of
corporate governance as appropriate, given the sig-
nificant role of enterprises within the social and eco-
nomic life of the nation;
(c) promote innovation and investment in the South African
markets;
(d) reaffirm the concept of the company as a means of achiev-
ing economic and social benefits;
ss 7–11 Auditing: Legislation and Standards
(e) continue to provide for the creation and use of companies,
in a manner that enhances the economic welfare of South
Africa as a partner within the global economy;
(f) promote the development of companies within all sectors
of the economy, and encourage active participation in eco-
nomic organisation, management and productivity;
(g) create optimum conditions for the aggregation of capital
for productive purposes, and for the investment of that cap-
ital in enterprises and the spreading of economic risk;
(h) provide for the formation, operation and accountability of
non-profit companies in a manner designed to promote,
support and enhance the capacity of such companies to
perform their functions;
(i) balance the rights and obligations of shareholders and
directors within companies;
(j) encourage the efficient and responsible management of
companies;
(k) provide for the efficient rescue and recovery of financially
distressed companies, in a manner that balances the rights
and interests of all relevant stakeholders; and
(l) provide a predictable and effective environment for the
efficient regulation of companies.
8. Categories of companies.—(1) Two types of companies
may be formed and incorporated under this Act, namely profit
companies and non-profit companies.
(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—
(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 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 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.
9. Modified application with respect to state-owned compa-
nies.—(1) Subject to section 5 (4) and (5), any provision of this Act
that applies to a public company applies also to a state-owned
company, except to the extent that the Minister has granted an
exemption in terms of subsection (3).
(2) The member of the Cabinet responsible for—
(a) state-owned companies may request the Minister to grant a
total, partial or conditional exemption from one or more
provisions of this Act, applicable to all state-owned com-
panies, any class of state-owned companies, or to one or
more particular state-owned company; or
(b) local government matters may request the Minister to grant
a total, partial or conditional exemption from one or more
provisions of this Act, applicable to all state-owned com-
panies owned by a municipality, any class of such enter-
prises, or to one or more particular such enterprises,
on the grounds that those provisions overlap or duplicate an applica-
ble regulatory scheme established in terms of any other national
legislation.
A-16
(3) The Minister, by notice in the Gazette after receiving the
advice of the Commission, may grant an exemption contemplated in
subsection (2)—
(a) only to the extent that the relevant alternative regulatory
scheme ensures the achievement of the purposes of this
Act at least as well as the provisions of this Act; and
(b) subject to any limits or conditions necessary to ensure the
achievement of the purposes of this Act.
10. Modified application with respect to non-profit compa-
nies.—(1) Every provision of this Act applies to a non-profit
company, subject to the provisions, limitations, alterations or
extensions set out in this section, and in Schedule 1.
(2) The following provisions of this Act, and any regulations
made in respect of any such provisions, do not apply to a non-profit
company—
(a) Part D of Chapter 2 — Capitalisation of profit companies.
(b) Part E of Chapter 2 — Securities registration and transfer.
(c) Section 66 (8) and (9) and section 68 — Remuneration and
election of directors.
(d) Parts B and D of Chapter 3 — Company secretaries, and
audit committees, except to the extent that an obligation to
appoint a company secretary, auditor or audit committee
arises in terms of—
(i) a requirement in the company’s Memorandum of
Incorporation, as contemplated in section 34 (2); or
(ii) regulations contemplated in section 30 (7).
(e) Chapter 4 — Public offerings of company securities.
(f) Chapter 5 — Takeovers, offers and fundamental transac-
tions, except to the extent contemplated in item 2 of
Schedule 1.
(g) Sections 146 (d), and 152 (3) (c) — Rights of shareholders
to approve a business rescue plan, except to the extent that
the non-profit company is itself a shareholder of a profit
company that is engaged in business rescue proceedings.
(h) Section 164 — Dissenting shareholders’ appraisal rights,
except to the extent that the non-profit company is itself a
shareholder of a profit company.
[Sub-s. (2) substituted by s. 5 of Act No. 3 of 2011.]
(3) Sections 58 to 65, read with the changes required by the con-
text—
(a) apply to a non-profit company only if the company has
voting members; and
(b) when applied to a non-profit company, are subject to the
provisions of item 4 of Schedule 1.
(4) With respect to a non-profit company that has voting mem-
bers, a reference in this Act to “a shareholder”, “the holders of a
company’s securities”, “holders of issued securities of that com-
pany” or “a holder of voting rights entitled to be voted” is a refer-
ence to the voting members of the non-profit company.
CHAPTER 2
FORMATION, ADMINISTRATION AND DISSOLUTION OF
COMPANIES
Part A
Reservation and registration of company names
11. Criteria for names of companies.—(1) Subject to subsec-
tions (2) and (3), a company name—
(a) may comprise one or more words in any language, irre-
spective of whether the word or words are commonly used
or contrived for the purpose, together with—
(i) any letters, numbers or punctuation marks;
(ii) any of the following symbols: +, &, #, @, %, =;
[Sub-para. (ii) substituted by s. 6 (b) of Act No. 3 of 2011.]
(Date of commencement of sub-para. (ii): 1 May 2014.)
(iii) any other symbol permitted by the regulations made
in terms of subsection (4); or
(Date of commencement of sub-para. (iii): 1 May 2014.)
A-17 Companies Act No. 71 of 2008
(iv) round brackets used in pairs to isolate any other part
of the name,
alone or in any combination; or
[Para. (a) amended by s. 6 (a) of Act No. 3 of 2011.]
(b) in the case of a profit company, may be the registration
number of the company together with the relevant expres-
sions required by subsection (3).
(2) The name of a company must—
(a) not be the same as—
(i) the name of another company, domesticated compa-
ny, registered external company, close corporation
or co-operative;
(ii) a name registered for the use of a person, other than
the company itself or a person controlling the com-
pany, as a defensive name in terms of section 12 (9),
or as a business name in terms of the Business
Names Act, 1960 (Act No. 27 of 1960), unless the
registered user of that defensive name or business
name has executed the necessary documents to
transfer the registration in favour of the company;
(iii) a registered trade mark belonging to a person other
than the company, or a mark in respect of which an
application has been filed in the Republic for regis-
tration as a trade mark or a well-known trade mark
as contemplated in section 35 of the Trade Marks
Act, 1993 (Act No. 194 of 1993), unless the regis-
tered owner of that mark has consented in
writing to the use of the mark as the name of the
company; or
(iv) a mark, word or expression the use of which is
restricted or protected in terms of the Merchandise
Marks Act, 1941 (Act No. 17 of 1941), except to the
extent permitted by or in terms of that Act;
[Para. (a) substituted by s. 6 (c) of Act No. 3 of 2011.]
(b) not be confusingly similar to a name, trade mark, mark,
word or expression contemplated in paragraph (a) unless—
(i) in the case of names referred to in paragraph (a) (i),
each company bearing any such similar name is a
member of the same group of companies;
(ii) in the case of a company name similar to a defensive
name or to a business name referred to in paragraph
(a) (ii), the company, or a person who controls the
company, is the registered owner of that defensive
name or business name;
(iii) in the case of a name similar to a trade mark or mark
referred to in paragraph (a) (iii), the company is the
registered owner of the business name, trade mark,
or mark, or is authorised by the registered owner to
use it; or
(iv) in the case of a name similar to a mark, word or
expression referred to in paragraph (a) (iv), the use
of that mark, word or expression by the company is
permitted by or in terms of the Merchandise Marks
Act, 1941;
[Para. (b) inserted by s. 6 (d) of Act No. 3 of 2011.]
(c) not falsely imply or suggest, or be such as would reasona-
bly mislead a person to believe incorrectly, that the com-
pany—
(i) is part of, or associated with, any other person or
entity;
(ii) is an organ of state or a court, or is operated, spon-
sored, supported or endorsed by the State or by any
organ of state or a court;
(iii) is owned, managed or conducted by a person or
persons having any particular educational designa-
tion or who is a regulated person or entity;
ss 11–12
(iv) is owned, operated, sponsored, supported or en-
dorsed by, or enjoys the patronage of, any—
(aa) foreign state, head of state, head of govern-
ment, government or administration or any
department of such a government or admin-
istration; or
(bb) international organisation; and
[Para. (c), previously para. (b), amended by s. 6 (d) of Act No. 3 of
2011.]
(d) not include any word, expression or symbol that, in
isolation or in context within the rest of the name, may rea-
sonably be considered to constitute—
(i) propaganda for war;
(ii) incitement of imminent violence; or
(iii) advocacy of hatred based on race, ethnicity, gender
or religion, or incitement to cause harm.
[Para. (d), previously para. (c), renumbered by s. 6 (d) of Act No. 3 of
2011.]
(3) In addition to complying with the requirements of subsections
(1) and (2)—
(a) if the name of a profit company is the company’s registra-
tion number, as contemplated in subsection (1) (b), that
number must be immediately followed by the expression
“(South Africa)”;
(b) if the company’s Memorandum of Incorporation includes
any provision contemplated in section 15 (2) (b) or (c) re-
stricting or prohibiting the amendment of any particular
provision of the Memorandum, the name must be immedi-
ately followed by the expression “(RF)”; and
[Para. (b) substituted by s. 6 (e) of Act No. 3 of 2011.]
(c) a company name, irrespective of its form or language,
must end with one of the following expressions, as appro-
priate for the category of the particular company:
(i) The word “Incorporated” or its abbreviation “Inc.”,
in the case of a personal liability company.
(ii) The expression “Proprietary Limited” or its abbrevia-
tion, “(Pty) Ltd.”, in the case of a private company.
(iii) The word “Limited” or its abbreviation, “Ltd.”, in
the case of a public company.
(iv) The expression “SOC Ltd.” in the case of a state-
owned company.
(v) The expression “NPC”, in the case of a non-profit
company.
(4) The Minister may prescribe—
(a) additional commonly recognised symbols for use in
company names as contemplated in subsection (1) (a) (iii);
and
(b) alternative expressions, in any official language, which
may be used in substitution for any expression required to
follow a company’s name in terms of subsection (3).
[Sub-s. (4) substituted by s. 6 (f) of Act No. 3 of 2011.]
12. Reservation of name and defensive names.—(1) A person
may reserve one or more names to be used at a later time, either for
a newly incorporated company, or as an amendment to the name of
an existing company, by filing an application together with the
prescribed fee.
(2) The Commission must reserve each name as applied for in the
name of the applicant, unless—
(a) the applicant is prohibited, in terms of section 11 (2) (a),
from using the name as applied for; or
(b) the name as applied for is already reserved in terms of this
section.
[Sub-s. (2) substituted by s. 7 (a) of Act No. 3 of 2011.]
(3) If, upon reserving a name in terms of subsection (2), there are
reasonable grounds for considering that the name may be incon-
sistent with the requirements of—
ss 12–13 Auditing: Legislation and Standards
(a) section 11 (2) (b) or (c)—
(i) the Commission, by written notice, may require the
applicant to serve a copy of the application and
name reservation on any particular person, or class
of persons, named in the notice, on the grounds that
the person or persons may have an interest in the use
of the name that has been reserved for the applicant;
and
(ii) any person to whom a notice is required to be given
in terms of subparagraph (i) may apply to the Com-
panies Tribunal for a determination and order in
terms of section 160; or
[Para. (a) amended by s. 7 (b) of Act No. 3 of 2011.]
(b) section 11 (2) (d)—
(i) the Commission may refer the application and name
reservation to the South African Human Rights
Commission; and
(ii) the South African Human Rights Commission may
apply to the Companies Tribunal for a determination
and order in terms of section 160.
[Para. (b) amended by s. 7 (c) of Act No. 3 of 2011.]
(4) A name reservation continues for a period of six months from
the date of the application, and may be extended by the Commission
for good cause shown, on application by the person for whom the
name is reserved together with the prescribed fee, for a period of
60 business days at a time.
(5) A person for whom a name has been reserved in terms of
subsection (2) may transfer that reservation to another person by
filing a signed notice of the transfer together with the prescribed fee.
(6) If the Commission reasonably believes that an applicant in
terms of subsection (1), a person to whom a reserved name is to be
transferred, or a person for whom a name is reserved, may be
attempting to abuse the name reservation system for the purpose of
selling access to names, or trading in or marketing names, the
Commission may issue a notice to that person—
(a) requiring the person to show cause why that name should
be reserved or continue to be reserved, or why the reserva-
tion should be transferred;
(b) refusing to extend a name reservation upon its expiry;
(c) refusing to transfer a reserved name; or
(d) cancelling a name reservation.
(7) If, as a result of a pattern of conduct by a person, or two or
more persons who are related or inter-related, the Commission has
reasonable grounds to believe that the person or persons have
abused the name reservation system by—
(a) selling access to names, or trading in or marketing reserved
names; or
(b) repeatedly attempting to reserve names for the purpose of
selling access to names, or trading in or marketing reserved
names,
the Commission may apply to a court for an order prohibiting the
person or persons from applying to reserve any names in terms of
this section for a period that the court considers just and reasonable
in the circumstances.
(8) In considering whether a person has abused, or may be at-
tempting to abuse, the name reservation system as contemplated in
subsection (6) or (7), the Commission, Tribunal or a court may
consider any relevant conduct by that person or any related or inter-
related person, including—
(a) the reservation of more than one name in a single applica-
tion or a series of applications;
(b) a pattern of repetitious applications to reserve a particular
name or a number of substantially similar names, or to ex-
tend the reservation of a particular name;
(c) a failure to show good cause for a reservation period to be
extended; or
A-18
(d) a pattern of unusually frequent transfers of reserved names
without apparent legitimate cause having regard to the na-
ture of the person’s profession or business.
[Sub-s. (8) amended by s. 7 (d) of Act No. 3 of 2011.]
(9) Any person may on application on the prescribed form and on
payment of the prescribed fee apply to the Commission to—
(a) register any name as a defensive name for a period of two
years; or
(b) renew, for a period of two years, the registration of a name
as a defensive name,
in respect of which he or she has furnished proof, to the satisfaction
of the Commission, that he or she has a direct and material interest.
(10) The registration of a defensive name may be transferred to
another person by notice in the prescribed manner and form and
upon payment of the prescribed fee.
[Sub-s. (10) inserted by s. 7 (e) of Act No. 3 of 2011.]
Part B
Incorporation and legal status of companies
13. Right to incorporate company or transfer registration of
foreign company.—(1) One or more persons, or an organ of state,
may incorporate a profit company, and an organ of state, a juristic
person, or three or more persons acting in concert, may incorporate
a non-profit company, by—
(a) completing, and each signing in person or by proxy, a
Memorandum of Incorporation—
(i) in the prescribed form; or
(ii) in a form unique to the company; and
(b) filing a Notice of Incorporation, in accordance with subsec-
tion (2).
[Sub-s. (1) amended by s. 8 (b) of Act No. 3 of 2011.]
(2) The Notice of Incorporation of a company must be—
(a) filed in the prescribed manner and form, together with the
prescribed fee; and
[Para. (a) substituted by s. 8 (c) of Act No. 3 of 2011.]
(b) accompanied by a copy of the Memorandum of Incorpora-
tion, subject to any declaration contemplated in section
6 (14) (b).
(3) If a company’s Memorandum of Incorporation includes any
provision contemplated in section 15 (2) (b) or (c), the Notice of
Incorporation filed by the company must include a prominent state-
ment drawing attention to each such provision, and its location in
the Memorandum of Incorporation.
(4) The Commission—
(a) may reject a Notice of Incorporation if the notice, or any
thing required to be filed with it, is incomplete, or improp-
erly completed in any respect, subject to section 6 (8); and
(b) must reject a Notice of Incorporation if—
(i) the initial directors of the company, as set out in the
Notice, are fewer than required by or in terms of sec-
tion 66 (2); or
(ii) the Commission reasonably believes that any of the
initial directors of the company, as set out in the No-
tice, are disqualified in terms of section 69 (8), and
the remaining directors are fewer than required by or
in terms of section 66 (2).
(5) Subject to subsections (6) and (7), a foreign company may
apply in the prescribed manner and form, accompanied by the
prescribed application fee, to transfer its registration to the Republic
from the foreign jurisdiction in which it is registered, and thereafter
exists as a company in terms of this Act as if it had been originally
so incorporated and registered.
[Sub-s. (5) inserted by s. 8 (d) of Act No. 3 of 2011.]
(6) A foreign company may transfer its registration as contem-
plated in subsection (5) if—
(a) the law of the jurisdiction in which the company is regis-
tered permits such a transfer, and the company has com-
plied with the requirements of that law in relation to the
transfer;
A-19 Companies Act No. 71 of 2008
(b) the transfer has been approved by the company’s share-
holders—
(i) in accordance with the law of the jurisdiction in
which the company is registered, if that law imposes
such a requirement; or
(ii) by the equivalent of a special resolution in terms of
this Act, if the law of the jurisdiction in which the
company is registered does not require such share-
holder approval;
(c) the whole or greater part of its assets and undertaking are
within the Republic, other than the assets and undertaking
of any subsidiary that is incorporated outside the Republic;
(d) the majority of its shareholders are resident in the Repub-
lic;
(e) the majority of its directors are or will be South African
citizens; and
(f) immediately following the transfer of registration, the
company—
(i) will satisfy the solvency and liquidity test; and
(ii) will no longer be registered in another jurisdiction.
[Sub-s. (6) inserted by s. 8 (d) of Act No. 3 of 2011.]
(7) Despite satisfying the requirements of subsection (6), a for-
eign company may not transfer its registration to the Republic as
contemplated in subsection (5) if—
(a) the foreign company—
(i) is permitted, in terms of any law or its Articles or
Memorandum of Incorporation, to issue bearer shares;
or
(ii) has issued any bearer shares that remain issued;
(b) the foreign company is in liquidation;
(c) a receiver or manager has been appointed, whether by a
court or otherwise, in relation to the property of the foreign
company;
(d) the foreign company—
(i) is engaged in proceedings comparable to business
rescue proceedings in terms of this Act; or
(ii) is subject to an approved plan, or a court order,
comparable to an approved business rescue plan in
terms of this Act; or
(iii) has entered into a compromise or arrangement with
a creditor, and the compromise or arrangement is in
force; or
(e) an application has been made to a court in any jurisdiction,
and not fully disposed of—
(i) to put the foreign company into liquidation, to wind
it up or to have it declared insolvent;
(ii) for the approval of a compromise or arrangement
between the foreign company and a creditor; or
(iii) for the appointment of a receiver or administrator in
relation to any property of the foreign company.
[Sub-s. (7) inserted by s. 8 (d) of Act No. 3 of 2011.]
(8) The Minister may make regulations—
(a) prescribing forms and procedures for the consideration of
applications contemplated in subsection (5);
(b) for the registration of domesticated companies as contem-
plated in subsections (5) to (7) and for the issuing of regis-
tration certificates to such companies; and
(c) establishing requirements for each domesticated company
to harmonise its Memorandum of Incorporation with this
Act.
[Sub-s. (8) inserted by s. 8 (d) of Act No. 3 of 2011.]
(9) Subsections (3) and (4) and section 14, each read with the
changes required by the context, apply to an application in terms of
subsections (5) to (7).
[Sub-s. (9) inserted by s. 8 (d) of Act No. 3 of 2011.]
(10) Upon compliance of the requirements for registration of a
domesticated company as contemplated in terms of this section, the
ss 13–14
Commissioner must issue to such company a registration certificate
to the effect that such registration has taken place and that it deemed
that the company has been incorporated under this Act.
[Sub-s. (10) inserted by s. 8 (d) of Act No. 3 of 2011.]
(11) The registration of a domesticated company in terms of
subsections (5) to (9) does not—
(a) establish a new juristic person;
(b) prejudice or affect the identity of the juristic person
constituted by that domesticated company, or its continuity
as a juristic person;
(c) prejudice the rights of any person or affect the property,
rights, liabilities or obligations of that juristic person; or
(d) render ineffective any legal proceedings by or against that
juristic person.
[S. 13 amended by s. 8 (a) of Act No. 3 of 2011. Sub-s. (11) inserted by
s. 8 (d) of Act No. 3 of 2011.]
14. Registration of company.—(1) As soon as practicable after
accepting a Notice of Incorporation in terms of section 13 (1), or an
application for the domestication of a foreign company in terms of
section 13 (5), the Commission must—
(a) assign to the company a unique registration number; and
(b) subject to subsection (2)—
(i) enter the prescribed information concerning the
company in the companies register;
(ii) endorse the Notice of Incorporation, and, if applica-
ble, the copy of the Memorandum of Incorporation
filed with it, in the prescribed manner; and
(iii) issue and deliver to the company a registration
certificate in the prescribed manner and form, dated
as of the later of—
(aa) the date on, and time at, which the Commis-
sion issued the certificate; or
(bb) the date, if any, stated by the incorporators in
the Notice of Incorporation.
[Sub-s. (1) amended by s. 9 (a) of Act No. 3 of 2011.]
(2) If the name of a company, as entered on the Notice of Incor-
poration—
(a) fails to satisfy the requirements of section 11 (3), the
Commission, in taking the steps required by subsection
(1) (b), may alter the name by inserting or substituting the
appropriate expressions as required by section 11 (3); or
(b) is a name that the company is prohibited, in terms of
section 11 (2) (a), from using, or is reserved in terms of
section 12 for a person other than one of the incorporators,
the Commission—
(i) must take the steps set out in subsection (1) (b),
using the company’s registration number, followed
by “Inc.”, “(Pty) Ltd”, “Ltd.”, “SOC”, or “NPC”, as
appropriate, as the interim name of the company in
the companies register and on the registration certif-
icate;
(ii) must invite the company to file an amended Notice
of Incorporation using a satisfactory name; and
(iii) when the company files such an amended Notice of
Incorporation, must—
(aa) enter the company’s amended name in the
companies register; and
(bb) issue and deliver to the company an amended
registration certificate showing the amended
name of the company.
[Para. (b) amended by s. 9 (b) of Act No. 3 of 2011.]
(3) If, upon registering a company in terms of subsection (1),
there are reasonable grounds for considering that the company’s
name may be inconsistent with the requirements of—
(a) section 11 (2) (b) or (c)—
(i) the Commission, by written notice, may require the
applicant to serve a copy of the application and
name reservation on any particular person, or class
ss 14–16 Auditing: Legislation and Standards
of persons, named in the notice, on the grounds that
the person or persons may have an interest in the use
of the reserved name by the applicant; and
(ii) any person contemplated in subparagraph (i) may
apply to the Companies Tribunal for a determination
and order in terms of section 160; or
[Para. (a) amended by s. 9 (d) of Act No. 3 of 2011.]
(b) section 11 (2) (d)—
(i) the Commission may refer the application and name
reservation to the South African Human Rights
Commission; and
(ii) the South African Human Rights Commission may
apply to the Companies Tribunal for a determination
and order in terms of section 160.
[Sub-s. (3) amended by s. 9 (c) of Act No. 3 of 2011. Para. (b) amended
by s. 9 (e) of Act No. 3 of 2011.]
(4) A registration certificate issued in terms of subsection (1) is
conclusive evidence that—
(a) all the requirements for the incorporation of the company
have been complied with; and
(b) the company is incorporated under this Act as from the
date, and the time, if any, stated in the certificate.
15. Memorandum of Incorporation, shareholder agreements
and rules of company.—(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, subject to section 6 (15).
[Para. (b) substituted by s. 10 (a) of Act No. 3 of 2011.]
(2) The Memorandum of Incorporation of any company may—
(a) include any provision—
(i) dealing with a matter that this Act does not address;
[Sub-para. (i) substituted by s. 10 (b) of Act No. 3 of 2011.]
(ii) altering the effect of any alterable provision of this
Act; or
[Sub-para. (ii) substituted by s. 10 (b) of Act No. 3 of 2011.]
(iii) imposing on the company a higher standard, greater
restriction, longer period of time or any similarly
more onerous requirement, than would otherwise
apply to the company in terms of an unalterable pro-
vision of this Act;
[Sub-para. (iii) inserted by s. 10 (c) of Act No. 3 of 2011.]
(b) contain any restrictive conditions applicable to the compa-
ny, and any requirement for the amendment of any such
condition in addition to the requirements set out in sec-
tion 16;
[Para. (b) substituted by s. 10 (d) of Act No. 3 of 2011.]
(c) prohibit the amendment of any particular provision of the
Memorandum of Incorporation; or
[Para. (c) substituted by s. 10 (e) of Act No. 3 of 2011.]
(d) not include any provision that negates, restricts, limits,
qualifies, extends or otherwise alters the substance or ef-
fect of an unalterable provision of this Act, except to the
extent contemplated in paragraph (a) (iii).
[Para. (d) inserted by s. 10 (f) of Act No. 3 of 2011.]
(3) Except to the extent that a company’s Memorandum of Incor-
poration 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 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)—
(a) must be consistent with this Act and the company’s
Memorandum of Incorporation, and any such rule that is
A-20
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—
(i) 10 business days after the rule is filed in terms of
subsection (3) (b); or
[Sub-para. (i) substituted by s. 10 (g) of Act No. 3 of 2011.]
(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 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 filed in terms of subsection (3) is sub-
sequently—
(a) ratified as contemplated in subsection (4) (c), the company
must file a notice of ratification within five business days
in the prescribed manner and form; or
(b) not ratified when put to a vote—
(i) the company must file a notice of non-ratification
within five business days after the vote, in the pre-
scribed manner and form; and
(ii) the company’s board may not make a substantially
similar rule within the ensuing 12 months, unless it
has been approved in advance by ordinary resolution
of the shareholders.
[Sub-s. (5) substituted by s. 10 (h) of Act No. 3 of 2011.]
(5A) Any failure to ratify the rules of a company does not affect
the validity of anything done in terms of those rules during the
period that they had an interim effect as provided in subsection (4)
(c) (i).
[Sub-s. (5A) inserted by s. 10 (i) of Act No. 3 of 2011.]
(6) A company’s Memorandum of Incorporation, and any rules
of the company, are binding—
(a) between the company and each shareholder;
(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 a committee of the board,
[Sub-para. (ii) substituted by s. 10 (j) of Act No. 3 of 2011.]
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 compa-
ny’s Memorandum of Incorporation is void to the extent of the
inconsistency.
16. Amending Memorandum of Incorporation.—(1) A com-
pany’s Memorandum of Incorporation may be amended—
(a) in compliance with a court order in the manner contem-
plated in subsection (4);
(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 that may be exercised on
such a resolution; and
(ii) is adopted at a shareholders meeting, or in accord-
ance with section 60, subject to subsection (3).
A-21 Companies Act No. 71 of 2008
(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.
(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.
(4) An amendment to a company’s Memorandum of Incorpora-
tion 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—
(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;
(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 Incorpora-
tion 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
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 Amendment; and
(b) if the amendment to a company’s Memorandum of Incor-
poration—
(i) has substituted a new Memorandum, as contemplat-
ed 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
(ii) has altered the existing Memorandum, as contem-
plated 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 amended Memorandum
of Incorporation within a reasonable time.
(8) If a company’s amendment to its Memorandum of Incorpora-
tion 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 com-
pany; and
(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 compa-
nies register; or
ss 16–17
(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 corpora-
tion or co-operative; or
(bb) reserved in terms of section 12 for another
person.
(9) An amendment to a company’s Memorandum of Incorpora-
tion takes effect—
(a) in the case of an amendment that changes the name of the
company, on the date set out in the amended registration
certificate issued by the Commission in terms of subsec-
tion (8), read with section 14 (1) (b) (iii); or
(b) in any other case, on the later of—
(i) the date on, and time at, which the Notice of
Amendment is filed; or
(ii) the date, if any, set out in the Notice of Amendment.
[Sub-s. (9) substituted by s. 11 (a) of Act No. 3 of 2011.]
(10) If an amendment to the Memorandum of Incorporation of a
personal liability company has the effect of transforming that
company into any other category of company, the company must
give at least 10 business days advance notice of the filing of the
notice of amendment to—
(a) any professional or industry regulatory authority that has
jurisdiction over the business activities carried on by the
company; and
(b) any person who—
(i) in its dealings with the company, may reasonably be
considered to have acted in reliance upon the joint
and several liability of any of the directors for the
debts and liabilities of the company; or
(ii) may be adversely affected if the joint and several
liability of any of the directors for the debts and
liabilities of the company is terminated as a conse-
quence of the amendment to the Memorandum of
Incorporation.
[Sub-s. 10 inserted by s. 11 (b) of Act No. 3 of 2011.]
(11) A person who receives, or is entitled to receive, a notice in
terms of subsection (10) may apply to a court in the prescribed
manner and form for an order sufficient to protect the interests of
that person.
[Sub-s. (11) inserted by s. 11 (b) of Act No. 3 of 2011.]
17. Alterations, translations and consolidations of Memo-
randum of Incorporation.—(1) The board of a company, or an
individual authorised by the board, may alter the company’s rules,
or its Memorandum of Incorporation, in any manner necessary to
correct a patent error in spelling, punctuation, reference, grammar or
similar defect on the face of the document, by—
(a) publishing a notice of the alteration, in any manner
required or permitted by the Memorandum of Incorpora-
tion or the rules of the company; and
(b) filing a notice of the alteration.
(2) The Commission, or a director or shareholder of a company,
may apply to the Companies Tribunal for an administrative order
setting aside the notice of an alteration published in terms of
subsection (1), only on the grounds that the alteration exceeds the
authority to correct a patent error or defect, as contemplated in that
subsection.
(3) At any time, a company that has filed its Memorandum of
Incorporation may file one or more translations of it, in any official
language or languages of the Republic.
(4) A translation of a company’s Memorandum of Incorporation
must be accompanied by a sworn statement by the person who made
the translation, stating that it is a true, accurate and complete
translation of the Memorandum of Incorporation.
ss 17–20 Auditing: Legislation and Standards
(5) At any time after a company has filed its Memorandum of
Incorporation, and subsequently filed one or more alterations or
amendments to it—
(a) the company may file a consolidated revision of its
Memorandum of Incorporation, as so altered or amended;
or
(b) the Commission may require the company to file a consoli-
dated revision of its Memorandum of Incorporation, as so
altered or amended.
(6) A consolidated revision of a company’s Memorandum of
Incorporation must be accompanied by—
(a) a sworn statement by a director of the company; or
(b) a statement by an attorney or notary public,
stating that the consolidated revision is a true, accurate and complete
representation of the company’s Memorandum of Incorporation, as
altered and amended up to the date of the statement.
18. Authenticity of versions of memorandum of incorpora-
tion.—(1) The Memorandum of Incorporation of a company, as
altered or amended, prevails in any case of a conflict between it
and—
(a) a translation filed in terms of section 17 (3); or
(b) a consolidated revision filed in terms of section 17 (5),
unless the consolidated revision has subsequently been rat-
ified by a special resolution at a general shareholders meet-
ing of the company.
(2) The latest version of a company’s Memorandum of Incorpo-
ration that has been endorsed by the Commission in terms of this
Part prevails in the case of any conflict between it and any other
purported version of the company’s Memorandum of Incorporation.
19. Legal status of companies.—(1) From the date and time
that the incorporation of a company is registered, as stated in its
registration certificate, the company—
(a) is a juristic person, which exists continuously until its
name is removed from the companies register in accord-
ance with this Act;
(b) has all of the legal powers and capacity of an individual,
except to the extent that—
(i) a juristic person is incapable of exercising any such
power, or having any such capacity; or
(ii) the company’s Memorandum of Incorporation
provides otherwise;
(c) is constituted in accordance with—
(i) the unalterable provisions of this Act;
(ii) the alterable provisions of this Act, subject to any
negation, restriction, limitation, qualification, exten-
sion or other alteration that is contemplated in an al-
terable provision, and has been noted in the
company’s Memorandum of Incorporation; and
(iii) any further provisions of the company’s Memoran-
dum of Incorporation.
(2) A person is not, solely by reason of being an incorporator,
shareholder or director of a company, liable for any liabilities or
obligations of the company, except to the extent that this Act or the
company’s Memorandum of Incorporation provides otherwise.
(3) If a company is a personal liability company the directors and
past directors are jointly and severally liable, together with the
company, for any debts and liabilities of the company as are or were
contracted during their respective periods of office.
(4) Subject to subsection (5), a person must not be regarded as
having received notice or knowledge of the contents of any docu-
ment relating to a company merely because the document—
(a) has been filed; or
(b) is accessible for inspection at an office of the company.
(5) A person must be regarded as having notice and knowledge
of—
A-22
(a) any provision of a company’s Memorandum of Incorpora-
tion contemplated in section 15 (2) (b) or (c) if the compa-
ny’s name includes the element ‘‘RF’’ as contemplated in
section 11 (3) (b), and the company’s Notice of Incorpora-
tion or a subsequent Notice of Amendment has drawn at-
tention to the relevant provision, as contemplated in sec-
section 13 (3); and
(b) the effect of subsection (3) on a personal liability company.
[Sub-s. (5) substituted by s. 12 of Act No. 3 of 2011.]
(6) If a company has amended its Memorandum of Incorporation,
the Memorandum of Incorporation as previously adopted by the
company has no force or effect with respect to any right, cause of
action or matter occurring or arising after the date on which the
amendment took effect.
(7) After a company has changed its name, any legal proceedings
that might have been commenced or continued by or against the
company under its former name may be commenced or continued by
or against it under its new name.
20. Validity of company actions.—(1) If a company’s Memo-
randum of Incorporation limits, restricts or qualifies the purposes,
powers or activities of that company, as contemplated in section 19
(1) (b) (ii)—
(a) no action of the company is void by reason only that—
(ii) the action was prohibited by that limitation, re-
striction or qualification; or
(ii) as a consequence of that limitation, restriction or
qualification, the directors had no authority to au-
thorise the action by the company; and
(Editorial Note: Numbering as per original
Government Gazette.)
(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 an action contemplated in para-
graph (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, 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 compa-
ny, may apply to the High Court for an appropriate order to restrain
the company from doing anything inconsistent with this Act.
[Sub-s. (4) substituted by s. 13 (a) of Act No. 3 of 2011.]
(5) One or more shareholders, directors or prescribed officers of
a company may apply to the High Court for an appropriate order to
restrain the company or the directors from doing anything incon-
sistent 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—
(a) obtained those rights in good faith; and
(b) did not have actual knowledge of the limit, restriction or
qualification.
[Sub-s. (5) amended by s. 13 (b) of Act No. 3 of 2011.]
(6) Each shareholder of a company has a claim for damages
against any person who intentionally, fraudulently or due to gross
negligence causes the company to do anything inconsistent with—
(a) this Act; or
A-23 Companies Act No. 71 of 2008
(b) a limitation, restriction or qualification contemplated in
this section, unless that action has been ratified by the
shareholders in terms of subsection (2).
[Sub-s. (6) amended by s. 13 (c) of Act No. 3 of 2011.]
(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 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 circum-
stances, 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, any relevant common law principle relating to
the presumed validity of the actions of a company in the exercise of
its powers.
(9) If, on application by an interested person or in any proceed-
ings in which a company is involved, a court finds that the incorpo-
ration of the company, any use of the company, or any act by or on
behalf of the company, constitutes an unconscionable abuse of the
juristic personality of the company as a separate entity, the court
may—
(a) declare that the company is to be deemed not to be a
juristic person in respect of any right, obligation or liability
of the company or of a shareholder of the company or, in
the case of a non-profit company, a member of the compa-
ny, or of another person specified in the declaration; and
(b) make any further order the court considers appropriate to
give effect to a declaration contemplated in paragraph (a).
[Sub-s. (9) inserted by s. 13 (d) of Act No. 3 of 2011.]
21. Pre-incorporation contracts.—(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 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 liabili-
ties created as provided for in the pre-incorporation contract while
so acting, if—
(a) the contemplated entity is not subsequently incorporated;
or
(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 contem-
plated in subsection (1), the liability of a person under subsection (2)
in respect of the substituted agreement is discharged.
(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 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 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.
(7) If a company rejects an agreement or action contemplated in
subsection (1), a person who bears any liability in terms of subsec-
tion (2) for that rejected agreement or action may assert a claim
ss 20–23
against the company for any benefit it has received, or is entitled to
receive, in terms of the agreement or action.
22. Reckless trading prohibited.—(1) A company must not
carry on its business recklessly, with gross negligence, with intent to
defraud any person or for any fraudulent purpose.
[Sub-s. (1) substituted by s. 14 of Act No. 3 of 2011.]
(2) If the Commission has reasonable grounds to believe that a
company is engaging in conduct prohibited by subsection (1), or is
unable to pay its debts as they become due and payable in the
normal course of business, 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.
[Sub-s. (2) substituted by s. 14 of Act No. 3 of 2011.]
(3) If a company to whom a notice has been issued in terms of
subsection (2) fails within 20 business days to satisfy the Commis-
sion that it is not engaging in conduct prohibited by subsection (1),
or that it is able to pay its debts as they become due and payable in
the normal course of business, the Commission may issue a compli-
ance notice to the company requiring it to cease carrying on its
business or trading, as the case may be.
[Sub-s. (3) substituted by s. 14 of Act No. 3 of 2011.]
Part C
Transparency, accountability and integrity of companies
23. Registration of external companies and registered of-
fice.—(1) An external company must register with the Commission
within 20 business days after it first begins to conduct business, or
non-profit activities, as the case may be, within the Republic—
(a) as an external non-profit company if, within the jurisdic-
tion in which it was incorporated, it meets legislative or
definitional requirements that are comparable to the legis-
lative or definitional requirements of a non-profit company
incorporated under this Act; or
(b) as an external profit company, in any other case.
[Para. (b) substituted by s. 15 (a) of Act No. 3 of 2011.]
(2) For the purposes of subsection (1), and the definition of “ex-
ternal company” as set out in section 1, a foreign company must be
regarded as “conducting business, or non-profit activities, as the
case may be, within the Republic” if that foreign company—
(a) is a party to one or more employment contracts within the
Republic; or
(b) subject to subsection (2A), is engaging in a course of
conduct, or has engaged in a course or pattern of activities
within the Republic over a period of at least six months,
such as would lead a person to reasonably conclude that
the company intended to continually engage in business or
non-profit activities within the Republic.
[Sub-s. (2) substituted by s. 15 (b) of Act No. 3 of 2011.]
(2A) When applying subsection (2) (b), a foreign company must
not be regarded as “conducting business activities, or non-profit
activities, as the case may be, within the Republic” solely on the
ground that the foreign company is or has engaged in one or more of
the following activities—
(a) Holding a meeting or meetings within the Republic of the
shareholders or board of the foreign company, or otherwise
conducting any of the company’s internal affairs within the
Republic;
(b) establishing or maintaining any bank or other financial
accounts within the Republic;
(c) establishing or maintaining offices or agencies within the
Republic for the transfer, exchange, or registration of the
foreign company’s own securities;
(d) creating or acquiring any debts within the Republic, or any
mortgages or security interests in any property within the
Republic;
(e) securing or collecting any debt, or enforcing any mortgage
or security interest within the Republic; or
ss 23–25 Auditing: Legislation and Standards
(f) acquiring any interest in any property within the Republic.
[Sub-s. (2A) inserted by s. 15 (b) of Act No. 3 of 2011.]
(3) Each company or external company must—
(a) continuously maintain at least one office in the Republic;
and
(b) register the address of its office, or its principal office if it
has more than one office—
(i) initially in the case of—
(aa) a company, by providing the required infor-
mation on its Notice of Incorporation; or
(bb) an external company, by providing the
required information when filing its regis-
tration in terms of subsection (1); and
(ii) subsequently, by filing a notice of change of regis-
tered office, together with the prescribed fee.
(4) A change contemplated in subsection (3) (b) (ii) takes effect
as from the later of—
(a) the date, if any, stated in the notice; or
(b) five business days after the date on which the notice was
filed.
[Sub-s. (4) amended by s. 15 (c) of Act No. 3 of 2011.]
(5) The Commission must—
(a) assign a unique registration number to each external
company that has registered in accordance with subsec-
tion (1);
(b) maintain a register of external companies;
(c) enter the prescribed information concerning each external
company in the register; and
(d) in the case of an external company whose name is a
foreign registration number but does not indicate the name
of the foreign jurisdiction in which it was incorporated,
append to its name on the registry the name of that juris-
diction in a manner comparable to that required for a com-
pany under section 11 (3) (a).
(6) If an external company has failed to register in terms of sub-
section (1) within three months after commencing its activities
within the Republic, the Commission may issue a compliance notice
to that external company requiring it to—
(a) register as required by subsection (1) within 20 business
days after receiving the notice; or
(b) if it fails to register within the time allowed in paragraph
(a), to cease carrying on its business or activities within the
Republic.
[Sub-s. (6) amended by s. 15 (d) of Act No. 3 of 2011.]
24. Form and standards for company records.—(1) Any doc-
uments, 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—
(a) in written form, or other form or manner that allows that
information to be converted into written form within a rea-
sonable 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), 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 com-
pany made in terms of section 15 (3) to (5);
(b) a record of its directors, including—
(i) all the information required in terms of subsection
(5) in respect of each current director at any particu-
lar time; and
A-24
(ii) with respect to each past director, the information
required in terms of subparagraph (i), which must be
retained for seven years after the past director retired
from the company;
[Para. (b) substituted by s. 16 (a) of Act No. 3 of 2011.]
(c) copies of all—
(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 particu-
lar statements were issued; and
(iii) accounting records required by this Act, for the
current financial year and for the previous seven
completed financial years of the company;
(d) notice and minutes of all shareholders meetings, includ-
ing—
(i) all resolutions adopted by them; and
(ii) any document that was made available by the
company to the holders of securities in relation to
each such resolution,
for seven years after the date each such resolution was
adopted;
[Para. (d) substituted by s. 16 (b) of Act No. 3 of 2011.]
(e) copies of any written communications sent generally by
the company to all 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
(ii) on which each such resolution was adopted.
(4) In addition to the requirements of subsection (3), every com-
pany must maintain—
(a) a securities register or its equivalent, as required by section
50, in the case of a profit company, or a member’s register
in the case of a non-profit company that has members; and
(b) the records required in terms of section 85, if that section
applies to the company.
[Sub-s. (4) substituted by s. 16 (c) of Act No. 3 of 2011.]
(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 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 which the person is a director, and in
the case of a foreign company, the nationality of that com-
pany; 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 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.
25. Location of company records.—(1) The records referred
to in section 24 must be accessible at or from the company’s
registered office or another location, or other locations, within the
Republic.
A-25 Companies Act No. 71 of 2008
(2) A company must file a notice, setting out the location or
locations at which any particular records referred to in section 24 are
kept or from which they are accessible if those records—
(a) are not kept at or made accessible from the company’s
registered office, as contemplated in subsection (1); or
(b) are moved from one location to another.
26. Access to company records.—(1) A person who holds or
has a beneficial interest in any securities issued by a profit company,
or who is a member of a non-profit company, has a right to inspect
and copy, without any charge for any such inspection or upon
payment of no more than the prescribed maximum charge for any
such copy, the information contained in the following records of the
company—
(a) The company’s Memorandum of Incorporation and any
amendments to it, and any rules made by the company, as
mentioned in section 24 (3) (a);
(b) the records in respect of the company’s directors, as
mentioned in section 24 (3) (b);
(c) the reports to annual meetings, and annual financial
statements, as mentioned in section 24 (3) (c) (i) and (ii);
(d) the notices and minutes of annual meetings, and communi-
cations mentioned in section 24 (3) (d) and (e), but the ref-
erence in section 24 (3) (d) to shareholders meetings, and
the reference in section 24 (3) (e) to communications sent
to holders of a company’s securities, must be regarded in
the case of a non-profit company as referring to a meeting
of members, or communication to members, respectively;
and
(e) the securities register of a profit company, or the members
register of a non-profit company that has members, as
mentioned in section 24 (4).
[Sub-s. (1) substituted by s. 17 (a) of Act No. 3 of 2011.]
(2) A person not contemplated in subsection (1) has a right to
inspect or copy the securities register of a profit company, or the
members register of a non-profit company that has members, or the
register of directors of a company, upon payment of an amount not
exceeding the prescribed maximum fee for any such inspection.
[Sub-s. (2) substituted by s. 17 (a) of Act No. 3 of 2011.]
(3) In addition to the information rights set out in subsections (1)
and (2), the Memorandum of Incorporation of a company may
establish additional information rights of any person, with respect to
any information pertaining to the company, but no such right may
negate or diminish any mandatory protection of any record required
by or in terms of Part 3 of the Promotion of Access to Information
Act, 2000 (Act No. 2 of 2000).
[Sub-s. (3) inserted by s. 17 (a) of Act No. 3 of 2011.]
(4) A person may exercise the rights set out in subsection (1) or
(2), or contemplated in subsection (3)—
(a) for a reasonable period during business hours;
(b) by direct request made to a company in the prescribed
manner, either in person or through an attorney or other
personal representative designated in writing; or
(c) in accordance with the Promotion of Access to Information
Act, 2000 (Act No. 2 of 2000).
[Sub-s. (4) inserted by s. 17 (a) of Act No. 3 of 2011.]
(5) Where a company receives a request in terms of subsection
(4) (b) it must within 14 business days comply with the request by
providing the opportunity to inspect or copy the register concerned
to the person making such request.
[Sub-s. (5) inserted by s. 17 (a) of Act No. 3 of 2011.]
(6) The register of members and register of directors of a compa-
ny, must, during business hours for reasonable periods be open to
inspection by any member, free of charge and by any other person,
upon payment for each inspection of an amount not more than
R100,00.
[Sub-s. (6), previously sub-s. (3), renumbered by
s. 17 (b) of Act No. 3 of 2011.]
ss 25–28
(7) The rights of access to information set out in this section are
in addition to, and not in substitution for, any rights a person may
have to access information in terms of—
(a) section 32 of the Constitution;
(b) the Promotion of Access to Information Act, 2000 (Act
No. 2 of 2000); or
(c) any other public regulation.
[Sub-s. (7), previously sub-s. (4), renumbered by
s. 17 (b) of Act No. 3 of 2011.]
(8) The Minister may make regulations respecting the exercise of
the rights set out in this section.
[Sub-s. (8), previously sub-s. (5), renumbered by
s. 17 (b) of Act No. 3 of 2011.]
(9) It is an offence for a company to—
(a) fail to accommodate any reasonable request for access, or
to unreasonably refuse access, to any record that a person
has a right to inspect or copy in terms of this section or
section 31; or
[Para. (a) substituted by s. 17 (c) of Act No. 3 of 2011.]
(b) to otherwise impede, interfere with, or attempt to frustrate,
the reasonable exercise by any person of the rights set out
in this section or section 31.
[Sub-s. (9), previously sub-s. (6), renumbered by
s. 17 (b) of Act No. 3 of 2011. Para. (b) substituted by s. 17 (c) of Act
No. 3 of 2011.]
27. Financial year of company.—(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 subsec-
tion (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 than 15 months after the date con-
templated in paragraph (a).
(3) The second and each subsequent financial year of a comp-
any—
(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).
(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
(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 com-
pany that has changed the date contemplated in subsection (1) ends
on the date as changed.
(6) . . . . . .
[Sub-s. (6) deleted by s. 18 of Act No. 3 of 2011.]
(7) The financial year of the company is its annual accounting
period.
28. Accounting records.—(1) A company must keep accurate
and complete accounting records in one of the official languages of
the Republic—
(a) as necessary to enable the company to satisfy its obliga-
tions in terms of this Act or any other law with respect to
the preparation of financial statements; and
(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 acces-
sible from, the registered office of the company.
ss 28–30 Auditing: Legislation and Standards
(3) It is an offence for—
(a) a company—
(i) with an intention to deceive or mislead any person—
(aa) to fail to keep accurate or complete account-
ing records;
(bb) to keep records other than in the prescribed
manner and form, if any; or
(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 compli-
ance 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 constitutes an offence
in terms of subsection (3).
29. Financial statements.—(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 standards are prescribed;
(b) present fairly the state of affairs and business of the
company, and explain the transactions and financial posi-
tion 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 in-
formation;
(d) set out the date on which the statements were published,
and the accounting period to which the statements apply;
and
[Para. (d) substituted by s. 19 (a) of Act No. 3 of 2011.]
(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 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 prepared, or supervised the prepar-
ation 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).
(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 the company, and setting out
the date of those statements;
(ii) stating whether the financial statements that it
summarises have been audited, independently re-
viewed, or are unaudited, as contemplated in subsec-
tion (1) (e);
(iii) stating the name, and professional designation, if
any, of the individual who prepared, or supervised
the preparation of, the financial statements that it
summarises; and
A-26
(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 regulations prescribing—
(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 for public
companies, must be in accordance with the International
Financial Reporting Standards of the International Ac-
counting Standards Board or its successor body; and
[Para. (b) substituted by s. 19 (b) of Act No. 3 of 2011.]
(c) may establish different standards applicable to—
(i) profit and non-profit companies; and
(ii) different categories of profit companies.
(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 contemplated in section 30, knowing that those
statements—
(i) fail in a material way to comply with the require-
ments of subsection (1); or
[Sub-para. (i) substituted by s. 19 (c) of Act No. 3 of 2011.]
(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 mate-
rially false or misleading, as contemplated in subsec-
tion (2); or
(ii) the summary does not comply with the requirements
of subsection (3), or is materially false or mislead-
ing.
30. Annual financial statements.—(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 appropri-
ate 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 profit or non-profit company—
(i) be audited, if so required by the regulations made in
terms of subsection (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 any relevant factors, including—
[Sub-para. (i) substituted by s. 20 (b) of Act No. 3 of 2011.]
(aa) its annual turnover;
(bb) the size of its workforce; or
(cc) the nature and extent of its activities; or
(ii) be either—
(aa) audited voluntarily if the company’s Memo-
randum of Incorporation, or a shareholders
resolution, so requires or if the Company’s
board has so determined; or
[Sub-item (aa) substituted by s. 20 (c) of Act No. 3 of 2011.]
(bb) independently reviewed in a manner that
satisfies the regulations made in terms of sub-
section (7), subject to subsection (2A).
[Para. (b) amended by s. 20 (a) of Act No. 3 of 2011. Sub-item (bb) sub-
stituted by s. 20 (c) of Act No. 3 of 2011.]
(2A) If, with respect to a particular company, every person who
is a holder of, or has a beneficial interest in, any securities issued by
that company is also a director of the company, that company is
A-27 Companies Act No. 71 of 2008
exempt from the requirements in this section to have its annual
financial statements audited or independently reviewed, but this
exemption—
(a) does not apply to the company if it falls into a class of
company that is required to have its annual financial
statement audited in terms of the regulations contemplated
in subsection (7) (a); and
(b) does not relieve the company of any requirement to have
its financial statements audited or reviewed in terms of an-
other law, or in terms of any agreement to which the com-
pany is a party.
[Sub-s. (2A) inserted by s. 20 (d) of Act No. 3 of 2011.]
(3) The annual financial statements of a company must—
(a) include an auditor’s report, if the statements are audited;
(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 appreci-
ate the company’s state of affairs; and
(ii) any prescribed information;
(c) be approved by the board and signed by an authorised
director; and
(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 re-
quired 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 director, or individual holding any pre-
scribed 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;
(ii) any amount paid or payable by the company to a
pension scheme with respect to current or past direc-
tors or individuals who hold or have held any pre-
scribed 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 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 indi-
viduals who hold any 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
(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 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;
(b) salary, bonuses and performance-related payments;
ss 30–31
(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);
(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 subscrip-
tion of options or securities, or the purchase of securities, as
contemplated in section 44; and
[Para. (f) substituted by s. 20 (e) of Act No. 3 of 2011.]
(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—
(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
(bb) the interest actually charged to the borrower,
if less.
(7) The Minister may make regulations, including different re-
quirements for different categories of companies, prescribing—
(a) the categories of any profit or non-profit companies that
are required to have their respective annual financial
statements audited, as contemplated in subsection (2) (b)
(i); and
[Para. (a) substituted by s. 20 (f) of Act No. 3 of 2011.]
(b) the manner, form and procedures for the conduct of an
independent review under subsection (2) (b) (ii) (bb), as
well as the professional qualifications, if any, and duties of
persons who may conduct such reviews and the accredita-
tion of professions whose members may conduct such re-
views.
[Para. (b) substituted by s. 20 (g) of Act No. 3 of 2011.]
(8) Despite section 1 of the Auditing Profession Act, an inde-
pendent review of a company’s annual financial statements required
by this section does not constitute an audit within the meaning of
that Act.
[Sub-s. (8) inserted by s. 20 (h) of Act No. 3 of 2011.]
31. Access to financial statements or related information.—
(1) In addition to the rights set out in section 26, a person who holds
or has a beneficial interest in any securities issued by a company, is
entitled—
(a) without demand to receive a notice of the publication of
any annual financial statements of the company required
by this Act, setting out the steps required to obtain a copy
of those statements; and
(b) on demand to receive without charge one copy of any
annual financial statements of the company required by
this Act.
(2) If a judgment creditor of a company has been informed, by a
person whose duty it is to execute the judgment, that there appears
to be insufficient disposable property to satisfy that judgment, the
judgment creditor is entitled within five business days after making
a demand, to receive without charge, one copy of the most recent
annual financial statements of the company.
(3) Trade unions must, through the Commission and under condi-
tions as determined by the Commission, be given access to company
financial statements for purposes of initiating a business rescue
process.
(4) It is an offence for a company to—
(a) fail to accommodate any reasonable request for access, or
to unreasonably refuse access, to any record that a person
has a right to inspect or copy in terms of this section; or
ss 31–36 Auditing: Legislation and Standards
(b) otherwise impede, interfere with, or attempt to frustrate the
reasonable exercise by any person of the rights set out in
this section.
[Sub-s. (4) inserted by s. 21 of Act No. 3 of 2011.]
32. Use of company name and registration number.—(1) A
company or external company must—
(a) provide its full registered name or registration number to
any person on demand; and
(b) not misstate its name or registration number in a manner
likely to mislead or deceive any person.
(2) If the Commission has issued to a company a registration
certificate with an interim name, as contemplated in section
14 (2) (b), the company must use its interim name, until its name has
been amended.
(3) A person must not—
(a) use the name or registration number of a company in a
manner likely to convey an impression that the person is
acting or communicating on behalf of that company, unless
the company has authorised that person to do so; or
(b) use a form of name for any purpose if, in the circumstanc-
es, the use of that form of name is likely to convey a false
impression that the name is the name of a company.
(4) Every company must have its name and registration number
mentioned in legible characters in all notices and other official
publications of the company, including such notices and publica-
tions in electronic format as contemplated in the Electronic Com-
munications and Transactions Act, and in all bills of exchange,
promissory notes, cheques and orders for money or goods and in all
letters, delivery notes, invoices, receipts and letters of credit of the
company.
(5) Contravention of subsection (1), (2), (3) or (4) is an offence.
(6) . . . . . .
[Sub-s. (6) deleted by s. 22 of Act No. 3 of 2011.]
(7) . . . . . .
[Sub-s. (7) deleted by s. 22 of Act No. 3 of 2011.]
33. Annual return.—(1) Every company must file an annual
return in the prescribed form with the prescribed fee, and within the
prescribed period after the end of the anniversary of the date of its
incorporation, including in that return—
(a) a copy of its annual financial statements, if it is required to
have such statements audited in terms of section 30 (2) or
the regulations contemplated in section 30 (7); and
[Para. (a) substituted by s. 23 of Act No. 3 of 2011.]
(b) any other prescribed information.
(2) Every external company must file an annual return in the
prescribed form with the prescribed fee, and within the prescribed
period after the anniversary of the date on which it was registered in
terms of section 23 (1).
(3) Each year, in its annual return filed in terms of subsection (1),
every company must designate a director, employee or other person
who is responsible for the company’s compliance with the require-
ments of this Part, and Chapter 3, if it applies to the company.
34. Additional accountability requirements for certain com-
panies.—(1) In addition to complying with the requirements of this
Part, a public company or state-owned company must also comply
with the extended accountability requirements set out in Chapter 3.
(2) A private company, personal liability company, or non-profit
company is not required to comply with the extended accountability
requirements set out in Chapter 3, except to the extent contemplated
in section 84 (1) (c), or as required by the company’s Memorandum
of Incorporation.
[Sub-s. (2) substituted by s. 24 of Act No. 3 of 2011.]
A-28
Part D
Capitalisation of profit companies
35. Legal nature of company shares and requirement to have
shareholders.—(1) A share issued by a company is movable
property, transferable in any manner provided for or recognised by
this Act or other legislation.
(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.
(Editorial Note: Wording as per original
Government Gazette.)
(4) An authorised share of a company has no rights associated
with it until it has been 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,
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 Memorandum of Incorporation, or in terms of that Act,
subject only to—
(a) amendments to that company’s Memorandum of Incorpo-
ration after the effective date;
(b) the operation of subsection (5); and
(c) the regulations contemplated in item 6 (3) of Schedule 5.
36. Authorisation for shares.—(1) A company’s Memoran-
dum 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—
(i) a distinguishing designation for that class; and
(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
(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
(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, limita-
tions and other terms associated with each 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), except to the extent that the Memorandum
of Incorporation provides otherwise.
(3) Except to the extent that a company’s Memorandum of Incor-
poration provides otherwise, the company’s board may—
(a) increase or decrease the number of authorised shares of
any class of shares;
A-29 Companies Act No. 71 of 2008
(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).
(4) If the board of a company acts pursuant to its authority con-
templated in subsection (3), the company must file a Notice of
Amendment of its Memorandum of Incorporation, setting out the
changes effected by the board.
37. Preferences, rights, limitations and other share terms.—
(1) All of the shares of any particular class authorised by a compa-
ny have preferences, rights, limitations and other terms that are
identical to those of other shares of the same class.
[Sub-s. (1) substituted by s. 25 (a) of Act No. 3 of 2011.]
(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—
(a) this Act; or
(b) the preferences, rights, limitations and other terms deter-
mined 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 Memoran-
dum of Incorporation—
(a) every share issued by that company has associated with it
an irrevocable right of the shareholder to vote on any pro-
posal 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 by shareholders of the compa-
ny; and
(ii) the holders of that class of shares are entitled to
receive the net assets of the company upon its liqui-
dation.
(4) If a company’s Memorandum of Incorporation has estab-
lished more than one class of shares the Memorandum of Incorpora-
tion, in setting out the preferences, rights, 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
(b) the holders of at least one class of the company’s shares,
irrespective of whether it is the same as any class contem-
plated 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 In-
corporation may establish, for any particular class of shares, prefer-
ences, rights, limitations or other terms 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—
(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
(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 require-
ments of sections 46 and 47; or
ss 36–38
(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 pro-
vide for preferences, rights, limitations or other terms of any class of
shares of that company to vary in 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
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 de-
termined 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 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 share-
holder—
(a) notified the company in advance of the intention to oppose
the resolution to amend the Memorandum of Incorpora-
tion; and
(b) was present at the meeting, and voted against that resolu-
tion.
(9) A person—
(a) acquires the rights associated with any particular securities
of a company—
(i) when that person’s name is entered in the company’s
certificated securities register; or
(ii) as determined in accordance with the rules of the
Central Securities Depository, in the case of uncer-
tificated securities; and
(b) ceases to have the rights associated with any particular
securities of a company—
(i) when the transfer to another person, re-acquisition
by the company, or surrender to the company has
been entered in the company’s certificated securities
register; or
(ii) as determined in accordance with the rules of the
Central Securities Depository, in the case of uncer-
tificated securities.
[Sub-s. (9) inserted by s. 25 (b) of Act No. 3 of 2011.]
38. Issuing shares.—(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 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 section 36 within 60 business days after the date on
which the shares were issued.
[Sub-s. (2) substituted by s. 26 of Act No. 3 of 2011.]
(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 received by the company in respect of that
share issue to the extent that it is nullified, together with
ss 38–40 Auditing: Legislation and Standards
interest in accordance with the Prescribed Rate of Interest
Act, 1975 (Act No. 55 of 1975), from the date on which
the consideration for the shares was received by the com-
pany, 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 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 shares had not been author-
ised in accordance with section 36.
39. Subscription of shares.—(1) This section—
(a) does not apply to a public company or state-owned
company, except to the extent that the company’s Memo-
randum of Incorporation provides otherwise; 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
(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
time to subscribe for, a percentage of the shares to be issued equal to
the voting power of that shareholder’s general voting rights immedi-
ately 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.
(4) Except to the extent that a private or personal liability com-
pany’s Memorandum of Incorporation provides otherwise—
(a) in exercising a right in terms of subsection (2), a share-
holder may subscribe for fewer shares than the shareholder
would be entitled to subscribe for under that subsection;
and
(b) shares not subscribed for by a shareholder within the
reasonable time contemplated in subsection (2), may be of-
fered to other persons to the extent permitted by the Mem-
orandum of Incorporation.
[Sub-s. (4) substituted by s. 27 of Act No. 3 of 2011 (English only).]
40. Consideration for shares.—(1) The board of a company
may issue authorised shares only—
(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 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 sub-
section (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).
A-30
(4) Subject to subsections (5) to (7), when a company has re-
ceived the consideration approved by its board for the issuance of
any shares—
(a) those shares are fully paid; and
(b) the company must issue those shares and cause the name
of the holder to be entered on the company’s securities reg-
ister 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 such that the value of the
consideration cannot be realised by the company until a date after
the time the shares are to be issued, or is in the form of an agreement
for future services, future benefits or future payment by the sub-
scribing party—
(a) the consideration for those shares is regarded as having
been received by the company at any time only to the ex-
tent—
(i) that the value of the consideration for any of those
shares has been realised by the company; or
[Sub-para. (i) substituted by s. 28 (b) of Act No. 3 of 2011.]
(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 agree-
ment, the company must—
(i) issue the shares immediately; and
(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 agree-
ment.
[Sub-s. (5) amended by s. 28 (a) of Act No. 3 of 2011.]
(6) Except to the extent that a trust agreement contemplated in
subsection (5) (b) provides otherwise—
(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 obliga-
tions 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 sub-
scribing 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 sub-
scribing 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—
(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 subscrib-
ing party has fulfilled its obligations under the
agreement;
(iii) must be transferred to the subscribing party when
the instrument has become negotiable by the com-
pany, 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 under the agree-
ment, must be returned to the company and can-
celled, on demand by the company.
A-31 Companies Act No. 71 of 2008
(7) A company may not make a demand contemplated in subsec-
tion (6) (d) (iv) unless—
(a) a negotiable instrument is dishonoured after becoming
negotiable by the 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.
41. Shareholder approval for issuing shares in certain cas-
es.—(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 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 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 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 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 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 transac-
tions 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)—
(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 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 trans-
actions; or
(ii) the transactions are entered into within a 12-month
period, and involve the same parties, or related per-
sons; 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 activity that did not
previously form part of the company’s princi-
pal activity.
ss 40–43
(5) A director of a company is liable to the extent set out in sec-
tion 77 (3) (e) (ii) if the director—
(a) was present at a meeting when the board approved the
issue of any securities 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 person who becomes a director or prescribed
officer of the company more than six months after acquiring a
particular option or right.
42. Options for subscription of securities.—(1) A company
may issue options for the allotment or subscription of authorised
shares or other securities of the company.
(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
(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, consti-
tutes also the decision 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 sec-
tion 77 (3) (e) (iii) if the director—
(a) was present at a meeting when the board approved the
granting of an option or a right as contemplated in this sec-
tion, 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
(ii) into which any securities could be converted,
had not been authorised in terms of section 36.
43. Securities other than shares.—(1) In this section—
(a) “debt instrument”—
(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
(b) “security document” includes any document by which a
debt instrument is offered or proposed to be offered, em-
bodying 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 any time, except to the extent provided
otherwise by the company’s Memorandum of Incorpora-
tion; and
[Para. (a) substituted by s. 29 of Act No. 3 of 2011.]
(b) must determine whether each such debt instrument is
secured or unsecured.
(3) Except to the extent that a company’s Memorandum of In-
corporation provides otherwise, a debt instrument issued by the
company may grant special privileges regarding—
(a) attending and voting at general meetings and the appoint-
ment of directors; or
ss 43–45 Auditing: Legislation and Standards
(b) allotment of securities, redemption by the company, or
substitution of the debt instrument for shares of the com-
pany, provided that the securities to be allotted or substi-
tuted in terms of any such privilege, are authorised by or in
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 per-
son, as trustee for the holders of the company’s debt instruments,
if—
(a) the person—
(i) is not a director or prescribed officer of the compa-
ny, or a person related or inter-related to the compa-
ny, a director or a prescribed officer; and
(ii) does not have any interest in, or relationship with,
the company that 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 trus-
tee.
(6) Any new trustee appointed for the purpose of this section
must—
(a) satisfy the requirements of subsection (5) (a); and
(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
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 a trustee before the giving of the re-
lease; 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
(ii) with respect to a specific act or omission, or of the
trustee dying or ceasing to act.
44. Financial assistance for subscription of securities.—
(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 money.
(2) Except 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 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 subsec-
tions (3) and (4).
[Sub-s. (2) substituted by s. 30 (a) of Act No. 3 of 2011.]
(3) Despite any provision of a company’s Memorandum of Incor-
poration to the contrary, the board may not authorise any financial
assistance contemplated in 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 previous two years, which ap-
proved such assistance either for the specific recipient,
A-32
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 satisfy the solvency and liquidi-
ty 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 in the company’s Memo-
randum 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
(b) a prohibition, condition or requirement contemplated in
subsection (4).
(6) If a resolution or an agreement is void in terms of subsection
(5) a director of the company is liable to the extent set out in section
77 (3) (e) (iv) if the director—
(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 in-
consistent with this section or a prohibition, condition or
requirement contemplated in subsection (4).
[Sub-s. (6) amended by s. 30 (b) of Act No. 3 of 2011.]
45. Loans or other financial assistance to directors.—(1) In
this section, “financial assistance”—
(a) includes lending money, guaranteeing a loan or other
obligation, and securing any debt or obligation; but
(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 concern-
ing the company; or
(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 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 corpora-
tion, or to a member of a related or inter-related corporation, or to a
person related to any such company, corporation, director, pre-
scribed officer or member, subject to subsections (3) and (4).
(3) Despite any provision of a company’s Memorandum of Incor-
poration to the contrary, the board may not authorise any financial
assistance contemplated in 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 previous two years, which ap-
proved such assistance either for the specific recipi-
ent, or generally for a category of potential
recipients, and the specific recipient falls within that
category; and
A-33 Companies Act No. 71 of 2008
(b) the board is satisfied that—
(i) immediately after providing the financial assistance,
the company would 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.
[Para. (b) substituted by s. 31 (a) of Act No. 3 of 2011.]
(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 in the company’s Memo-
randum 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 represent-
ing its employees—
(a) within 10 business days after the board adopts the resolu-
tion, if the total value of all loans, debts, obligations or as-
sistance 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.
(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
(b) a prohibition, condition or requirement contemplated in
subsection (4).
(7) If a resolution or an agreement is void in terms of subsection
(6) a director of the company is liable to the extent set out in section
77 (3) (e) (v) if the director—
(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 in-
consistent with this section or a prohibition, condition or
requirement contemplated in subsection (4).
[Sub-s. (7) amended by s. 31 (b) of Act No. 3 of 2011.]
46. Distributions must be authorised by board.—(1) A com-
pany must not make any proposed distribution unless—
(a) the distribution—
(i) is pursuant to an existing legal ob1igation of the
company, or a court order; or
(ii) the board of the company, by resolution, has author-
ised 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 acknowl-
edged that it has applied the solvency and liquidity test, as
set out in section 4, and reasonably concluded that the
company will satisfy the solvency and liquidity test imme-
diately after completing the proposed distribution.
(2) When the board of a company has adopted a resolution con-
templated in subsection (1) (c), the relevant distribution must be
fully carried out, subject only to subsection (3).
(3) If the distribution contemplated in a particular board resolu-
tion, court order or existing legal obligation has not been completed
within 120 business days after the board made the acknowledgement
ss 45–47
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 remaining distribution to be made pur-
suant 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).
(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 require-
ments of this section—
(a) apply at the time that the board resolves that the company
may incur that debt or obligation; and
(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 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
(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 obli-
gations as they fall due and payable.
(6) A director of a company is liable to the extent set out in sec-
tion 77 (3) (e) (vi) if the 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 was contrary to this section.
47. Capitalisation shares.—(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 capi-
talisation shares, on a pro rata basis 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 re-
solve to permit any shareholder entitled to 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 pay-
ment 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 the assumption that every such share-
holder 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.
ss 48–50 Auditing: Legislation and Standards
48. Company or subsidiary acquiring company’s shares.—
(1) This section does not apply to—
(a) the making of a demand, tendering of shares and payment
by a company to a shareholder in terms of a shareholder’s
appraisal rights set out in section 164; or
(b) the redemption by the company of any redeemable securi-
ties in accordance with the terms and conditions of those
securities.
[Sub-s. (1) substituted by s. 32 (a) of Act No. 3 of 2011.]
(2) Subject to subsections (3) and (8), and if the decision to do so
satisfies the requirements of section 46—
(a) the board of a company may determine that the company
will acquire a number of its own shares; and
[Para. (a) substituted by s. 32 (c) of Act No. 3 of 2011.]
(b) the board of a subsidiary company may determine that it
will acquire shares of its holding 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 sub-
sidiaries of that company, taken together; and
(ii) no voting rights attached to those shares may be
exercised while the shares are held by the subsidiary,
and it remains a subsidiary of the company whose
shares it holds.
[Sub-s. (2) amended by s. 32 (b) of Act No. 3 of 2011. Para. (b) substi-
tuted by s. 32 (c) of Act No. 3 of 2011.]
(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 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).
(5) If a company alleges that, as a result of the operation of sub-
section (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
(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 payment in terms of the agree-
ment is paid at the earliest possible date compatible
with the company satisfying its other financial obli-
gations as they fall due and payable.
(6) If a company acquires any shares contrary to section 46, or
this section, the company must, not more than two years after the
acquisition, apply to a court for an order reversing the acquisition,
and the court may order—
(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.
[Sub-s. (6) amended by s. 32 (d) of Act No. 3 of 2011.]
(7) A director of a company is liable to the extent set out in sec-
tion 77 (3) (e) (vii) if the director—
A-34
(a) was present at the meeting when the board approved an
acquisition of shares contemplated in this section, or par-
ticipated in the making of such a decision in terms of sec-
tion 74; and
(b) failed to vote against the acquisition of shares, despite
knowing that the acquisition was contrary to this section or
section 46.
(8) A decision by the board of a company contemplated in sub-
section (2) (a)—
(a) must be approved by a special resolution of the sharehold-
ers of the company if any shares are to be acquired by the
company from a director or prescribed officer of the com-
pany, or a person related to a director or prescribed officer
of the company; and
(b) is subject to the requirements of sections 114 and 115 if,
considered alone, or together with other transactions in an
integrated series of transactions, it involves the acquisition
by the company of more than 5% of the issued shares of
any particular class of the company’s shares.
[Sub-s. (8) inserted by s. 32 (e) of Act No. 3 of 2011.]
Part E
Securities registration and transfer
49. Securities to be evidenced by certificates or uncertifi-
cated.—(1) In this Part, “certificated” means evidenced by a
certificate, as contemplated in subsection (2) (a).
(2) Any securities issued by a company must be either—
(a) evidenced by certificates; or
(b) uncertificated, in which case the company must not issue
certificates evidencing or purporting to evidence title to
those securities, subject to subsection (6).
(3) Except to the extent that this Act expressly provides other-
wise—
(a) the rights and obligations of security holders are not
different solely on the basis of their respective securities
being certificated or uncertificated; and
(b) any provision of this Act applies with respect to any
uncertificated securities in the same manner as it applies to
certificated securities.
(4) Sections 52 to 55—
(a) apply only to uncertificated securities; and
(b) prevail in the case of a conflict between any provision of
those sections and any other provision of this Act, any
other law, the common law, the company’s Memorandum
of Incorporation or any agreement.
(5) Any certificated securities may cease to be evidenced by
certificates, and thereafter be uncertificated, in which case any
provision of this Act contemplated in subsection (4) applies to those
securities from the date on which they ceased to be evidenced by
certificates.
(6) In the manner set out in section 54, any uncertificated secur-
ities may be withdrawn from the uncertificated securities register,
and certificates issued evidencing those securities, in which case
from the date on which they became certificated—
(a) sections 52 to 55 cease to apply to those securities; and
(b) for greater certainty, transfer of ownership in those
securities cannot be effected by a participant or central
securities depository while they remain in certificated
form, unless they are held in certificated form in collective
custody by the participant or central securities depository.
[Para. (b) substituted by s. 33 of Act No. 3 of 2011.]
(7) The Minister may make regulations regarding matters that are
supplementary and ancillary to the provisions of this Part.
50. Securities register and numbering.—(1) Every company
must—
(a) establish or cause to be established a register of its issued
securities in the prescribed form; and
A-35 Companies Act No. 71 of 2008
(b) maintain its securities register in accordance with the
prescribed standards.
(2) As soon as practicable after issuing any securities a company
must enter or cause to be entered in its securities register, in respect
of every class of securities that it has issued—
(a) the total number of those securities that are held in uncer-
tificated form; and
(b) with respect to certificated securities—
(i) the names and addresses of the persons to whom the
securities were issued;
(ii) the number of securities issued to each of them;
(iii) the number of, and prescribed circumstances relating
to, any securities—
(aa) that have been placed in trust as contemplated
in section 40 (6) (d); or
(bb) whose transfer has been restricted;
(iv) in the case of securities contemplated in section
43—
(aa) the number of those securities issued and
outstanding; and
[Sub-item (aa) substituted by s. 34 of Act No. 3 of 2011.]
(bb) the names and addresses of the registered
owner of the security and any holders of a
beneficial interest in the security; and
(v) any other prescribed information.
(3) If a company has issued uncertificated securities, or has is-
sued securities that have ceased to be certificated, as contemplated
in section 49 (5), a record must be administered and maintained by a
participant or central securities depository in the prescribed form, as
the company’s uncertificated securities register, which—
(a) forms part of that company’s securities register; and
(b) must contain, with respect to all securities contemplated in
this subsection, any details—
(i) referred to in subsection (2) (b), read with the
changes required by the context; or
(ii) determined by the rules of the central securities
depository.
(4) A securities register, or an uncertificated securities register,
maintained in accordance with this Act is sufficient proof of the
facts recorded in it, in the absence of evidence to the contrary.
(5) Unless all the shares of a company rank equally for all pur-
poses, the company’s shares, or each class of shares, and any other
securities, must be distinguished by an appropriate numbering
system.
51. Registration and transfer of certificated securities.—
(1) A certificate evidencing any certificated securities of a compa-
ny—
(a) must state on its face—
(i) the name of the issuing company;
(ii) the name of the person to whom the securities were
issued;
(iii) the number and class of shares and the designation
of the series, if any, evidenced by that certificate;
and
(iv) any restriction on the transfer of the securities
evidenced by that certificate,
subject to item 6 (4) of Schedule 5;
(b) must be signed by two persons authorised by the compa-
ny’s board; and
(c) is proof that the named security holder owns the securities,
in the absence of evidence to the contrary.
(2) A signature contemplated in subsection (1) (b) may be affixed
to or placed on the certificate by autographic, mechanical or elec-
tronic means.
(3) A certificate remains valid despite the subsequent departure
from office of any person who signed it.
ss 50–53
(4) If, as contemplated in section 50 (5), all of a company’s
shares rank equally for all purposes, and are therefore not distin-
guished by a numbering system—
(a) each certificate issued in respect of those shares must be
distinguished by a numbering system; and
(b) if the share has been transferred, the certificate must be
endorsed with a reference number or similar device that
will enable each preceding holder of the share in succes-
sion to be identified.
(5) Subject to subsection (6), a company must enter in its securi-
ties register every transfer of any certificated securities, including in
the entry—
(a) the name and address of the transferee;
(b) the description of the securities, or interest transferred;
(c) the date of the transfer; and
(d) the value of any consideration still to be received by the
company on each share or interest, in the case of a transfer
of securities contemplated in section 40 (5) and (6).
(6) A company may make an entry contemplated in subsection
(5) only if the transfer—
(a) is evidenced by a proper instrument of transfer that has
been delivered to the company; or
(b) was effected by operation of law.
52. Registration of uncertificated securities.—(1) At the
request of a company, and on payment of the prescribed fee, if any,
a participant or central securities depository, as determined in
accordance with the rules of the central securities depository, must
furnish that company with all details of that company’s uncertifi-
cated securities reflected in the uncertificated securities register.
(2) A person who wishes to inspect an uncertificated securities
register may do so only—
(a) through the relevant company in terms of section 26; and
(b) in accordance with the rules of the central securities
depository.
(3) Within five business days after the date of a request for in-
spection, a company must produce a record of the uncertificated
securities register, which record must reflect at least the details
referred to in section 50 (3) (b) at the close of business on the day on
which the request for inspection was made.
(4) A participant or central securities depository, determined in
accordance with the rules of the central securities depository—
(a) must provide a regular statement at prescribed intervals to
each person for whom any uncertificated securities are
held in an uncertificated securities register, setting out the
number and identity of the uncertificated securities held on
that person’s behalf;
(b) must not impose a charge for a statement on the person
entitled to the statement; and
(c) may impose a charge or service fee for such a statement on
the relevant company in accordance with the regulations.
(5) The regulations contemplated in section 49 (7) may provide
for a charge or service fee for statements contemplated in subsection
(4) (c).
53. Transfer of uncertificated securities.—(1) The transfer of
uncertificated securities in an uncertificated securities register may
be effected only—
(a) by a participant or central securities depository;
(b) on receipt of—
(i) an instruction to transfer sent and properly authenti-
cated in terms of the rules of a central securities
depository; or
(ii) an order of a court; and
(c) in accordance with this section and the rules of the central
securities depository.
ss 53–56 Auditing: Legislation and Standards
(2) Transfer of ownership in any uncertificated securities must be
effected by—
(a) debiting the account in the uncertificated securities register
from which the transfer is effected; and
(b) crediting the account in the uncertificated securities
register to which the transfer is effected,
in accordance with the rules of a central securities depository.
(3) The requirements of section 51 (5), read with the changes
required by the context, apply with respect to a transfer of uncertifi-
cated securities.
(4) A transfer of ownership in accordance with this section
occurs despite any fraud, illegality or insolvency that may—
(a) affect the relevant uncertificated securities; or
(b) have resulted in the transfer being effected,
but a transferee who was a party to or had knowledge of the fraud or
illegality, or had knowledge of the insolvency, as the case may be,
may not rely on this subsection.
(5) A court may not order the name of a transferee contemplated
in this section to be removed from an uncertificated securities
register, unless that person was a party to or had knowledge of a
fraud or illegality as contemplated in subsection (4).
[Sub-s. (5) substituted by s. 35 of Act No. 3 of 2011 (English only).]
(6) Nothing in this section prejudices any power of a participant
or central securities depository, as the case may be, to effect a
transfer to a person to whom the right to any uncertificated secur-
ities of a company has been transmitted by operation of law.
54. Substitution of certificated or uncertificated securities.—
(1) A person who wishes to withdraw all or part of the uncertifi-
cated securities held by that person in an uncertificated securities
register, and obtain a certificate in respect of those withdrawn
securities, may so notify the relevant participant or central securities
depository, as determined in accordance with the rules of the central
securities depository, which must within five business days—
(a) notify the relevant company to provide the requested
certificate; and
(b) remove the details of the uncertificated securities from the
uncertificated securities register.
(2) After receiving a notice in terms of subsection (1) (a) from a
participant or central securities depository, as the case may be, a
company must—
(a) immediately enter the relevant person’s name and details
of that person’s holding of securities in the company’s
securities register and indicate on the register that the secu-
rities so withdrawn are no longer held in uncertificated
form; and
(b) within 10 business days, or 20 business days in the case of
a holder of securities who is not resident within the Repub-
lic—
(i) prepare and deliver to the relevant person a certifi-
cate in respect of the securities; and
(ii) notify the central securities depository that the
securities are no longer held in uncertificated form.
(3) A company may charge a holder of its securities a reasonable
fee to cover the actual costs of issuing a certificate, as contemplated
in this section.
55. Liability relating to uncertificated securities.—(1) A
person who takes any unlawful action in consequence of which any
of the following events occur in a securities register or uncertificated
securities register, namely—
(a) the name of any person remains in, is entered in, or is
removed or omitted;
(b) the number of uncertificated securities is increased,
reduced, or remains unaltered; or
(c) the description of any uncertificated securities is changed,
is liable to any person who has suffered any direct loss or damage
arising out of that action.
A-36
(2) A person who gives an instruction to transfer uncertificated
securities must—
(a) warrant the legality and correctness of that instruction; and
(b) indemnify the company and the participant or central
securities depository required to effect the transfer in ac-
cordance with the rules of the central securities depository,
against any claim and against any direct loss or damage
suffered by them arising out of such a transfer by virtue of
an instruction referred to in this subsection.
(3) A participant or central securities depository who may effect
the transfer of uncertificated securities in accordance with the rules
of a central securities depository must indemnify—
(a) a company against any claim made upon it and against any
direct loss or damage suffered by it arising out of a transfer
of any uncertificated securities; and
(b) any other person against any direct loss or damage arising
out of a transfer of any uncertificated securities,
if that transfer was effected by the participant or central securities
depository without instruction, or in accordance with an instruction
that was not sent and properly authenticated in terms of the rules of
a central securities depository, or in a manner inconsistent with an
instruction that was sent and properly authenticated in terms of the
rules of a central securities depository.
56. Beneficial interest in securities.—(1) Except to the extent
that a company’s Memorandum of Incorporation provides other-
wise, the company’s issued securities may be held by, and registered
in the name of, one person for the beneficial interest of another
person.
(2) A person is regarded to have a beneficial interest in a security
of a public company if the security is held nomine officii by another
person on that first person’s behalf, or if that first person—
(a) is married in community of property to a person who has a
beneficial interest in that security;
(b) is the parent of a minor child who has a beneficial interest
in that security;
(c) acts in terms of an agreement with another person who has
a beneficial interest in that security, and the agreement is
in respect of the co-operation between them for the acqui-
sition, disposal or any other matter relating to a beneficial
interest in that security;
(d) is the holding company of a company that has a beneficial
interest in that security;
(e) is entitled to exercise or control the exercise of the majori-
ty of the voting rights at general meetings of a juristic per-
son that has a beneficial interest in that security; or
(f) gives directions or instructions to a juristic person that has a
beneficial interest in that security, and its directors or the
trustees are accustomed to act in accordance with that per-
son’s directions or instructions.
(3) If a security of a public company is registered in the name of
a person who is not the holder of the beneficial interest in all of the
securities in the same company held by that person, that registered
holder of security must disclose—
(a) the identity of the person on whose behalf that security is
held; and
(b) the identity of each person with a beneficial interest in the
securities so held, the number and class of securities held
for each such person with a beneficial interest, and the
extent of each such beneficial interest.
[Para. (b) substituted by s. 36 (a) of Act No. 3 of 2011.]
(4) The information required in terms of subsection (3) must—
(a) be disclosed in writing to the company within five business
days after the end of every month during which a change
has occurred in the information contemplated in subsection
(3), or more promptly or frequently to the extent so pro-
vided by the requirements of a central securities deposi-
tory; and
[Para. (a) substituted by s. 36 (b) of Act No. 3 of 2011.]
A-37 Companies Act No. 71 of 2008
(b) otherwise be provided on payment of a prescribed fee
charged by the registered holder of securities.
(5) A company that knows or has reasonable cause to believe that
any of its securities are held by one person for the beneficial interest
of another, by notice in writing, may require either of those persons
to—
(a) confirm or deny that fact;
(b) provide particulars of the extent of the beneficial interest
held during the three years preceding the date of the notice;
and
(c) disclose the identity of each person with a beneficial
interest in the securities held by that person.
(6) The information required in terms of subsection (5) must be
provided not later than 10 business days after receipt of the notice.
(7) A company that falls within the meaning of “regulated com-
pany” as set out in section 117 (1) (i) must—
(a) establish and maintain a register of the disclosures made in
terms of this section; and
(b) publish in its annual financial statements, if it is required to
have such statements audited in terms of section 30 (2), a
list of the persons who hold beneficial interests equal to or
in excess of 5% of the total number of securities of that
class issued by the company, together with the extent of
those beneficial interests.
(8) Subsections (9) to (11) do not apply in respect of securities
that are subject to the rules of a central securities depository.
[Sub-s. (8) inserted by s. 36 (c) of Act No. 3 of 2011.]
(9) A person who holds a beneficial interest in any securities may
vote in a matter at a meeting of shareholders, only to the extent
that—
(a) the beneficial interest includes the right to vote on the
matter; and
(b) the person’s name is on the company’s register of disclo-
sures as the holder of a beneficial interest, or the person
holds a proxy appointment in respect of that matter from
the registered holder of those securities.
[Sub-s. (9) inserted by s. 36 (c) of Act No. 3 of 2011.]
(10) The registered holder of any securities in which any person
has a beneficial interest must deliver to each such person—
(a) a notice of any meeting of a company at which those
securities may be voted on within two business days after
receiving such a notice from the company; and
(b) a proxy appointment to the extent of that person’s benefi-
cial interest, if the person so demands in terms of subsec-
tion (11).
[Sub-s. (10) inserted by s. 36 (c) of Act No. 3 of 2011.]
(11) A person who has a beneficial interest in any securities that
are entitled to be voted on at a meeting of a company’s shareholders,
may demand a proxy appointment from the registered holder of
those securities, to the extent of that person’s beneficial interest, by
delivering such a demand to the registered holder, in writing, or as
required by the applicable requirements of a central securities
depository.
[Sub-s. (11) inserted by s. 36 (c) of Act No. 3 of 2011.]
Part F
Governance of companies
57. Interpretation and application of Part.—(1) In this Part,
“shareholder” has the meaning set out in section 1, but also includes
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.
[Sub-s. (1) substituted by s. 37 (b) of Act No. 3 of 2011.]
(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
ss 56–58
formalities, except to the extent that the company’s Memo-
randum 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 com-
pliance with any other internal formalities, 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, 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 share-
holders at any time after being referred by the board, with-
out notice or compliance with any other internal
formalities, except to the extent that the Memorandum of
Incorporation provides otherwise, provided that—
(i) every such person was present at the board meeting
when the matter was referred to them in their capaci-
ty as shareholders;
(ii) sufficient persons are present in their capacity as
shareholders to satisfy the quorum requirements set
out in section 64; and
(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 the provisions of section 73 to 78
relating to the duties, obligations, liabilities and indemnifi-
cation 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.
(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.
(7) For greater certainty, this section applies to the exercise of
authority within a company in respect of any matter arising in terms
of this Act or a company’s Memorandum of Incorporation, irrespec-
tive of whether any such particular matter is expressly addressed in
this Part.
[S. 57 amended by s. 37 (a) of Act No. 3 of 2011. Sub-s. (7) inserted by
s. 37 (c) of Act No. 3 of 2011.]
58. Shareholder right to be represented by proxy.—(1) At
any time, a shareholder of a company may appoint any individual,
including an individual who is not a shareholder of that company, as
a proxy to—
(a) participate in, and speak and vote at, a shareholders
meeting on behalf of the shareholder; or
(b) give or withhold written consent on behalf of the share-
holder to a decision contemplated in section 60.
[Sub-s. (1) substituted by s. 38 (a) of Act No. 3 of 2011.]
(2) A proxy appointment—
(a) must be in writing, dated and signed by the shareholder;
and
(b) remains valid for—
(i) one year after the date on which it was signed; or
ss 58–60 Auditing: Legislation and Standards
(ii) any longer or shorter period expressly set out in the
appointment, unless it is revoked in a manner con-
templated in subsection (4) (c), or expires earlier as
contemplated in subsection (8) (d).
(3) Except to the extent that the Memorandum of Incorporation
of a company provides otherwise—
(a) a shareholder of that company may appoint two or more
persons concurrently as proxies, and may appoint more
than one proxy to exercise voting rights attached to differ-
ent securities held by the shareholder;
[Para. (a) substituted by s. 38 (b) of Act No. 3 of 2011.]
(b) a proxy may delegate the proxy’s authority to act on behalf
of the shareholder to another person, subject to any re-
striction set out in the instrument appointing the proxy; and
(c) a copy of the instrument appointing a proxy must be
delivered to the company, or to any other person on behalf
of the company, before the proxy exercises any rights of
the shareholder at a shareholders meeting.
(4) Irrespective of the form of instrument used to appoint a
proxy—
(a) the appointment is suspended at any time and to the extent
that the shareholder chooses to act directly and in person in
the exercise of any rights as a shareholder;
(b) the appointment is revocable unless the proxy appointment
expressly states otherwise; and
(c) if the appointment is revocable, a shareholder may revoke
the proxy appointment by—
(i) cancelling it in writing, or making a later incon-
sistent appointment of a proxy; and
(ii) delivering a copy of the revocation instrument to the
proxy, and to the company.
(5) The revocation of a proxy appointment constitutes a complete
and final cancellation of the proxy’s authority to act on behalf of the
shareholder as of the later of—
(a) the date stated in the revocation instrument, if any; or
(b) the date on which the revocation instrument was delivered
as required in subsection (4) (c) (ii).
(6) If the instrument appointing a proxy or proxies has been de-
livered to a company, as long as that appointment remains in effect,
any notice that is required by this Act or the company’s Memoran-
dum of Incorporation to be delivered by the company to the share-
holder must be delivered by the company to—
(a) the shareholder; or
(b) the proxy or proxies, if the shareholder has—
(i) directed the company to do so, in writing; and
(ii) paid any reasonable fee charged by the company for
doing so.
(7) A proxy is entitled to exercise, or abstain from exercising,
any voting right of the shareholder without direction, except to the
extent that the Memorandum of Incorporation, or the instrument
appointing the proxy, provides otherwise.
(8) If a company issues an invitation to shareholders to appoint
one or more persons named by the company as a proxy, or supplies
a form of instrument for appointing a proxy—
(a) the invitation must be sent to every shareholder who is
entitled to notice of the meeting at which the proxy is in-
tended to be exercised;
(b) the invitation, or form of instrument supplied by the
company for the purpose of appointing a proxy, must—
(i) bear a reasonably prominent summary of the rights
established by this section;
(ii) contain adequate blank space, immediately preced-
ing the name or names of any person or persons
named in it, to enable a shareholder to write in the
name and, if so desired, an alternative name of a
proxy chosen by the shareholder; and
A-38
(iii) provide adequate space for the shareholder to
indicate whether the appointed proxy is to vote in
favour of or against any resolution or resolutions to
be put at the meeting, or is to abstain from voting;
(c) the company must not require that the proxy appointment
be made irrevocable; and
(d) the proxy appointment remains valid only until the end of
the meeting at which it was intended to be used, subject to
subsection (5).
(9) Subsection (8) (b) and (d) do not apply if the company merely
supplies a generally available standard form of proxy appointment
on request by a shareholder.
59. Record date for determining shareholder rights.—
(1) The board of a company may set a record date for the purpose
of determining which shareholders are entitled to—
(a) receive notice of a shareholders meeting;
(b) participate in and vote at a shareholders meeting;
(c) decide any matter by written consent or electronic commu-
nication, as contemplated in section 60;
(d) exercise pre-emptive rights, as contemplated in section 39;
(e) receive a distribution; or
(f) be allotted or exercise other rights.
(2) A record date determined by the board in terms of subsection
(1)—
(a) may not be—
(i) earlier than the date on which the record date is
determined; or
(ii) more than 10 business days before the date on which
the event or action, for which the record date is be-
ing set, is scheduled to occur; and
(b) must be published to the shareholders in a manner that
satisfies any prescribed requirements.
(3) If the board does not determine a record date for any action or
event, the record date is—
(a) in the case of a meeting, the latest date by which the
company is required to give shareholders notice of that
meeting; or
(b) the date of the action or event, in any other case,
unless the Memorandum of Incorporation or rules of the company
provide otherwise.
60. Shareholders acting other than at meeting.—(1) A reso-
lution 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
(b) voted on in writing by shareholders entitled to exercise
voting rights in relation to the resolution within 20 busi-
ness days after the resolution was submitted to them.
(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 meet-
ing; and
(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 share-
holders 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.
(4) Within 10 business days after adopting a resolution, or con-
ducting an election of directors, in terms of this section, the compa-
ny must deliver a statement describing the results of the vote,
consent process, or election to every shareholder who was entitled to
A-39 Companies Act No. 71 of 2008
vote on or consent to the resolution, or vote in the election of the
director, as the case may be.
(5) For greater certainty, any business of a company that is re-
quired 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.
61. Shareholders meetings.—(1) The board of a company, or
any other person specified in the company’s 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 share-
holders for decision;
(b) whenever required in terms of section 70 (3) to fill a
vacancy on the board; and
(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 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 by the holders, as of 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 mat-
ter proposed to be considered at the meeting.
[Para. (b) substituted by s. 39 of Act No. 3 of 2011.]
(4) A company’s Memorandum of Incorporation may specify a
lower percentage in substitution for that set out in subsection (3) (b).
(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 subsec-
tion (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 con-
templated in subsection (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 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
(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 Com-
panies 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:
(a) Presentation of—
(i) the directors’ report;
(ii) audited financial statements for the immediately
preceding financial year; and
(iii) an audit committee report;
(b) election of directors, to the extent required by this Act or
the company’s Memorandum of Incorporation;
ss 60–62
(c) appointment of—
(i) an auditor for the ensuing financial year; and
(ii) an audit committee; and
(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 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 participa-
tion by shareholders in the manner 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 Memoran-
dum of Incorporation 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 administrative order for a
shareholders meeting to be convened on a date, and subject
to any terms, that the Tribunal considers appropriate in the
circumstances.
(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),
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), respectively, for the costs of those pro-
ceedings.
(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.
62. Notice of meetings.—(1) The company must deliver a no-
tice of each shareholders meeting in the 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 vot-
ing members; or
(b) 10 business days before the meeting is to begin, in any
other case.
(2) A company’s Memorandum of Incorporation may provide for
longer or shorter minimum notice periods than required by subsec-
tion (1).
[Sub-s. (2) substituted by s. 40 (a) of Act No. 3 of 2011.]
(2A) A company may call a meeting with less notice than re-
quired by subsection (1) or by its Memorandum of Incorporation,
but such a meeting may proceed only if every person who is entitled
to exercise voting rights in respect of any item on the meeting
agenda—
(a) is present at the meeting; and
(b) votes to waive the required minimum notice of the meet-
ing.
[Sub-s. (2A) inserted by s. 40 (b) of Act No. 3 of 2011.]
ss 62–64 Auditing: Legislation and Standards
(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, 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) the financial statements to be presented or a summa-
rised form thereof; and
[Sub-para. (i) substituted by s. 40 (c) of Act No. 3 of 2011.]
(ii) directions for obtaining a copy of the complete
annual financial statements for the preceding finan-
cial 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, par-
ticipate in and vote at the meeting in the place of the
shareholder, or two or more proxies if the Memo-
randum of 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 there was a material defect in the giving of the notice of a
shareholders meeting, the meeting may proceed, subject to subsec-
tion (5), only if every person who is entitled to exercise voting rights
in respect of any item on the meeting agenda is present at the
meeting and votes to approve the ratification of the defective notice.
[Sub-s. (4) substituted by s. 40 (d) of Act No. 3 of 2011.]
(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—
(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 rati-
fied in terms of subsection (4) (d).
(6) An immaterial defect in the form or manner of giving notice
of a shareholders 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, either in person or
by proxy—
(a) is regarded as having received or waived notice of the
meeting, if at least the required minimum notice was giv-
en; and
(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 if less than the required min-
imum notice was given, or to ratify a defective no-
tice; and
(c) except to the extent set out in paragraph (b), is regarded as
having waived any right based on an actual or alleged de-
fect in the notice of the meeting.
[Sub-s. (7) substituted by s. 40 (e) of Act No. 3 of 2011.]
63. Conduct of meetings.—(1) Before any person may attend or
participate in a shareholders meeting—
(a) that person must present reasonably satisfactory identifica-
tion; and
A-40
(b) the person presiding at the meeting must be reasonably
satisfied that the right of that person to participate and
vote, either as a shareholder, or as a proxy for a sharehold-
er, has been reasonably verified.
(2) Unless prohibited by its Memorandum of Incorporation, a
company may provide for—
(a) a shareholders meeting to be conducted entirely by elec-
tronic communication; or
(b) one or more shareholders, or proxies for shareholders, to
participate by electronic communication in all or part of a
shareholders meeting that is being held in person,
as long as the electronic communication employed ordinarily
enables all persons participating in that meeting to communicate
concurrently with each other without an intermediary, and to
participate reasonably effectively in the meeting.
[Sub-s. (2) substituted by s. 41 (a) of Act No. 3 of 2011.]
(3) If a company provides for participation in a meeting by elec-
tronic communication, as contemplated in subsection (2)—
(a) the notice of that meeting must inform shareholders of the
availability of that form of participation, and provide any
necessary information to enable shareholders or their prox-
ies to access the available medium or means of electronic
communication; and
(b) access to the medium or means of electronic communica-
tion is at the expense of the shareholder or proxy, except to
the extent that the company determines otherwise.
(4) At a meeting of shareholders, voting may either be by show
of hands, or by polling.
[Sub-s. (4) substituted by s. 41 (b) of Act No. 3 of 2011.]
(5) If voting is by show of hands, any person who is present at
the meeting, whether as a shareholder or as proxy for a shareholder
and entitled to exercise voting rights has one vote, irrespective of the
number of voting rights that person would otherwise be entitled to
exercise.
[Sub-s. (5) substituted by s. 41 (b) of Act No. 3 of 2011.]
(6) If voting on a particular matter is by polling, any person who
is present at the meeting, whether as a shareholder or as proxy for a
shareholder, has the number of votes determined in accordance with
the voting rights associated with the securities held by that share-
holder.
[Sub-s. (6) inserted by s. 41 (c) of Act No. 3 of 2011.]
(7) Despite any provision of a company’s Memorandum of Incor-
poration or agreement to the contrary, a polled vote must be held on
any particular matter to be voted on at a meeting if a demand for
such a vote is made by—
(a) at least five persons having the right to vote on that matter,
either as a shareholder or a proxy representing a share-
holder; or
(b) a person who is, or persons who together are, entitled, as a
shareholder or proxy representing a shareholder, to exer-
cise at least 10% of the voting rights entitled to be voted on
that matter.
[Sub-s. (7) inserted by s. 41 (c) of Act No. 3 of 2011.]
64. Meeting quorum and adjournment.—(1) Subject to sub-
sections (2) to (8)—
(a) a shareholders meeting may not begin until sufficient
persons are present at the meeting to exercise, in aggre-
gate, at least 25% of all of the voting rights that are entitled
to be exercised in respect of at least one matter to be de-
cided 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 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).
A-41 Companies Act No. 71 of 2008
(3) Despite the percentage figures set out in subsection (1), or in
any applicable provisions of a company’s Memorandum of Incorpo-
ration, 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.
(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 no-
tice, for one week;
(b) for consideration of a particular matter to begin have not
been satisfied—
(i) if there is other business on the agenda of the
meeting, consideration of that matter may be post-
poned 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.
(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, transporta-
tion or electronic communication have generally impeded
or are generally impeding the ability of shareholders to be
present at the meeting; or
(b) one or more particular shareholders, having been delayed,
have communicated 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.
(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).
(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 meeting.
(8) If, at the time appointed in terms of this section for a post-
poned meeting to begin, or for an adjourned meeting to resume, the
requirements of subsection (1), or (3) if applicable, have not been
satisfied, the shareholders, or in the case of a non-profit company,
the members of the company present in person or by proxy will be
deemed to constitute a quorum.
[Sub-s. (8) substituted by s. 42 (a) of Act No. 3 of 2011.]
(9) Unless the company’s Memorandum of Incorporation or rules
provide otherwise, after a quorum has been established for a meet-
ing, 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 meet-
ing, or on that matter, is present at the meeting.
(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
(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.
ss 64–65
(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—
(i) to a fixed time and place; or
(ii) until further notice,
as agreed at the meeting; and
[Sub-para. (ii) substituted by s. 42 (b) of Act No. 3 of 2011.]
(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).
(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 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.
65. Shareholder resolutions.—(1) Every resolution of share-
holders 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 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 resolu-
tion be submitted to 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 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 resolu-
tion to determine whether to participate in the meeting and
to seek to influence the outcome of the vote on the resolu-
tion.
[Sub-s. (4) substituted by s. 43 (a) of Act No. 3 of 2011.]
(5) At any time before the start of the meeting at which a resolu-
tion 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—
(a) restraining the company from putting the proposed resolu-
tion 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 requirements of subsection (4); and
(ii) compensate the applicant for costs of the proceed-
ings, if successful.
(6) Once a resolution has been approved, it may not be chal-
lenged 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 more than 50% of the voting rights exercised
on the resolution.
ss 65–66 Auditing: Legislation and Standards
(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 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 highest established requirement for
approval of an ordinary resolution on any matter, and the lowest
established requirement for approval of a special resolution, on any
matter.
[Sub-s. (8) amended by s. 43 (c) of Act No. 3 of 2011.]
(9) For a special resolution to be approved by shareholders, it
must be supported by at least 75% of the voting rights exercised on
the resolution.
(10) A company’s Memorandum of Incorporation may permit—
(a) a different percentage of voting rights to approve any
special resolution; or
[Para. (a) substituted by s. 43 (b) of Act No. 3 of 2011.]
(b) one or more different percentages of voting rights to
approve special resolutions concerning one or more partic-
ular matters, respectively,
[Para. (b) substituted by s. 43 (b) of Act No. 3 of 2011.]
provided that there must at all times be a margin of at least 10
percentage points between the highest established requirement for
approval of an ordinary resolution on any matter, and the lowest
established requirement for approval of a special resolution, on any
matter.
[Sub-s. (10) amended by s. 43 (c) of Act No. 3 of 2011.]
(11) A special resolution is required to—
(a) amend the company’s Memorandum of Incorporation to
the extent required by section 16 (1) (c) and section
36 (2) (a);
(b) ratify a consolidated revision of a company’s Memoran-
dum of Incorporation, as contemplated in section
18 (1) (b);
(c) ratify actions by the company or directors in excess of their
authority, as contemplated in section 20 (2);
(d) approve an issue of shares or grant of rights in the circum-
stances contemplated in section 41 (1);
(e) approve an issue of shares or securities as contemplated in
section 41 (3);
(f) authorise the board to grant financial assistance in the
circumstances contemplated in section 44 (3) (a) (ii) or
45 (3) (a) (ii);
(g) approve a decision of the board for re-acquisition of shares
in the circumstances contemplated in section 48 (8);
(h) authorise the basis for compensation to directors of a profit
company, as required by section 66 (9);
(i) approve the voluntary winding up of the company, as
contemplated in section 80 (1);
(j) approve the winding up of a company in the circumstances
contemplated in section 81 (1);
(k) approve an application to transfer the registration of the
company to a foreign jurisdiction as contemplated in sec-
tion 82 (5);
(l) approve any proposed fundamental transaction, to the
extent required by Part A of Chapter 5; or
(m) revoke a resolution contemplated in section 164 (9) (c).
[Sub-s. (11) substituted by s. 43 (d) of Act No. 3 of 2011.]
(12) A company’s Memorandum of Incorporation may require a
special resolution to approve any other matter not contemplated in
subsection (11).
A-42
66. Board, directors and prescribed officers.—(1) The busi-
ness 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 any of the functions of the company, except to
the extent that this Act or the company’s Memorandum of Incorpo-
ration 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
(b) in the case of a public company, or a non-profit company,
at least three directors,
in addition to the minimum number of directors that the company
must have to satisfy any requirement, whether in terms of this Act or
its Memorandum of Incorporation, to appoint an audit committee, or
a social and ethics committee as contemplated in section 72 (4).
[Para. (b) substituted by s. 44 (a) of Act No. 3 of 2011.]
(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—
(a) may provide for—
(i) the direct appointment and removal of one or more
directors by any person who is named in, or deter-
mined in terms of, the Memorandum of Incorpora-
tion;
(ii) a person to be an ex officio director of the company
as a consequence of 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 provide for the election by shareholders of
at least 50% of the directors, and 50% of any alternate di-
rectors.
(5) A person contemplated in subsection (4) (a) (ii)—
(a) may not serve or continue to serve as an ex officio director
of a company, despite holding the relevant office, title,
designation or similar status, if that 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 officio
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 powers,
functions or duties of an ex officio 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 69.
(7) A person becomes entitled to serve as 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 enti-
tling that person to be an ex officio director of the compa-
ny, subject to subsection (5) (a); and
(b) has delivered to the company a written consent to serve as
its director.
[Sub-s. (7) amended by s. 44 (b) of Act No. 3 of 2011.]
(8) Except to the extent that the Memorandum of Incorporation
of a company provides otherwise, the company may pay remunera-
tion to its directors for their service as directors, subject to subsec-
tion (9).
(9) Remuneration contemplated in subsection (8) may be paid only
in accordance with a special resolution approved by the shareholders
within the previous two years.
A-43 Companies Act No. 71 of 2008
(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 Memo-
randum of Incorporation, does not limit or negate the authority of
the board, or invalidate anything done by the board or the company.
(12) Save as otherwise provided elsewhere in this Act or in the
company’s Memorandum of Incorporation, any particular director
may be appointed to more than one committee of the company, and
when calculating the minimum number of directors required for a
company in terms of subsections (2) and (3), any such director who
has been appointed to more than one committee must be counted
only once.
[Sub-s. (12) inserted by s. 44 (c) of Act No. 3 of 2011.]
67. First director or directors.—(1) Each incorporator of a
company is a first director of the company, and serves until suffi-
cient other directors to satisfy the minimum requirements of this
Act, or the 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 com-
pany’s Memorandum of Incorporation.
(2) If the number of incorporators of a company, together with
any ex officio directors, 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.
68. Election of directors of profit companies.—(1) Subject to
subsection (3), each director of a profit company, other than the first
director 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.
[Sub-s. (1) substituted by s. 45 (b) of Act No. 3 of 2011.]
(2) Unless a profit 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; 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.
[Sub-s. (2) amended by s. 45 (c) of Act No. 3 of 2011.]
(3) Unless the Memorandum of Incorporation of a profit com-
pany 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 the liabilities, of
any other director of the company.
[S. 68 amended by s. 45 (a) of Act No. 3 of 2011. Sub-s. (3) substituted
by s. 45 (d) of Act No. 3 of 2011.]
69. Ineligibility and disqualification of persons to be director or
prescribed officer.—(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,
irrespective of whether or not the person is also a member of the
company’s board.
ss 66–68
(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
(b) act as a director of a company.
(3) A company must not knowingly permit an ineligible or dis-
qualified person to serve or act as a director.
(4) A person who becomes ineligible or disqualified while serv-
ing as a director of a company ceases to be entitled to continue to act
as a director immediately, subject to section 70 (2).
[Sub-s. (4) substituted by s. 46 (a) of Act No. 3 of 2011.]
(5) A person who has been placed under probation by a court in
terms of section 162, or in terms of section 47 of the Close Corpora-
tions 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
(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 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
(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 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 dishon-
esty;
(bb) in connection with the promotion, formation
or management of a company, or in connec-
tion with any act contemplated in subsection
(2) or (5); or
(cc) under this Act, the Insolvency Act, 1936, (Act
24 of 1936), the Close Corporations Act,
1984, the Competition Act, the Financial In-
telligence Centre Act, 2001 (Act 38 of 2001),
the Financial Markets Act, 2012, or Chapter 2
of the Prevention and Combating of Corrupt
Activities Act, 2004 (Act 12 of 2004);
[Item (cc) substituted by s. 111 of
Act No. 19 of 2012.]
(9) A disqualification in terms of subsection (8) (b) (iii) or (iv)
ends at the later of—
(a) five years after the date of removal from office, or the
completion of the sentence imposed for the relevant of-
fence, 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).
ss 68–71 Auditing: Legislation and Standards
(10) At any time before the expiry of a person’s disqualification
in terms of subsection (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 exten-
sion is necessary to protect the public, 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).
(11A) The Registrar of the Court must, upon—
(a) the issue of a sequestration order;
(b) the issue of an order for the removal of a person from any
office of trust on the grounds of misconduct involving dis-
honesty; or
(c) a conviction for an offence referred in subsection
(8) (b) (iv),
send a copy of the relevant order or particulars of the conviction, as
the case may be, to the Commission.
[Sub-s. (11A) inserted by s. 46 (b) of Act No. 3 of 2011.]
(11B) The Commission must notify each company which has as
a director to whom the order or conviction relates, of the order or
conviction.
[Sub-s. (11B) inserted by s. 46 (b) of Act No. 3 of 2011.]
(12) . . . . . .
[Sub-s. (12) deleted by s. 46 (c) of Act No. 3 of 2011.]
(13) The Commission must establish and maintain in the pre-
scribed manner a public register of persons who are disqualified
from serving as a director, or who are subject to an order of proba-
tion as a director, in terms of an order of a court pursuant to this Act
or any other law.
70. Vacancies on board.—(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 contemplated in section 68 (1);
or
(b) in any case, if the person—
(i) resigns or dies;
(ii) in the case of an ex officio director, ceases to hold
the office, title, designation or similar status that en-
titled the person to be an ex officio director;
(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 reasona-
ble 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 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);
(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 71 (5); or
A-44
(b) the granting of an order by the court on such an applica-
tion,
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
officio director ceasing to hold that office, it must be filled by—
(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
(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).
(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 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.
71. Removal of directors.—(1) Despite anything to the contra-
ry 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 election of that director,
subject to subsection (2).
(2) Before the shareholders of a company may consider a resolu-
tion 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, 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.
(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
(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, and may remove a director whom it has
determined to be ineligible or disqualified, incapacitated, or negli-
gent 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 statement setting out reasons for the reso-
lution, with sufficient specificity to reasonably permit the
director to prepare and present a response; and
A-45 Companies Act No. 71 of 2008
(b) a reasonable opportunity to make a presentation, in person
or through a representative, to the meeting before the reso-
lution is put to a vote.
(5) If, in terms of subsection (3), the board of a company has
determined that a 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 director is not ineligible or disqualified, incapaci-
tated, 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 elec-
tion of that director, may apply to a court to review the de-
termination of the board; and
(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 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 shareholder of the company may apply to the
Companies Tribunal, to make a determination contemplat-
ed in that subsection; and
(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—
(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.
72. Board committees.—(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.
(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 disquali-
fied to be a director in terms of section 69; and
(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 the required duty of a
director to the company, as set out in section 76.
ss 71–73
(4) The Minister, by regulation, may prescribe—
(a) a category of companies that must each have a social and
ethics committee, if it is desirable in the public interest,
having regard to—
(i) annual turnover;
(ii) workforce size; or
(iii) the nature and extent of the activities of such
companies;
(b) the functions to be performed by social and ethics commit-
tees required by this subsection; and
(c) rules governing the composition and conduct of social and
ethics committees.
[Sub-s. (4) substituted by s. 47 (a) of Act No. 3 of 2011.]
(5) A company that falls within a category of companies that are
required in terms of this section and the regulations to appoint a
social and ethics committee may apply to the Tribunal in the
prescribed manner and form for an exemption from that require-
ment, and the Tribunal may grant such an exemption if it is satisfied
that—
(a) the company is required in terms of other legislation to
have, and does have, some form of formal mechanism
within its structures that substantially performs the func-
tion that would otherwise be performed by the social and
ethics committee in terms of this section and the regula-
tions; or
(b) it is not reasonably necessary in the public interest to
require the company to have a social and ethics committee,
having regard to the nature and extent of the activities of
the company.
[Sub-s. (5) inserted by s. 47 (b) of Act No. 3 of 2011.]
(6) An exemption granted in terms of subsection (5) is valid for
five years, or such shorter period as the Tribunal may determine at
the time of granting the exemption, unless set aside by the Tribunal
in terms of subsection (7).
[Sub-s. (6) inserted by s. 47 (b) of Act No. 3 of 2011.]
(7) The Commission, on its own initiative or on request by a
shareholder, or a person who was granted standing by the Tribunal
at the hearing of the exemption application, may apply to the
Tribunal to set aside an exemption only on the grounds that the basis
on which the exemption was granted no longer applies.
[Sub-s. (7) inserted by s. 47 (b) of Act No. 3 of 2011.]
(8) A social and ethics committee of a company is entitled to—
(a) require from any director or prescribed officer of the
company any information or explanation necessary for the
performance of the committee’s functions;
(b) request from any employee of the company any infor-
mation or explanation necessary for the performance of the
committee’s functions;
(c) attend any general shareholders meeting;
(d) receive all notices of and other communications relating to
any general shareholders meeting; and
(e) be heard at any general shareholders meeting contemplated
in this paragraph on any part of the business of the meeting
that concerns the committee’s functions.
[Sub-s. (8) inserted by s. 47 (b) of Act No. 3 of 2011.]
(9) A company must pay all the expenses reasonably incurred by
its social and ethics committee, including, if the social and ethics
committee considers it appropriate, the costs or the fees of any
consultant or specialist engaged by the social and ethics committee
in the performance of its functions.
[Sub-s. (9) inserted by s. 47 (b) of Act No. 3 of 2011.]
(10) Section 84 (6) and (7), read with the changes required by the
context, apply with respect to a company that fails to appoint a
social and ethics committee, as required by this section and the
regulations.
[Sub-s. (10) inserted by s. 47 (b) of Act No. 3 of 2011.]
73. Board meetings.—(1) A director authorised by the board of
a company—
(a) may call a meeting of the board at any time; and
ss 73–75 Auditing: Legislation and Standards
(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 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 Memoran-
dum 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 communication,
so long as the electronic communication facility employed ordin-
arily enables all persons participating in that meeting to communi-
cate 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 meetings, but—
(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 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,
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;
(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
(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
(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.
(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.
74. Directors acting other than at meeting.—(1) Except to the
extent that the Memorandum of Incorporation of a company pro-
vides 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 elec-
tronic 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 as if it had been approved by voting at a meeting.
A-46
75. Director’s personal financial interests.—(1) In this sec-
tion—
(a) “director” includes—
(i) an alternate director;
(ii) a prescribed officer; and
(iii) a person who is a member of a committee of the
board of a company, irrespective of whether the per-
son is also a member of the company’s board; and
(b) “related person”, when used in reference to a director,
has the meaning set out in section 1, but also includes a se-
cond company of which the director or a related person is
also a director, or a close corporation of which the director
or a related person is a member.
[Sub-s. (1) substituted by s. 48 (a) of Act No. 3 of 2011.]
(2) This section does not apply—
(a) to a director of a company—
(i) in respect of a decision that may generally affect—
(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 per-
sons, 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 contemplated in section 71; or
(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 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,
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 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 contemplat-
ed in subsection (2) (b) or (3), has a personal financial interest in
respect of a matter to be considered at a 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, 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 immedi-
ately after making any disclosure contemplated in para-
graph (b) or (c);
(e) must not take part in the consideration of the matter,
except to the extent contemplated in paragraphs (b) and
(c);
A-47 Companies Act No. 71 of 2008
(f) while absent from the meeting in terms of this subsec-
tion—
(i) is to be regarded as being present at the meeting for
the purpose of determining whether sufficient direc-
tors are present to constitute the 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 matter unless specifically requested or
directed to do so by the board.
(6) If a director of a company acquires a personal financial inter-
est 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 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 subsec-
tion (3), is valid despite any personal financial interest of a director
or person related to the director, only if—
(a) it was approved following disclosure of that interest in the
manner contemplated in this section; or
(b) despite having been approved without disclosure of that
interest, it—
(i) has subsequently been ratified by an ordinary
resolution of the shareholders following disclosure
of that interest; or
(ii) has been declared to be valid by a court in terms of
subsection (8).
[Sub-s. (7) substituted by s. 48 (b) of Act No. 3 of 2011.]
(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, despite the failure of the
director to satisfy the disclosure requirements of this section.
[Sub-s. (8) substituted by s. 48 (b) of Act No. 3 of 2011.]
76. Standards of directors conduct.—(1) In this section, “di-
rector” 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,
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 ob-
tained while acting in the capacity of a director—
(i) to gain an advantage for the director, or for another
person other than the 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—
(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.
(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;
ss 75–77
(b) in the best interests of the company; and
(c) with the degree of care, skill and diligence that may
reasonably be expected of 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 performance of the functions of director, a particu-
lar 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—
(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 contem-
plated in subparagraph (aa); and
(iii) the director made a decision, or supported the decision
of a committee or the board, with regard to that mat-
ter, and the director had a rational basis for believ-
ing, and did believe, that the decision was in the best
interests of the company; and
(b) is entitled to rely on—
(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 dele-
gable under 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).
(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 company, the board or a committee as to
matters involving skills or expertise that the director rea-
sonably 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 director has reason to believe that the
actions of the committee do not merit confidence.
77. Liability of directors and prescribed officers.—(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,
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 fiduciary duty, for any loss, damag-
es or costs sustained by the company as a consequence of
s 77 Auditing: Legislation and Standards
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 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 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 au-
thority to do so;
(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;
(d) signed, consented to, or authorised, the publication of—
(i) any financial statements that were false or mislead-
ing in a material respect; or
(ii) a prospectus, or a written statement contemplated in
section 101, that contained—
(aa) an “untrue statement” as defined and de-
scribed 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
required by the context, apply to limit the liability of
a director in terms of this paragraph; or
[Sub-item (bb) substituted by s. 49 (a) of Act No. 3 of 2011.]
(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 had not been authorised in
accordance with section 36;
(ii) the issuing of any authorised securities, despite
knowing that the issue of those securities was incon-
sistent 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
(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 se-
curities of the company, despite knowing that the pro-
vision of financial assistance was inconsistent with
section 44 or the company’s Memorandum of Incor-
poration;
[Sub-para. (iv) substituted by s. 49 (b) (i) of Act No. 3 of 2011.]
(v) the provision of financial assistance to a director for
a purpose contemplated in section 45, despite know-
ing that the provision of financial assistance was in-
consistent with that section or the company’s
Memorandum of Incorporation;
[Sub-para. (v) substituted by s. 49 (b) (i) of Act No. 3 of 2011.]
A-48
(vi) a resolution approving a distribution, despite
knowing that the distribution 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 know-
ing that the acquisition was contrary to section 46 or
48; or
(viii) an allotment by the company, despite knowing that
the allotment was contrary to any provision of Chap-
ter 4.
[Sub-para. (viii) substituted by s. 49 (b) (ii) of Act No. 3 of 2011.]
(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 distri-
bution in contravention of section 46—
(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 li-
quidity test; and
(ii) it was unreasonable at the time of the decision to
conclude that the company would satisfy the solven-
cy and liquidity test after making the relevant distri-
bution; 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 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)—
(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 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 re-
ceived by any person in terms of the 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 person who is or may be held liable for the
same act.
(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—
(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 breach of trust, the court may relieve the
director, either wholly or partly, from any liability set out in this
A-49 Companies Act No. 71 of 2008
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, includ-
ing those connected 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).
78. Indemnification and directors’ insurance.—(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 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 agree-
ment, 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—
(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 director.
(3) Subject to subsection (3A), a company may not directly or
indirectly pay any fine that may be imposed on a director of the
company, or on a director of a related company, as a consequence of
that director having been convicted of an offence, unless the convic-
tion was based on strict liability.
[Sub-s. (3) substituted by s. 50 (a) of Act No. 3 of 2011.]
(3A) Subsection (3) does not apply to a private or personal liabil-
ity company if—
(a) a single individual is the sole shareholder and sole director
of that company; or
(b) two or more related individuals are the only shareholders
of that company, and there are no directors of the company
other than one or more of those individuals.
[Sub-s. (3A) inserted by s. 50 (b) of Act No. 3 of 2011.]
(4) Except to the extent that a company’s Memorandum of Incor-
poration provides 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 expens-
es contemplated in paragraph (a), irrespective of whether it
has advanced those expenses, if the proceedings—
(i) are abandoned or exculpate the director; or
(ii) arise in respect of any liability for which the com-
pany may indemnify the director, in terms of subsec-
tions (5) and (6).
(5) Except to the extent that the Memorandum of Incorporation
of a company 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—
(i) in terms of section 77 (3) (a), (b) or (c); or
ss 77–80
(ii) from wilful misconduct or wilful breach of trust on
the part of the director; or
[Sub-para. (ii) substituted by s. 50 (c) of Act No. 3 of 2011 (English
only).]
(b) any fine contemplated in subsection (3).
(7) Except to the extent that the Memorandum of Incorporation
of a company provides otherwise, a company may purchase insur-
ance to protect—
(a) a director against any liability or expenses for which the
company is permitted to indemnify a director in accord-
ance with subsection (5); or
(b) the company against any contingency including, but not
limited to—
(i) any expenses—
(aa) that the company is permitted to advance in
accordance with subsection (4) (a); or
(bb) for which the company is permitted to indem-
nify a director in accordance with subsection
(4) (b); or
(ii) any liability for which the company is permitted to
indemnify a director in accordance with subsec-
tion (5).
[Para. (b) amended by s. 50 (d) of Act No. 3 of 2011.]
(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.
Part G
Winding-up of solvent companies and
deregistering companies
79. Winding-up of solvent companies.—(1) A solvent com-
pany may be dissolved by—
(a) voluntary winding-up initiated by the company as contem-
plated in section 80, and conducted either—
(i) by the company; or
(ii) by the company’s creditors,
as determined by the resolution of the company; or
(b) winding-up and liquidation by court order, as contemplated
in section 81.
(2) The procedures for winding-up and liquidation of a solvent
company, whether voluntary or by court order, are governed by this
Part and, to the extent applicable, by the laws referred to or contem-
plated in item 9 of Schedule 5.
(3) If, at any time after a company has adopted a resolution con-
templated in section 80, or after an application has been made to a
court as contemplated in section 81, it is determined that the com-
pany to be wound up is or may be insolvent, a court, on application
by any interested person, may order that the company be wound up
as an insolvent company in terms of the laws referred to or contem-
plated in item 9 of Schedule 5.
80. Voluntary winding-up of solvent company.—(1) A sol-
vent company may be wound up voluntarily if the company has
adopted a special resolution to do so, which may provide for the
winding-up to be by the company, or by its creditors.
(2) A resolution providing for the voluntary winding-up of a
company must be filed, together with the prescribed notice and
filing fee.
(3) If a resolution contemplated in this section provides for wind-
ing-up by the company, before the resolution and notice are filed the
company must—
(a) arrange for security, satisfactory to the Master, for the
payment of the company’s debts within no more than 12
months after the start of the winding-up of the company; or
ss 80–81 Auditing: Legislation and Standards
(b) obtain the consent of the Master to dispense with security,
which the Master may do only if the company has submit-
ted to the Master—
(i) a sworn statement by a director authorised by the
board of the company, stating that the company has
no debts; and
(ii) a certificate by the company’s auditor, or if it does
not have an auditor, a person who meets the re-
quirements for appointment as an auditor, and ap-
pointed for the purpose, stating that to the best of the
auditor’s knowledge and belief and according to the
financial records of the company, the company ap-
pears to have no debts.
(4) Any costs incurred in furnishing the security referred to in
subsection (3) may be paid by the company.
(5) A liquidator appointed in a voluntary winding-up may exer-
cise all powers given by this Act, or a law contemplated in item 9 of
Schedule 5, to a liquidator in a winding-up by the court—
(a) without requiring specific order or sanction of the court;
and
(b) subject to any directions given by—
(i) the shareholders of the company in a general
meeting, in the case of a winding-up by the com-
pany; or
(ii) the creditors, in the case of a winding-up by credi-
tors.
(6) A voluntary winding-up of a company begins when the reso-
lution of the company has been filed in terms of subsection (2).
(7) When a resolution has been filed in terms of subsection (2),
the Commission must promptly deliver a copy of it to the Master.
(8) Despite any provision to the contrary in a company’s Memo-
randum of Incorporation—
(a) the company remains a juristic person and retains all of its
powers as such while it is being wound up voluntarily; but
(b) from the beginning of the company’s winding-up—
(i) it must stop carrying on its business except to the
extent required for the beneficial winding-up of the
company; and
(ii) all of the powers of the company’s directors cease,
except to the extent specifically authorised—
(aa) in the case of a winding-up by the company,
by the liquidator or the shareholders in a gen-
eral meeting; or
(bb) in the case of a winding-up by creditors, the
liquidator or the creditors.
81. Winding-up of solvent companies by court order.—(1) A
court may order a solvent company to be wound up if—
(a) the company has—
(i) resolved, by special resolution, that it be wound up
by the court; or
(ii) applied to the court to have its voluntary winding-up
continued by the court;
(b) the practitioner of a company appointed during business
rescue proceedings has applied for liquidation in terms of
section 141 (2) (a), on the grounds that there is no reason-
able prospect of the company being rescued; or
(c) one or more of the company’s creditors have applied to the
court for an order to wind up the company on the grounds
that—
(i) the company’s business rescue proceedings have
ended in the manner contemplated in section 132
(2) (b) or (c) (i) and it appears to the court that it is
just and equitable in the circumstances for the com-
pany to be wound up; or
(ii) it is otherwise just and equitable for the company to
be wound up;
A-50
(d) the company, one or more directors or one or more
shareholders have applied to the court for an order to wind
up the company on the grounds that—
(i) the directors are deadlocked in the management of
the company, and the shareholders are unable to
break the deadlock, and—
(aa) irreparable injury to the company is resulting,
or may result, from the deadlock; or
(bb) the company’s business cannot be conducted
to the advantage of shareholders generally, as a
result of the deadlock;
(ii) the shareholders are deadlocked in voting power,
and have failed for a period that includes at least two
consecutive annual general meeting dates, to elect
successors to directors whose terms have expired; or
(iii) it is otherwise just and equitable for the company to
be wound up;
(e) a shareholder has applied, with leave of the court, for an
order to wind up the company on the grounds that—
(i) the directors, prescribed officers or other persons in
control of the company are acting in a manner that is
fraudulent or otherwise illegal; or
(ii) the company’s assets are being misapplied or
wasted; or
(f) the Commission or Panel has applied to the court for an
order to wind up the company on the grounds that—
(i) the company, its directors or prescribed officers or
other persons in control of the company are acting or
have acted in a manner that is fraudulent or other-
wise illegal, the Commission or Panel, as the case
may be, has issued a compliance notice in respect of
that conduct, and the company has failed to comply
with that compliance notice; and
(ii) within the previous five years, enforcement proce-
dures in terms of this Act or the Close Corporations
Act, 1984 (Act No. 69 or 1984), were taken against
the company, its directors or prescribed officers, or
other persons in control of the company for substan-
tially the same conduct, resulting in an administra-
tive fine, or conviction for an offence.
(2) A shareholder may not apply to a court as contemplated in
subsection (1) (d) or (e) unless the shareholder—
(a) has been a shareholder continuously for at least six months
immediately before the date of the application; or
(b) became a shareholder as a result of—
(i) acquiring another shareholder; or
(ii) the distribution of the estate of a former shareholder,
and the present shareholder, and other or former share-
holder, in aggregate, satisfied the requirements of para-
graph (a).
(3) A court may not make an order applied for in terms of sub-
section (1) (e) or (f) if, before the conclusion of the court proceed-
ings—
(a) any of the directors have resigned, or have been removed
in terms of section 71, and the court concludes that the re-
maining directors were not materially implicated in the
conduct on which the application was based; or
(b) one or more shareholders have applied to the court for a
declaration in terms of section 162 to declare delinquent
the directors, if any, responsible for the alleged miscon-
duct, and the court is satisfied that the removal of those
directors would bring the misconduct to an end.
(4) A winding-up of a company by a court begins when—
(a) an application has been made to the court in terms of
subsection (1) (a) or (b); or
(b) the court has made an order applied for in terms of subsec-
tion (1) (c), (d), (e) or (f).
A-51 Companies Act No. 71 of 2008
82. Dissolution of companies and removal from register.—
(1) The Master must file a certificate of winding up of a company in
the prescribed form when the affairs of the company have been
completely wound up.
[Sub-s. (1) substituted by s. 51 (a) of Act No. 3 of 2011.]
(2) Upon receiving a certificate in terms of subsection (1), the
Commission must—
(a) record the dissolution of the company in the prescribed
manner; and
(b) remove the company’s name from the companies register.
(3) In addition to the duty to deregister a company contemplated
in subsection (2) (b), the Commission may otherwise remove a
company from the companies register only if—
(a) the company has transferred its registration to a foreign
jurisdiction in terms of subsection (5), or—
(i) has failed to file an annual return in terms of section
33 for two or more years in succession; and
(ii) on demand by the Commission, has failed to—
(aa) give satisfactory reasons for the failure to file
the required annual returns; or
(bb) show satisfactory cause for the company to
remain registered; or
[Para. (a) amended by s. 51 (b) of Act No. 3 of 2011.]
(b) the Commission—
(i) has determined in the prescribed manner that the
company appears to have been inactive for at least
seven years, and no person has demonstrated a rea-
sonable interest in, or reason for, its continued exist-
ence; or
[Sub-para. (i) substituted by s. 51 (c) of Act No. 3 of 2011 (English on-
ly).]
(ii) has received a request in the prescribed manner and
form and has determined that the company—
(aa) has ceased to carry on business; and
(bb) has no assets or, because of the inadequacy of
its assets, there is no reasonable probability of
the company being liquidated.
(4) If the Commission deregisters a company as contemplated in
subsection (3), any interested person may apply in the prescribed
manner and form to the Commission, to reinstate the registration of
the company.
(5) A company may apply to be deregistered upon the transfer of
its registration to a foreign jurisdiction, if—
(a) the shareholders have adopted a special resolution approv-
ing such an application and transfer of registration; and
(b) the company has satisfied the prescribed requirements for
doing so.
[Sub-s. (5) inserted by s. 51 (d) of Act No. 3 of 2011.]
(6) The Minister may prescribe criteria and procedural require-
ments that must be satisfied by a company before it may be de-
registered in terms of subsection (5).
[Sub-s. (6) inserted by s. 51 (d) of Act No. 3 of 2011.]
83. Effect of removal of company from register.—(1) A
company is dissolved as of the date its name is removed from the
companies register unless the reason for the removal is that the
company’s registration has been transferred to a foreign jurisdiction,
as contemplated in section 82 (5).
[Sub-s. (1) substituted by s. 52 of Act No. 3 of 2011.]
(2) The removal of a company’s name from the companies regis-
ter does not affect the liability of any former director or shareholder
of the company or any other person in respect of any act or omission
that took place before the company was removed from the register.
(3) Any liability contemplated in subsection (2) continues and
may be enforced as if the company had not been removed from the
register.
ss 82–84
(4) At any time after a company has been dissolved—
(a) the liquidator of the company, or other person with an
interest in the company, may apply to a court for an order
declaring the dissolution to have been void, or any other
order that is just and equitable in the circumstances; and
(b) if the court declares the dissolution to have been void, any
proceedings may be taken against the company as might
have been taken if the company had not been dissolved.
CHAPTER 3
ENHANCED ACCOUNTABILITY AND TRANSPARENCY
Part A
Application and general requirements of Chapter
84. Application of Chapter.—(1) This Chapter applies to—
(a) every public company, subject to sections 5 (6) and 94 (1);
[Para. (a) substituted by s. 53 (a) of Act No. 3 of 2011.]
(b) every company that is a state-owned company—
(i) except to the extent that the company has been
exempted from the 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—
(i) if the company is required by this Act or the regula-
tions to have its annual financial statements audited
every year: Provided that the provisions of Parts B
and D of this Chapter will not apply to any such
company; or
(ii) otherwise, only to the extent that the company’s
Memorandum of Incorporation so requires, as con-
templated in section 34 (2).
[Para. (c) substituted by s. 53 (b) of Act No. 3 of 2011.]
(2) . . . . . .
[Sub-s. (2) deleted by s. 53 (c) of Act No. 3 of 2011.]
(3) In the case of a state-owned company—
(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 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 enter-
prise; 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 ap-
proved 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;
(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 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).
ss 84–88 Auditing: Legislation and Standards
(6) If the board of a company fails to make an appointment as
required by 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, in responding, fails to satisfy the Com-
mission that the board will make the appointment, or con-
vene a shareholders meeting to make the appointment,
within an acceptable period, the Commission may—
(i) give notice to the holders of the company’s secur-
ities of a general meeting, and convene such a meet-
ing, to make that appointment; and
(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.
[Sub-s. (6) amended by s. 53 (d) of Act No. 3 of 2011.]
(7) A company that has been given notice contemplated in sub-
section (6) (a), or a director who has been assessed any portion of
the costs of a meeting, as contemplated in subsection (6) (b), may
apply to the Companies Tribunal to set aside the notice, or the
assessment, in whole or in part.
85. Registration of company secretary and auditor.—
(1) Every company that makes an appointment contemplated in
section 84 (4), irrespective of whether the company does so as re-
quired 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 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 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.
(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
(b) in other circumstances prescribed by the Minister.
(3) Within 10 business days after making an appointment con-
templated in subsection (1), or after the termination of service of
such an appointment, a company must file a notice of the appoint-
ment or termination, as the case may be, subject to subsection (4).
(4) The incorporators of a company may file a notice of the ap-
pointment of the company’s first company secretary, auditor or audit
committee as part of the company’s Notice of Incorporation.
Part B
Company secretary
86. Mandatory appointment of company secretary.—(1) A
public company or state-owned company must appoint a company
secretary.
[Sub-s. (1) substituted by s. 54 (a) of Act No. 3 of 2011.]
(2) Every company secretary, irrespective of whether the ap-
pointment is made as required by subsection (1) or in terms of a
requirement in a company’s Memorandum of Incorporation, as con-
templated in sections 34 (2) and 84 (1) (c) (ii), must—
A-52
(a) have the requisite knowledge of, or experience in, relevant
laws; and
(b) be a permanent resident of the Republic, and remain so
while serving in that capacity.
[Sub-s. (2) substituted by s. 54 (a) of Act No. 3 of 2011.]
(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
(ii) an ordinary resolution of the holders of the com-
pany’s securities.
(3A) The first company secretary of a company that is required
only in terms of its Memorandum of Incorporation to appoint a
company secretary as contemplated in sections 34 (2) and
84 (1) (c) (ii), must be appointed—
(a) in accordance with subsection (3), if the requirement to
appoint a company secretary applies to that company when
it is incorporated; or
(b) within 40 business days after the date on which the
requirement first applies to the company, by either—
(i) the directors of the company; or
(ii) an ordinary resolution of the holders of the com-
pany’s securities.
[Sub-s. (3A) inserted by s. 54 (b) of Act No. 3 of 2011.]
(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.
87. Juristic person or partnership may be appointed com-
pany secretary.—(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 require-
ments contemplated in section 84 (5); and
(b) at least one employee of that juristic person, or one partner
or employee of that partnership, as the case may be, satis-
fies the requirements contemplated in section 86.
(2) A change in the membership of a juristic person or partner-
ship 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 a particular company—
(a) the juristic person or partnership must immediately notify
the directors of the company if the juristic person or part-
nership no longer satisfies the requirements of subsection
(1), and is regarded to have resigned as company secretary
upon giving that notice to the company;
(b) the company is entitled to assume that the juristic person or
partnership satisfies the requirements of subsection (1), un-
til the company has received a notice contemplated in para-
graph (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 person or partner-
ship had ceased to satisfy the requirements of subsection
(1) at the time of that action.
88. Duties of company secretary.—(1) A company’s secretary
is accountable to the company’s board.
A-53 Companies Act No. 71 of 2008
(2) A company secretary’s duties include, but are not restricted
to—
(a) providing the directors of the company collectively and
individually with guidance as to their duties, responsibili-
ties 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 Memoran-
dum of Incorporation or rules of the company or this Act;
(d) ensuring that minutes of all shareholders meetings, board
meetings and the meetings of any committees of the direc-
tors, 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 has filed required returns and notices
in terms of this Act, and whether all such returns and no-
tices 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).
89. Resignation or removal of company secretary.—(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 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 re-
ferred to in subsection (2), the company secretary must give written
notice to that effect to the company by not 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 subsec-
tion (2) must be included in the directors’ report in the company’s
annual financial statements.
Part C
Auditors
90. Appointment of auditor.—(1) Upon its incorporation, and
each year at its annual general meeting, a public company or state-
owned company must appoint an auditor.
(1A) A company referred to in section 84 (1) (c) (i), or a com-
pany that is required only in terms of its Memorandum of Incorpora-
tion to have its annual financial statements audited as contemplated
in sections 34 (2) and 84 (1) (c) (ii), must appoint an auditor—
(a) in accordance with subsection (1), if the requirement to
have its annual financial statements audited applies to that
company when it is incorporated; or
(b) at the annual general meeting at which the requirement
first applies to the company, and each annual general meet-
ing thereafter.
[Sub-s. (1A) inserted by s. 55 of Act No. 3 of 2011.]
(2) To be appointed as an auditor of a company, whether as re-
quired 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;
ss 88–91
(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 rec-
ords or the preparation of any of its financial state-
ments;
(iii) a director, officer or employee of a person appointed
as company secretary in terms of Part B of this
Chapter;
(iv) a person who, alone or with a partner or employees,
habitually or regularly performs the duties of ac-
countant or bookkeeper, or performs related secre-
tarial work, for the company;
(v) a person who, at any time during the five financial
years immediately preceding the date of appoint-
ment, was a person contemplated in any of subpara-
graphs (i) to (iv); or
(vi) a person related to a person contemplated in subpar-
agraphs (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 com-
pany that has appointed an audit committee, whether as re-
quired 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 performing 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 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 conclu-
sion of the first annual general meeting of the company.
(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 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 or persons in place of the retir-
ing 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 91 within
40 business days after the date of the meeting.
91. Resignation of auditors and vacancies.—(1) The resigna-
tion 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—
(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.
(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 ap-
pointment as the new auditor; and
ss 91–94 Auditing: Legislation and Standards
(b) may proceed to make an appointment of a person proposed
in terms of 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 audi-
tor.
(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 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 consti-
tutes the resignation of the firm as auditor of the company, giving
rise to a vacancy.
(6) Section 89, read with the changes required by the context,
applies with respect to an auditor of a company, but a reference in
that section to ‘‘company secretary’’ must be regarded as referring
to the company’s auditor.
[Sub-s. (6) inserted by s. 56 of Act No. 3 of 2011.]
92. Rotation of auditors.—(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 audi-
tor of a company for two or more consecutive financial years and
then ceases to be the auditor or designated 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 relin-
quish office in the same year.
93. Rights and restricted functions of auditors.—(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 offic-
ers of the company any information and explanations nec-
essary 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 state-
ments of any subsidiary of that holding company and is en-
titled to require from the directors or officers of the
holding company or subsidiary any information and expla-
nations in connection with any such statements and in con-
nection 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;
(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.
(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
(b) make an order of costs personally against any director or
prescribed officer whom the court has found to have wil-
fully and knowingly frustrated, or attempted to frustrate,
the performance of the auditor’s functions.
A-54
(3) An auditor appointed by a company may not perform any
services for that company—
(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 Audit-
ing Profession Act; or
(b) as may be determined by the company’s audit committee
in terms of section 94 (7) (d).
Part D
Audit committees
94. Audit committees.—(1) This section—
(a) applies concurrently with section 64 of the Banks Act, to
any company that is 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 com-
pany; and
(b) does not apply to a company that has been granted an
exemption in terms of section 64 (4) of the Banks Act.
(2) At each annual general meeting, a public company, state-
owned company or other company that is required only by its
Memorandum of Incorporation to have an audit committee as
contemplated in sections 34 (2) and 84 (1) (c) (ii), 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; and
(b) the audit committee of that other company will perform the
functions required under this section on behalf of that sub-
sidiary company.
[Sub-s. (2) amended by s. 57 (a) of Act No. 3 of 2011.]
(3) The first members of the audit committee may be appointed
by—
(a) the incorporators of a company; or
(b) by the board, within 40 business days after the incorpora-
tion 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—
(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 compa-
ny, or have been such an officer or employee at any
time during the previous three financial years; or
(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, im-
partiality or objectivity of that director is comprom-
ised by that relationship; and
(c) not be related to any person who falls within any of the
criteria set out in paragraph (b).
(5) The Minister may prescribe minimum qualification require-
ments 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.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “comprises persons with adequate relevant
knowledge” is intended to be “comprises of persons with adequate
relevant knowledge”.)
(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.
A-55 Companies Act No. 71 of 2008
(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 of the company;
(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 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 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 financial statements, the account-
ing 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;
(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 concern-
ing the company’s accounting policies, financial control,
records and reporting; and
(i) to perform such other oversight functions as may be
determined by the board.
[Para. (i) substituted by s. 57 (b) of Act No. 3 of 2011.]
(8) In considering whether, for the purposes of this Part, a regis-
tered auditor is 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 terms of subsection (7) (d);
[Sub-para. (ii) substituted by s. 57 (c) of Act No. 3 of 2011.]
(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
(c) consider compliance with other criteria relating to inde-
pendence or conflict of interest as prescribed by the Inde-
pendent 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.
(9) Nothing in this section precludes the appointment by a com-
pany at its annual general meeting of an auditor other than one
nominated by the audit committee, but if such an auditor is appoint-
ed, the appointment is valid only if the audit committee is satisfied
that the proposed auditor is independent of the company.
[Sub-s. (9) substituted by s. 57 (d) of Act No. 3 of 2011.]
ss 94–95
(10) Neither the appointment nor the duties of an audit commit-
tee reduce the 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.
CHAPTER 4
PUBLIC OFFERINGS OF COMPANY
SECURITIES
95. Application and interpretation of Chapter.—(1) In this
Chapter, unless the context indicates otherwise —
(a) “company”, in addition to the meaning set out in section
1, also includes a foreign company;
(b) “compliance officer” means a compliance officer ap-
pointed by a company in respect of its employee share
scheme;
(c) “employee share scheme” means a scheme established by
a company, whether by means of a trust or otherwise, for
the purpose of offering participation therein solely to em-
ployees, officers and other persons closely involved in the
business of the company or a subsidiary of the company,
either—
(i) by means of the issue of shares in the company; or
(ii) by the grant of options for shares in the company;
[Para. (c) amended by s. 58 (a) of Act No. 3 of 2011.]
(d) “expert” means—
(i) a geologist, engineer, architect, quantity surveyor,
valuer, accountant or auditor; or
(ii) any person who professes—
(aa) to be a person referred to in subparagraph (i);
or
(bb) to have extensive knowledge or experience, or
to exercise special skill which gives or implies
authority to a statement made by that person;
(e) “initial public offering” means an offer to the public of
any securities of a company, if—
(i) no securities of that company have previously been
the subject of an offer to the public; or
(ii) all of the securities of that company that had previ-
ously been the subject of an offer to the public have
subsequently been re-acquired by the company;
(f) “letter of allocation” means any document conferring a
right to subscribe for shares in terms of a rights offer;
(g) “offer”, in relation to securities, means an offer made in
any way by any person with respect to the acquisition, for
consideration, of any securities in a company;
(h) “offer to the public”—
(i) includes an offer of securities to be issued by a
company to any section of the public, whether se-
lected—
(aa) as holders of that company’s securities;
(bb) as clients of the person issuing the prospectus;
(cc) as the holders of any particular class of
property; or
(dd) in any other manner; but
(ii) does not include—
(aa) an offer made in any of the circumstances
contemplated in section 96; or
(bb) a secondary offer effected through an ex-
change;
(i) “primary offering” means an offer to the public, made by
or on behalf of a company, of securities to be issued by
that company, or by another company—
(i) within a group of companies of which the first
company is a member; or
ss 95–96 Auditing: Legislation and Standards
(ii) with which the first company proposes to be amal-
gamated or to merge.
[Para. (i) substituted by s. 58 (b) of Act No. 3 of 2011.]
(j) “promoter”, in relation to civil and criminal liability in
respect of an untrue statement in a prospectus, means—
an offer to the public—
(i) a person who was a party to the preparation of the
prospectus, or of the portion of it that contains the
untrue statement; but
(ii) does not include any person acting in a professional
capacity for persons engaged in procuring the for-
mation of the company or preparing the prospectus;
(k) “registered prospectus” means a prospectus that complies
with this Act and—
(i) in the case of listed securities, has been approved by
the relevant exchange; or
(ii) otherwise, has been filed;
(l) “rights offer” means an offer, with or without a right to
renounce in favour of other persons, made to any holders
of a company’s securities for subscription of any securities
of that company, or any other company within the same
group of companies;
(m) “secondary offering” means an offer for sale to the public
of any securities of a company or its subsidiary, made by
or on behalf of a person other than that company or its sub-
sidiary;
(n) “specified shares” means shares, including options on
shares, offered to employees of a company in terms of an
employee share scheme;
(o) “unit” means any right or interest in any securities; and
(p) “untrue statement” includes a statement that is mislead-
ing in the form and context in which it is made, subject to
subsections (3) and (4).
(2) For the purposes of this Chapter, a person is to be regarded,
by or in respect of a company, as being a member of the public,
despite that person being a shareholder of the company or a pur-
chaser of goods from the company.
(3) An untrue statement is regarded to have been included in a
prospectus, written statement, or summary directing a person to
either a prospectus or written statement, if it is contained in any
report or memorandum—
(a) that appears on the face of the prospectus, written state-
ment, or summary; or
(b) that is incorporated by reference within, or is attached to or
accompanies, the prospectus, written statement or sum-
mary.
(4) An omission from a prospectus or written statement of any
matter that, in the context, is calculated to mislead by omission
constitutes the making of an untrue statement in that prospectus or
written statement, irrespective of whether this Act requires that
matter to be included in the prospectus or written statement.
(5) A provision of an agreement is void to the extent that it—
(a) requires an applicant for securities to waive compliance
with a requirement of this Chapter; or
(b) purports to affect an applicant for securities with any
notice of any agreement, document or matter not specifi-
cally referred to in a prospectus or written statement.
(6) Nothing in this Chapter limits any liability that a person may
incur under this Act apart from this Chapter, or under any other
public regulation, or under the common law.
(7) The Minister may make regulations—
(a) establishing general or specific requirements respecting the
form and content of rights offers, letters of allocation and
prospectuses;
(b) prescribing the manner and form to be followed in filing
and publishing of rights offers, letters of allocation and
prospectuses; and
A-56
(c) in respect of related or ancillary matters concerning the
offering of company securities.
[Sub-s. (7) inserted by s. 58 (c) of Act No. 3 of 2011.]
96. Offers that are not offers to public.—(1) An offer is not
(a) if the offer is made only to—
(i) persons whose ordinary business, or part of whose
ordinary business, is to deal in securities, whether as
principals or agents;
(ii) the Public Investment Corporation as defined in the
Public Investment Corporation Act, 2004 (Act
No. 23 of 2004);
(iii) a person or entity regulated by the Reserve Bank of
South Africa;
(iv) an authorised financial services provider, as defined
in the Financial Advisory and Intermediary Services
Act, 2002 (Act No. 37 of 2002);
(v) a financial institution, as defined in the Financial
Services Board Act, 1990 (Act No. 97 of 1990);
(vi) a wholly-owned subsidiary of a person contemplated
in subparagraph (iii), (iv) or (v), acting as agent in
the capacity of an authorised portfolio manager for a
pension fund registered in terms of the Pension
Funds Act, 1956 (Act No. 24 of 1956), or as man-
ager for a collective investment scheme registered in
terms of the Collective Investment Schemes Control
Act, 2002 (Act No. 45 of 2002); or
(vii) any combination of persons contemplated in para-
graphs (i) to (vi);
(b) if the total contemplated acquisition cost of the securities,
for any single addressee acting as principal, is equal to or
greater than the amount prescribed in terms of subsection
(2) (a);
(c) if it is a non-renounceable offer made only to—
(i) existing holders of the company’s securities; or
(ii) persons related to existing holders of the company’s
securities; or
(d) if it is a rights offer that satisfies the prescribed require-
ments, and—
(i) an exchange has granted or has agreed to grant a
listing for the securities that are the subject of the
offer; and
(ii) the rights offer complies with any relevant require-
ments of that exchange at the time the offer is made;
(e) if the offer is made only to a director or prescribed officer
of the company, or a person related to a director or pre-
scribed officer, unless the offer is renounceable in favour
of a person who is not a director or prescribed officer of
the company or a person related to a director or prescribed
officer;
(f) if it pertains to an employee share scheme that satisfies the
requirements of section 97; or
(g) if it is an offer, or one of a series of offers, for subscription,
made in writing, and—
(i) no offer in the series is accompanied by or made by
means of an advertisement and no selling expenses
are incurred in connection with any offer in the se-
ries;
(ii) the issue of securities under any one offer in the
series is finalised within six months after the date
that the offer was first made;
(iii) the offer, or series of offers in aggregate, is or are
accepted by a maximum of fifty persons acting as
principals;
A-57 Companies Act No. 71 of 2008
(iv) the subscription price, including any premium, of the
securities issued in respect of the series of offers,
does not exceed, in aggregate, the amount prescribed
in terms of subsection (2) (a); and
(v) no similar offer, or offer in a series of offers, has
been made by the company within the period pre-
scribed in terms of subsection (2) (b) immediately
before the offer, or first of a series of offers, as the
case may be.
(2) The Minister, by notice in the Gazette, may prescribe—
(a) a value of not less than R100 000, to be the minimum
value for the purposes of subsection (1) (b) and the maxi-
mum value for the purposes of subsection (1) (g) (iv); and
(b) a minimum period for the purposes of subsection
(1) (g) (v), which must not be less than six months.
97. Standards for qualifying employee share schemes.—
(1) An employee share scheme qualifies for exemptions contem-
plated in sections 41 (2) (d), 44 (3) (a) (i) or 45 (3) (a) (i) or other-
wise contemplated in this Chapter, if—
(a) the company has—
(i) appointed a compliance officer for the scheme to be
accountable to the directors of the company;
(ii) states in its annual financial statements the number
of specified shares that it has allotted during that fi-
nancial year in terms of its employee share scheme;
and
(b) the compliance officer has complied with the requirements
of subsection (2).
[Sub-s. (1) amended by s. 59 (a) of Act No. 3 of 2011.]
(2) A compliance officer who is appointed in respect of any em-
ployee share scheme—
(a) is responsible for the administration of that scheme;
(b) must provide a written statement to any employee who
receives an offer of specified shares in terms of that em-
ployee scheme, setting out—
(i) full particulars of the nature of the transaction,
including the risks associated with it;
(ii) information relating to the company, including its
latest annual financial statements, the general nature
of its business and its profit history over the last
three years; and
(iii) full particulars of any material changes that occur in
respect of any information provided in terms of sub-
paragraph (i) or (ii);
(c) must ensure that copies of the documents containing the
information referred to in paragraph (b) are filed within
20 business days after the employee share scheme has been
established; and
[Para. (c) substituted by s. 59 (b) of Act No. 3 of 2011 (English only).]
(d) must file a certificate within 60 business days after the end
of each financial year, certifying that the compliance of-
ficer has complied with the obligations in terms of this sec-
tion during the past financial year.
[Para. (d) substituted by s. 59 (b) of Act No. 3 of 2011 (English only).]
98. Advertisements relating to offers.—(1) As an alternative
to any other manner of making or presenting an offer to the public,
such an offer may be made or presented by way of an advertisement
that—
(a) satisfies all of the requirements of this Act with respect to
a registered prospectus; and
(b) is subject to every provision of this Act relating to the
making of a prospectus.
(2) In addition to making or presenting an offer to the public by
publishing a prospectus, such an offer may be drawn to the attention
of the public by an advertisement, but any such advertisement—
(a) must include a statement—
(i) clearly stating that it is not a prospectus; and
ss 96–99
(ii) indicating where and how a person may obtain a
copy of the full registered prospectus relating to that
offer;
(b) must not contain any untrue statement or, by express
statement, omission or reasonable implication, be such as
would reasonably mislead a person reading the advertise-
ment—
(i) to believe that the advertisement is a prospectus; or
(ii) as to any material particular addressed in the pro-
spectus relating to that offer; and
(c) is subject to sections 102 to 111, read with the changes
required by the context.
(3) An advertisement drawing attention to an offer to the public,
as contemplated in subsection (2)—
(a) that satisfies the requirements of subsection (2) (a) and (b)
is not required to be filed, or registered with an exchange;
or
[Para. (a) substituted by s. 60 of Act No. 3 of 2011.]
(b) that does not satisfy all of the requirements set out in
subsection (2) (a) and (b) will, despite any statement to the
contrary contained in the advertisement, be regarded as
having been intended to be a prospectus issued by the per-
son responsible for publishing or disseminating the adver-
tisement, and is subject to every provision of this Act
relating to such a prospectus.
[Para. (b) substituted by s. 60 of Act No. 3 of 2011.]
99. General restrictions on offers to public.—(1) A person
must not offer to the public any securities of any person unless that
second person—
(a) is a company; and
(b) in the case of a foreign company, a copy of its Memoran-
dum of Incorporation or comparable governing document,
and a list of the names and addresses of its directors, has
been filed within 90 business days before the offer to the
public is made.
[Para. (b) substituted by s. 61 of Act No. 3 of 2011.]
(2) A person must not make an initial public offering unless that
offer is accompanied by a registered prospectus.
(3) Except with respect to securities that are the subject of a
company’s initial public offering, a person must not make a—
(a) primary offer to the public of any—
(i) listed securities of a company, otherwise than in
accordance with the requirements of the relevant ex-
change; or
(ii) unlisted securities of a company, unless the offer is
accompanied by a registered prospectus that satisfies
the requirements of section 100; or
(b) secondary offer to the public of any securities of a com-
pany, unless the offer satisfies the requirements of sec-
tion 101.
(4) A person must not issue, distribute, deliver or cause to be
issued, distributed or delivered a letter of allocation unless it is
accompanied by all documents that are required, and have been—
(a) filed, in the case of unlisted securities; or
(b) approved by the relevant exchange, in the case of listed
securities.
(5) Subject to subsection (6), a person must not issue, distribute
or deliver or cause to be issued, distributed or delivered, any form of
application in respect of securities of a company, unless the form—
(a) is accompanied by—
(i) a registered prospectus in the case of a primary
offering; or
(ii) a written statement that satisfies the requirements of
section 101, in the case of a secondary offering; and
(b) bears on the face of it the date on which the prospectus in
respect of those securities was filed.
ss 99–101 Auditing: Legislation and Standards
(6) Subsection (5) does not apply if the form of application was
issued either—
(a) in connection with a genuine invitation to enter into an
underwriting agreement with respect to the securities; or
(b) in relation to securities that were not offered to the public.
(7) Despite anything contained in a company’s Memorandum of
Incorporation, the company may exclude from any rights offer any
category of holders of the company’s securities who are not resident
within the Republic—
(a) if the Commission has approved that exclusion in advance,
on application by the company in the prescribed manner
and form on the grounds that the number of those persons
is insignificant relative to—
(i) the number of existing holders of the company’s
securities who are resident within the Republic; and
(ii) the administrative cost and inconvenience of extend-
ing the rights offer to them; and
(b) subject to any conditions attached to the approval contem-
plated in paragraph (a).
(8) A person must not issue a prospectus or a document that
purports to be a prospectus, or a document that may reasonably be
misapprehended to be intended as a prospectus, unless it is a
registered prospectus.
(9) A prospectus may not be registered unless the requirements
of this Act have been complied with and it has been filed for
registration, together with any prescribed documents, within 10
business days after the date of that prospectus.
(10) As soon as the Commission has registered a prospectus, it
must send notice of the registration to the person who filed the
prospectus for registration.
(11) A prospectus may not be issued more than three months
after the date of its registration, and if a prospectus is so issued, it is
regarded to be unregistered.
100. Requirements concerning prospectus.—(1) This section
does not apply in respect of listed securities, except listed securities
that are the subject of an initial public offering.
(2) Every prospectus is subject to the requirements and provi-
sions of sections 102 to 111 and, in addition, must—
(a) contain all the information that an investor may reasonably
require to assess—
(i) the assets and liabilities, financial position, profits
and losses, cash flow and prospects of the company
in which a right or interest is to be acquired; and
(ii) the securities being offered and rights attached to
them; and
(b) adhere to the prescribed specifications.
[Sub-s. (2) amended by s. 62 (a) of Act No. 3 of 2011.]
(3) The date of registration of a prospectus is the date of the issue
of the prospectus unless the contrary is proven.
(4) A prospectus must not be registered unless there is attached to
it—
(a) a copy of any material agreement as prescribed; or
(b) in the case of an unwritten agreement, a memorandum
giving full particulars of the agreement.
(5) If any part of an agreement contemplated in subsection (4) is
in a language that is not an official language, a certified translation,
in an official language, of that part must be attached to the agree-
ment.
(6) A prospectus containing a statement to the effect that the
whole or any portion of the issue of the securities offered to the
public has been or is being underwritten may not be registered until
a copy of the underwriting agreement has been filed, together with a
sworn declaration stating that to the best of the deponent’s
knowledge and belief the underwriter is and will be in a position to
carry out the obligations contemplated in the agreement even if no
shares are being applied for.
(7) A declaration contemplated in subsection (6) must be sworn
by the person named as underwriter or, if the underwriter is a
A-58
company, by each of two directors of that company, or if it has only
one director, by that director.
(8) If an offer is made in respect of which no prospectus is re-
quired by this Act, the copy of the agreement and sworn declaration
referred to in subsection (6) must be filed not later than the date of
the proposed offer of shares.
(9) The Commission, or an exchange in the case of listed securi-
ties, on application may allow required information to be omitted
from a prospectus, if the Commission or exchange is satisfied—
(a) that publication of the information would be unnecessarily
burdensome for the applicant, seriously detrimental to the
company whose securities are the subject of the prospec-
tus, or against public interest; and
(b) that users will not be unduly prejudiced by the omission.
(10) An application under subsection (9) must be in writing and
accompanied by the prescribed fee.
(11) As long as an initial public offering or other primary offer-
ing to the public of unlisted securities remains open, any person
responsible for information in the prospectus must, when that person
becomes aware of it—
(a) correct any error;
(b) report on any new matter; and
(c) report on any change of a matter included in the prospec-
tus,
provided these are relevant or material in terms of this Chapter.
(12) A correction or report under subsection (11) must be regis-
tered as a supplement to the prospectus, simultaneously published to
known recipients of the prospectus and included in future distribu-
tions of the prospectus.
(13) If a correction or report has been published, as contemplated
in subsections (11) and (12)—
(a) any person who subscribed for the issue of shares as a
result of the offer, before the date of that publication, may
withdraw the subscription by written notice within 20
business days after the date of publication;
(b) the offeror, upon receipt of a notice in terms of paragraph
(a), may either—
(i) accept the withdrawal, and restore to the person any
consideration already paid in respect of the subscrip-
tion; or
(ii) apply to the court for an order in terms of paragraph
(c); and
(c) the court, on an application in terms of paragraph (b) (ii),
may make any order that is just and equitable in the cir-
cumstances including, but not limited to, an order—
(i) negating the right of the subscriber to withdraw the
offer; or
(ii) to reverse any transaction, or restore any considera-
tion paid or benefit received by any person in terms
of the offer and subscription.
[Para. (c) amended by s. 62 (b) of Act No. 3 of 2011 (English only).]
101. Secondary offers to public.—(1) This section does not
apply in respect of securities that are—
(a) listed on an exchange; or
(b) in respect of which an exchange has granted permission to
deal.
(2) Subject only to subsection (3), a person making a secondary
offering of the securities of a company must ensure that the offer is
accompanied by either—
(a) the registered prospectus that accompanied the primary
offering of those securities, together with any revisions re-
quired to address changes in any material matter since the
date the prospectus was registered; or
(b) a written statement that satisfies the requirements of
subsections (4) to (6).
A-59 Companies Act No. 71 of 2008
(3) Subsection (2) does not apply—
(a) if the offer is made or the material is published—
(i) by a person acting in the capacity of an executor or
administrator of a deceased estate or a trustee of an
insolvent estate or a liquidator or trustee referred to
in the Administration of Estates Act, 1965 (Act
No. 66 of 1965); or
(ii) for the purpose of a sale in execution or by public
auction or by public tender.
(4) If an offer contemplated in this section is in respect of secur-
ities of a public company, a person publishing or making the offer
must—
(a) file a copy of the written statement for registration before it
is issued, distributed or published; and
(b) not issue, distribute or publish the statement more than
three months after the date on which it is registered.
(5) The written statement referred to in subsection (3) must be
dated and signed by—
(a) the person making the offer or issuing, distributing or
publishing the material; and
(b) if that person is a company, by every director of the
company.
(6) The written statement referred to in subsection (3) must—
(a) not contain any matter other than the particulars required
by this section;
(b) not be in characters smaller or less legible than any
characters used in—
(i) the written offer, if any; or
(ii) any document that accompanies the statement;
(c) be accompanied by a copy of the last annual financial
statements of the company, together with any subsequent
interim report or provisional annual financial statements of
that company; and
(d) contain particulars with respect to the following matters—
(i) whether the person making the offer is acting as
principal or agent and, if as agent—
(aa) the name of the principal;
(bb) an address in the Republic where that princi-
pal can be served with process; and
(cc) the nature and extent of the remuneration
received or receivable by the agent for the
services provided;
(ii) the date on which and the country in which the
company was incorporated and the address of its
registered office in the Republic or, if there is no
such address, the address of its principal office out-
side the Republic;
(iii) the classes and number of securities in each class
that have been authorised, and with respect to each
class of securities—
(aa) the preferences, rights, limitations and other
terms associated with the class, with respect to
capital, dividends and voting;
(bb) the number of securities that have been issued
for cash, and the total cash consideration re-
ceived by the company for those issued secu-
rities of that class; and
(cc) the number of securities that have been issued
for consideration other than cash, and the val-
ue of the consideration received by the com-
pany for those issued securities of that class;
(iv) the dividends, if any, paid by the company on each
class of securities during each of the five financial
years immediately preceding the offer, and if no div-
idend has been paid in respect of securities of any
particular class during any of those years, a state-
ment to that effect;
ss 101–103
(v) the total amount of any securities other than shares
issued by the company and outstanding at the date of
the statement, together with the rate of interest paya-
ble thereon;
(vi) the names and addresses of the directors of the
company;
(vii) whether or not the securities are listed on an ex-
change, or permission to deal in those securities has
been granted by an exchange, other than that re-
ferred to in subsection (1), and—
(aa) if so, a statement naming that exchange; or
(bb) if not, a statement that they are not so listed
and that no such permission has been granted;
[Sub-para. (vii) substituted by s. 63 of Act No. 3 of 2011.]
(viii) if the offer relates to units, particulars of the names
and addresses of the persons in whom the securities
represented by the units are vested, the date and the
parties to any document defining the terms on which
those securities are held, and an address in the Re-
public where that document or a copy of it can be in-
spected;
(ix) the dates on which and the prices at which the
securities offered were originally issued by the com-
pany, and were acquired by the person making the
offer or by that person’s principal, giving the reasons
for any difference between those prices and the
prices at which the securities are being offered;
(x) if any securities were issued by the company as
partly paid-up shares under the Companies Act,
1973 (Act No. 61 of 1973), to what extent they are
paid up; and
(xi) the date of registration of the written statement by
the Commission.
(7) In subsection (6), the expression “company” refers to the
company that issued the relevant securities.
102. Consent to use of name in prospectus.—(1) In any pro-
spectus relating to securities of a company, a person must not—
(a) name a second person as a director or proposed director of
that company unless, before the registration of that pro-
spectus—
(i) in the case of a company incorporated in the Repub-
lic, the second person consented in writing to act as
a director before the prospectus was filed, and has
not withdrawn the consent; and
(ii) the prescribed return reflecting the relevant particu-
lars in regard to that second person has been filed; or
[Sub-para. (ii) substituted by s. 64 (b) of Act No. 3 of 2011.]
(b) include any statement made by an expert, or reference to
any statement purporting to be made by an expert, un-
less—
(i) the expert consented in writing to the use of that
statement before the prospectus was filed, and has
not withdrawn the consent;
(ii) the written consent is endorsed on or attached to the
copy of the filed prospectus; and
(iii) the prospectus includes a statement that the expert
has consented to the use of the statement and has not
withdrawn that consent.
[Sub-s. (1) amended by s. 64 (a) of Act No. 3 of 2011.]
(2) A prospectus must not name any person as the auditor, attor-
ney, banker or broker of a company, unless it is accompanied by the
written consent of the named person, agreeing to—
(a) be named to act in the stated capacity; and
(b) the use of that person’s name in the prospectus.
[Para. (b) substituted by s. 64 (c) of Act No. 3 of 2011.]
103. Variation of agreement mentioned in prospectus.—
(1) Subject to subsection (2), within one year after the date of filing
a prospectus, a company must not vary or agree to vary any material
ss 103–105 Auditing: Legislation and Standards
terms of an agreement referred to in the prospectus, other than in the
ordinary course of business.
(2) A variation in the terms of an agreement, as contemplated in
subsection (1), may be made or agreed by a company only if—
(a) the variation was contemplated and set out in the prospec-
tus; or
(b) the specific terms of the variation are authorised or ratified
by an ordinary resolution adopted at a general shareholders
meeting.
104. Liability for untrue statements in prospectus.—(1) If
securities are offered to the public for subscription or sale pursuant
to a prospectus, every—
(a) person who becomes a director between the issuing of the
prospectus and the holding of the first general shareholders
meeting at which directors are elected or appointed;
(b) person who has consented to be named in the prospectus as
a director, or as having agreed to become a director either
immediately or after an interval of time;
(c) promoter of the company; or
(d) person who—
(i) authorised the issue of the prospectus or, under this
Act, is regarded as having authorised the issue of the
prospectus; or
(ii) made that offer to the public,
is liable to compensate any person who acquired securities on the
faith of the prospectus for any loss or damage the person may have
sustained as a result of any untrue statement in the prospectus, or in
any report or memorandum appearing on the face of, issued with, or
incorporated by reference in, the prospectus.
[Sub-s. (1) substituted by s. 65 (a) of Act No. 3 of 2011.]
(2) The liability contemplated in subsection (1) is in addition to
the liability of a director of the company, as set out in section
77 (3) (d) (ii).
(3) Liability contemplated in this section does not attach to a
person if—
(a) with respect to every untrue statement not purporting to be
made on the authority of an expert or of a public official
document or statement, that person had reasonable grounds
to believe, and did up to the time of the allotment of the
securities or the acceptance of the offer, as the case may
be, believe that the statement was true;
(b) with respect to every untrue statement purporting to be a
statement by an expert or contained in what purports to be
a copy of or extract from the report or valuation of an ex-
pert—
(i) the untrue statement fairly represented the statement
or was a correct and fair copy of or extract from the
report or valuation; and
(ii) the person had reasonable grounds to believe and did
up to the time of the issue of the prospectus believe
that the expert who made the statement was compe-
tent to make it, and consented, as required by this
Act, to the issue of the prospectus or the making of
the offer and had not withdrawn that consent—
(aa) before the prospectus was filed; or
(bb) to that person’s knowledge, before any
allotment under the prospectus, or before the
acceptance of the offer;
(c) any untrue statement purporting to be a statement made by
an official person or contained in what purports to be a
copy of or extract from a public official document was a
correct and a fair representation of the statement or copy of
or extract from the document;
(d) that person consented to become a director of the com-
pany, but subsequently withdrew that consent before the
issue of the prospectus, and it was issued without that per-
son’s consent;
[Para. (d) substituted by s. 65 (b) of Act No. 3 of 2011.]
A-60
(e) the prospectus was issued without the knowledge or
consent of that person and, on becoming aware of its issue,
that person forthwith gave reasonable public notice that it
was issued without the knowledge or consent of that per-
son; or
(f) after the issue of the prospectus and before allotment or
acceptance thereunder, that person, on becoming aware of
any untrue statement in it, withdrew any consent to the
prospectus and gave reasonable public notice of the with-
drawal and of the reason for it.
(4) If a prospectus contains the name of a person as a director of
the company, or as having agreed to become a director of that
company, and that person has not consented to becoming a director,
or has withdrawn consent before the issue of the prospectus, and has
not authorised or consented to the issue of the prospectus, the
directors of the company, except any without whose knowledge or
consent the prospectus was issued—
(a) are liable to the extent set out in section 77 (3) (d) (ii); and
(b) any other person who issued the prospectus or authorised
the issue of it, is liable, together with the directors, to in-
demnify any person incorrectly named as a director against
any damage, cost or expense arising as a result of that per-
son having been so named in the prospectus, or incurred in
defending against any action or legal proceedings brought
in respect of having been so named in the prospectus.
(5) Subsection (4), read with the changes required by the context,
applies equally in respect of any other person whose consent is
required in terms of this Act in connection with any thing contained
in a prospectus, and who has either—
(a) not given that consent; or
(b) has withdrawn it before the issue of the prospectus.
(6) A person who, by reason of—
(a) being a director, or having been named as a director;
(b) having agreed to become a director;
(c) having authorised the issue of the prospectus; or
(d) having become a director between the issue of the prospec-
tus and the holding of the first general shareholders meet-
ing at which directors are elected or appointed,
has satisfied any liability under this section by making a payment to
another person, may recover a contribution, as in cases of contract,
from any other person, who, if sued separately, would have been
liable to make the same payment, unless the person who has satis-
fied such liability was, and that other person was not, guilty of
fraudulent misrepresentation.
105. Liability of experts and others.—(1) If a person has
consented to the use of their name, or the inclusion of any material
in a prospectus, as contemplated in this Chapter, that consent does
not make the person liable as one who has authorised the issue of
the prospectus under section 104 (1) (d), either—
(a) to compensate persons purchasing on the faith of the
prospectus, except in respect of any untrue statement pur-
porting to be made by that person as an expert; or
(b) to indemnify any person against liability under section
104 (6).
[Sub-s. (1) substituted by s. 66 of Act No. 3 of 2011.]
(2) Despite subsection (1), a person contemplated in that subsec-
tion is liable under section 104 in respect of any untrue statement
purporting to be made by that person as an expert unless—
(a) the expert person withdrew that consent in writing before
the prospectus was filed for registration;
(b) between the filing of the prospectus for registration and
any allotment in terms of it to a complainant, that expert
person became aware of the untrue statement, withdrew
the consent in writing and gave reasonable public notice of
the withdrawal and of the reason for it; or
(c) the expert person—
(i) was competent to make the statement; and
A-61 Companies Act No. 71 of 2008
(ii) had reasonable ground to believe and did up to the
time of the allotment of the securities or the ac-
ceptance of the offer, as the case may be, believe
that the statement was true.
(3) The defences available to a person in this subsection are in
lieu of any applicable defence available in terms of section 104 (3).
106. Responsibility for untrue statements in prospectus.—
(1) If a prospectus contains a statement that is untrue, every person
referred to in section 104 (1) or (2) is equally responsible in terms of
the enforcement provisions of this Act, for that untrue statement,
subject to the provisions of subsections (2) and (3).
(2) If—
(a) a published prospectus contains or is accompanied by a
report of an expert, or an extract from such a report;
(b) the report or extract contains a statement that is untrue; and
(c) the expert has consented to the inclusion of the statement
in the prospectus in the form and context in which it ap-
pears,
the expert person is solely responsible for that statement, subject to
the provisions of subsection (3).
(3) A person is not responsible for an untrue statement contem-
plated in this section if—
(a) the untrue statement was immaterial; or
(b) liability for the untrue statement does not attach to that
person for any reason set out in section 104 (3).
107. Time limit for allotment or acceptance.—A company that
has offered securities to the public must not allot any of those
securities or accept any subscription for any of those securities,
more than four months after filing the prospectus for that offer.
108. Restrictions on allotment.—(1) A company that has of-
fered securities to the public must not allot any of those securities or
accept any subscription for any of those securities unless—
(a) the subscription has been made on an application form that
has been attached to or accompanied by a prospectus; or
(b) it is shown that the applicant, at the time of the application,
was in fact in possession of a copy of the prospectus or was
aware of its contents.
(2) A company that has offered securities to the public must not
allot any of those securities unless the amount stated in that prospec-
tus as the minimum amount which in the opinion of the directors of
the company concerned must be raised by the issue of securities in
order to provide for the matters prescribed to be covered by mini-
mum subscription and the amount so stated has been paid to and
received by the company.
(3) For the purposes of subsection (2)—
(a) an amount stated in any cheque received by the company
must not be regarded to have been paid to it until the
amount of the cheque has been unconditionally credited to
its account with its bankers; and
(b) any amount paid to and received by the company must be
reduced by the amount of any money, bill, promissory note
or cheque that it has at any time delivered to the payer oth-
erwise than in discharge of a debt bona fide due by the
company.
(4) The minimum amount contemplated in subsection (2) must be
reckoned exclusively of any amount payable otherwise than in cash.
(5) Until the minimum amount contemplated in subsection (2)
has been made up, any amount paid on an application contemplated
in this section must—
(a) be paid into a separate account with a banking institution
registered under the Banks Act; and
(b) not be used or made available for the purposes of the
company or for the satisfaction of its debts.
(6) If the circumstances contemplated in subsection (2) have not
been realised within 40 business days after the issue of the prospectus,
ss 105–111
all amounts received from applicants must be repaid to them
promptly without interest.
(7) If any money required to be repaid to an applicant in terms of
subsection (6) has not been repaid within 55 business days after the
issue of the prospectus, each director or prescribed officer of the
company is jointly and severally liable, with all other such directors
and prescribed officers of the company, to repay that money with
interest, in accordance with the Prescribed Rate of Interest Act, 1975
(Act No. 55 of 1975), from the expiration of the 55th business day,
unless the default in payment was not due to any misconduct or
negligence on the part of that director or prescribed officer.
[Sub-s. (7) substituted by s. 67 of Act No. 3 of 2011.]
109. Voidable allotment.—(1) If an allotment made by a com-
pany to an applicant, or the acceptance of an offer made by an
applicant, is in contravention of section 108 (2), and the relevant
offer was not subsequently subscribed to the minimum extent
contemplated in that section—
(a) that allotment is voidable at the instance of the applicant
concerned, irrespective of whether the company concerned
may be in the course of being wound up; and
[Para. (a) substituted by s. 68 of Act No. 3 of 2011 (English only).]
(b) every director of the company concerned and, if the offeror
is a company, every director of that company, is liable to
the extent set out in section 77 (3) (e) (vii), if the allotment
or acceptance is declared void under paragraph (a).
[Para. (b) substituted by s. 68 of Act No. 3 of 2011.]
(2) Proceedings to recover any loss, damages or costs contem-
plated in this section may not be commenced after the earlier of—
(a) 20 business days after the applicant discovers the contra-
vention; or
(b) three years after the date of the relevant allotment or
acceptance.
110. Minimum interval before allotment or acceptance.—
(1) No allotment of securities or acceptance of an offer in respect of
securities of a company may be made in pursuance of a prospectus,
and no proceedings may be taken on applications made in pursuance
of a prospectus, until the beginning of the third day after that on
which the prospectus is first issued or such later time, if any,
specified in the prospectus.
(2) The reference in subsection (1) to the day on which a pro-
spectus was first issued—
(a) is a reference to the day on which it is first issued as a
newspaper advertisement; or
(b) if it is not issued as a newspaper advertisement before the
third day after the day on which it is first issued in any
other manner, is a reference to the day on which it is first
issued in that other manner.
(3) A contravention of subsection (1) does not affect the validity
of an allotment or acceptance.
111. Conditional allotment if prospectus states securities to
be listed.—(1) A prospectus containing a statement to the effect
that application has been or will be made for permission for the
securities offered thereby to be listed on an exchange must not be
issued unless—
(a) an application has in fact been made in accordance with
the requirements of the relevant exchange on or before the
date of issue of that prospectus; and
(b) the prospectus names the particular exchange to which the
application has been made.
(2) Any allotment of securities in pursuance of a prospectus
referred to in subsection (1) is subject to the condition that—
(a) the application contemplated in subsection (1) (a) is
granted; or
(b) an appeal against a refusal of such an application is upheld.
ss 112–114 Auditing: Legislation and Standards
CHAPTER 5
FUNDAMENTAL TRANSACTIONS,
TAKEOVERS AND OFFERS
Part A
Approval for certain fundamental transactions
112. Proposals to dispose of all or greater part of assets or
undertaking.—(1) This section and section 115 do not apply to a
proposal to dispose of all or the greater part of the assets or under-
taking of a company, if that disposal would constitute a transac-
tion—
(a) that is pursuant to or contemplated in a business rescue
plan adopted in accordance with Chapter 6;
(b) between a wholly-owned subsidiary and its holding
company; or
(c) between or among—
(i) two or more wholly-owned subsidiaries of the same
holding company; or
(ii) a wholly-owned subsidiary of a holding company,
on the one hand, and its holding company and one or
more wholly-owned subsidiaries of that holding
company, on the other hand.
(2) A company may not dispose of all or the greater part of its
assets or undertaking unless—
(a) the disposal has been approved by a special resolution of
the shareholders, in accordance with section 115; and
(b) the company has satisfied all other requirements set out in
section 115, to the extent those requirements are applicable
to such a disposal by that company.
(3) A notice of a shareholders meeting to consider a resolution to
approve a disposal contemplated in subsection (2) (a) must—
(a) be delivered within the prescribed time, and in the pre-
scribed manner, to each shareholder of the company, sub-
ject to section 62 read with any changes required by the
context;
[Para. (a) substituted by s. 69 (a) of Act No. 3 of 2011.]
(b) include or be accompanied by a written summary of—
(i) the precise terms of the transaction or series of
transactions, to be considered at the meeting; and
(ii) the provisions of sections 115 and 164,
in a manner that satisfies the prescribed standards.
(4) Any part of the undertaking or assets of a company to be
disposed of, as contemplated in this section, must be fairly valued,
as calculated in the prescribed manner, as at the date of the proposal,
which date must be determined in the prescribed manner.
[Sub-s. (4) substituted by s. 69 (b) of Act No. 3 of 2011.]
(5) A resolution contemplated in subsection (2) (a) is effective
only to the extent that it authorises a specific transaction.
[Sub-s. (5) substituted by s. 69 (b) of Act No. 3 of 2011.]
113. Proposals for amalgamation or merger.—(1) Two or
more profit companies, including holding and subsidiary companies,
may amalgamate or merge if, upon implementation of the amalgam-
ation or merger, each amalgamated or merged company will satisfy
the solvency and liquidity test.
(2) Two or more companies proposing to amalgamate or merge
must enter into a written agreement setting out the terms and means
of effecting the amalgamation or merger and, in particular, setting
out—
(a) the proposed Memorandum of Incorporation of any new
company to be formed by the amalgamation or merger;
(b) the name and identity number of each proposed director of
any proposed amalgamated or merged company;
(c) the manner in which the securities of each amalgamating
or merging company are to be converted into securities of
any proposed amalgamated or merged company, or ex-
changed for other property;
A-62
(d) if any securities of any of the amalgamating or merging
companies are not to be converted into securities of any
proposed amalgamated or merged company, the considera-
tion that the holders of those securities are to receive in
addition to or instead of securities of any proposed amal-
gamated or merged company;
(e) the manner of payment of any consideration instead of the
issue of fractional securities of an amalgamated or merged
company or of any other juristic person the securities of
which are to be received in the amalgamation or merger;
(f) details of the proposed allocation of the assets and liabili-
ties of the amalgamating or merging companies among the
companies that will be formed or continue to exist when
the amalgamation or merger agreement has been imple-
mented;
(g) details of any arrangement or strategy necessary to com-
plete the amalgamation or merger, and to provide for the
subsequent management and operation of the proposed
amalgamated or merged company or companies; and
(h) the estimated cost of the proposed amalgamation or
merger.
(3) If the securities of one of the amalgamating or merging com-
panies are held by or on behalf of another of the amalgamating or
merging companies, the agreement required by subsection (2) must
provide for the cancellation of those securities when the amalgama-
tion or merger becomes effective, without any repayment of capital
in respect thereof, and no provision may be made in the agreement
for the conversion of those securities into securities of an amalga-
mated or merged company.
(4) Subject to subsection (6), the board of each amalgamating or
merging company—
(a) must consider whether, upon implementation of the
agreement, each proposed amalgamated or merged compa-
ny will satisfy the solvency and liquidity test; and
(b) if the board reasonably believes that each proposed
amalgamated or merged company will satisfy the solvency
and liquidity test, it may submit the agreement for consid-
eration at a shareholders meeting of that amalgamating or
merging company, in accordance with section 115.
(5) Subject to subsection (6), a notice of a shareholders meeting
contemplated in subsection (4) (b) must be delivered to each share-
holder of each respective amalgamating or merging company, and
must include or be accompanied by a copy or summary of—
(a) the amalgamation or merger agreement; and
(b) the provisions of sections 115 and 164 in a manner that
satisfies prescribed standards.
(6) The requirements of subsections (4) and (5) do not apply to a
company engaged in business rescue proceedings, in respect of any
transaction that is pursuant to or contemplated in the company’s
business rescue plan that has been adopted in accordance with
Chapter 6.
114. Proposals for scheme of arrangement.—(1) Unless it is
in liquidation or in the course of business rescue proceedings in
terms of Chapter 6, the board of a company may propose and,
subject to subsection (4) and approval in terms of this Part, imple-
ment any arrangement between the company and holders of any
class of its securities, by way of, among other things—
(a) a consolidation of securities of different classes;
(b) a division of securities into different classes;
(c) an expropriation of securities from the holders;
(d) exchanging any of its securities for other securities;
(e) a re-acquisition by the company of its securities; or
(f) a combination of the methods contemplated in this subsec-
tion.
[Sub-s. (1) amended by s. 70 (a) of Act No. 3 of 2011.]
A-63 Companies Act No. 71 of 2008
(2) The company must retain an independent expert, who meets
the following requirements, to compile a report as required by
subsection (3)—
(a) The person to be retained must be—
(i) qualified, and have the competence and experience
necessary to—
(aa) understand the type of arrangement proposed;
(bb) evaluate the consequences of the arrangement;
and
(cc) assess the effect of the arrangement on the
value of securities and on the rights and inter-
ests of a holder of any securities, or a creditor
of the company; and
(ii) able to express opinions, exercise judgment and
make decisions impartially.
(b) The person to be retained must not—
(i) have any other relationship with the company or
with a proponent of the arrangement, such as would
lead a reasonable and informed third party to con-
clude that the integrity, impartiality or objectivity of
that person is compromised by that relationship;
(ii) have had any relationship contemplated in subpara-
graph (i) within the immediately preceding two
years; or
(iii) be related to a person who has or has had a relation-
ship contemplated in subparagraph (i) or (ii).
[Sub-s. (2) amended by s. 70 (b) of Act No. 3 of 2011.]
(3) The person retained in terms of subsection (2) must prepare a
report to the board, and cause it to be distributed to all holders of the
company’s securities, concerning the proposed arrangement, which
must, at a minimum—
(a) state all prescribed information relevant to the value of the
securities affected by the proposed arrangement;
(b) identify every type and class of holders of the company’s
securities affected by the proposed arrangement;
(c) describe the material effects that the proposed arrangement
will have on the rights and interests of the persons men-
tioned in paragraph (b);
(d) evaluate any material adverse effects of the proposed
arrangement against—
(i) the compensation that any of those persons will
receive in terms of that arrangement; and
(ii) any reasonably probable beneficial and significant
effect of that arrangement on the business and pro-
spects of the company;
(e) state any material interest of any director of the company
or trustee for security holders;
[Para. (e) substituted by s. 70 (c) of Act No. 3 of 2011.]
(f) state the effect of the proposed arrangement on the interest
and person contemplated in paragraph (e); and
(g) include a copy of sections 115 and 164.
(4) Section 48 applies to a proposed arrangement contemplated in
this section to the extent that the arrangement would result in any re-
acquisition by a company of any of its previously issued securities.
[Sub-s. (4) inserted by s. 70 (d) of Act No. 3 of 2011.]
115. Required approval for transactions contemplated in
Part.—(1) Despite section 65, and any provision of a company’s
Memorandum of Incorporation, or any resolution adopted by its
board or holders of its securities, to the contrary, a company may not
dispose of, or give effect to an agreement or series of agreements to
dispose of, all or the greater part of its assets or undertaking,
implement an amalgamation or a merger, or implement a scheme of
arrangement, unless—
(a) the disposal, amalgamation or merger, or scheme of
arrangement—
(i) has been approved in terms of this section; or
ss 114–115
(ii) is pursuant to or contemplated in an approved
business rescue plan for that company, in terms of
Chapter 6; and
(b) to the extent that Parts B and C of this Chapter, and the
Takeover Regulations, apply to a company that proposes
to—
(i) dispose of all or the greater part of its assets or
undertaking;
(ii) amalgamate or merge with another company; or
(iii) implement a scheme of arrangement,
the Panel has issued a compliance certificate in respect of
the transaction, in terms of section 119 (4) (b), or exempt-
ed the transaction in terms of section 119 (6).
[Para. (b) substituted by s. 71 (a) of Act No. 3 of 2011.]
(2) A proposed transaction contemplated in subsection (1) must
be approved—
(a) by a special resolution adopted by persons entitled to
exercise voting rights on such a matter, at a meeting called
for that purpose and at which sufficient persons are present
to exercise, in aggregate, at least 25% of all of the voting
rights that are entitled to be exercised on that matter, or
any higher percentage as may be required by the com-
pany’s Memorandum of Incorporation, as contemplated in
section 64 (2); and
[Para. (a) substituted by s. 71 (b) of Act No. 3 of 2011.]
(b) by a special resolution, also adopted in the manner re-
quired by paragraph (a), by the shareholders of the com-
pany’s holding company if any, if—
(i) the holding company is a company or an external
company;
(ii) the proposed transaction concerns a disposal of all or
the greater part of the assets or undertaking of the
subsidiary; and
(iii) having regard to the consolidated financial state-
ments of the holding company, the disposal by the
subsidiary constitutes a disposal of all or the greater
part of the assets or undertaking of the holding com-
pany; and
[Sub-para. (iii) substituted by s. 71 (c) of Act No. 3 of 2011.]
(c) by the court, to the extent required in the circumstances
and manner contemplated in subsections (3) to (6).
(3) Despite a resolution having been adopted as contemplated in
subsections (2) (a) and (b), a company may not proceed to imple-
ment that resolution without the approval of a court if—
(a) the resolution was opposed by at least 15% of the voting
rights that were exercised on that resolution and, within
five business days after the vote, any person who voted
against the resolution requires the company to seek court
approval; or
[Para. (a) substituted by s. 71 (d) of Act No. 3 of 2011.]
(b) the court, on an application within 10 business days after
the vote by any person who voted against the resolution,
grants that person leave, in terms of subsection (6), to
apply to a court for a review of the transaction in accord-
ance with subsection (7).
[Para. (b) substituted by s. 71 (d) of Act No. 3 of 2011.]
(4) For the purposes of subsections (2) and (3), any voting rights
controlled by an acquiring party, a person related to an acquiring
party, or a person acting in concert with either of them, must not be
included in calculating the percentage of voting rights—
(a) required to be present, or actually present, in determining
whether the applicable quorum requirements are satisfied;
or
(b) required to be voted in support of a resolution, or actually
voted in support of the resolution.
[Sub-s. (4) substituted by s. 71 (e) of Act No. 3 of 2011.]
ss 115–116 Auditing: Legislation and Standards
(4A) In subsection (4), “act in concert” has the meaning set out in
section 117 (1) (b).
[Sub-s. (4A) inserted by s. 71 (f) of Act No. 3 of 2011.]
(5) If a resolution requires approval by a court as contemplated in
terms of subsection (3) (a), the company must either—
(a) within 10 business days after the vote, apply to the court
for approval, and bear the costs of that application; or
[Para. (a) substituted by s. 71 (g) of Act No. 3 of 2011.]
(b) treat the resolution as a nullity.
(6) On an application contemplated in subsection (3) (b), the
court may grant leave only if it is satisfied that the applicant—
(a) is acting in good faith;
(b) appears prepared and able to sustain the proceedings; and
(c) has alleged facts which, if proved, would support an order
in terms of subsection (7).
(7) On reviewing a resolution that is the subject of an application
in terms of subsection (5) (a), or after granting leave in terms of
subsection (6), the court may set aside the resolution only if—
(a) the resolution is manifestly unfair to any class of holders of
the company’s securities; or
(b) the vote was materially tainted by conflict of interest,
inadequate disclosure, failure to comply with the Act, the
Memorandum of Incorporation or any applicable rules of
the company, or other significant and material procedural
irregularity.
(8) The holder of any voting rights in a company is entitled to
seek relief in terms of section 164 if that person—
(a) notified the company in advance of the intention to oppose
a special resolution contemplated in this section; and
(b) was present at the meeting and voted against that special
resolution.
(9) If a transaction contemplated in this Part has been approved,
any person to whom assets are, or an undertaking is, to be trans-
ferred, may apply to a court for an order to effect—
(a) the transfer of the whole or any part of the undertaking,
assets and liabilities of a company contemplated in that
transaction;
(b) the allotment and appropriation of any shares or similar
interests to be allotted or appropriated as a consequence of
the transaction;
(c) the transfer of shares from one person to another;
(d) the dissolution, without winding-up, of a company, as
contemplated in the transaction;
(e) incidental, consequential and supplemental matters that are
necessary for the effectiveness and completion of the
transaction; or
(f) any other relief that may be necessary or appropriate to
give effect to, and properly implement, the amalgamation
or merger.
116. Implementation of amalgamation or merger.—(1) Sub-
ject to subsection (2), after a resolution approving an amalgamation
or merger has been adopted by each company that is a party to the
agreement—
(a) each of the amalgamating or merging companies must
cause a notice of the amalgamation or merger to be given
in the prescribed manner and form to every known creditor
of that company;
(b) within 15 business days after delivery of a notice required
by paragraph (a), a creditor may seek leave to apply to a
court for a review of the amalgamation or merger only on
the grounds that the creditor will be materially prejudiced
by the amalgamation or merger; and
(c) a court may grant leave contemplated in paragraph (b) only
if it is satisfied that—
(i) the applicant for leave is acting in good faith;
A-64
(ii) if implemented, the amalgamation or merger would
materially prejudice the creditor; and
(iii) there are no other remedies available to the creditor.
[Sub-s. (1) amended by s. 72 (a) of Act No. 3 of 2011.]
(2) Subsection (1) does not apply to a company engaged in busi-
ness rescue proceedings, in respect of any transaction pursuant to or
contemplated in the company’s business rescue plan adopted in
accordance with Chapter 6.
(3) A notice of amalgamation or merger must be filed after the
transaction has satisfied all the applicable requirements set out in
section 115, and—
(a) after the time contemplated in subsection (1) (b), if no
application has been made to the court in terms of that sub-
section; or
(b) in any other case—
(i) after the court has disposed of any proceedings
arising in terms of subsection (1) (b) and (c); and
(ii) subject to the order of the court.
[Sub-s. (3) amended by s. 72 (b) of Act No. 3 of 2011.]
(4) A notice of amalgamation or merger must include—
(a) confirmation that the amalgamation or merger—
(i) has satisfied the requirements of sections 113 and
115;
(ii) has been approved in terms of the Competition Act,
if so required by that Act;
(iii) has been granted the consent of the Minister of
Finance in terms of section 54 of the Banks Act or
obtained the approval of the Registrar of Securities
Services in terms of section 64 of the Financial Mar-
kets Act, 2012, if so required by that Act; and
[Sub-para. (iii) substituted by s. 111 of Act No. 19 of 2012.]
(iv) is not subject to—
(aa) further approval by any regulatory authority;
or
(bb) any unfulfilled conditions imposed by or in
terms of any law administered by a regulatory
authority; and
(b) the Memorandum of Incorporation of any company newly
incorporated in terms of the agreement.
(5) After receiving a notice of amalgamation or merger, the
Commission must—
(a) issue a registration certificate for each company, if any,
that has been newly incorporated in terms of the amalgam-
ation or merger agreement; and
(b) deregister any of the amalgamating or merging companies
that did not survive the amalgamation or merger.
(6) An amalgamation or merger—
(a) takes effect in accordance with, and subject to any condi-
tions set out in the amalgamation or merger agreement;
(b) does not affect any—
(i) existing liability of a party to the agreement, or of a
director of any of the amalgamating or merging
companies, to be prosecuted in terms of any applica-
ble law;
(ii) civil, criminal or administrative action or proceeding
pending by or against an amalgamating or merging
company, and any such proceeding may continue to
be prosecuted by or against any amalgamated or
merged company; or
[Sub-para. (ii) substituted by s. 72 (c) of Act No. 3 of 2011.]
(iii) conviction against, or ruling, order or judgment in
favour of or against, an amalgamating or merging
company, and any such ruling, order or judgment
may be enforced by or against any amalgamated or
merged company.
[Sub-para. (iii) substituted by s. 72 (c) of Act No. 3 of 2011.]
A-65 Companies Act No. 71 of 2008
(7) When an amalgamation or merger agreement has been im-
plemented—
(a) the property of each amalgamating or merging company
becomes the property of the newly amalgamated, or sur-
viving merged, company or companies; and
(b) each newly amalgamated, or surviving merged company is
liable for all of the obligations of every amalgamating or
merging company,
in accordance with the provisions of the amalgamation or merger
agreement, or any other relevant agreement, but in any case subject
to the requirement that each amalgamated or merged company must
satisfy the solvency and liquidity test, and subject to subsection (8),
if it is applicable.
[Sub-s. (7) substituted by s. 72 (d) of Act No. 3 of 2011.]
(8) If, as a consequence of an amalgamation or merger, any prop-
erty that is registered in terms of any public regulation is to be
transferred from an amalgamating or merging company to an
amalgamated or merged company, a copy of the amalgamation or
merger agreement, together with a copy of the filed notice of
amalgamation or merger, constitutes sufficient evidence for the
keeper of the relevant property registry to effect a transfer of the
registration of that property.
(9) If, with respect to a transaction involving a company that is
regulated in terms of the Banks Act or the Financial Markets Act,
2012, there is a conflict between a provision of subsection (7) and a
provision of section 54 of the Banks Act or section 64 of the
Financial Markets Act, 2012 Act, as the case may be, the provisions
of those Acts prevail.
[Sub-s. (9) substituted by s. 111 of Act No. 19 of 2012.]
Part B
Authority of Panel and Takeover Regulations
117. Definitions applicable to this Part, Part C and Takeover
Regulations.—(1) In this Part, Part C, and in the Takeover Regula-
tions—
(a) “acquisition” includes an acquisition by a regulated
company of its own securities as contemplated in section
48, but does not include the return of any securities of a
regulated company to that company pursuant to the exer-
cise of appraisal rights in terms of section 164;
(b) “act in concert” means any action pursuant to an agree-
ment between or among two or more persons, in terms of
which any of them co-operate for the purpose of entering
into or proposing an affected transaction or offer;
(c) “affected transaction” means—
(i) a transaction or series of transactions amounting to
the disposal of all or the greater part of the assets or
undertaking of a regulated company, as contemplat-
ed in section 112, subject to section 118 (3);
(ii) an amalgamation or merger, as contemplated in
section 113, if it involves at least one regulated com-
pany, subject to section 118 (3);
(iii) a scheme of arrangement between a regulated
company and its shareholders, as contemplated in
section 114, subject to section 118 (3);
(iv) the acquisition of, or announced intention to acquire,
a beneficial interest in any voting securities of a reg-
ulated company to the extent and in the circum-
stances contemplated in section 122 (1);
(v) the announced intention to acquire a beneficial
interest in the remaining voting securities of a regu-
lated company not already held by a person or per-
sons acting in concert;
(vi) a mandatory offer contemplated in section 123; or
(vii) compulsory acquisition contemplated in section 124;
(d) “Executive Director” means the person appointed under
section 200;
(e) “holder” includes a person who holds a beneficial interest
in any securities of a regulated company;
ss 116–118
(f) “offer”, when used as a noun, means a proposal of any
sort, including a partial offer, which, if accepted, would re-
sult in an affected transaction other than such a transaction
that is exempted in terms of section 118 (3);
(g) “offer period” means the period from the time when an
announcement is made or ought to have been made, of a
proposed or possible offer until the first closing date or, if
later, the date when the offer becomes or is declared un-
conditional as to acceptances or lapses;
(h) “partial offer” means an offer that, if fully accepted,
would result in the offeror, alone or together with a related
or inter-related person, or a person acting in concert with
any of them, holding less than 100% of the voting securi-
ties of the company whose securities are the subject of the
offer;
(i) “regulated company” means a company to which this
Part, Part C and the Takeover Regulations apply, as deter-
mined in accordance with section 118 (1) and (2); and
(j) “securities” has the meaning referred to in section 1, but
does not include any instrument issued by a regulated
company unless that instrument—
(i) has associated with it the right to vote generally at a
general shareholders meeting; or
(ii) is convertible to a instrument that satisfies the criteria
set out in subparagraph (i).
(2) For the purposes of this Part, Part C and the Takeover Regu-
lations, two or more related or inter-related persons are regarded to
have acted in concert, unless there is satisfactory evidence that they
acted independently in any particular matter.
118. Application of this Part, Part C and Takeover Regula-
tions.—(1) Subject to subsections (2) to (4), this Part, Part C and
the Takeover Regulations apply with respect to an affected transac-
tion or offer involving a profit company or its securities if the
company is—
(a) a public company;
(b) a state-owned company, except to the extent that any such
company has been exempted in terms of section 9; or
(c) a private company, but only if—
(i) the percentage of the issued securities of that
company that have been transferred, other than by
transfer between or among related or inter-related
persons, within the period of 24 months immediately
before the date of a particular affected transaction or
offer exceeds the percentage prescribed in terms of
subsection (2); or
[Sub-para. (i) substituted by s. 73 of Act No. 3 of 2011 (English only).]
(ii) the Memorandum of Incorporation of that company
expressly provides that the company and its securi-
ties are subject to this Part, Part C and the Takeover
Regulations, irrespective of whether the company
falls within the criteria set out in subparagraph (i).
(2) The Minister, after consulting the Panel, may prescribe a
minimum percentage, being not less than 10%, of the issued securi-
ties of a private company which, if transferred within a 24-month
period as contemplated in subsection (1) (c) (i), would bring that
company and its securities within the application of this Part, Part C,
and the Takeover Regulations in terms of that subsection.
(3) Despite the definition of ‘affected transaction’ set out in sec-
tion 117 (1) (c), this Part, Part C and the Takeover Regulations do
not apply to—
(a) a proposal to dispose, or disposal, of all or the greater part
of the assets or undertaking of a regulated company;
(b) a proposed amalgamation or merger involving at least one
regulated company; or
(c) a scheme of arrangement proposed by a regulated com-
pany,
ss 118–121 Auditing: Legislation and Standards
to the extent that any such affected transaction is pursuant to or
contemplated in an approved business rescue plan in terms of
Chapter 6.
(4) If there is a conflict between any provision of this Part, Part
C, or the Takeover Regulations, and any provision of another public
regulation—
(a) the conflicting provisions apply concurrently to the extent
that it is possible to apply and comply with one of the in-
consistent 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 the other public regulation pre-
vail.
(5) A person granted an option to acquire shares with a voting
right in a regulated company is presumed to have acted in concert
with the grantor of the option, unless the voting rights are retained
by the grantor.
(6) A presumption under subsection (5) may be rebutted by evi-
dence to the contrary.
119. Panel regulation of affected transactions.—(1) The
Panel must regulate any affected transaction or offer in accordance
with this Part, Part C and the Takeover Regulations, but without
regard to the commercial advantages or disadvantages of any
transaction or proposed transaction, in order to—
(a) ensure the integrity of the marketplace and fairness to the
holders of the securities of regulated companies;
(b) ensure the provision of—
(i) necessary information to holders of securities of
regulated companies, to the extent required to facili-
tate the making of fair and informed decisions; and
(ii) adequate time for regulated companies and holders
of their securities to obtain and provide advice with
respect to offers; and
(c) prevent actions by a regulated company designed to
impede, frustrate, or defeat an offer, or the making of fair
and informed decisions by the holders of that company’s
securities.
(2) Subject to subsection (6), the Panel must regulate any affect-
ed transaction or offer, and the conduct of the parties in respect of
any such transaction or offer, in a manner that promotes the objects
set out in subsection (1) and, without limiting the generality of that
subsection, ensures—
(a) that no person may enter into an affected transaction unless
that person is ready, able and willing to implement that
transaction;
(b) that all holders of—
(i) any particular class of voting securities of an offeree
regulated company are afforded equivalent treat-
ment; and
(ii) voting securities of an offeree regulated company
are afforded equitable treatment, having regard to
the circumstances;
(c) that no relevant information is withheld from the holders
of relevant securities; and
(d) that all holders of relevant securities—
(i) receive the same information from an offeror, potential
offeror, or offeree regulated company during the
course of an affected transaction, or when an affect-
ed transaction is contemplated; and
(ii) are provided sufficient information, and permitted
sufficient time, to enable them to reach a properly
informed decision.
(3) Subsection (2) (d) is not to be construed or applied to prohib-
it—
(a) the furnishing of information in confidence by an offeree
company to a bona fide potential offeror or vice versa; or
A-66
(b) the issue of circulars by brokers or advisers to any party to
the transaction to their own investment clients,
with the prior approval of the Panel.
(4) In carrying out its mandate, the Panel may—
(a) require the filing, for approval or otherwise, of any
document with respect to an affected transaction or offer, if
the document is required to be prepared in terms of this
Part, Part C and the Takeover Regulations;
(b) issue compliance certificates, if the Panel is satisfied that
the offer or transaction satisfies the requirements of this
Part, Part C and the Takeover Regulations; and
[Para. (b) substituted by s. 74 (a) of Act No. 3 of 2011.]
(c) initiate or receive complaints, conduct investigations, and
issue compliance notices, with respect to any affected
transaction or offer, in accordance with Chapter 7, and the
Takeover Regulations.
(5) To the extent necessary to ensure compliance with this Part,
Part C and the Takeover Regulations, and to fulfil the purposes
contemplated in subsection (1), a compliance notice contemplated in
subsection (4) (c) may, among other things—
(a) prohibit or require any action by a person; or
(b) order a person to—
(i) divest of an acquired asset; or
(ii) account for profits.
[Sub-s. (5) amended by s. 74 (b) of Act No. 3 of 2011.]
(6) The Panel may wholly or partially, and with or without condi-
tions, exempt an offeror to an affected transaction or an offer from
the application of any provision of this Part, Part C or the Takeover
Regulations if—
(a) there is no reasonable potential of the affected transaction
prejudicing the interests of any existing holder of a regulat-
ed company’s securities;
(b) the cost of compliance is disproportionate relative to the
value of the affected transaction; or
(c) doing so is otherwise reasonable and justifiable in the
circumstances having regard to the principles and purposes
of this Part, Part C and the Takeover Regulations.
120. Takeover regulations.—The Minister, in consultation with
the Panel, must prescribe regulations, to be known as the Takeover
Regulations, to give effect to the purposes of this Part and Part C
including, among other things, regulations to provide for—
(a) compliance with and enforcement of the provisions of this
Part and Part C respecting affected transactions and offers;
(b) the administration, operation and procedures of the Panel;
(c) prescribed fees and levies imposed in terms of an Act of
Parliament on certain companies; and
(d) any other matters relating to the powers and functions of
the Panel.
Part C
Regulation of affected transactions and offers
121. General requirement concerning transactions and of-
fers.—Any person making an offer must—
(a) comply with all reporting or approval requirements,
whether set out in this Part or in the Takeover Regulations,
except to the extent that the Panel has granted the person
an exemption from any such requirement; and
(b) not give effect to an affected transaction unless the Panel
has—
(i) issued a compliance certificate with respect to the
transaction; or
[Sub-para. (i) substituted by s. 75 of Act No. 3 of 2011.]
(ii) granted an exemption for that transaction.
A-67 Companies Act No. 71 of 2008
122. Required disclosure concerning certain share transac-
tions.—(1) A person must notify a regulated company in the
prescribed manner and form within three business days after that
person—
(a) acquires a beneficial interest in sufficient securities of a
class issued by that company such that, as a result of the
acquisition, the person holds a beneficial interest in securi-
ties amounting to 5%, 10%, 15%, or any further whole
multiple of 5%, of the issued securities of that class; or
(b) disposes of a beneficial interest in sufficient securities of a
class issued by a company such that, as a result of the dis-
position, the person no longer holds a beneficial interest in
securities amounting to a particular multiple of 5% of the
issued securities of that class.
[Sub-s. (1) amended by s. 76 (a) of Act No. 3 of 2011.]
(2) The requirements set out in subsection (1) apply to a person
irrespective of whether—
(a) the person acquires or disposes of any securities—
(i) directly or indirectly; or
(ii) individually, or in concert with any other person or
persons, or
(b) the stipulated percentage of issued securities is held by that
person alone, or in aggregate by that person together with
any—
(i) related or inter-related person; and
(ii) person who has acted in concert with any other
person.
[Sub-s. (2) amended by s. 76 (b) of Act No. 3 of 2011 (English only).]
(3) A regulated company that has received a notice in terms of
this section must—
(a) file a copy with the Panel; and
(b) report the information to the holders of the relevant class
of securities unless the notice concerned a disposition of
less than 1% of the class of securities.
(4) For the purposes of this section—
(a) when determining the number of issued securities of a
class, a person is entitled to rely on the most recently pub-
lished statement by the company, unless that person knows
or has reason to believe that the statement is inaccurate;
and
(b) when determining the number of securities held by—
(i) a person or persons contemplated in subsection
(1)—
(aa) to the extent that the person has the entire, or a
partial or shared, beneficial interest in any se-
curities, those interests must be aggregated, ir-
respective of the nature of the person’s
interest; and
(bb) any securities that may be acquired by the
person if they exercised any options, conver-
sion privileges or similar rights, are to be in-
cluded; and
(ii) any other person, any securities that may be acquired
by that other person if they exercised any options,
conversion privileges or similar rights, are to be ex-
cluded.
123. Mandatory offers.—(1) In this section, “prescribed per-
centage” means the percentage prescribed by the Minister in terms
of subsection (5).
(2) This section applies if—
(a) either—
(i) a regulated company reacquires any of its voting
securities as contemplated in section 48 or in terms
of a scheme of arrangement contemplated in section
114; or
[Sub-para. (i) substituted by s. 77 (a) of Act No. 3 of 2011.]
ss 122–124
(ii) a person acting alone has, or two or more related or
inter-related persons, or two or more persons acting
in concert, have, acquired a beneficial interest in
voting rights attached to any securities issued by a
regulated company;
[Sub-para. (ii) substituted by s. 77 (a) of Act No. 3 of 2011.]
(b) before that acquisition a person was, or persons contem-
plated in paragraph (a) (ii) together were, able to exercise
less than the prescribed percentage of all the voting rights
attached to securities of that company; and
(c) as a result of that acquisition, together with any other
securities of the company already held by the person or
persons contemplated in paragraph (a) (ii), they are able to
exercise at least the prescribed percentage of all the voting
rights attached to securities of that company.
(3) Within one business day after the date of an acquisition con-
templated in subsection (2), the person or persons in whom the
prescribed percentage, or more, of the voting rights beneficially
vests must give notice in the prescribed manner to the holders of the
remaining securities, including in that notice—
(a) a statement that they are in a position to exercise at least
the prescribed percentage of all the voting rights attached
to securities of that regulated company; and
(b) offering to acquire any remaining such securities on terms
determined in accordance with this Act and the Takeover
Regulations.
[Sub-s. (3) amended by s. 77 (b) of Act No. 3 of 2011.]
(4) Within one month after giving notice in terms of subsection
(3), the person or persons contemplated in subsection (2) must
deliver a written offer, in compliance with the Takeover Regula-
tions, to the holders of the remaining securities of that company, to
acquire those securities on the terms contemplated in subsection (3)
(b).
(5) For the purposes contemplated in this section, the Minister,
on the advice of the Panel, may prescribe a percentage of not more
than 35% of the voting securities of a company.
124. Compulsory acquisitions and squeeze out.—(1) If, with-
in four months after the date of an offer for the acquisition of any
class of securities of a regulated company, that offer has been
accepted by the holders of at least 90% of that class of securities,
other than any such securities held before the offer by the offeror, a
related or inter-related person, or persons acting in concert, or a
nominee or subsidiary of any such person or persons—
(a) within two further months, the offeror may notify the
holders of the remaining securities of the class, in the pre-
scribed manner and form—
(i) that the offer has been accepted to that extent; and
(ii) that the offeror desires to acquire all remaining
securities of that class; and
(b) subject to subsection (2), after giving notice in terms of
paragraph (a), the offeror is entitled, and bound, to acquire
the securities concerned on the same terms that applied to
securities whose holders accepted the original offer.
(2) Within 30 business days after receiving a notice in terms of
subsection (1) (a), a person may apply to a court for an order—
(a) that the offeror is not entitled to acquire the applicant’s
securities of that class; or
(b) imposing conditions of acquisition different from those of
the original offer.
(3) If an offer to acquire the securities of a particular class has
not been accepted to the extent contemplated in subsection (1)—
(a) the offeror may apply to a court for an order authorising
the offeror to give a notice contemplated in subsection
(1) (a); and
(b) the court may make the order applied for, if—
(i) after making reasonable enquiries, the offeror has
been unable to trace one or more of the persons
holding securities to which the offer relates;
ss 124–125 Auditing: Legislation and Standards
(ii) by virtue of acceptances of the original offer, the
securities that are the subject of the application, to-
gether with the securities held by the person or per-
sons referred to in subparagraph (i), amount to not
less than the minimum specified in subsection (1);
(iii) the consideration offered is fair and reasonable; and
(iv) the court is satisfied that it is just and equitable to
make the order, having regard, in particular, to the
number of holders of securities who have been
traced but who have not accepted the offer.
(4) If an offer for the acquisition of any class of securities of a
regulated company has resulted in the acquisition by the offeror or a
nominee or subsidiary of the offeror, or a related or inter-related
person of any of them, individually or in aggregate, of sufficient
securities of that class such that, together with any other securities of
that class already held by that person, or those persons in aggregate,
they then hold at least 90% of the securities of that class—
(a) the offeror must notify the holders of the remaining
securities of the class that the offer has been accepted to
that extent;
(b) within three months after receiving a notice in terms of
paragraph (a), a person may demand that the offeror ac-
quire all of the person’s securities of the class concerned;
and
(c) after receiving a demand in terms of paragraph (b), the
offeror is entitled, and bound, to acquire the securities con-
cerned on the same terms that applied to securities whose
holders accepted the original offer.
(5) If an offeror has given notice in terms of subsection (1), and
no order has been made in terms of subsection (3), or if the offeror
has received a demand in terms of subsection (4) (b)—
(a) six weeks after the date on which the notice was given or,
if an application to a court is then pending, after the appli-
cation has been disposed of, or after the date on which the
demand was received, as the case may be, the offeror
must—
(i) transmit a copy of the notice to the regulated
company whose securities are the subject of the of-
fer, together with an instrument of transfer, executed
on behalf of the holder of the those securities by any
person
appointed by the offeror; and
(ii) pay or transfer to that company the consideration
representing the price payable by the offeror for the
securities concerned,
(b) subject to the payment of prescribed fees or duties, the
company must thereupon register the offeror as the holder
of those securities.
(6) An instrument of transfer contemplated in subsection (5) is
not required for any securities for which a share warrant is for the
time being outstanding.
[Sub-s. (6) substituted by s. 78 of Act No. 3 of 2011.]
(7) A regulated company must deposit any consideration re-
ceived under this section into a separate interest bearing bank
account with a banking institution registered under the Banks Act
and, subject to subsection (8), those deposits must be—
(a) held in trust by the company for the person entitled to the
securities in respect of which the consideration was re-
ceived; and
(b) paid on demand to the person contemplated in paragraph
(a), with interest to the date of payment.
(8) If a person contemplated in subsection (7) (a) fails for more
than three years to demand payment of an amount held in terms of
that paragraph, the amount, together with any accumulated interest,
must be paid to the benefit of the Guardian’s Fund of the Master of
the High Court, to be held and dealt with in accordance with the
rules of that Fund.
(9) In this section any reference to a “holder of securities who
has not accepted the offer” includes any holder who has failed or
A-68
refused to transfer their securities to the offeror in accordance with
the offer.
125. Comparable and partial offers.—(1) In this section—
(a) “independent holder of voting rights” mean a person
who—
(i) holds any securities of a company that entitle that
person to exercise general voting rights; and
(ii) is independent of an offeror or any related or inter-
related person, or person acting in concert with any
of them; and
(b) “prescribed percentage” means the percentage prescribed
in terms of section 123 (5).
(2) If—
(a) a regulated company that has more than one class of issued
securities re-acquires any of its voting securities of a par-
ticular class or one or more particular classes, as contem-
plated in section 48 or in terms of a scheme of arrangement
contemplated in section 114 and, as a result, a person or a
number of related persons hold securities of the company
entitling the person or persons to exercise more than the
prescribed percentage of the general voting rights associat-
ed with all the issued securities of the company; or
(b) a person acting alone, or two or more persons acting in
concert, make an offer for any securities of a regulated
company that has more than one class of issued securities,
which, if accepted, could result in a person, or a number of
related or inter-related persons holding securities of the
company entitling the person or persons to exercise more
than the prescribed percentage of the general voting rights
associated with all issued securities of the company,
that person or those persons acting in concert must make a compa-
rable offer to acquire securities of each class of issued securities of
that company.
[Sub-s. (2) substituted by s. 79 (a) of Act No. 3 of 2011.]
(3) A person making a partial offer for any class of issued securi-
ties of a company must—
(a) make the offer to all of the holders of that class of securi-
ties;
(b) if the offer could result in the person, together with any
related or inter-related person or person acting in concert
with any of them, holding securities of the company enti-
tling the person or persons to exercise more than the pre-
scribed percentage of the general voting rights of all issued
securities of the company, make the offer conditional on—
(i) a specified number of acceptances being received;
and
(ii) the offer being approved by the independent holders of
issued securities of that class, if all such independent
holders, in aggregate, control more than 50% of the
general voting rights of all issued securities of that
class;
[Sub-para. (ii) substituted by s. 79 (b) of Act No. 3 of 2011.]
(c) state in the offer the precise number of shares offered for,
if the offer could result in the person, together with any re-
lated or inter-related person or person acting in concert
with any of them, holding securities of the company enti-
tling the persons or persons to exercise more than the pre-
scribed percentage, but less than 50%, of the general
voting rights of all issued securities of the company; and
(d) if the offer could result in the person, together with any
related or inter-related person or person acting in concert
with any of them, holding securities of the company en-
titling the person or persons to exercise more than the
prescribed percentage of the general voting rights of all
issued securities of the company, include a specific and
prominent notice that the offer could result in such circum-
stances.
[Para. (d) substituted by s. 79 (c) of Act No. 3 of 2011.]
A-69 Companies Act No. 71 of 2008
(4) An offer that is conditional, as contemplated in subsection
(3) (b), may not be declared to be unconditional as to acceptances
unless it has been accepted to the extent specified in terms of
subsection (3) (b) (i).
(5) If a partial offer has been made for a class of securities—
(a) any holder of those securities is entitled to accept the offer
in full for the relevant percentage of that person’s holding;
and
(b) any securities tendered in excess of the relevant percentage
must be accepted by the offeror from each holder of securi-
ties in the same proportion to the number tendered as will
enable the offeror to obtain the total number of shares for
which it has offered.
126. Restrictions on frustrating action.—(1) If the board of a
regulated company believes that a bona fide offer might be immi-
nent, or has received such an offer, the board must not—
(a) take any action in relation to the affairs of the company
that could effectively result in—
(i) a bona fide offer being frustrated; or
(ii) the holders of relevant securities being denied an
opportunity to decide on its merits;
(b) issue any authorised but unissued securities;
(c) issue or grant options in respect of any unissued securities;
(d) authorise or issue, or permit the authorisation or issue of,
any securities carrying rights of conversion into or sub-
scription for other securities;
(e) sell, dispose of or acquire, or agree to sell, dispose of or
acquire, assets of a material amount except in the ordinary
course of business;
(f) enter into contracts otherwise than in the ordinary course
of business; or
(g) make a distribution that is abnormal as to timing and
amount,
without the prior written approval of the Panel, and the approval of
the holders of relevant securities, or in terms of a pre-existing
obligation or agreement entered into before the time contemplated in
this subsection.
(2) If a regulated company believes that it is subject to a pre-
existing obligation contemplated in subsection (1), it may apply to
the Panel for consent to proceed.
127. Prohibited dealings before and during an offer.—
(1) During an offer, or when one is reasonably in contemplation, an
offeror or a person acting in concert with that offeror, must not—
(a) make arrangements with any holders of the relevant
securities;
(b) deal in, or enter into arrangements to deal in, securities of
the offeree regulated company; or
(c) enter into arrangements which involve acceptance of an
offer,
if there are favourable conditions attached that are not being extend-
ed to all holders of the relevant securities.
(2) During an offer period, an offeror or a person acting in con-
cert with that offeror must not—
(a) sell any securities in the offeree company, unless—
(i) the Panel has consented in advance to that sale;
(ii) the person selling those securities has given at least
24 hours notice to the public that sales of that type
might be made, in the manner and form required by
the Takeover Regulations; and
(iii) the sale is on the same terms and conditions as the
offer; or
(b) acquire any securities in the offeree company after giving
the notice contemplated in paragraph (a) (ii).
(3) If an offer has been announced or posted, but has not become
or been declared unconditional, and has, as a result, subsequently
been withdrawn or lapsed, then for a period of 12 months after the
ss 125–128
date on which the offer was withdrawn or lapsed, the offeror, any
person who acted in concert with the offeror in the course of the
original offer, or any person who is subsequently acting in concert
with any of them, must not—
(a) make an offer for the relevant securities of the offeree
company; or
(b) acquire any securities of the offeree company, if as a result
of that acquisition, either the offeror or that person would
be required to make a mandatory offer in terms of section
123.
(4) Subsection (3) applies equally to a partial offer whether or not
the offer has become or been declared unconditional, but the period
of 12 months runs from that date on which that offer became or was
declared to be unconditional, or is withdrawn or lapsed, as the case
may be.
(5) For a period of six months immediately following the later of
the closing date of an offer, or the date on which the offer became
unconditional—
(a) the offeror;
(b) any person who acted in concert with the offeror; or
(c) any person who is subsequently acting in concert with a
person contemplated in paragraph (a) or (b),
must not make a second offer to any holder of securities of the target
company, or acquire any interest in any such securities, on more
favourable terms than those made under the original offer.
CHAPTER 6
BUSINESS RESCUE AND COMPROMISE WITH CREDITORS
Part A
Business rescue proceedings
[Heading of Part substituted by s. 80 of Act No. 3 of 2011 (English on-
ly).]
128. Application and definitions applicable to Chapter.—
(1) In this Chapter—
(a) “affected person”, in relation to a company, means—
(i) a shareholder or creditor of the company;
(ii) any registered trade union representing employees of
the company; and
(iii) if any of the employees of the company are not
represented by a registered trade union, each of
those employees or their respective representatives;
(b) “business rescue” means proceedings to facilitate the
rehabilitation of a company that is financially distressed by
providing for—
(i) the temporary supervision of the company, and of
the management of its affairs, business and property;
(ii) a temporary moratorium on the rights of claimants
against the company or in respect of property in its
possession; and
(iii) the development and implementation, if approved,
of a plan to rescue the company by restructuring its
affairs, business, property, debt and other liabilities,
and equity in a manner that maximises the likelihood
of the company continuing in existence on a solvent
basis or, if it is not possible for the company to so
continue in existence, results in a better return for
the company’s creditors or shareholders than would
result from the immediate liquidation of the compa-
ny;
(c) “business rescue plan” means a plan contemplated in
section 150;
(d) “business rescue practitioner” means a person appointed,
or two or more persons appointed jointly, in terms of this
Chapter to oversee a company during business rescue pro-
ceedings and “practitioner” has a corresponding meaning;
(e) “court”, depending on the context, means either—
(i) the High Court that has jurisdiction over the matter;
or
ss 128–130 Auditing: Legislation and Standards
(ii) either—
(aa) a designated judge of the High Court that has
jurisdiction over the matter, if the Judge Pres-
ident has designated any judges in terms of
subsection (3); or
(bb) a judge of the High Court that has jurisdiction
over the matter, as assigned by the Judge Pres-
ident to hear the particular matter, if the Judge
President has not designated any judges in
terms of subsection (3);
(f) “financially distressed”, in reference to a particular
company at any particular time, means that—
(i) it appears to be reasonably unlikely that the com-
pany will be able to pay all of its debts as they be-
come due and payable within the immediately ensu-
ing six months; or
[Sub-para. (i) substituted by s. 81 (a) of Act No. 3 of 2011 (English on-
ly).]
(ii) it appears to be reasonably likely that the company
will become insolvent within the immediately ensu-
ing six months;
(g) “independent creditor” means a person who—
(i) is a creditor of the company, including an employee
of the company who is a creditor in terms of section
144 (2); and
(ii) is not related to the company, a director, or the
practitioner, subject to subsection (2);
(h) “rescuing the company” means achieving the goals set
out in the definition of “business rescue” in paragraph (b);
(i) “supervision” means the oversight imposed on a company
during its business rescue proceedings; and
(j) “voting interest” means an interest as recognised, ap-
praised and valued in terms of section 145 (4) to (6).
(2) For the purpose of subsection (1) (g), an employee of a com-
pany is not related to that company solely as a result of being a
member of a trade union that holds securities of that company.
[Sub-s. (2) substituted by s. 81 (b) of Act No. 3 of 2011.]
(3) For the purposes contemplated in subsection (1) (e) or in any
other law, the Judge President of a High Court may designate any
judge of that court generally as a specialist to determine issues
relating to commercial matters, commercial insolvencies and
business rescue.
129. Company resolution to begin business rescue proceed-
ings.—(1) Subject to subsection (2) (a), the board of a company
may resolve that the company voluntarily begin business rescue
proceedings and place the company under supervision, if the board
has reasonable grounds to believe that—
(a) the company is financially distressed; and
(b) there appears to be a reasonable prospect of rescuing the
company.
(2) A resolution contemplated in subsection (1)—
(a) may not be adopted if liquidation proceedings have been
initiated by or against the company; and
(b) has no force or effect until it has been filed.
(3) Within five business days after a company has adopted and
filed a resolution, as contemplated in subsection (1), or such longer
time as the Commission, on application by the company, may allow,
the company must—
(a) publish a notice of the resolution, and its effective date, in
the prescribed manner to every affected person, including
with the notice a sworn statement of the facts relevant to
the grounds on which the board resolution was founded;
and
(b) appoint a business rescue practitioner who satisfies the
requirements of section 138, and who has consented in
writing to accept the appointment.
A-70
(4) After appointing a practitioner as required by subsection
(3) (b), a company must—
(a) file a notice of the appointment of a practitioner within two
business days after making the appointment; and
(b) publish a copy of the notice of appointment to each
affected person within five business days after the notice
was filed.
(5) If a company fails to comply with any provision of subsection
(3) or (4)—
(a) its resolution to begin business rescue proceedings and
place the company under supervision lapses and is a nulli-
ty; and
(b) the company may not file a further resolution contemplated
in subsection (1) for a period of three months after the date
on which the lapsed resolution was adopted, unless a court,
on good cause shown on an ex parte application, approves
the company filing a further resolution.
(6) A company that has adopted a resolution contemplated in this
section may not adopt a resolution to begin liquidation proceedings,
unless the resolution has lapsed in terms of subsection (5), or until
the business rescue proceedings have ended as determined in
accordance with section 132 (2).
(7) If the board of a company has reasonable grounds to believe
that the company is financially distressed, but the board has not
adopted a resolution contemplated in this section, the board must
deliver a written notice to each affected person, setting out the
criteria referred to in section 128 (1) (f) that are applicable to the
company, and its reasons for not adopting a resolution contemplated
in this section.
[Sub-s. (7) substituted by s. 82 of Act No. 3 of 2011 (English only).]
130. Objections to company resolution.—(1) Subject to sub-
section (2), at any time after the adoption of a resolution in terms of
section 129, until the adoption of a business rescue plan in terms of
section 152, an affected person may apply to a court for an order—
(a) setting aside the resolution, on the grounds that—
(i) there is no reasonable basis for believing that the
company is financially distressed;
(ii) there is no reasonable prospect for rescuing the
company; or
(iii) the company has failed to satisfy the procedural
requirements set out in section 129;
(b) setting aside the appointment of the practitioner, on the
grounds that the practitioner—
(i) does not satisfy the requirements of section 138;
(ii) is not independent of the company or its manage-
ment; or
(iii) lacks the necessary skills, having regard to the
company’s circumstances; or
(c) requiring the practitioner to provide security in an amount
and on terms and conditions that the court considers neces-
sary to secure the interests of the company and any affect-
ed persons.
(2) An affected person who, as a director of a company, voted in
favour of a resolution contemplated in section 129 may not apply to
a court in terms of—
(a) subsection (1) (a) to set aside that resolution; or
(b) subsection (1) (b) to set aside the appointment of the
practitioner appointed by the company,
unless that person satisfies the court that the person, in supporting
the resolution, acted in good faith on the basis of information that
has subsequently been found to be false or misleading.
(3) An applicant in terms of subsection (1) must—
(a) serve a copy of the application on the company and the
Commission; and
(b) notify each affected person of the application in the
prescribed manner.
A-71 Companies Act No. 71 of 2008
(4) Each affected person has a right to participate in the hearing
of an application in terms of this section.
(5) When considering an application in terms of subsection
(1) (a) to set aside the company’s resolution, the court may—
(a) set aside the resolution—
(i) on any grounds set out in subsection (1); or
(Editorial Note: Wording as per original
Government Gazette.)
(ii) if, having regard to all of the evidence, the court
considers that it is otherwise just and equitable to do
so;
(b) afford the practitioner sufficient time to form an opinion
whether or not—
(i) the company appears to be financially distressed; or
(ii) there is a reasonable prospect of rescuing the
company,
and after receiving a report from the practitioner, may set
aside the company’s resolution if the court concludes that
the company is not financially distressed, or there is no
reasonable prospect of rescuing the company; and
(c) if it makes an order under paragraph (a) or (b) setting aside
the company’s resolution, may make any further necessary
and appropriate order, including—
(i) an order placing the company under liquidation; or
(ii) if the court has found that there were no reasonable
grounds for believing that the company would be
unlikely to pay all of its debts as they became due
and payable, an order of costs against any director
who voted in favour of the resolution to commence
business rescue proceedings, unless the court is sat-
isfied that the director acted in good faith and on the
basis of information that the director was entitled to
rely upon in terms of section 76 (4) and (5).
(6) If, after considering an application in terms of subsection
(1) (b), the court makes an order setting aside the appointment of a
practitioner—
(a) the court must appoint an alternate practitioner who
satisfies the requirements of section 138, recommended by,
or acceptable to, the holders of a majority of the independ-
ent creditors’ voting interests who were represented in the
hearing before the court; and
(b) the provisions of subsection (5) (b), if relevant, apply to
the practitioner appointed in terms of paragraph (a).
131. Court order to begin business rescue proceedings.—
(1) Unless a company has adopted a resolution contemplated in
section 129, an affected person may apply to a court at any time for
an order placing the company under supervision and commencing
business rescue proceedings.
(2) An applicant in terms of subsection (1) must—
(a) serve a copy of the application on the company and the
Commission; and
(b) notify each affected person of the application in the
prescribed manner.
(3) Each affected person has a right to participate in the hearing
of an application in terms of this section.
(4) After considering an application in terms of subsection (1),
the court may—
(a) make an order placing the company under supervision and
commencing business rescue proceedings, if the court is
satisfied that—
(i) the company is financially distressed;
(ii) the company has failed to pay over any amount in
terms of an obligation under or in terms of a public
regulation, or contract, with respect to employment-
related matters; or
ss 130–132
(iii) it is otherwise just and equitable to do so for finan-
cial reasons,
and there is a reasonable prospect for rescuing the com-
pany; or
(b) dismissing the application, together with any further
necessary and appropriate order, including an order placing
the company under liquidation.
(5) If the court makes an order in terms of subsection (4) (a), the
court may make a further order appointing as interim practitioner a
person who satisfies the requirements of section 138, and who has
been nominated by the affected person who applied in terms of
subsection (1), subject to ratification by the holders of a majority of
the independent creditors’ voting interests at the first meeting of
creditors, as contemplated in section 147.
(6) If liquidation proceedings have already been commenced by
or against the company at the time an application is made in terms
of subsection (1), the application will suspend those liquidation
proceedings until—
(a) the court has adjudicated upon the application; or
(b) the business rescue proceedings end, if the court makes the
order applied for.
(7) In addition to the powers of a court on an application con-
templated in this section, a court may make an order contemplated
in subsection (4), or (5) if applicable, at any time during the course
of any liquidation proceedings or proceedings to enforce any
security against the company.
(8) A company that has been placed under supervision in terms
of this section—
(a) may not adopt a resolution placing itself in liquidation
until the business rescue proceedings have ended as deter-
mined in accordance with section 132 (2); and
(b) must notify each affected person of the order within five
business days after the date of the order.
132. Duration of business rescue proceedings.—(1) Business
rescue proceedings begin when—
(a) the company—
(i) files a resolution to place itself under supervision in
terms of section 129 (3); or
(ii) applies to the court for consent to file a resolution in
terms of section 129 (5) (b);
(b) an affected person applies to the court for an order placing
the company under supervision in terms of section 131 (1);
or
[Para. (b) substituted by s. 83 (a) of Act No. 3 of 2011.]
(c) a court makes an order placing a company under supervi-
sion during the course of liquidation proceedings, or pro-
ceedings to enforce a security interest, as contemplated in
section 131 (7).
[Para. (c) substituted by s. 83 (b) of Act No. 3 of 2011.]
(2) Business rescue proceedings end when—
(a) the court—
(i) sets aside the resolution or order that began those
proceedings; or
(ii) has converted the proceedings to liquidation pro-
ceedings;
(b) the practitioner has filed with the Commission a notice of
the termination of business rescue proceedings; or
(c) a business rescue plan has been—
(i) proposed and rejected in terms of Part D of this
Chapter, and no affected person has acted to extend
the proceedings in any manner contemplated in sec-
tion 153; or
(ii) adopted in terms of Part D of this Chapter, and the
practitioner has subsequently filed a notice of sub-
stantial implementation of that plan.
ss 132–136 Auditing: Legislation and Standards
(3) If a company’s business rescue proceedings have not ended
within three months after the start of those proceedings, or such
longer time as the court, on application by the practitioner, may
allow, the practitioner must—
(a) prepare a report on the progress of the business rescue
proceedings, and update it at the end of each subsequent
month until the end of those proceedings; and
(b) deliver the report and each update in the prescribed manner
to each affected person, and to the—
(i) court, if the proceedings have been the subject of a
court order; or
(ii) Commission, in any other case.
133. General moratorium on legal proceedings against com-
pany.—(1) During business rescue proceedings, no legal proceed-
ing, including enforcement action, against the company, or in
relation to any property belonging to the company, or lawfully in its
possession, may be commenced or proceeded with in any forum,
except—
(a) with the written consent of the practitioner;
(b) with the leave of the court and in accordance with any
terms the court considers suitable;
(c) as a set-off against any claim made by the company in any
legal proceedings, irrespective of whether those proceed-
ings commenced before or after the business rescue pro-
ceedings began;
[Para. (c) substituted by s. 84 (a) of Act No. 3 of 2011 (English only).]
(d) criminal proceedings against the company or any of its
directors or officers;
[Para. (d) substituted by s. 84 (b) of Act No. 3 of 2011.]
(e) proceedings concerning any property or right over which
the company exercises the powers of a trustee; or
[Para. ( e) substituted by s. 84 (b) of Act No. 3 of 2011.]
(f) proceedings by a regulatory authority in the execution of
its duties after written notification to the business rescue
practitioner.
[Para. (f) inserted by s. 84 (c) of Act No. 3 of 2011.]
(2) During business rescue proceedings, a guarantee or surety by
a company in favour of any other person may not be enforced by
any person against the company except with leave of the court and
in accordance with any terms the court considers just and equitable
in the circumstances.
(3) If any right to commence proceedings or otherwise assert a
claim against a company is subject to a time limit, the measurement
of that time must be suspended during the company’s business
rescue proceedings.
134. Protection of property interests.—(1) Subject to subsec-
tions (2) and (3), during a company’s business rescue proceedings—
(a) the company may dispose, or agree to dispose, of property
only—
(i) in the ordinary course of its business;
(ii) in a bona fide transaction at arm’s length for fair
value approved in advance and in writing by the
practitioner; or
(iii) in a transaction contemplated within, and undertaken
as part of the implementation of, a business rescue
plan that has been approved in terms of section 152;
(b) any person who, as a result of an agreement made in the
ordinary course of the company’s business before the busi-
ness rescue proceedings began, is in lawful possession of
any property owned by the company may continue to exer-
cise any right in respect of that property as contemplated in
that agreement, subject to section 136; and
(c) despite any provision of an agreement to the contrary,
no person may exercise any right in respect of any property
in the lawful possession of the company, irrespective of
A-72
whether the property is owned by the company, except to
the extent that the practitioner consents in writing.
[Sub-s. (1) amended by s. 85 (a) of Act No. 3 of 2011. Para. (c)
substituted by s. 85 (b) of Act No. 3 of 2011 (English only).]
(2) The practitioner may not unreasonably withhold consent in
terms of subsection (1) (c), having regard to—
(a) the purposes of this Chapter;
(b) the circumstances of the company; and
(c) the nature of the property, and the rights claimed in respect
of it.
(3) If, during a company’s business rescue proceedings, the com-
pany wishes to dispose of any property over which another person
has any security or title interest, the company must—
(a) obtain the prior consent of that other person, unless the
proceeds of the disposal would be sufficient to fully dis-
charge the indebtedness protected by that person’s security
or title interest; and
(b) promptly—
(i) pay to that other person the sale proceeds attributa-
ble to that property up to the amount of the compa-
ny’s indebtedness to that other person; or
(ii) provide security for the amount of those proceeds, to
the reasonable satisfaction of that other person.
135. Post-commencement finance.—(1) To the extent that any
remuneration, reimbursement for expenses or other amount of
money relating to employment becomes due and payable by a
company to an employee during the company’s business rescue
proceedings, but is not paid to the employee—
(a) the money is regarded to be post-commencement financ-
ing; and
(b) will be paid in the order of preference set out in subsec-
tion (3) (a).
(2) During its business rescue proceedings, the company may
obtain financing other than as contemplated is subsection (1), and
any such financing—
(a) may be secured to the lender by utilising any asset of the
company to the extent that it is not otherwise encumbered;
and
(b) will be paid in the order of preference set out in subsec-
tion (3) (b).
(3) After payment of the practitioner’s remuneration and expens-
es referred to in section 143, and other claims arising out of the costs
of the business rescue proceedings, all claims contemplated—
(a) in subsection (1) will be treated equally, but will have
preference over—
(i) all claims contemplated in subsection (2), irrespec-
tive of whether or not they are secured; and
[Sub-para. (i) substituted by s. 86 (b) of Act No. 3 of 2011 (English on-
ly).]
(ii) all unsecured claims against the company; or
(b) in subsection (2) will have preference in the order in which
they were incurred over all unsecured claims against the
company.
[Sub-s. (3) amended by s. 86 (a) of Act No. 3 of 2011.]
(4) If business rescue proceedings are superseded by a liquidation
order, the preference conferred in terms of this section will remain
in force, except to the extent of any claims arising out of the costs of
liquidation.
136. Effect of business rescue on employees and contracts.—
(1) Despite any provision of an agreement to the contrary—
(a) during a company’s business rescue proceedings, employ-
ees of the company immediately before the beginning of
those proceedings continue to be so employed on the same
terms and conditions, except to the extent that—
(i) changes occur in the ordinary course of attrition; or
A-73 Companies Act No. 71 of 2008
(ii) the employees and the company, in accordance with
applicable labour laws, agree different terms and
conditions; and
[Para. (a) amended by s. 87 (a) of Act No. 3 of 2011 (English only).]
(b) any retrenchment of any such employees contemplated in
the company’s business rescue plan is subject to section
189 and 189A of the Labour Relations Act, 1995 (Act
No. 66 of 1995), and other applicable employment related
legislation.
(2) Subject to subsection (2A), and despite any provision of an
agreement to the contrary, during business rescue proceedings, the
practitioner may—
(a) entirely, partially or conditionally suspend, for the duration
of the business rescue proceedings, any obligation of the
company that—
(i) arises under an agreement to which the company
was a party at the commencement of the business
rescue proceedings; and
(ii) would otherwise become due during those proceed-
ings; or
(Editorial Note: Wording as per original
Government Gazette.)
(b) apply urgently to a court to entirely, partially or condition-
ally cancel, on any terms that are just and reasonable in the
circumstances, any obligation of the company contemplat-
ed in paragraph (a).
[Sub-s. (2) substituted by s. 87 (b) of Act No. 3 of 2011.]
(2A) When acting in terms of subsection (2)—
(a) a business rescue practitioner must not suspend any
provision of—
(i) an employment contract; or
(ii) an agreement to which section 35A or 35B of the
Insolvency Act, 1936 (Act No. 24 or 1936), would
have applied had the company been liquidated;
(Editorial Note: It is suggested that the expression “(Act No. 24 or
1936)” in sub-para. (ii) is intended to reflect as “(Act No. 24 of
1936)”.
(b) a court may not cancel any provision of—
(i) an employment contract, except as contemplated in
subsection (1);
(ii) an agreement to which section 35A or 35B of the
Insolvency Act, (Act No. 24 of 1936), would have
applied had the company been liquidated; and
(c) if a business practitioner suspends a provision of an
agreement relating to security granted by the company,
that provision nevertheless continues to apply for the pur-
pose of section 134, with respect to any proposed disposal
of property by the company
[Sub-s. (2A) inserted by s. 87 (c) of Act No. 3 of 2011.]
(3) Any party to an agreement that has been suspended or can-
celled, or any provision which has been suspended or cancelled, in
terms of subsection (2), may assert a claim against the company
only for damages.
(4) If liquidation proceedings have been converted into business
rescue proceedings, the liquidator is a creditor of the company to the
extent of any outstanding claim by the liquidator for any remunera-
tion due for work performed, or compensation for expenses in-
curred, before the business rescue proceedings began.
137. Effect on shareholders and directors.—(1) During busi-
ness rescue proceedings an alteration in the classification or status of
any issued securities of a company, other than by way of a transfer
of securities in the ordinary course of business, is invalid except to
the extent—
(a) that the court otherwise directs; or
(b) contemplated in an approved business rescue plan.
(2) During a company’s business rescue proceedings, each direc-
tor of the company—
(a) must continue to exercise the functions of director, subject
to the authority of the practitioner;
ss 136–138
(b) has a duty to the company to exercise any management
function within the company in accordance with the ex-
press instructions or direction of the practitioner, to the ex-
tent that it is reasonable to do so;
(c) remains bound by the requirements of section 75 concern-
ing personal financial interests of the director or a related
person; and
(d) to the extent that the director acts in accordance with
paragraphs (b) and (c), is relieved from the duties of a di-
rector as set out in section 76, and the liabilities set out in
section 77, other than section 77 (3) (a), (b) and (c).
(3) During a company’s business rescue proceedings, each direc-
tor of the company must attend to the requests of the practitioner at
all times, and provide the practitioner with any information about
the company’s affairs as may reasonably be required.
(4) If, during a company’s business rescue proceedings, the
board, or one or more directors of the company, purports to take any
action on behalf of the company that requires the approval of the
practitioner, that action is void unless approved by the practitioner.
(5) At any time during the business rescue proceedings, the prac-
titioner may apply to a court for an order removing a director from
office on the grounds that the director has—
(a) failed to comply with a requirement of this Chapter; or
(b) by act or omission, has impeded, or is impeding—
(i) the practitioner in the performance of the powers
and functions of practitioner;
(ii) the management of the company by the practitioner;
or
(iii) the development or implementation of a business
rescue plan in accordance with this Chapter.
(6) Subsection (5) is in addition to any right of a person to apply
to a court for an order contemplated in section 162.
Part B
Practitioner’s functions and terms of appointment
138. Qualifications of practitioners.—(1) A person may be
appointed as the business rescue practitioner of a company only if
the person—
(a) is a member in good standing of a legal, accounting or
business management profession accredited by the Com-
mission;
(b) has been licensed as such by the Commission in terms of
subsection (2);
(c) is not subject to an order of probation in terms of section
162 (7);
(d) would not be disqualified from acting as a director of the
company in terms of section 69 (8);
(e) does not have any other relationship with the company
such as would lead a reasonable and informed third party
to conclude that the integrity, impartiality or objectivity of
that person is compromised by that relationship; and
(f) is not related to a person who has a relationship contem-
plated in paragraph (d).
(2) For the purposes of subsection (1) (a) (ii), the Commission
may license any qualified person to practice in terms of this Chapter
and may suspend or withdraw any such licence in the prescribed
manner.
(Editorial Note: Please note that the reference to subsection
(1) (a) (ii) does not follow. We suggest that subsection (1) (b) was in
fact meant.)
(3) The Minister may make regulations prescribing—
(a) standards and procedures to be followed by the Commis-
sion in carrying out its licencing functions and powers in
terms of this section; and
(b) minimum qualifications for a person to practice as a
business rescue practitioner, including different minimum
qualifications for different categories of companies.
[S. 138 substituted by s. 88 of Act No. 3 of 2011.]
ss 139–142 Auditing: Legislation and Standards
139. Removal and replacement of practitioner.—(1) A prac-
titioner may be removed only—
(a) by a court order in terms of section 130; or
(b) as provided for in this section.
(2) Upon request of an affected person, or on its own motion, the
court may remove a practitioner from office on any of the following
grounds:
(a) Incompetence or failure to perform the duties of a business
rescue practitioner of the particular company;
[Para. (a) substituted by s. 89 of Act No. 3 of 2011.]
(b) failure to exercise the proper degree of care in the perfor-
mance of the practitioner’s functions;
(c) engaging in illegal acts or conduct;
(d) if the practitioner no longer satisfies the requirements set
out in section 138 (1);
(e) conflict of interest or lack of independence; or
(f) the practitioner is incapacitated and unable to perform the
functions of that office, and is unlikely to regain that
capacity within a reasonable time.
(3) The company, or the creditor who nominated the practitioner,
as the case may be, must appoint a new practitioner if a practitioner
dies, resigns or is removed from office, subject to the right of an
affected person to bring a fresh application in terms of section
130 (1) (b) to set aside that new appointment.
140. General powers and duties of practitioners.—(1) During
a company’s business rescue proceedings, the practitioner, in
addition to any other powers and duties set out in this Chapter—
(a) has full management control of the company in substitu-
tion for its board and pre-existing management;
(b) may delegate any power or function of the practitioner to a
person who was part of the board or pre-existing manage-
ment of the company;
(c) may—
(i) remove from office any person who forms part of
the pre-existing management of the company; or
(ii) appoint a person as part of the management of a
company, whether to fill a vacancy or not, subject to
subsection (2); and
(d) is responsible to—
(i) develop a business rescue plan to be considered by
affected persons, in accordance with Part D of this
Chapter; and
(ii) implement any business rescue plan that has been
adopted in accordance with Part D of this Chapter.
(1A) The practitioner must, as soon as practicable after appoint-
ment, inform all relevant regulatory authorities having authority in
respect of the activities of the company, of the fact that the company
has been placed under business rescue proceedings and of his or her
appointment.
[Sub-s. (1A) inserted by s. 90 of Act No. 3 of 2011.]
(2) Except with the approval of the court on application by the
practitioner, a practitioner may not appoint a person as part of the
management of the company, or an advisor to the company or to the
practitioner, if that person—
(a) has any other relationship with the company such as would
lead a reasonable and informed third party to conclude that
the integrity, impartiality or objectivity of that person is
compromised by that relationship; or
(b) is related to a person who has a relationship contemplated
in paragraph (a).
(3) During a company’s business rescue proceedings, the practi-
tioner—
(a) is an officer of the court, and must report to the court in
accordance with any applicable rules of, or orders made
by, the court;
A-74
(b) has the responsibilities, duties and liabilities of a director
of the company, as set out in sections 75 to 77; and
(c) other than as contemplated in paragraph (b)—
(i) is not liable for any act or omission in good faith in
the course of the exercise of the powers and perfor-
mance of the functions of practitioner; but
(ii) may be held liable in accordance with any relevant
law for the consequences of any act or omission
amounting to gross negligence in the exercise of the
powers and performance of the functions of practi-
tioner.
(4) If the business rescue process concludes with an order placing
the company in liquidation, any person who has acted as practitioner
during the business rescue process may not be appointed as liquida-
tor of the company.
141. Investigation of affairs of company.—(1) As soon as
practicable after being appointed, a practitioner must investigate the
company’s affairs, business, property, and financial situation, and
after having done so, consider whether there is any reasonable
prospect of the company being rescued.
(2) If, at any time during business rescue proceedings, the practi-
tioner concludes that—
(a) there is no reasonable prospect for the company to be
rescued, the practitioner must—
(i) so inform the court, the company, and all affected
persons in the prescribed manner; and
(ii) apply to the court for an order discontinuing the
business rescue proceedings and placing the com-
pany into liquidation;
(b) there no longer are reasonable grounds to believe that the
company is financially distressed, the practitioner must so
inform the court, the company, and all affected persons in
the prescribed manner, and—
(i) if the business rescue process was confirmed by a
court order in terms of section 130, or initiated by an
application to the court in terms of section 131,
apply to a court for an order terminating the business
rescue proceedings; or
(ii) otherwise, file a notice of termination of the business
rescue proceedings; or
(c) there is evidence, in the dealings of the company before
the business rescue proceedings began, of—
(i) voidable transactions, or the failure by the company
or any director to perform any material obligation
relating to the company, the practitioner must take
any necessary steps to rectify the matter and may
direct the management to take appropriate steps.
[Sub-para. (i) substituted by s. 91 of Act No. 3 of 2011.]
(ii) reckless trading, fraud or other contravention of any
law relating to the company, the practitioner must—
(aa) forward the evidence to the appropriate
authority for further investigation and possible
prosecution; and
(bb) direct the management to take any necessary
steps to rectify the matter, including recover-
ing any misappropriated assets of the compa-
ny.
(3) A court to which an application has been made in terms of
subsection (2) (a) (ii) may make the order applied for, or any other
order that the court considers appropriate in the circumstances.
142. Directors of company to co-operate with and assist
practitioner.—(1) As soon as practicable after business rescue
proceedings begin, each director of a company must deliver to the
practitioner all books and records that relate to the affairs of the
company and are in the director’s possession.
A-75 Companies Act No. 71 of 2008
(2) Any director of a company who knows where other books
and records relating to the company are being kept, must inform the
practitioner as to the whereabouts of those books and records.
(3) Within five business days after business rescue proceedings
begin, or such longer period as the practitioner allows, the directors
of a company must provide the practitioner with a statement of
affairs containing, at a minimum, particulars of the following:
(a) Any material transactions involving the company or the
assets of the company, and occurring within 12 months
immediately before the business rescue proceedings began;
[Para. (a) substituted by s. 92 (a) of Act No. 3 of 2011.]
(b) any court, arbitration or administrative proceedings,
including pending enforcement proceedings, involving the
company;
[Para. (b) substituted by s. 92 (a) of Act No. 3 of 2011.]
(c) the assets and liabilities of the company, and its income
and disbursements within the immediately preceding 12
months;
(d) the number of employees, and any collective agreements
or other agreements relating to the rights of employees;
(e) any debtors and their obligations to the company; and
(f) any creditors and their rights or claims against the com-
pany.
(4) No person is entitled, as against the practitioner of a com-
pany, to retain possession of any books or records of the company,
or to claim or enforce a lien over any such books or records, unless
such books or records are in the lawful possession of such person
and he or she has made copies available to the practitioner or has
afforded the practitioner a reasonable opportunity to inspect the
books or records concerned.
[Sub-s. (4) substituted by s. 92 (b) of Act No. 3 of 2011.]
143. Remuneration of practitioner.—(1) The practitioner is
entitled to charge an amount to the company for the remuneration
and expenses of the practitioner in accordance with the tariff
prescribed in terms of subsection (6).
(2) The practitioner may propose an agreement with the company
providing for further remuneration, additional to that contemplated
in subsection (1), to be calculated on the basis of a contingency
related to—
(a) the adoption of a business rescue plan at all, or within a
particular time, or the inclusion of any particular matter
within such a plan; or
(b) the attainment of any particular result or combination of
results relating to the business rescue proceedings.
(3) Subject to subsection (4), an agreement contemplated in sub-
section (2) is final and binding on the company if it is approved
by—
(a) the holders of a majority of the creditors’ voting interests,
as determined in accordance with section 145 (4) to (6),
present and voting at a meeting called for the purpose of
considering the proposed agreement; and
(b) the holders of a majority of the voting rights attached to
any shares of the company that entitle the shareholder to a
portion of the residual value of the company on winding-
up, present and voting at a meeting called for the purpose
of considering the proposed agreement.
(4) A creditor or shareholder who voted against a proposal con-
templated in this section may apply to a court within 10 business
days after the date of voting on that proposal, for an order setting
aside the agreement on the grounds that—
(a) the agreement is not just and equitable; or
(b) the remuneration provided for in the agreement is unreason-
able having regard to the financial circumstances of the
company.
[Para. (b) substituted by s. 93 of Act No. 3 of 2011.]
(5) To the extent that the practitioner’s remuneration and expens-
es are not fully paid, the practitioner’s claim for those amounts will
ss 142–144
rank in priority before the claims of all other secured and unsecured
creditors.
(6) The Minister may make regulations prescribing a tariff of
fees and expenses for the purpose of subsection (1).
Part C
Rights of affected persons during business rescue proceedings
144. Rights of employees.—(1) During a company’s business
rescue proceedings any employees of the company who are—
(a) represented by a registered trade union may exercise any
rights set out in this Chapter—
(i) collectively through their trade union; and
(ii) in accordance with applicable labour law; or
(b) not represented by a registered trade union may elect to
exercise any rights set out in this Chapter either directly, or
by proxy through an employee organisation or representa-
tive.
(2) To the extent that any remuneration, reimbursement for ex-
penses or other amount of money relating to employment became
due and payable by a company to an employee at any time before
the beginning of the company’s business rescue proceedings, and
had not been paid to that employee immediately before the begin-
ning of those proceedings, the employee is a preferred unsecured
creditor of the company for the purposes of this Chapter.
(3) During a company’s business rescue process, every registered
trade union representing any employees of the company, and any
employee who is not so represented, is entitled to—
(a) notice, which must be given in the prescribed manner and
form to employees at their workplace, and served at the
head office of the relevant trade union, of each court pro-
ceeding, decision, meeting or other relevant event concern-
ing the business rescue proceedings;
[Para. (a) substituted by s. 94 (a) of Act No. 3 of 2011.]
(b) participate in any court proceedings arising during the
business rescue proceedings;
(c) form a committee of employees’ representatives;
(d) be consulted by the practitioner during the development of
the business rescue plan, and afforded sufficient opportuni-
ty to review any such plan and prepare a submission con-
templated in section 152 (1) (c);
(e) be present and make a submission to the meeting of the
holders of voting interests before a vote is taken on any
proposed business rescue plan, as contemplated in section
152 (1) (c);
(f) vote with creditors on a motion to approve a proposed
business plan, to the extent that the employee is a creditor,
as contemplated in subsection (2); and
[Para. (f) substituted by s. 94 (b) of Act No. 3 of 2011.]
(g) if the proposed business rescue plan is rejected, to—
(i) propose the development of an alternative plan, in
the manner contemplated in section 153; or
(ii) present an offer to acquire the interests of one or
more affected persons, in the manner contemplated
in section 153.
(4) A medical scheme, or a pension scheme including a provident
scheme, for the benefit of the past or present employees of a com-
pany is an unsecured creditor of the company for the purposes of
this Chapter to the extent of—
(a) any amount that was due and payable by the company to
the trustees of the scheme at any time before the beginning
of the company’s business rescue proceedings, and that
had not been paid immediately before the beginning of
those proceedings; and
(b) in the case of a defined benefit pension scheme, the present
value at the commencement of the business rescue pro-
ceedings of any unfunded liability under that scheme.
(5) The rights set out in this section are in addition to any other
rights arising or accruing in terms of any law, contract, collective
agreement, shareholding, security or court order.
ss 145–149 Auditing: Legislation and Standards
145. Participation by creditors.—(1) Each creditor is entitled
to—
(a) notice of each court proceeding, decision, meeting or other
relevant event concerning the business rescue proceedings;
(b) participate in any court proceedings arising during the
business rescue proceedings;
(c) formally participate in a company’s business rescue
proceedings to the extent provided for in this Chapter; and
(d) informally participate in those proceedings by making
proposals for a business rescue plan to the practitioner.
(2) In addition to the rights set out in subsection (1), each creditor
has—
(a) the right to vote to amend, approve or reject a proposed
business rescue plan, in the manner contemplated in sec-
tion 152; and
(b) if the proposed business rescue plan is rejected, a further
right to—
(i) propose the development of an alternative plan, in the
manner contemplated in section 153; or
(ii) present an offer to acquire the interests of any or all
of the other creditors in the manner contemplated in
section 153.
(3) The creditors of a company are entitled to form a creditors’
committee, and through that committee are entitled to be consulted
by the practitioner during the development of the business rescue
plan.
(4) In respect of any decision contemplated in this Chapter that
requires the support of the holders of creditors’ voting interests—
(a) a secured or unsecured creditor has a voting interest equal
to the value of the amount owed to that creditor by the
company; and
(b) a concurrent creditor who would be subordinated in a
liquidation has a voting interest, as independently and ex-
pertly appraised and valued at the request of the practition-
er, equal to the amount, if any, that the creditor could
reasonably expect to receive in such a liquidation of the
company.
(5) The practitioner of a company must—
(a) determine whether a creditor is independent for the
purposes of this Chapter;
(b) request a suitably qualified person to independently and
expertly appraise and value an interest contemplated in
subsection (4) (b); and
(c) give a written notice of the determination, or appraisal and
valuation, to the person concerned at least 15 business days
before the date of the meeting to be convened in terms of
section 151.
(6) Within five business days after receiving a notice of a deter-
mination contemplated in subsection (5), a person may apply to a
court to—
(a) review the practitioner’s determination that the person is,
or is not, an independent creditor; or
(b) review, re-appraise and re-value that person’s voting
interest, as determined in terms of subsection (5) (b).
146. Participation by holders of company’s securities.—
During a company’s business rescue proceedings, each holder of
any issued security of the company is entitled to—
(a) notice of each court proceeding, decision, meeting or other
relevant event concerning the business rescue proceedings;
(b) participate in any court proceedings arising during the
business rescue proceedings;
(c) formally participate in a company’s business rescue
proceedings to the extent provided for in this Chapter;
(d) vote to approve or reject a proposed business rescue plan
in the manner contemplated in section 152, if the plan
A-76
would alter the rights associated with the class of securities
held by that person; and
(e) if the business rescue plan is rejected, to—
(i) propose the development of an alternative plan, in
the manner contemplated in section 153; or
(ii) present an offer to acquire the interests of any or all
of the creditors or other holders of the company’s
securities in the manner contemplated in section
153.
147. First meeting of creditors.—(1) Within 10 business days
after being appointed, the practitioner must convene, and preside
over, a first meeting of creditors, at which—
(a) the practitioner—
(i) must inform the creditors whether the practitioner
believes that there is a reasonable prospect of rescu-
ing the company; and
(ii) may receive proof of claims by creditors; and
(b) the creditors may determine whether or not a committee of
creditors should be appointed and, if so, may appoint the
members of the committee.
(2) The practitioner must give notice of the first meeting of credi-
tors to every creditor of the company whose name and address is
known to, or can reasonably be obtained by, the practitioner, setting
out the—
(a) date, time and place of the meeting; and
(b) agenda for the meeting.
(3) At any meeting of creditors, other than the meeting contem-
plated in section 151, a decision supported by the holders of a
simple majority of the independent creditors’ voting interests voted
on a matter, is the decision of the meeting on that matter.
148. First meeting of employees’ representatives.—(1) Within
10 business days after being appointed, the practitioner must
convene, and preside over, a first meeting of employees’ representa-
tives, at which—
(a) the practitioner must inform the employees’ representa-
tives whether the practitioner believes that there is a rea-
sonable prospect of rescuing the company; and
(b) the employees’ representatives may determine whether or
not an employees’ committee should be appointed and, if
so, may appoint the members of the committee.
(2) The practitioner must give notice of the meeting to every
registered trade union representing employees of the company and,
if there are any employees who are not represented by such a
registered trade union, to those employees, or their representatives,
setting out the—
(a) date, time and place of the meeting; and
(b) agenda for the meeting.
149. Functions, duties and membership of committees of
affected persons.—(1) A committee of employees, or of creditors,
appointed in terms of section 147 or 148, respectively—
(a) may consult with the practitioner about any matter relating
to the business rescue proceedings, but may not direct or
instruct the practitioner;
(b) may, on behalf of the general body of creditors or employ-
ees, respectively, receive and consider reports relating to
the business rescue proceedings; and
(c) must act independently of the practitioner to ensure fair
and unbiased representation of creditors’ or employees’ in-
terests.
(2) A person may be a member of a committee of creditors or
employees, respectively, only if the person is—
(a) an independent creditor, or an employee, of the company;
(b) an agent, proxy or attorney of an independent creditor or
employee, or other person acting under a general power of
attorney; or
A-77 Companies Act No. 71 of 2008
(c) authorised in writing by an independent creditor or em-
ployee to be a member.
Part D
Development and approval of business rescue plan
150. Proposal of business rescue plan.—(1) The practitioner,
after consulting the creditors, other affected persons, and the
management of the company, must prepare a business rescue plan
for consideration and possible adoption at a meeting held in terms of
section 151.
(2) The business rescue plan must contain all the information
reasonably required to facilitate affected persons in deciding
whether or not to accept or reject the plan, and must be divided into
three Parts, as follows:
(a) Part A—Background, which must include at least—
(i) a complete list of all the material assets of the
company, as well as an indication as to which assets
were held as security by creditors when the business
rescue proceedings began;
(ii) a complete list of the creditors of the company when
the business rescue proceedings began, as well as an
indication as to which creditors would qualify as se-
cured, statutory preferent and concurrent in terms of
the laws of insolvency, and an indication of which of
the creditors have proved their claims;
(iii) the probable dividend that would be received by
creditors, in their specific classes, if the company
were to be placed in liquidation;
(iv) a complete list of the holders of the company’s
issued securities;
(v) a copy of the written agreement concerning the
practitioner’s remuneration; and
(vi) a statement whether the business rescue plan
includes a proposal made informally by a creditor of
the company.
(b) Part B—Proposals, which must include at least—
(i) the nature and duration of any moratorium for which
the business rescue plan makes provision;
(ii) the extent to which the company is to be released
from the payment of its debts, and the extent to
which any debt is proposed to be converted to equity
in the company, or another company;
(iii) the ongoing role of the company, and the treatment
of any existing agreements;
(iv) the property of the company that is to be available to
pay creditors’ claims in terms of the business rescue
plan;
(v) the order of preference in which the proceeds of
property will be applied to pay creditors if the busi-
ness rescue plan is adopted;
(vi) the benefits of adopting the business rescue plan as
opposed to the benefits that would be received by
creditors if the company were to be placed in liqui-
dation; and
(vii) the effect that the business rescue plan will have on
the holders of each class of the company’s issued se-
curities.
(c) Part C—Assumptions and conditions, which must
include at least—
(i) a statement of the conditions that must be satisfied,
if any, for the business rescue plan to—
(aa) come into operation; and
(bb) be fully implemented;
(ii) the effect, if any, that the business rescue plan
contemplates on the number of employees, and their
terms and conditions of employment;
(iii) the circumstances in which the business rescue plan
will end; and
ss 149–152
(iv) a projected—
(aa) balance sheet for the company; and
(bb) statement of income and expenses for the
ensuing three years,
prepared on the assumption that the proposed
business plan is adopted.
(3) The projected balance sheet and statement required by sub-
section (2) (c) (iv)—
(a) must include a notice of any material assumptions on
which the projections are based; and
(b) may include alternative projections based on varying
assumptions and contingencies.
(4) A proposed business rescue plan must conclude with a certif-
icate by the practitioner stating that any—
(a) actual information provided appears to be accurate,
complete, and up to date; and
(b) projections provided are estimates made in good faith on
the basis of factual information and assumptions as set out
in the statement.
(5) The business rescue plan must be published by the company
within 25 business days after the date on which the practitioner was
appointed, or such longer time as may be allowed by—
(a) the court, on application by the company; or
(b) the holders of a majority of the creditors’ voting interests.
151. Meeting to determine future of company.—(1) Within
10 business days after publishing a business rescue plan in terms of
section 150, the practitioner must convene and preside over a
meeting of creditors and any other holders of a voting interest,
called for the purpose of considering the plan.
[Sub-s. (1) substituted by s. 95 of Act No. 3 of 2011.]
(2) At least five business days before the meeting contemplated
in subsection (1), the practitioner must deliver a notice of the
meeting to all affected persons, setting out—
(a) the date, time and place of the meeting;
(b) the agenda of the meeting; and
(c) a summary of the rights of affected persons to participate
in and vote at the meeting.
(3) The meeting contemplated in this section may be adjourned
from time to time, as necessary or expedient, until a decision
regarding the company’s future has been taken in accordance with
sections 152 and 153.
152. Consideration of business rescue plan.—(1) At a meet-
ing convened in terms of section 151, the practitioner must—
(a) introduce the proposed business plan for consideration by
the creditors and, if applicable, by the shareholders;
[Para. (a) substituted by s. 96 (a) of Act No. 3 of 2011 (English only).]
(b) inform the meeting whether the practitioner continues to
believe that there is a reasonable prospect of the company
being rescued;
(c) provide an opportunity for the employees’ representatives
to address the meeting;
(d) invite discussion, and entertain and conduct a vote, on any
motions to—
(i) amend the proposed plan, in any manner moved and
seconded by holders of creditors’ voting interests,
and satisfactory to the practitioner; or
(ii) direct the practitioner to adjourn the meeting in
order to revise the plan for further consideration; and
(e) call for a vote for preliminary approval of the proposed
plan, as amended if applicable, unless the meeting has first
been adjourned in accordance with paragraph (d) (ii).
(2) In a vote called in terms of subsection (1) (e), the proposed
business rescue plan will be approved on a preliminary basis if—
(a) it was supported by the holders of more than 75% of the
creditors’ voting interests that were voted; and
ss 152–153 Auditing: Legislation and Standards
(b) the votes in support of the proposed plan included at least
50% of the independent creditors’ voting interests, if any,
that were voted.
(3) If a proposed business rescue plan—
(a) is not approved on a preliminary basis, as contemplated in
subsection (2), the plan is rejected, and may be considered
further only in terms of section 153;
(b) does not alter the rights of the holders of any class of the
company’s securities, approval of that plan on a prelimi-
nary basis in terms of subsection (2) constitutes also the fi-
nal adoption of that plan, subject to satisfaction of any
conditions on which that plan is contingent; or
(c) does alter the rights of any class of holders of the com-
pany’s securities—
(i) the practitioner must immediately hold a meeting of
holders of the class, or classes of securities who
rights would be altered by the plan, and call for a
vote by them to approve the adoption of the pro-
posed business rescue plan; and
(ii) if, in a vote contemplated in subparagraph (i), a
majority of the voting rights that were exercised—
(aa) support adoption of the plan, it will have been
finally adopted, subject only to satisfaction of
any conditions on which it is contingent; or
(bb) oppose adoption of the plan, the plan is
rejected, and may be considered further only
in terms of section 153.
(4) A business rescue plan that has been adopted is binding on
the company, and on each of the creditors of the company and every
holder of the company’s securities, whether or not such a person—
(a) was present at the meeting;
(b) voted in favour of adoption of the plan; or
(c) in the case of creditors, had proven their claims against the
company.
(5) The company, under the direction of the practitioner, must
take all necessary steps to—
(a) attempt to satisfy any conditions on which the business
rescue plan is contingent; and
(b) implement the plan as adopted.
(6) To the extent necessary to implement an adopted business
rescue plan—
(a) the practitioner may, in accordance with that plan, deter-
mine the consideration for, and issue, any authorised secu-
rities of the company, despite section 38 or 40 to the
contrary; and
(b) if the business rescue plan was approved by the sharehold-
ers of the company, as contemplated in subsection (3) (c),
the practitioner may amend the company’s Memorandum
of Incorporation to authorise, and determine the prefer-
ences, rights, limitations and other terms of, any securities
that are not otherwise authorised, but are contemplated to
be issued in terms of the business rescue plan, despite any
provision of section 16, 36 or 37 to the contrary.
[Para. (b) substituted by s. 96 (b) of Act No. 3 of 2011 (English only).]
(7) Except to the extent that an approved business rescue plan
provides otherwise, a pre-emptive right of any shareholder of the
company, as contemplated in section 39, does not apply with respect
to an issue of shares by the company in terms of the business rescue
plan.
(8) When the business rescue plan has been substantially imple-
mented, the practitioner must file a notice of the substantial imple-
mentation of the business rescue plan.
153. Failure to adopt business rescue plan.—(1) (a) If a
business rescue plan has been rejected as contemplated in section
152 (3) (a) or (c) (ii) (bb) the practitioner may—
(i) seek a vote of approval from the holders of voting interests
to prepare and publish a revised plan; or
A-78
(ii) advise the meeting that the company will apply to a court
to set aside the result of the vote by the holders of voting
interests or shareholders, as the case may be, on the
grounds that it was inappropriate.
(b) If the practitioner does not take any action contemplated in
paragraph (a)—
(i) any affected person present at the meeting may—
(aa) call for a vote of approval from the holders of voting
interests requiring the practitioner to prepare and
publish a revised plan; or
(bb) apply to the court to set aside the result of the vote
by the holders of voting interests or shareholders, as
the case may be, on the grounds that it was inappro-
priate; or
(ii) any affected person, or combination of affected persons,
may make a binding offer to purchase the voting interests
of one or more persons who opposed adoption of the busi-
ness rescue plan, at a value independently and expertly de-
termined, on the request of the practitioner, to be a fair and
reasonable estimate of the return to that person, or those
persons, if the company were to be liquidated.
(2) If the practitioner, acting in terms of subsection (1) (a) (ii), or
an affected person, acting in terms of subsection (1) (b) (i) (bb),
informs the meeting that an application will be made to the court as
contemplated in those provisions, the practitioner must adjourn the
meeting—
(a) for five business days, unless the contemplated application
is made to the court during that time; or
(b) until the court has disposed of the contemplated applica-
tion.
(3) If, on the request of the practitioner in terms of subsection
(1) (a) (i), or a call by an affected person in terms of subsection
(1) (b) (i) (aa), the meeting directs the practitioner to prepare and
publish a revised business rescue plan—
(a) the practitioner must—
(i) conclude the meeting after that vote; and
(ii) prepare and publish a new or revised business rescue
plan within 10 business days; and
(b) the provisions of this Part apply afresh to the publishing
and consideration of that new or revised plan.
(4) If an affected person makes an offer contemplated in subsec-
tion (1) (b) (ii), the practitioner must—
(a) adjourn the meeting for no more than five business days,
as necessary to afford the practitioner an opportunity to
make any necessary revisions to the business rescue plan
to appropriately reflect the results of the offer; and
(b) set a date for resumption of the meeting, without further
notice, at which the provisions of section 152 and this sec-
tion will apply afresh.
(5) If no person takes any action contemplated in subsection (1),
the practitioner must promptly file a notice of the termination of the
business rescue proceedings.
(6) A holder of a voting interest, or a person acquiring that inter-
est in terms of a binding offer, may apply to a court to review, re-
appraise and re-value a determination by an independent expert in
terms of subsection (1) (b) (ii).
(7) On an application contemplated in subsection (1) (a) (ii), or
(1) (b) (i) (bb), a court may order that the vote on a business rescue
plan be set aside if the court is satisfied that it is reasonable and just
to do so, having regard to—
(a) the interests represented by the person or persons who
voted against the proposed business rescue plan;
(b) the provision, if any, made in the proposed business rescue
plan with respect to the interests of that person or those
persons; and
A-79 Companies Act No. 71 of 2008
(c) a fair and reasonable estimate of the return to that person,
or those persons, if the company were to be liquidated.
[Sub-s. (7) inserted by s. 97 of Act No. 3 of 2011.]
154. Discharge of debts and claims.—(1) A business rescue
plan may provide that, if it is implemented in accordance with its
terms and conditions, a creditor who has acceded to the discharge of
the whole or part of a debt owing to that creditor will lose the right
to enforce the relevant debt or part of it.
(2) If a business rescue plan has been approved and implemented
in accordance with this Chapter, a creditor is not entitled to enforce
any debt owed by the company immediately before the beginning of
the business rescue process, except to the extent provided for in the
business rescue plan.
Part E
Compromise with creditors
155. Compromise between company and creditors.—(1) This
section applies to a company, irrespective of whether or not it is
financially distressed as defined in section 128 (1) (f), unless it is
engaged in business rescue proceedings in terms of this Chapter.
(2) The board of a company, or the liquidator of such a company
if it is being wound up, may propose an arrangement or a compro-
mise of its financial obligations to all of its creditors, or to all of the
members of any class of its creditors, by delivering a copy of the
proposal, and notice of meeting to consider the proposal, to—
(a) every creditor of the company, or every member of the
relevant class of creditors whose name or address is known
to, or can reasonably be obtained by, the company; and
(b) the Commission.
(3) A proposal contemplated in subsection (2) must contain all
information reasonably required to facilitate creditors in deciding
whether or not to accept or reject the proposal, and must be divided
into three Parts, as follows—
(a) Part A—Background, which must include at least—
(i) a complete list of all the material assets of the
company, as well as an indication as to which assets
are held as security by creditors as of the date of the
proposal;
(ii) a complete list of the creditors of the company as of
the date of the proposal, as well as an indication as
to which creditors would qualify as secured, statu-
tory preferent and concurrent in terms of the laws of
insolvency, and an indication of which of the credi-
tors have proved their claims;
(iii) the probable dividend that would be received by
creditors, in their specific classes, if the company
were to be placed in liquidation;
(iv) a complete list of the holders of the company issued
securities, and the effect that the proposal would
have on them, if any; and
(v) whether the proposal includes a proposal made
informally by a creditor of the company.
(b) Part B—Proposals, which must include at least—
(i) the nature and duration of any proposed debt
moratorium;
(ii) the extent to which the company is to be released
from the payment of its debts, and the extent to
which any debt is proposed to be converted to equity
in the company, or another company;
(iii) the treatment of contracts and ongoing role of the
company;
(iv) the property of the company that is proposed to be
available to pay creditors’ claims;
(v) the order of preference in which the proceeds of
property of the company will be applied to pay cred-
itors if the proposal is adopted; and
ss 153–155
(vi) the benefits of adopting the proposal as opposed to
the benefits that would be received by creditors if
the company were to be placed in liquidation.
(c) Part C—Assumptions and conditions, which must
include at least—
(i) a statement of the conditions that must be satisfied,
if any, for the proposal to—
(aa) come into operation; and
(bb) be fully implemented;
(ii) the effect, if any, that the plan contemplates on the
number of employees, and their terms and con-
ditions of employment; and
(iii) a projected—
(aa) balance sheet for the company; and
(bb) statement of income and expenses for the
ensuing three years,
prepared on the assumption that the proposal is
accepted.
(4) The projected balance sheet and statement required by sub-
section (3) (c) (iii)—
(a) must include a notice of any significant assumptions on
which the projections are based; and
(b) may include alternative projections based on varying
assumptions and contingencies.
(5) A proposal must conclude with a certificate by an authorised
director or prescribed officer of the company stating that any—
(a) factual information provided appears to be accurate,
complete, and up to the date; and
(b) projections provided are estimates made in good faith on
the basis of factual information and assumptions as set out
in the statement.
(6) A proposal contemplated in this section will have been adopt-
ed by the creditors of the company, or the members of a relevant
class of creditors, if it is supported by a majority in number, repre-
senting at least 75% in value of the creditors or class, as the case
may be, present and voting in person or by proxy, at a meeting
called for that purpose.
(7) If a proposal is adopted as contemplated in subsection (6)—
(a) the company may apply to the court for an order approving
the proposal; and
(b) the court, on an application in terms of paragraph (a) may
sanction the compromise as set out in the adopted pro-
posal, if it considers it just and equitable to do so, having
regard to—
(i) the number of creditors of any affected class of
creditors, who were present or represented at the
meeting, and who voted in favour of the proposal;
and
(ii) in the case of a compromise in respect of a company
being wound up, the report of the Master required in
terms of the laws contemplated in item 9 of Sched-
ule 5.
(8) A copy of an order of the court sanctioning a compromise—
(a) must be filed by the company within five business days;
(b) must be attached to each copy of the company’s Memo-
randum of Incorporation that is kept at the company’s reg-
istered office, or elsewhere as contemplated in section 25;
and
(c) is final and binding on all of the company’s creditors or all
of members of the relevant class of creditors, as the case
may be, as of the date on which it is filed.
(9) An arrangement or a compromise contemplated in this section
does not affect the liability of any person who is a surety of the
company.
ss 156–159 Auditing: Legislation and Standards
CHAPTER 7
REMEDIES AND ENFORCEMENT
Part A
General principles
156. Alternative procedures for addressing complaints or
securing rights.—A person referred to in section 157 (1) may seek
to address an alleged contravention of this Act, or to enforce any
provision of, or right in terms of this Act, a company’s Memoran-
dum of Incorporation or rules, or a transaction or agreement con-
templated in this Act, the company’s Memorandum of Incorporation
or rules, by—
(a) attempting to resolve any dispute with or within a compa-
ny through alternative dispute resolution in accordance
with Part C of this Chapter;
(b) applying to the Companies Tribunal for adjudication in
respect of any matter for which such an application is per-
mitted in terms of this Act;
(c) applying for appropriate relief to the division of the High
Court that has jurisdiction over the matter; or
(d) filing a complaint in accordance with Part D of this
Chapter within the time permitted by section 219 with—
(i) the Panel, if the complaint concerns a matter within
its jurisdiction; or
(ii) the Commission in respect of any matter arising in
terms of this Act, other than a matter contemplated
in subparagraph (i).
157. Extended standing to apply for remedies.—(1) When, in
terms of this Act, an application can be made to, or a matter can be
brought before, a court, the Companies Tribunal, the Panel or the
Commission, the right to make the application or bring the matter
may be exercised by a person—
(a) directly contemplated in the particular provision of this
Act;
(b) acting on behalf of a person contemplated in paragraph (a),
who cannot act in their own name;
(c) acting as a member of, or in the interest of, a group or class
of affected persons, or an association acting in the interest
of its members; or
(d) acting in the public interest, with leave of the court.
(2) The Commission or the Panel, acting in either case on its own
motion and in its absolute discretion, may—
(a) commence any proceedings in a court in the name of a
person who, when filing a complaint with the Commission
or Panel, as the case may be, in respect of the matter giving
rise to those proceedings, also made a written request that
the Commission or Panel do so; or
(b) apply for leave to intervene in any court proceedings
arising in terms of this Act, in order to represent any inter-
est that would not otherwise be adequately represented in
those proceedings.
(3) For greater certainty, nothing in this section creates a right of
any person to commence any legal proceedings contemplated in
section 165 (1), other than—
(a) on behalf of a person entitled to make a demand in terms
of section 165 (2); and
(b) in the manner set out in section 165.
158. Remedies to promote purpose of Act.—When determin-
ing a matter brought before it in terms of this Act, or making an
order contemplated in this Act—
(a) a court must develop the common law as necessary to
improve the realisation and enjoyment of rights established
by this Act; and
(b) the Commission, the Panel, the Companies Tribunal or a
court—
(i) must promote the spirit, purpose and objects of this
Act; and
A-80
(ii) if any provision of this Act, or other document in
terms of this Act, read in its context, can be reasona-
bly construed to have more than one meaning, must
prefer the meaning that best promotes the spirit and
purpose of this Act, and will best improve the reali-
sation and enjoyment of rights.
159. Protection for whistle-blowers.—(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 substitu-
tion for, any right or protection established by that Act;
and
(b) that Act applies to a disclosure contemplated in this section
by an employee, as defined in that Act, irrespective of
whether that Act would otherwise apply to that disclosure.
[Para. (b) substituted by s. 98 (a) of Act No. 3 of 2011 (English only).]
(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 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 secre-
tary, auditor, a person performing the function of internal
audit, board or committee of the company concerned; and
[Para. (a) substituted by s. 98 (b) of Act No. 3 of 2011.]
(b) the person making the disclosure reasonably believed at
the time of the 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, had—
(i) contravened this Act, or a law mentioned in Sched-
ule 4;
(ii) failed or was failing to comply with any statutory
obligation to which the company was subject;
[Sub-para. (ii) substituted by s. 98 (d) of Act No. 3 of 2011.]
(iii) engaged in conduct that had endangered, or was
likely to endanger, the health or safety of any indi-
vidual, or had harmed or was likely to harm the en-
vironment;
[Sub-para. (iii) substituted by s. 98 (d) of Act No. 3 of 2011.]
(iv) unfairly discriminated, or condoned unfair discrimi-
nation, against any person, as contemplated in sec-
tion 9 of the Constitution and the 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 in-
terests of the company.
[Para. (b) amended by s. 98 (c) of Act No. 3 of 2011.]
(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 employ-
ees of that company, a supplier of goods or services to a company,
or an employee of such a supplier, who makes a disclosure contem-
plated in this section—
(a) has qualified privilege in respect of the disclosure; and
(b) is immune from any civil, criminal or administrative
liability for that disclosure.
(5) A person contemplated in subsection (4) is entitled to com-
pensation from another person for any damages suffered if the first
person is entitled to make, or has made, a disclosure contemplated in
A-81 Companies Act No. 71 of 2008
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 or unconditional, to cause any detri-
ment 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 fears or feared that the threat
will or would be carried out.
[Para. (b) substituted by s. 98 (e) of Act No. 3 of 2011.]
(6) Any conduct or threat contemplated in subsection (5) is pre-
sumed 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 the threat.
(7) A public company or a 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 contemplated in subsection (4).
[Sub-s. (7) amended by s. 98 (f) of Act No. 3 of 2011.]
Part B
Rights to seek specific remedies
160. Disputes concerning reservation or registration of com-
pany names.—(1) A person to whom a notice is delivered in terms
of this Act with respect to an application for reservation of a name,
registration of a defensive name, application to transfer the reserva-
tion of a name or the registration of a defensive name, or the
registration of a company’s name, or any other person with an
interest in the name of a company, may apply to the Companies
Tribunal in the prescribed manner and form for a determination
whether the name, or the reservation, registration or use of the name,
or the transfer of any such reservation or registration of a name,
satisfies the requirements of this Act.
[Sub-s (1) substituted by s. 99 (a) of Act No. 3 of 2011.]
(2) An application in terms of subsection (1) may be made—
(a) within three months after the date of a notice contemplated
in subsection (1), if the applicant received such a notice; or
(b) on good cause shown at any time after the date of the
reservation or registration of the name that is the subject of
the application, in any other case.
(3) After considering an application made in terms of subsection
(1), and any submissions by the applicant and any other person with
an interest in the name or proposed name that is the subject of the
application, the Companies Tribunal—
(a) must make a determination whether that name, or the
reservation, registration or use of the name, or the transfer
of the reservation or registration of the name, satisfies the
requirements of this Act; and
[Para. (a) substituted by s. 99 (b) of Act No. 3 of 2011.]
(b) may make an administrative order directing—
(i) the Commission to—
(aa) reserve a contested name, or register a particu-
lar defensive name that had been contested,
for the applicant;
(bb) register a name or amended name that had
been contested as the name of a company;
(Editorial Note: Wording as per original Government Gazette.)
(cc) cancel the reservation of a name, or the
registration of a defensive name; or
ss 159–162
(dd) transfer, or cancel the transfer of, the reserva-
tion of a name, or the registration of a defen-
sive name; or
[Sub-para. (i) substituted by s. 99 (c) of Act No. 3 of 2011.]
(ii) a company to choose a new name, and to file a
notice of an amendment to its Memorandum of In-
corporation, within a period and on any conditions
that the Tribunal considers just, equitable and expe-
dient in the circumstances, including a condition ex-
empting the company from the requirement to pay
the prescribed fee for filing the notice of amendment
contemplated in this paragraph.
(4) Within 20 business days after receiving a notice or a decision
issued by the Companies Tribunal in terms of this section, an
incorporator of a company, a company, a person who received a
notice in terms of section 12 (3) or 14 (3), an applicant under
subsection (1) or and any other person with an interest in the name
or proposed name that is the subject of the application, as the case
may be, may apply to a court to review the notice or decision.
161. Application to protect rights of securities holders.—
(1) A holder of issued securities of a company may apply to a court
for—
(a) an order determining any rights of that securities holder in
terms of this Act, the company’s Memorandum of Incorpo-
ration, any rules of the company, or any applicable debt in-
strument; or
(b) any appropriate order necessary to—
(i) protect any right contemplated in paragraph (a); or
(ii) rectify any harm done to the securities holder by—
(aa) the company as a consequence of an act or
omission that contravened this Act or the
company’s Memorandum of Incorporation,
rules or applicable debt instrument, or violated
any right contemplated in paragraph (a); or
(bb) any of its directors to the extent that they are
or may be held liable in terms of section 77.
(2) The right to apply to a court in terms of this section is in
addition to any other remedy available to a holder of a company’s
securities—
(a) in terms of this Act; or
(b) in terms of the common law, subject to this Act.
[Sub-s. (2) amended by s. 100 of Act No. 3 of 2011]
162. Application to declare director delinquent or under
probation.—(1) In this section, “legislation” means any national or
provincial legislation—
(a) relating to the promotion, formation or management of a
juristic person;
(b) regulating an industry or sector of an industry; or
(c) imposing obligations on, prohibiting any conduct by, or
otherwise regulating the activities of, a juristic person.
(2) A company, a shareholder, director, company secretary or
prescribed officer of a company, a registered trade union that
represents employees of the company or another representative of
the employees of a company may apply to a court for an order
declaring a person delinquent or under probation if—
(a) the person is a director of that company or, within the
24 months immediately preceding the application, was a
director of that company; and
(b) any of the circumstances contemplated in—
(i) subsection (5) (a) to (c) apply, in the case of an
application for a declaration of delinquency; or
(ii) subsections (7) (a) and (8) apply, in the case of an
application for probation.
[Sub-s. (2) amended by s. 101 (a) of Act No. 3 of 2011 (English only).]
s 162 Auditing: Legislation and Standards
(3) The Commission or the Panel may apply to a court for an
order declaring a person delinquent or under probation if—
(a) the person is a director of a company or, within the
24 months immediately preceding the application, was a
director of a company; and
(b) any of the circumstances contemplated in—
(i) subsection (5) apply, in the case of an application for
a declaration of delinquency; or
(ii) subsections (7) and (8) apply, in the case of an
application for probation.
(4) Any organ of state responsible for the administration of any
legislation may apply to a court for an order declaring a person
delinquent if—
(a) the person is a director of a company or, within the
24 months immediately preceding the application, was a
director of a company; and
(b) any of the circumstances contemplated in subsection
(5) (d) to (f) apply with respect to any legislation adminis-
tered by that organ of state.
(5) A court must make an order declaring a person to be a delin-
quent director if the person—
(a) consented to serve as a director, or acted in the capacity of
a director or prescribed officer, while ineligible or disqual-
ified in terms of section 69, unless the person was acting—
(i) under the protection of a court order contemplated in
section 69 (11); or
(ii) as a director as contemplated in section 69 (12);
(b) while under an order of probation in terms of this section
or section 47 of the Close Corporations Act, 1984 (Act
No. 69 of 1984), acted as a director in a manner that con-
travened that order;
(c) while a director—
(i) grossly abused the position of director;
(ii) took personal advantage of information or an
opportunity, contrary to section 76 (2) (a);
(iii) intentionally, or by gross negligence, inflicted harm
upon the company or a subsidiary of the company,
contrary to section 76 (2) (a);
(iv) acted in a manner—
(aa) that amounted to gross negligence, wilful
misconduct or breach of trust in relation to the
performance of the director’s functions within,
and duties to, the company; or
(bb) contemplated in section 77 (3) (a), (b) or (c);
(d) has repeatedly been personally subject to a compliance
notice or similar enforcement mechanism, for substantially
similar conduct, in terms of any legislation;
(e) has at least twice been personally convicted of an offence,
or subjected to an administrative fine or similar penalty, in
terms of any legislation; or
(f) within a period of five years, was a director of one or more
companies or a managing member of one or more close
corporations, or controlled or participated in the control of
a juristic person, irrespective of whether concurrently, se-
quentially or at unrelated times, that were convicted of an
offence, or subjected to an administrative fine or similar
penalty, in terms of any legislation, and—
(i) the person was a director of each such company, or a
managing member of each such close corporation or
was responsible for the management of each such
juristic person, at the time of the contravention that
resulted in the conviction, administrative fine or
other penalty; and
(ii) the court is satisfied that the declaration of delin-
quency is justified, having regard to the nature of the
contraventions, and the person’s conduct in relation
to the management, business or property of any
A-82
company, close corporation or juristic person at the
time.
[Para. (f) amended by s. 101 (b) of Act No. 3 of 2011 (English only).]
(6) A declaration of delinquency in terms of—
(a) subsection (5) (a) or (b) is unconditional, and subsists for
the lifetime of the person declared delinquent; or
(b) subsection (5) (c) to (f)—
(i) may be made subject to any conditions the court
considers appropriate, including conditions limiting
the application of the declaration to one or more par-
ticular categories of companies; and
(ii) subsists for seven years from the date of the order, or
such longer period as determined by the court at the
time of making the declaration, subject to subsec-
tions (11) and (12).
(7) A court may make an order placing a person under probation,
if—
(a) while serving as a director, the person—
(i) was present at a meeting and failed to vote against a
resolution despite the inability of the company to
satisfy the solvency and liquidity test, contrary to
this Act;
(ii) otherwise acted in a manner materially inconsistent
with the duties of a director; or
(iii) acted in, or supported a decision of the company to
act in, a manner contemplated in section 163 (1); or
(b) within any period of 10 years after the effective date—
(i) the person has been a director of more than one
company, or a managing member of more than one
close corporation, irrespective of whether concur-
rently, sequentially or at unrelated times; and
[Sub-para. (i) substituted by s. 101 (c) of Act No. 3 of 2011 (English
only).]
(ii) during the time that the person was a director of
each such company or managing member of each
such close corporation, two or more of those compa-
nies or close corporations each failed to fully pay all
of its creditors or meet all of its obligations, except
in terms of—
(aa) a business rescue plan resulting from a
resolution of the board in terms of section
129; or
(bb) a compromise with creditors in terms of
section 155.
(8) The court may declare a person under probation in the cir-
cumstances contemplated in—
(a) subsection (7) (a) (iii), only if the court is satisfied that the
declaration is justified having regard to the circumstances
of the company’s or close corporation’s conduct, if appli-
cable, and the person’s conduct in relation to the manage-
ment, business or property of the company or close
corporation at the time; or
(b) subsection (7) (b), only if the court is satisfied that—
(i) the manner in which the company or close corpora-
tion was managed was wholly or partly responsible
for it failing to meet its obligations; and
(ii) the declaration is justified, having regard to the
circumstances of the company’s or close corpora-
tion’s failure, and the person’s conduct in relation to
the management, business or property of the compa-
ny or close corporation at the time.
(9) A declaration placing a person under probation—
(a) may be made subject to any conditions the court considers
appropriate, including conditions limiting the application
of the declaration to one or more particular categories of
companies; and
A-83 Companies Act No. 71 of 2008
(b) subsists for a period not exceeding five years, as deter-
mined by the court at the time it makes the declaration,
subject to subsections (11) and (12).
(10) Without limiting the powers of the court, a court may order,
as conditions applicable or ancillary to a declaration of delinquency
or probation, that the person concerned—
(a) undertake a designated programme of remedial education
relevant to the nature of the person’s conduct as director;
(b) carry out a designated programme of community service;
(c) pay compensation to any person adversely affected by the
person’s conduct as a director, to the extent that such a vic-
tim does not otherwise have a legal basis to claim compen-
sation; or
(d) in the case of an order of probation—
(i) be supervised by a mentor in any future participation
as a director while the order remains in force; or
(ii) be limited to serving as a director of a private
company, or of a company of which that person is
the sole shareholder.
(11) A person who has been declared delinquent, other than as
contemplated in subsection (6) (a), or is subject to an order of
probation, may apply to a court—
(a) to suspend the order of delinquency, and substitute an
order of probation, with or without conditions, at any time
more than three years after the order of delinquency was
made; or
(b) to set aside an order of—
(i) delinquency at any time more than two years after it
was suspended as contemplated in paragraph (a); or
(ii) of probation, at any time more than two years after it
was made.
(12) On considering an application contemplated in subsection
(11), the court may—
(a) not grant the order applied for unless the applicant has
satisfied any conditions that were attached to the original
order, or imposed in terms of subsection (11) (a); and
(b) grant an order if, having regard to the circumstances
leading to the original order, and the conduct of the appli-
cant in the ensuing period, the court is satisfied that—
(i) the applicant has demonstrated satisfactory progress
towards rehabilitation, and
(ii) there is a reasonable prospect that the applicant
would be able to serve successfully as a director of a
company in the future.
(13) An applicant in terms of subsection (4) must serve the
Commission with a copy of the application.
163. Relief from oppressive or prejudicial conduct or from
abuse of separate juristic personality of company.—(1) A
shareholder or a director of a company may apply to a court for
relief if—
(a) any act or omission of the company, or a related person,
has had a result that is oppressive or unfairly prejudicial to,
or that unfairly disregards the interests of, the applicant;
(b) the business of the company, or a related person, is being
or has been carried on or conducted in a manner that is op-
pressive or unfairly prejudicial to, or that unfairly disre-
gards the interests of, the applicant; or
(c) the powers of a director or prescribed officer of the
company, or a person related to the company, are being or
have been exercised in a manner that is oppressive or un-
fairly prejudicial to, or that unfairly disregards the interests
of, the applicant.
(2) Upon considering an application in terms of subsection (1),
the court may make any interim or final order it considers fit,
including—
(a) an order restraining the conduct complained of;
ss 162–164
(b) an order appointing a liquidator, if the company appears to
be insolvent;
(c) an order placing the company under supervision and
commencing business rescue proceedings in terms of
Chapter 6, if the court is satisfied that the circumstances
set out in section 131 (4) (a) apply;
(d) an order to regulate the company’s affairs by directing the
company to amend its Memorandum of Incorporation or to
create or amend a unanimous shareholder agreement;
(e) an order directing an issue or exchange of shares;
(f) an order—
(i) appointing directors in place of or in addition to all
or any of the directors then in office; or
(ii) declaring any person delinquent or under probation,
as contemplated in section 162;
(g) an order directing the company or any other person to
restore to a shareholder any part of the consideration that
the shareholder paid for shares, or pay the equivalent
value, with or without conditions;
(h) an order varying or setting aside a transaction or an
agreement to which the company is a party and compensat-
ing the company or any other party to the transaction or
agreement;
(i) an order requiring the company, within a time specified by
the court, to produce to the court or an interested person
financial statements in a form required by this Act, or an
accounting in any other form the court may determine;
(j) an order to pay compensation to an aggrieved person,
subject to any other law entitling that person to compensa-
tion;
(k) an order directing rectification of the registers or other
records of a company; or
(l) an order for the trial of any issue as determined by the
court.
(3) If an order made under this section directs the amendment of
the company’s Memorandum of Incorporation—
(a) the directors must promptly file a notice of amendment to
give effect to that order, in accordance with section 16 (4);
and
(b) no further amendment altering, limiting or negating the
effect of the court order may be made to the Memorandum
of Incorporation, until a court orders otherwise.
(4) . . . . . .
[Sub-s. (4) deleted by s. 102 of Act No. 3 of 2011.]
164. Dissenting shareholders appraisal rights.—(1) This
section does not apply in any circumstances relating to a transaction,
agreement or offer pursuant to a business rescue plan that was
approved by shareholders of a company, in terms of section 152.
(2) If a company has given notice to shareholders of a meeting to
consider adopting a resolution to—
(a) amend its Memorandum of Incorporation by altering the
preferences, rights, limitations or other terms of any class
of its shares in any manner materially adverse to the rights
or interests of holders of that class of shares, as contem-
plated in section 37 (8); or
(b) enter into a transaction contemplated in section 112, 113,
or 114,
that notice must include a statement informing shareholders of their
rights under this section.
(3) At any time before a resolution referred to in subsection (2) is
to be voted on, a dissenting shareholder may give the company a
written notice objecting to the resolution.
(4) Within 10 business days after a company has adopted a reso-
lution contemplated in this section, the company must send a notice
that the resolution has been adopted to each shareholder who—
(a) gave the company a written notice of objection in terms of
subsection (3); and
s 164 Auditing: Legislation and Standards
(b) has neither—
(i) withdrawn that notice; or
(ii) voted in support of the resolution.
(5) A shareholder may demand that the company pay the share-
holder the fair value for all of the shares of the company held by that
person if—
(a) the shareholder—
(i) sent the company a notice of objection, subject to
subsection (6); and
(ii) in the case of an amendment to the company’s
Memorandum of Incorporation, holds shares of a
class that is materially and adversely affected by the
amendment;
(b) the company has adopted the resolution contemplated in
subsection (2); and
(c) the shareholder—
(i) voted against that resolution; and
(ii) has complied with all of the procedural requirements
of this section.
(6) The requirement of subsection (5) (a) (i) does not apply if the
company failed to give notice of the meeting, or failed to include in
that notice a statement of the shareholders rights under this section.
(7) A shareholder who satisfies the requirements of subsection
(5) may make a demand contemplated in that subsection by deliver-
ing a written notice to the company within—
(a) 20 business days after receiving a notice under subsec-
tion (4); or
(b) if the shareholder does not receive a notice under subsec-
tion (4), within 20 business days after learning that the res-
olution has been adopted.
(8) A demand delivered in terms of subsections (5) to (7) must
also be delivered to the Panel, and must state—
(a) the shareholder’s name and address;
(b) the number and class of shares in respect of which the
shareholder seeks payment; and
(c) a demand for payment of the fair value of those shares.
[Sub-s. (8) amended by s. 103 (a) of Act No. 3 of 2011.]
(9) A shareholder who has sent a demand in terms of subsections
(5) to (8) has no further rights in respect of those shares, other than
to be paid their fair value, unless—
(a) the shareholder withdraws that demand before the com-
pany makes an offer under subsection (11), or allows an
offer made by the company to lapse, as contemplated in
subsection (12) (b);
(b) the company fails to make an offer in accordance with
subsection (11) and the shareholder withdraws the de-
mand; or
(c) the company, by a subsequent special resolution, revokes
the adopted resolution that gave rise to the shareholder’s
rights under this section.
[Para. (c) substituted by s. 103 (b) of Act No. 3 of 2011.]
(10) If any of the events contemplated in subsection (9) occur, all
of the shareholder’s rights in respect of the shares are reinstated
without interruption.
(11) Within five business days after the later of—
(a) the day on which the action approved by the resolution is
effective;
(b) the last day for the receipt of demands in terms of subsec-
tion (7) (a); or
(c) the day the company received a demand as contemplated
in subsection (7) (b), if applicable, the company must send
to each shareholder who has sent such a demand a written
offer to pay an amount considered by the company’s direc-
tors to be the fair value of the relevant shares, subject to
subsection (16), accompanied by a statement showing how
that value was determined.
A-84
(12) Every offer made under subsection (11)—
(a) in respect of shares of the same class or series must be on
the same terms; and
(b) lapses if it has not been accepted within 30 business days
after it was made.
(13) If a shareholder accepts an offer made under subsection
(12)—
(a) the shareholder must either in the case of—
(i) shares evidenced by certificates, tender the relevant
share certificates to the company or the company’s
transfer agent; or
(ii) uncertificated shares, take the steps required in terms
of section 53 to direct the transfer of those shares to
the company or the company’s transfer agent; and
(b) the company must pay that shareholder the agreed amount
within 10 business days after the shareholder accepted the
offer and—
(i) tendered the share certificates; or
(ii) directed the transfer to the company of uncertificated
shares.
(14) A shareholder who has made a demand in terms of subsec-
tions (5) to (8) may apply to a court to determine a fair value in
respect of the shares that were the subject of that demand, and an
order requiring the company to pay the shareholder the fair value so
determined, if the company has—
(a) failed to make an offer under subsection (11); or
(b) made an offer that the shareholder considers to be inade-
quate, and that offer has not lapsed.
(15) On an application to the court under subsection (14)—
(a) all dissenting shareholders who have not accepted an offer
from the company as at the date of the application must be
joined as parties and are bound by the decision of the
court;
(b) the company must notify each affected dissenting share-
holder of the date, place and consequences of the applica-
tion and of their right to participate in the court
proceedings; and
(c) the court—
(i) may determine whether any other person is a
dissenting shareholder who should be joined as a
party;
(ii) must determine a fair value in respect of the shares
of all dissenting shareholders, subject to subsection
(16);
(iii) in its discretion may—
(aa) appoint one or more appraisers to assist it in
determining the fair value in respect of the
shares; or
(bb) allow a reasonable rate of interest on the
amount payable to each dissenting shareholder
from the date the action approved by the reso-
lution is effective, until the date of payment;
(iv) may make an appropriate order of costs, having
regard to any offer made by the company, and the
final determination of the fair value by the court; and
(v) must make an order requiring—
(aa) the dissenting shareholders to either withdraw
their respective demands or to comply with
subsection (13) (a); and
[Item (aa) substituted by s. 103 (c) of Act No. 3 of 2011.]
(bb) the company to pay the fair value in respect of
their shares to each dissenting shareholder
who complies with subsection (13) (a), sub-
ject to any conditions the court considers nec-
essary to ensure that the company fulfils its
obligations under this section.
A-85 Companies Act No. 71 of 2008
(15A) At any time before the court has made an order contem-
plated in subsection (15) (c) (v), a dissenting shareholder may
accept the offer made by the company in terms of subsection (11), in
which case—
(a) that shareholder must comply with the requirements of
subsection 13 (a); and
(b) the company must comply with the requirements of
subsection 13 (b).
[Sub-s. (15A) inserted by s. 103 (d) of Act No. 3 of 2011.]
(16) The fair value in respect of any shares must be determined
as at the date on which, and time immediately before, the company
adopted the resolution that gave rise to a shareholder’s rights under
this section.
(17) If there are reasonable grounds to believe that compliance
by a company with subsection (13) (b), or with a court order in
terms of subsection (15) (c) (v) (bb), would result in the company
being unable to pays its debts as they fall due and payable for the
ensuing 12 months—
(a) the company may apply to a court for an order varying the
company’s obligations in terms of the relevant subsection;
and
(b) 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 owes
money in terms of this section is paid at the earliest
possible date compatible with the company satisfy-
ing its other financial obligations as they fall due and
payable.
(18) If the resolution that gave rise to a shareholder’s rights under
this section authorised the company to amalgamate or merge with
one or more other companies, such that the company whose shares
are the subject of a demand in terms of this section has ceased to
exist, the obligations of that company under this section are obliga-
tions of the successor to that company resulting from the amalgama-
tion or merger.
(19) For greater certainty, the making of a demand, tendering of
shares and payment by a company to a shareholder in terms of this
section do not constitute a distribution by the company, or an
acquisition of its shares by the company within the meaning of
section 48, and therefore are not subject to—
(a) the provisions of that section; or
(b) the application by the company of the solvency and
liquidity test set out in section 4.
(20) Except to the extent—
(a) expressly provided in this section; or
(b) that the Panel rules otherwise in a particular case,
a payment by a company to a shareholder in terms of this
section does not obligate any person to make a comparable
offer under section 125 to any other person.
[Sub-s. (20) inserted by s. 103 (e) of Act No. 3 of 2011.]
165. Derivative actions.—(1) Any right at common law of a
person other than a company to bring or prosecute any legal pro-
ceedings on behalf of that company is abolished, and the rights in
this section are in substitution for any such abolished right.
(2) A person may serve a demand upon a company to commence
or continue legal proceedings, or take related steps, to protect the
legal interests of the company if the person—
(a) is a shareholder or a person entitled to be registered as a
shareholder, of the company or of a related company;
(b) is a director or prescribed officer of the company or of a
related company;
(c) is a registered trade union that represents employees of the
company, or another representative of employees of the
company; or
(d) has been granted leave of the court to do so, which may be
granted only if the court is satisfied that it is necessary or
ss 164–165
expedient to do so to protect a legal right of that other per-
son.
(3) A company that has been served with a demand in terms of
subsection (2) may apply within 15 business days to a court to set
aside the demand only on the grounds that it is frivolous, vexatious
or without merit.
(4) If a company does not make an application contemplated in
subsection (3), or the court does not set aside the demand in terms of
that subsection, the company must—
(a) appoint an independent and impartial person or committee
to investigate the demand, and report to the board on—
(i) any facts or circumstances—
(aa) that may gave rise to a cause of action con-
templated in the demand; or
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “that may gave rise” is intended to be “that
may give rise”.)
(bb) that may relate to any proceedings contem-
plated in the demand;
(ii) the probable costs that would be incurred if the
company pursued any such cause of action or con-
tinued any such proceedings; and
(iii) whether it appears to be in the best interests of the
company to pursue any such cause of action or con-
tinue any such proceedings; and
(b) within 60 business days after being served with the
demand, or within a longer time as a court, on application
by the company, may allow, either—
(i) initiate or continue legal proceedings, or take related
legal steps to protect the legal interests of the com-
pany, as contemplated in the demand; or
(ii) serve a notice on the person who made the demand,
refusing to comply with it.
(5) A person who has made a demand in terms of subsection (2)
may apply to a court for leave to bring or continue proceedings in
the name and on behalf of the company, and the court may grant
leave only if—
(a) the company—
(i) has failed to take any particular step required by
subsection (4);
(ii) appointed an investigator or committee who was not
independent and impartial;
(iii) accepted a report that was inadequate in its prepara-
tion, or was irrational or unreasonable in its conclu-
sions or recommendations;
(iv) acted in a manner that was inconsistent with the
reasonable report of an independent, impartial inves-
tigator or committee; or
(v) has served a notice refusing to comply with the
demand, as contemplated in subsection (4) (b) (ii); and
(b) the court is satisfied that—
(i) the applicant is acting in good faith;
(ii) the proposed or continuing proceedings involve the
trial of a serious question of material consequence to
the company; and
(iii) it is in the best interests of the company that the
applicant be granted leave to commence the pro-
posed proceedings or continue the proceedings, as
the case may be.
(6) In exceptional circumstances, a person contemplated in sub-
section (2) may apply to a court for leave to bring proceedings in the
name and on behalf of the company without making a demand as
contemplated in that subsection, or without affording the company
time to respond to the demand in accordance with subsection (4),
and the court may grant leave only if the court is satisfied that—
(a) the delay required for the procedures contemplated in
subsections (3) to (5) to be completed may result in—
(i) irreparable harm to the company; or
ss 165–166 Auditing: Legislation and Standards
(ii) substantial prejudice to the interests of the applicant
or another person;
(b) there is a reasonable probability that the company may not
act to prevent that harm or prejudice, or act to protect the
company’s interests that the applicant seeks to protect; and
(c) that the requirements of subsection (5) (b) are satisfied.
(7) A rebuttable presumption that granting leave is not in the best
interests of the company arises if it is established that—
(a) the proposed or continuing proceedings are by—
(i) the company against a third party; or
(ii) a third party against the company;
(b) the company has decided—
(i) not to bring the proceedings;
(ii) not to defend the proceedings; or
(iii) to discontinue, settle or compromise the proceed-
ings; and
(c) all of the directors who participated in that decision—
(i) acted in good faith for a proper purpose;
(ii) did not have a personal financial interest in the
decision, and were not related to a person who had a
personal financial interest in the decision;
(iii) informed themselves about the subject matter of the
decision to the extent they reasonably believed to be
appropriate; and
(iv) reasonably believed that the decision was in the best
interests of the company.
(8) For the purposes of subsection (7)—
(a) a person is a third party if the company and that person are
not related or inter-related; and
[Para. (a) substituted by s. 104 (a) of Act No. 3 of 2011.]
(b) proceedings by or against the company include any appeal
from a decision made in proceedings by or against the
company.
(9) If a court grants leave to a person under this section—
(a) the court must also make an order stating who is liable for
the remuneration and expenses of the person appointed;
(b) the court may vary the order at any time;
(c) the persons who may be made liable under the order, or the
order as varied, are—
(i) all or any of the parties to the proceedings or
application; and
(ii) the company;
(d) if the order, or the order as varied, makes two or more
persons liable, the order may also determine the nature and
extent of the liability of each of those persons; and
(e) the person to whom leave has been granted is entitled, on
giving reasonable notice to the company, to inspect any
books of the company for any purpose connected with the
legal proceedings.
(10) At any time, a court may make any order it considers appro-
priate about the costs of the following persons in relation to pro-
ceedings brought or intervened in with leave under this section, or in
respect of an application for leave under this section—
(a) The person who applied for or was granted leave;
(b) the company; or
(c) any other party to the proceedings or application.
(11) An order under this section may require security for costs.
(12) At any time after a court has granted leave in terms of this
section, a person contemplated in subsection (2) may apply to a
court for an order that they be substituted for the person to whom
leave was originally granted, and the court may make the order
applied for if it is satisfied that—
(a) the applicant is acting in good faith; and
(b) it is appropriate to make the order in all the circumstances.
A-86
(13) An order substituting one person for another has the effect
that—
(a) the grant of leave is taken to have been made in favour of
the substituting person; and
(b) if the person originally granted leave has already brought
the proceedings, the substituting person is taken to have
brought those proceedings or to have made that interven-
tion.
(14) If the shareholders of a company have ratified or approved
any particular conduct of the company—
(a) the ratification or approval—
(i) does not prevent a person from making a demand,
applying for leave, or bringing or intervening in pro-
ceedings with leave under this section; and
(ii) does not prejudice the outcome of any application
for leave, or proceedings brought or intervened in
with leave under this section; or
(b) the court may take that ratification or approval into
account in making any judgment or order.
[Para. (b) substituted by s. 104 (b) of Act No. 3 of 2011 (English only).]
(15) Proceedings brought or intervened in with leave under this
section must not be discontinued, compromised or settled without
the leave of the court.
(16) For greater certainty, the right of a person in terms of this
section to serve a demand on a company, or apply to a court for
leave, may be exercised by that person directly, or by the Commis-
sion or Panel, or another person on behalf of that first person, in the
manner permitted by section 157.
Part C
Voluntary resolution of disputes
166. Alternative dispute resolution.—(1) As an alternative to
applying for relief to a court, or filing a complaint with the Commis-
sion in terms of Part D, a person who would be entitled to apply for
relief, or file a complaint in terms of this Act, may refer a matter that
could be the subject of such an application or complaint for resolu-
tion by mediation, conciliation or arbitration to—
(a) the Companies Tribunal;
(b) an accredited entity, as defined in subsection (3); or
(c) any other person.
[Sub-s. (1) substituted by s. 105 of Act No. 3 of 2011.]
(2) If the Companies Tribunal, or an accredited entity, to whom a
matter is referred for alternative dispute resolution concludes that
either party to the conciliation, mediation or arbitration is not
participating in that process in good faith, or that there is no reason-
able probability of the parties resolving their dispute through that
process, the Companies Tribunal or accredited entity must issue a
certificate in the prescribed form stating that the process has failed.
(3) In this section, “accredited entity” means—
(a) a juristic person or an association of persons accredited by
the Commission in terms of subsection (4); or
(b) an organ of state, or entity established by or in terms of a
public regulation that—
(i) is mandated, among other things, to perform media-
tion, conciliation or arbitration; and
(ii) has been designated by the Minister in terms of
subsection (5) as an accredited entity for the pur-
poses of this Part.
(4) For the purposes of this Part, the Commission—
(a) may accredit, with or without conditions, a juristic person
or an association that—
(i) functions predominantly to provide conciliation,
mediation or arbitration services;
(ii) has the demonstrated capacity to perform such
services within the context of company law; and
(iii) satisfies the prescribed requirements for accredita-
tion;
A-87 Companies Act No. 71 of 2008
(b) must monitor the effectiveness of any accredited person or
an association relative to the purposes and policies of this
Act; and
(c) may—
(i) reasonably require any person or association accred-
ited by it to provide information necessary for the
purpose of monitoring in terms of paragraph (b); and
(ii) with reasonable notice, withdraw any accreditation
granted by it in terms of this section if the person or
association no longer satisfies the criteria set out in
paragraph (a).
(5) The Minister, after consulting the Commission—
(a) may designate any organ of state or other entity contem-
plated in subsection (3) (b) as an accredited entity for the
purposes of this Part; and
(b) must prescribe criteria for the Commission to follow in
assessing whether an applicant for accreditation in terms of
subsection (4) meets the requirements of this section.
167. Dispute resolution may result in consent order.—(1) If
the Companies Tribunal, or an entity accredited in terms of section
166, has resolved, or assisted parties in resolving, a dispute in terms
of this Part the Tribunal or accredited entity may—
(a) record the resolution of that dispute in the form of an
order; and
(b) if the parties to the dispute consent to that order, submit it
to a court to be confirmed as a consent order, in terms of
its rules.
(2) After hearing an application for a consent order, the court
may—
(a) make the order as agreed and proposed in the application;
(b) indicate any changes that must be made to the draft order
before it will be made an order of the court; or
(c) refuse to make the order.
(3) A consent order confirmed in terms of subsection (2)—
(a) may include an award of damages; and
(b) does not preclude a person applying for an award of civil
damages, unless the consent order includes an award of
damages to that person.
(4) A court hearing any proceedings concerning a dispute arising
out of a consent order may order the proceedings closed to the
public if it is the interest of the confidentiality of the parties to the
consent order to do so.
Part D
Complaints to Commission or Panel
168. Initiating a complaint.—(1) Any person may file a com-
plaint in writing—
(a) with the Panel in respect of a matter contemplated in Part
B or C of Chapter 5, or in the Takeover Regulations; or
(b) with the Commission in respect of any provision of this
Act not referred to in paragraph (a),
alleging that a person has acted in a manner inconsistent
with this Act, or that the complainant’s rights under this
Act, or under a company’s Memorandum of Incorporation
or rules, have been infringed.
[Sub-s. (1) substituted by s. 106 of Act No. 3 of 2011.]
(2) A complaint may be initiated directly by the Commission, or
the Panel, as the case may be, on its own motion or on the request of
another regulatory authority.
(3) The Minister may direct the Commission, as contemplated in
section 190 (2) (b), or the Panel to investigate—
(a) an alleged contravention of this Act; or
(b) other specified circumstances.
169. Investigation by Commission or Panel.—(1) Upon initi-
ating or receiving a complaint, or receiving a direction from the
Minister, in terms of this Act, the Commission or Panel, as the case
may be, may—
ss 166–170
(a) except in the case of a direction from the Minister, issue a
notice to the complainant in the prescribed form indicating
that it will not investigate the complaint, if the complaint
appears to be frivolous or vexatious, or does not allege any
facts that, if proven, would constitute grounds for remedy
under this Act;
(b) if they think it expedient as a means of resolving the
matter, refer the complainant to the Companies Tribunal,
or to an accredited entity, as defined in section 166 (3),
with a recommendation that the complainant seek to re-
solve the matter with the assistance of that agency or per-
son; or
[Para. (b) substituted by s. 107 of Act No. 3 of 2011.]
(c) direct an inspector or investigator to investigate the
complaint as quickly as practicable, in any other case.
(2) At any time during an investigation, the Commission or
Panel, as the case may be, may—
(a) designate one or more persons to assist the inspector or
investigator conducting the investigation; or
(b) if a complaint concerns a dispute that is internal to a
particular company, and does not appear to implicate a
party other than the company, the holders of its securities,
its directors, committees, prescribed officers, company
secretary, or auditor—
(i) submit a proposal to the company seeking an
agreement to jointly appoint an independent investi-
gator—
(aa) at the expense of the company, or on a cost-
shared basis; and
(bb) to report to both the company, and to the
Commission or Panel, as the case may be; or
(ii) apply to a court for an order appointing an independ-
ent investigator—
(aa) at the expense of the company; and
(bb) to report to both the Commission or Panel, as
the case may be, and the company.
(3) In conducting an investigation contemplated in this section an
inspector or investigator may investigate any person—
(a) named in the complaint, or related to a person named in the
complaint; or
(b) whom the inspector reasonably considers may have
information relevant to the investigation of the complaint.
170. Outcome of investigation.—(1) After receiving the report
of an inspector or independent investigator, the Commission or
Panel, as the case may be, may—
(a) excuse any person as a respondent in the complaint, if the
Commission or Panel considers it reasonable to do so, hav-
ing regard to the person’s conduct, and the degree to which
the person has cooperated with the Commission or Panel in
the investigation;
(b) refer the complaint to the Companies Tribunal, or to the
Commission or the Panel as the case may be, if the matter
falls within their respective jurisdictions in terms of this
Act;
(c) issue a notice of non-referral to the complainant, with a
statement advising the complainant of any rights they may
have under this Act to seek a remedy in court;
(d) in the case of the Commission, propose that the complain-
ant and any affected person meet with the Commission or
with the Companies Tribunal, with a view to resolving the
matter by consent order;
(e) commence proceedings in a court in the name of the
complainant, if the complainant—
(i) has a right in terms of this Act to apply to a court in
respect of that matter; and
(ii) has consented to the Commission or Panel, as the
case may be, doing so;
ss 170–174 Auditing: Legislation and Standards
(f) refer the matter to the National Prosecuting Authority, or
other regulatory authority concerned, if the Commission or
Panel, as the case may be, alleges that a person has com-
mitted an offence in terms of this Act or any other legisla-
tion; or
(g) in the case of—
(i) the Commission, issue a compliance notice in terms
of section 171; or
(ii) the Panel, refer the matter to the Executive Director,
who may, among other things, issue a compliance
notice in terms of section 171.
(2) The Commission or Panel, as the case may be—
(a) in its sole discretion, may publish a report contemplated in
subsection (1); and
(b) irrespective whether it publishes such a report, must
deliver a copy of the report to—
(i) the complainant, or a regulatory authority that
requested the initiation of the complaint;
(ii) any person who was a subject of the investigation;
(iii) any court, if requested or ordered to do so by the
court; and
(iv) any holder of securities, or creditor, of a company
that was the subject of the report, or any other per-
son implicated in the report, upon payment of the
prescribed fee.
171. Issuance of compliance notices.—(1) Subject to subsec-
tion (3), the Commission, or the Executive Director of the Panel,
may issue a compliance notice in the prescribed form to any person
whom the Commission or Executive Director, as the case may be,
on reasonable grounds believes—
(a) has contravened this Act; or
(b) assented to, was implicated in, or directly or indirectly
benefited from, a contravention of this Act,
unless the alleged contravention could otherwise be addressed in
terms of this Act by an application to a court or to the Companies
Tribunal.
[Sub-s. (1) substituted by s. 108 (a) of Act No. 3 of 2011.]
(2) A compliance notice may require the person to whom it is
addressed to—
(a) cease, correct or reverse any action in contravention of this
Act;
(b) take any action required by this Act;
(c) restore assets or their value to a company or any other
person;
(d) provide a community service, in the case of a notice issued
by the Commission; or
(e) take any other steps reasonably related to the contravention
and designed to rectify its effect.
(3) When issuing a notice in terms of subsection (1) to a regulat-
ed person or entity, the Commission or Executive Director, as the
case may be, must send a copy of the notice to the regulatory
authority that granted a licence or similar authority to that regulated
person or entity, and in terms of which that person is authorised to
conduct business.
(4) A compliance notice contemplated in subsection (1) must set
out—
(a) the person or association to whom the notice applies;
(b) the provision of this Act that has been contravened;
(c) details of the nature and extent of the non-compliance;
(d) any steps that are required to be taken and the period
within which those steps must be taken; and
(e) any penalty that may be imposed in terms of this Act if
those steps are not taken.
[Sub-s. (4) substituted by s. 108 (b) of Act No. 3 of 2011.]
(5) A compliance notice issued in terms of this section, or any
part of it, remains in force until—
A-88
(a) it is set aside by—
(i) the Companies Tribunal, or a court upon a review of
the notice, in the case of a notice issued by the Com-
mission; or
(ii) the Takeover Special Committee, or a court upon a
review of the notice, in the case of a notice issued by
the Executive Director; or
(b) the Commission, or Executive Director, as the case may
be, issues a compliance certificate contemplated in subsec-
tion (6).
(6) If the requirements of a compliance notice issued in terms of
subsection (1) have been satisfied, the Commission or the Executive
Director, as the case may be, must issue a compliance certificate.
(7) If a person to whom a compliance notice has been issued fails
to comply with the notice, the Commission or the Executive Direc-
tor, as the case may be, may either—
(a) apply to a court for the imposition of an administrative
fine; or
(b) refer the matter to the National Prosecuting Authority for
prosecution as an offence in terms of section 214 (3),
but may not do both in respect of any particular compliance notice.
[Sub-s. (7) substituted by s. 108 (c) of Act No. 3 of 2011.]
172. Objection to notices.—(1) Any person issued with a com-
pliance notice in terms of this Act may apply to the Companies
Tribunal in the case of a notice issued by the Commission, or to the
Takeover Special Committee in the case of a notice issued by the
Executive Director, or to a court in either case, to review the notice
within—
(a) 15 business days after receiving that notice; or
(b) such longer period as may be allowed on good cause
shown.
[Sub-s. (1) amended by s. 109 (a) of Act No. 3 of 2011.]
(2) After considering any representations by the applicant and
any other relevant information, the Companies Tribunal, the Take-
over Special Committee, or a court may confirm, modify or cancel
all or part of a compliance notice.
(3) If the Companies Tribunal, the Takeover Special Committee
or a court confirms or modifies all or part of a notice, the applicant
must comply with that notice as confirmed or modified, within the
time period specified in it, subject to subsection (4).
(4) A decision by the Companies Tribunal or the Takeover Spe-
cial Committee in terms of this section is binding, subject to any
right of review by, or appeal to, a court.
[Sub-s. (4) substituted by s. 109 (b) of Act No. 3 of 2011.]
173. Consent orders.—(1) If a matter has been investigated in
terms of this Part, and the Commission and the respondent have
agreed a resolution of the complaint, the Commission may—
(a) record the resolution in the form of an order; and
(b) if the person who is the subject of the complaint consents
to that order, apply to the High Court to have it confirmed
as a consent order, in terms of its rules.
(2) Section 167 (2) to (4), read with the changes required by the
context, applies to an application contemplated in subsection (1).
174. Referral of complaints to court.—(1) If the Commission
or Panel, as the case may be, issues a notice of non-referral in
response to a complaint, the complainant concerned may apply to a
court for leave to refer the matter directly to the court, but no such
complaint may be referred directly to a court in respect of a person
who has been excused as a respondent, as contemplated in section
170 (1) (a).
(2) A court—
(a) may grant leave contemplated in subsection (1) only if it
appears that the applicant has no other remedy available in
terms of this Act; and
A-89 Companies Act No. 71 of 2008
(b) if it grants leave, and after conducting a hearing, deter-
mines that the respondent has contravened the Act, may—
(i) require the Commission or Executive Director, as
the case may be, to issue a compliance notice suffi-
cient to address that contravention; or
(ii) make any other order contemplated in this Act that is
just and reasonable in the circumstances.
175. Administrative fines.—(1) A court, on application by the
Commission or Panel, may impose an administrative fine—
(a) only for failure to comply with a compliance notice, as
contemplated in section 171 (7); and
(b) not exceeding the greater of—
(i) 10% of the respondent’s turnover for the period
during which the company failed to comply with the
compliance notice; and
(ii) the maximum prescribed in terms of subsection (5).
(2) When determining the amount of an appropriate administra-
tive fine, the following factors must be considered:
(a) The nature, duration, gravity and extent of the contraven-
tion;
(b) any loss or damage suffered as a result of the contraven-
tion;
(c) the behaviour of the respondent;
(d) the market circumstances in which the contravention took
place;
(e) the level of profit derived from the contravention;
(f) the degree to which the respondent has co-operated with
the Commission or Panel, as the case may be, and the
court; and
[Para. (f) substituted by s. 110 of Act No. 3 of 2011.]
(g) whether the respondent has previously been found in
contravention of this Act.
(3) For the purpose of this section, the annual turnover of any
person, is the amount determined in the prescribed manner.
(4) A fine payable in terms of this section must be paid into the
National Revenue Fund referred to in section 213 of the Constitu-
tion.
(5) The Minister may make a regulation prescribing the maxi-
mum amount of an administrative fine, which amount must be not
less than R1 000 000.
Part E
Powers to support investigations and inspections
176. Summons.—(1) At any time during an investigation being
conducted by it, the Commission, or the Panel, as the case may be,
may issue a summons to any person who is believed to be able to
furnish any information on the subject of the investigation, or to
have possession or control of any book, document or other object
that has a bearing on that subject to—
(a) appear before the Commission or Panel, or before an
inspector or independent investigator, to be questioned at a
time and place specified in the summons; or
(b) deliver or produce to the Commission or Panel, or to an
inspector or independent investigator, any book, document
or other object referred to in paragraph (a) at a time and
place specified in the summons.
(2) A summons contemplated in subsection (1)—
(a) must be signed by the Commissioner or the Executive
Director, as the case may be, or by an employee of the
Commission or Panel designated by the Commissioner or
the Executive Director, as the case may be; and
(b) may be served in the same manner as a subpoena in a
criminal case issued by the magistrate’s court.
(3) An inspector or investigator before whom a person is sum-
moned to appear, or to whom a person is required to deliver any
book, document or other object, may—
ss 174–178
(a) interrogate and administer an oath to, or accept an affirma-
tion from, the person named in the summons; and
(b) retain any such book, document or other object for exami-
nation, for a period not exceeding two months, or such
longer period as the court, on good cause shown, may al-
low.
(4) A person questioned by the Commission, the Panel, or an
inspector or independent investigator conducting an investigation
must answer each question truthfully and to the best of that person’s
ability, but—
(a) a person is not obliged to answer any question if the answer
is self-incriminating; and
(b) the person asking the questions must inform that person of
the right set out in paragraph (a).
(5) No self-incriminating answer given or statement made by any
person to the Commission, Panel, or an inspector or independent
investigator exercising powers in terms of this Act will be admissi-
ble as evidence against that person in criminal proceedings against
that person instituted in any court, except in criminal proceedings
for perjury or in which that person is tried for an offence contem-
plated in section 215 (2) (e), and then only to the extent that the
answer or statement is relevant to prove the offence charged.
177. Authority to enter and search under warrant.—(1) A
judge of the High Court or a magistrate, may issue a warrant to enter
and search any premises that are within the jurisdiction of that judge
or magistrate, if, from information on oath or affirmation, there are
reasonable grounds to believe that—
(a) a contravention of this Act has taken place, is taking place,
or is likely to take place on or in those premises; or
(b) that anything connected with an investigation in terms of
this Act is in the possession of, or under the control of, a
person who is on or in those premises.
(2) A warrant to enter and search may be issued at any time and
must specifically—
(a) identify the premises that may be entered and searched;
and
(b) authorise an inspector or a police officer to enter and
search the premises and to do anything listed in section
178.
(3) A warrant to enter and search is valid until one of the follow-
ing events occurs:
(a) The warrant is executed;
(b) the warrant is cancelled by the person who issued it or, in
that person’s absence, by a person with similar authority;
(c) the purpose for issuing it has lapsed; or
(d) the expiry of one month after the date it was issued.
(4) A warrant to enter and search may be executed only during
the day, unless the judge or magistrate who issued it authorises that
it may be executed at night at a time that is reasonable in the
circumstances.
(5) A person authorised by a warrant issued in terms of subsec-
tion (2) may enter and search premises named in that warrant.
(6) Immediately before commencing with the execution of a
warrant, a person executing that warrant must either—
(a) if the owner, or person in control, of the premises to be
searched is present—
(i) provide identification to that person and explain to
that person the authority by which the warrant is be-
ing executed; and
(ii) hand a copy of the warrant to that person or to the
person named in it; or
(b) if none of those persons is present, affix a copy of the
warrant to the premises in a prominent and visible place.
178. Powers to enter and search.—(1) A person who is au-
thorised under section 177 to enter and search premises may—
(a) enter upon or into those premises;
ss 178–184 Auditing: Legislation and Standards
(b) search those premises;
(c) search any person on those premises if there are reasonable
grounds for believing that the person has personal posses-
sion of an article or document that has a bearing on the in-
vestigation;
(d) examine any article or document that is on or in those
premises that has a bearing on the investigation;
(e) request information about any article or document from the
owner of, or person in control of, the premises or from any
person who has control of the article or document, or from
any other person who may have the information;
(f) take extracts from, or make copies of, any book or docu-
ment that is on or in the premises that has a bearing on the
investigation;
(g) use any computer system on the premises, or require
assistance of any person on the premises to use that com-
puter system, to—
(i) search any data contained in or available to that
computer system; or
(ii) reproduce any record from that data; and
(h) seize any output from that computer for examination and
copying; and
(i) attach, and, if necessary, remove from the premises for
examination and safekeeping, anything that has a bearing
on the investigation.
(2) Section 176 (4) and (5) apply to—
(a) any person questioned by an inspector or police officer in
terms of this section; or
(b) to any answer given or statement made to an inspector or
police officer in terms of this section.
(3) An inspector authorised to conduct an entry and search in
terms of section 177 may be accompanied and assisted by a police
officer.
179. Conduct of entry and search.—(1) A person who enters
and searches any premises under section 178 must conduct the entry
and search with strict regard for decency and order, and with regard
for each person’s right to dignity, freedom, security and privacy.
(2) During any search under section 178 (1) (c), only a female
inspector or police officer may search a female person, and only a
male inspector or police officer may search a male person.
(3) A person who enters and searches premises under section
178, before questioning anyone—
(a) must advise that person of the right to be assisted at the
time by an advocate or attorney; and
(b) allow that person to exercise the right contemplated in
paragraph (a).
(4) A person who removes anything from premises being
searched must—
(a) issue a receipt for it to the owner of, or person in control
of, the premises; and
(b) return it as soon as practicable after achieving the purpose
for which it was removed.
(5) During a search, a person may refuse to permit the inspection
or removal of an article or document on the grounds that it contains
privileged information.
(6) If the owner or person in control of an article or document
refuses in terms of subsection (5) to give that article or document to
the person conducting the search, the person conducting the search
may request the registrar or sheriff of the High Court that has
jurisdiction to attach and remove the article or document for safe
custody until that court determines whether or not the information is
privileged.
(7) A police officer who is authorised to enter and search premis-
es under section 177, or who is assisting an inspector who is author-
ised to enter and search premises under section 178 may overcome
resistance to the entry and search by using as much force as is
A-90
reasonably required, including breaking a door or window of the
premises.
(8) Before using force in terms of subsection (7), a police officer
must audibly demand admission and must announce the purpose of
the entry, unless it is reasonable to believe that doing so may induce
someone to destroy or dispose of an article or document that is the
object of the search.
(9) The Commission may compensate anyone who suffers dam-
age because of a forced entry during a search when no one responsi-
ble for the premises was present.
Part F
Companies Tribunal adjudication procedures
180. Adjudication hearings before Tribunal.—(1) The Com-
panies Tribunal—
(a) must conduct its adjudication proceedings contemplated in
this Act expeditiously and in accordance with the princi-
ples of natural justice; and
(b) may conduct those proceedings informally.
(2) If adjudication proceedings before the Tribunal are open to
the public, the Tribunal may exclude members of the public, or
specific persons or categories of persons, from attending the pro-
ceedings—
(a) if evidence to be presented is confidential information, but
only to the extent that the information cannot otherwise be
protected;
(b) if the proper conduct of the hearing requires it; or
(c) for any other reason that would be justifiable in civil
proceedings in a High Court.
(3) At the conclusion of adjudication proceedings, the presiding
member must issue a decision together with written reasons for the
decision.
181. Right to participate in hearing.—The following persons
may participate in an adjudication hearing contemplated in this Part,
in person or through a representative, and may put questions to
witnesses and inspect any books, documents or items presented at
the hearing—
(a) The Commission;
(b) the applicant or complainant; and
(c) any other person who has a material interest in the hearing,
unless that interest is adequately represented by another
participant.
182. Powers of Tribunal adjudication hearing.—The Compa-
nies Tribunal may—
(a) direct or summon any person to appear at any specified
time and place;
(b) question any person under oath or affirmation;
(c) summon or order any person—
(i) to produce any book, document or item necessary
for the purposes of the hearing; or
(ii) to perform any other act in relation to this Act; and
(d) give directions prohibiting or restricting the publication of
any evidence given to the Tribunal.
183. Rules of procedure.—Subject to the requirements of the
applicable sections of this Act, the Companies Tribunal may
determine any matter of procedure for an adjudication hearing, with
due regard to the circumstances of the case.
184. Witnesses.—(1) Every person giving evidence before the
Companies Tribunal at an adjudication hearing must answer any
relevant question.
(2) The law regarding a witness’s privilege in a criminal case in a
court of law applies equally to a person who provides information
during an adjudication hearing.
A-91 Companies Act No. 71 of 2008
(3) During an adjudication hearing, the Companies Tribunal may
order a person to answer any question, or to produce any article or
document, subject to subsection (4).
(4) Section 176 (4) and (5) apply to any person questioned, or
any evidence given, before the Companies Tribunal in terms of this
section.
CHAPTER 8
REGULATORY AGENCIES AND
ADMINISTRATION OF ACT
Part A
Companies and Intellectual Property Commission
185. Establishment of Companies and Intellectual Property
Commission.—(1) The Commission is hereby established as a
juristic person to function as an organ of state within the public
administration, but as an institution outside the public service.
(2) The Commission—
(a) has jurisdiction throughout the Republic;
(b) is independent, and subject only to—
(i) the Constitution and the law; and
(ii) any policy statement, directive or request issued to it
by the Minister in terms of this Act;
(c) must be impartial and perform its functions without fear,
favour, or prejudice; and
(d) must exercise the functions assigned to it in terms of this
Act or any other law, or by the Minister, in—
(i) the most cost-efficient and effective manner; and
(ii) in accordance with the values and principles men-
tioned in section 195 of the Constitution.
(3) Each organ of state must assist the Commission to maintain
its independence and impartiality, and to exercise its authority and
perform its functions effectively.
(4) Except to the extent prescribed otherwise by or in terms of
this Act, a certificate, notice, decision, determination or ruling
issued or made with respect to any particular matter contemplated in
this Act by—
(a) the Commissioner; or
(b) a person designated by the Commissioner to perform a
particular function of the Commission,
is the certificate, notice, decision, determination or ruling
of the Commission with respect to that matter.
186. Commission objectives.—(1) The objectives of the Com-
mission are—
(a) the efficient and effective registration of—
(i) companies, and external companies, in terms of this
Act;
(ii) other juristic persons, in terms of any applicable
legislation referred to in Schedule 4; and
(iii) intellectual property rights, in terms of any relevant
legislation;
(b) the maintenance of accurate, up-to-date and relevant
information concerning companies, foreign companies and
other juristic persons contemplated in subsection
(1) (a) (ii), and concerning intellectual property rights, and
the provision of that information to the public and to other
organs of state;
(c) the promotion of education and awareness of company and
intellectual property laws, and related matters;
(d) the promotion of compliance with this Act, and any other
applicable legislation; and
(e) the efficient, effective and widest possible enforcement of
this Act, and any other legislation listed in Schedule 4.
(2) To achieve its objectives, the Commission may—
(a) have regard to international developments in the field of
company and intellectual property law; or
ss 184–187
(b) consult any person, organisation or institution with regard
to any matter.
187. Functions of Commission.—(1) In this section, “this
Act” has the meaning set out in section 1, but also includes any
legislation listed in Schedule 4.
(2) Other than with respect to matters within the jurisdiction of
the Takeover Regulation Panel, the Commission must enforce this
Act, by, among other things—
(a) promoting voluntary resolution of disputes arising in terms
of this Act between a company on the one hand and a
shareholder or director on the other, as contemplated in
Part C of Chapter 7, without intervening in, or adjudicating
any such dispute;
(b) monitoring proper compliance with this Act;
(c) receiving or initiating complaints concerning alleged
contraventions of this Act, evaluating those complaints,
and initiating investigations into complaints;
(d) receiving directions from the Minister in terms of section
190, concerning investigations to be conducted into alleged
contraventions of this Act, or other circumstances, and
conducting any such investigation;
(e) ensuring that contraventions of this Act are promptly and
properly investigated;
(f) negotiating and concluding undertakings and consent
orders contemplated in section 169 (1) (b) and 173;
(g) issuing and enforcing compliance notices;
(h) referring alleged offences in terms of this Act to the
National Prosecuting Authority; and
(i) referring matters to a court, and appearing before the court
or the Companies Tribunal, as permitted or required by this
Act.
(3) The Commission must promote the reliability of financial
statements by, among other things—
(a) monitoring patterns of compliance with, and contraven-
tions of, financial reporting standards; and
(b) making recommendations to the Council for amendments
to financial reporting standards, to secure better reliability
and compliance.
(4) The Commission must—
(a) establish and maintain in the prescribed manner and
form—
(i) a companies register; and
(ii) any other register contemplated in this Act, or in any
other legislation that assigns a registry function to
the Commission;
(b) receive and deposit in the registry any documents required
to be filed in terms of this Act;
(c) make the information in those registers efficiently and
effectively available to the public, and to other organs of
state;
(d) register and deregister companies, directors, business
names and intellectual property rights, in accordance with
relevant legislation; and
(e) perform any related functions assigned to it by legislation,
or reasonably necessary to carry out its assigned registry
functions.
(5) Subject to the provisions of subsections (6) and (7), any per-
son, on payment of the prescribed fee, may—
(a) inspect a document filed under this Act;
(b) obtain a certificate from the Commission as to the contents
or part of the contents of any document that—
(i) has been filed under this Act in respect of any
company; and
(ii) is open to inspection; or
(c) obtain a copy of or extract from any document contemplat-
ed in paragraph (b); or
(Editorial Note: Wording as per original Government Gazette.)
ss 187–189 Auditing: Legislation and Standards
(d) through any electronic medium approved by the Commis-
sion—
(i) inspect, or obtain a copy of or extract from, any
document contemplated in paragraph (b) that has
been converted into electronic format; or
(ii) obtain a certificate contemplated in paragraph (b).
(6) Subsection (5) does not apply to any part of a filed document
if that part has been determined to be confidential, or contain
confidential information, in accordance with section 212.
(7) The Commission—
(a) must waive any prescribed registry fee contemplated in
subsection (5) if the Commission is satisfied—
(i) that an inspection, certificate, copy or extract is
required on behalf of a foreign government accredit-
ed to the Republic; and
(ii) that no fees are payable in the foreign country
concerned in respect of such inspection, certificate,
copy or extract required on behalf of the Republic;
and
(b) may waive any such fee if satisfied that any inspection,
certificate, copy or extract is required for the purposes of
research by or under the control of an institution for higher
education.
188. Reporting, research, public information and relations
with other regulators.—(1) In addition to any other advice or
reporting requirements set out in this Part, the Commission is
responsible to—
(a) advise the Minister on matters of national policy relating to
company and intellectual property law, and recommend to
the Minister changes to bring the law and the administra-
tion of this Act up to date and in line with international
best practice;
(b) report to the Minister annually on the volume and nature of
registration and enforcement activities in terms of this Act
and on any other matter as prescribed by the Minister; and
(c) enquire into and report to the Minister on any matter
concerning the purposes of this Act, and advise the Minis-
ter in respect of any matter referred to it by the Minister.
(2) The Commission must increase knowledge of the nature and
dynamics of company and intellectual property law, and promote
public awareness of company and intellectual property law matters,
by—
(a) implementing education and information measures to
develop public awareness of the provisions of this Act, and
in particular to advance the purposes of this Act;
(b) providing guidance to the public by—
(i) issuing explanatory notices outlining its procedures,
or its non-binding opinion on the interpretation of
any provision of this Act; or
(ii) applying to a court for a declaratory order on the
interpretation or application of any provision of this
Act;
(c) conducting research relating to its mandate and activities
and, from time to time, publishing the results of that re-
search; and
(d) over time, reviewing legislation and public regulations,
and reporting to the Minister concerning matters relating to
company and intellectual property law.
(3) The Commission may—
(a) liaise with any regulatory authority on matters of common
interest, and without limiting the generality of this para-
graph, may exchange information with, and receive infor-
mation from any such regulatory authority pertaining to—
(i) matters of common interest; or
(ii) a specific complaint or investigation;
A-92
(b) negotiate agreements with any regulatory authority, and
exercise its authority through any such agreement, to—
(i) co-ordinate and harmonise the exercise of jurisdic-
tion over company and intellectual property law
matters within the relevant industry or sector; and
(ii) ensure the consistent application of the principles of
this Act;
(c) participate in the proceedings of any regulatory authority;
and
(d) advise, or receive advice from, any regulatory authority.
(4) The Commission may liaise with any foreign or international
authorities having any objects similar to the functions and powers of
the Commission.
(5) The Commission may refer to—
(a) the Competition Commission any concerns regarding
conduct that may be prohibited or regulated in terms of the
Competition Act;
(b) the South Africa Revenue Service any concerns regarding
behaviour or conduct that may be prohibited or regulated
in terms of legislation within the jurisdiction of that Ser-
vice;
(c) the Independent Regulatory Board for Auditors any
concerns regarding behaviour or conduct that may be pro-
hibited or regulated in terms of the Auditing Profession
Act; or
(d) any other regulatory authority any concerns regarding
behaviour or conduct that may be prohibited or regulated
in terms of legislation within the jurisdiction of that regula-
tory authority.
189. Appointment of Commissioner.—(1) The Minister must
appoint a suitably qualified and experienced person to be—
(a) the Commissioner of the Commission, who—
(i) holds office for an agreed term not exceeding five
years; and
(ii) is responsible for all matters pertaining to the
functions of the Commission; and
(b) the Deputy Commissioner of the Commission, who—
(i) holds office for an agreed term not exceeding five
years; and
(ii) may perform any function of the Commissioner
when the office of the Commissioner is vacant, or
when the Commissioner is absent or is for any rea-
son unable to perform the functions of that office.
(2) A person may be reappointed as Commissioner or Deputy
Commissioner on the expiry of an agreed term of office.
(3) The Commissioner is the accounting authority of the Com-
mission, and as such, is responsible for—
(a) the proper control and management of the Commission;
(b) the effectiveness and efficiency of the Commission;
(c) all income and expenditure of the Commission;
(d) all revenue collected by the Commission;
(e) all assets, and the discharge of all liabilities, of the Com-
mission; and
(f) the proper and diligent implementation of the Public
Finance Management Act, 1999 (Act No. 1 of 1999), with
respect to the Commission.
(4) The Commissioner may—
(a) assign management or other duties to employees of the
Commission, who have appropriate skills to assist in the
management, or control over any function of the Commis-
sion; and
(b) delegate, with or without conditions, any of the powers or
functions of the Commissioner to the Deputy Commis-
sioner or any other suitably qualified employee of the
Commission, but any such delegation does not divest the
Commissioner of responsibility for the exercise or any
power or performance of any duty.
A-93 Companies Act No. 71 of 2008
190. Minister may direct policy and require investigation.—
(1) In this section, “this Act” has the meaning set out in section 1,
but also includes any legislation listed in Schedule 4.
(2) The Minister—
(a) by notice in the Gazette, may issue policy directives to the
Commission with respect to the application, administration
and enforcement of this Act, but any such directive must
be consistent with this Act; and
(b) may at any time direct the Commission to investigate—
(i) an alleged contravention of this Act; or
(ii) any matter or circumstances with respect to the
administration of one or more companies in terms of
this Act, whether or not those circumstances appear
at the time of the direction to amount to a possible
contravention of this Act.
191. Establishment of specialist committees.—(1) The Minis-
ter may appoint one or more specialist committees to advise the—
(a) Minister on any matter relating to company law or policy;
or
(b) Commission on the management of the Commission’s
resources, or the performance of any of its functions.
[Para. (b) substituted by s. 111 of Act No. 3 of 2011.]
(2) The Minister may assign specific powers to the members of a
specialist committee for the purposes of performing any function
contemplated in subsection (1).
(3) A specialist committee may—
(a) be established for an indefinite term, or for a period
determined by the Minister when the committee is estab-
lished; and
(b) determine its own procedures.
192. Constitution of specialist committees.—(1) A specialist
committee established under section 191 must—
(a) perform its functions impartially and without fear, favour
or prejudice; and
(b) consist of—
(i) not more than eight persons who are independent
from the Commission and are appointed by the Min-
ister to serve for a period of not more than five
years, as determined by the Minister when the per-
son is appointed; and
(ii) not more than two senior employees of the Commis-
sion designated by the Commissioner.
(2) To be appointed or designated as a member of a specialist
committee in terms of this section, a person must—
(a) be a fit and proper person;
(b) have appropriate expertise or experience; and
(c) have the ability to perform effectively as a member of that
committee.
(3) The members of a specialist committee must not—
(a) act in any way that is inconsistent with subsection (1) (a)
or expose themselves to any situation in which the risk of a
conflict may arise between their responsibilities and any
personal financial interest; or
(b) use their position or any information entrusted to them to
enrich themselves or improperly benefit any other person.
(4) A member ceases to be a member of a specialist committee if
the—
(a) person resigns from the committee;
(b) Minister terminates the person’s membership because the
member no longer complies with subsection (2) or has
contravened subsection (3); or
(c) member’s term has expired.
(5) A member of a specialist committee who has a personal or
financial interest in any matter on which the committee gives advice
ss 190–194
must disclose that interest and withdraw from the proceedings of the
specialist committee when that matter is discussed.
(6) The Commission must remunerate and compensate for ex-
penses—
(a) a member mentioned in subsection (1) (b) (i), as determined
by the Minister; and
(b) a member designated as contemplated in (1) (b) (ii), to the
extent that the member’s remuneration and expense com-
pensation as an employee of the Commission does not ex-
tend to that person’s services as a member of the specialist
committee.
Part B
Companies Tribunal
193. Establishment of Companies Tribunal.—(1) There is
hereby established a juristic person to be known as the Companies
Tribunal, which—
(a) has jurisdiction throughout the Republic;
(b) is independent, and subject only to the Constitution and the
law;
(c) must exercise its functions in accordance with this Act;
and
(d) must perform its functions impartially and without fear,
favour, or prejudice, and in as transparent a manner as is
appropriate having regard to the nature of the specific
function.
(2) Each organ of state must assist the Companies Tribunal to
maintain its independence and impartiality, and to perform its
functions effectively.
(3) In carrying out its functions, the Companies Tribunal may—
(a) have regard to international developments in the field of
company law; or
(b) consult any person, organisation or institution with regard
to any matter.
(4) The Companies Tribunal consists of a chairperson and not
less than 10 other women or men appointed by the Minister, on a
full or part-time basis.
194. Appointment of Companies Tribunal.—(1) The Minister
must—
(a) appoint the chairperson and other members of the Compa-
nies Tribunal no later than the date on which this Act
comes into operation; and
(b) appoint a person to fill any vacancy on the Tribunal.
(2) A person may not be—
(a) appointed as chairperson or member of the Tribunal unless
the person satisfies the requirements of section 205; or
(b) re-appointed to a second term as chairperson of the
Tribunal.
(3) The Tribunal must comprise—
(a) persons with suitable qualifications and experience in
economics, law, commerce, industry or public affairs; and
(b) sufficient persons with legal training and experience to
satisfy the requirements of section 195 (3) (a).
[Para. (b) substituted by s. 112 (a) of Act No. 3 of 2011.]
(4) The Minister must designate a member of the Tribunal as
deputy chairperson of the Tribunal.
(5) The deputy chairperson performs the functions of chairperson
whenever—
(a) the office of chairperson is vacant; or
(b) the chairperson is for any other reason temporarily unable
to perform those functions.
(6) Sections 206 and 207 apply to the chairperson and other
members of the Tribunal.
ss 194–198 Auditing: Legislation and Standards
(7) The chairperson and each other member of the Tribunal
serves for a term of five years and may, subject to subsection (2) (b),
be reappointed for a second term.
[Sub-s. (7) inserted by s. 112 (b) of Act No. 3 of 2011.]
195. Functions of Companies Tribunal.—(1) The Companies
Tribunal, or a member of the Tribunal acting alone in accordance
with this Act, may—
(a) adjudicate in relation to any application that may be made
to it in terms of this Act, and make any order provided for
in this Act in respect of such an application;
(b) assist in the resolution of disputes as contemplated in Part
C of Chapter 7; and
(c) perform any other function assigned to it by or in terms of
this Act, or any law mentioned in Schedule 4.
(2) The chairperson is responsible to manage the caseload of the
Companies Tribunal, and must assign each matter referred to the
Tribunal to—
(a) a member of the Tribunal, to the extent that this Act
provides for a matter to be considered by a single member
of the Tribunal; or
(b) a panel composed of any three members of the Tribunal, in
any other case.
(3) When assigning a matter to a panel in terms of subsection
(2) (b), the chairperson must—
(a) ensure that at least one member of the panel is a person
who has suitable legal qualifications and experience; and
(b) designate a member of the panel to preside over the panel’s
proceedings.
(4) If, because of resignation, illness, death, or withdrawal from a
hearing in terms of section 206 (3), a member of the panel is unable
to complete the proceedings in a matter assigned to that panel, the
chairperson must—
(a) direct that the hearing of that matter proceed before the
remaining members of the panel, subject to the require-
ments of subsection (3) (a); or
(b) terminate the proceedings before that panel and constitute
another panel, which may include any member of the orig-
inal panel, and direct that panel to conduct a new hearing.
(5) The decision of a panel on a matter referred to it must be in
writing and include reasons for that decision.
(6) A decision of a single member of the Companies Tribunal
hearing a matter as contemplated in subsection (1) (a), or of a
majority of the members of a panel in any other case, is the decision
of the Tribunal.
(7) A decision by the Companies Tribunal with respect to a deci-
sion of, or a notice or order issued by, the Commission is binding on
the Commission, subject to any review by, or appeal to, a court.
[Sub-s. (7) substituted by s. 113 of Act No. 3 of 2011.]
(8) An order of the Companies Tribunal may be filed in the High
Court as an order of the court, in accordance with its rules.
(9) A member of the Tribunal may not represent any person
before the Tribunal.
(10) If, on the expiry of the term of office of a member of the
Companies Tribunal, that member is still considering a matter
before the Tribunal, that member may continue to act as a member
in respect of that matter only.
Part C
takeover regulation panel
196. Establishment of Takeover Regulation Panel.—(1) The
Takeover Regulation Panel is hereby established as a juristic person,
to function as an organ of state within the public administration, but
as an institution outside the public service.
(2) The Panel—
(a) has jurisdiction throughout the Republic;
A-94
(b) is independent, and subject only to—
(i) the Constitution and the law; and
(ii) any policy statement, directive or request issued to it
by the Minister in terms of this Act;
(c) must be impartial and perform its functions without fear,
favour, or prejudice; and
(d) must exercise the functions assigned to it in terms of this
Act or any other law, or by the Minister, in—
(i) the most cost-efficient and effective manner; and
(ii) in accordance with the values and principles men-
tioned in section 195 of the Constitution.
(3) Each organ of state must assist the Panel to maintain its inde-
pendence and impartiality, and to exercise its authority and perform
its functions effectively.
(4) In carrying out its functions, the Panel may—
(a) have regard to international developments in the field of
company law; or
(b) consult any person, organisation or institution with regard
to any matter.
197. Composition of Panel.—(1) The Panel comprises—
(a) the Commissioner, or a person designated by the Commis-
sioner;
(b) the Commissioner of the Competition Commission
established by section 19 of the Competition Act, or a per-
son designated by that Commissioner;
(c) three persons designated by each exchange named for the
purpose by the Minister by notice in the Gazette; and
(d) not more than a number, being 15 minus the total number
of persons designated in terms of paragraph (c), of other
persons appointed by the Minister on the basis of their
knowledge and experience in the regulation of securities
and takeovers.
(2) At any time, the Panel may co-opt additional members for a
particular purpose and a limited period.
(3) Persons designated, appointed or co-opted to be members of
the Panel—
(a) must have the qualifications, and satisfy the further
requirements set out in section 205; and
(b) are subject to the provisions of sections 206 and 207.
(4) Members of the Panel—
(a) contemplated in subsection (1) (a) or (b) serve so long as
they hold the relevant office referred to in that subsection;
(b) designated in terms of subsection (1) (c), serve for a term
of five years unless replaced earlier by the designating ex-
change;
(c) appointed in terms of subsection (1) (d), serve for a term
not exceeding five years, as determined by the Minister at
the time the person is appointed; or
(d) co-opted in terms of subsection (2), serve until the comple-
tion of the purpose for which they were co-opted.
(5) A person whose term of service as a member of Panel has
expired may be designated, appointed or co-opted to serve for a
further term, or terms without limit, subject to the requirements of
subsection (3) and section 205.
198. Chairperson and deputy chairpersons.—(1) The Minister
may designate—
(a) one of the members of the Panel to be the chairperson of
the Panel; and
(b) two of its members to be deputy chairpersons of the Panel.
(2) Either deputy chairperson may exercise and perform the pow-
ers and duties of the chairperson whenever the chairperson is unable
to do so or while the office of chairperson is vacant.
A-95 Companies Act No. 71 of 2008
199. Meetings of Panel.—(1) The chairperson of the Panel—
(a) may determine the date, time and place for meetings of the
Panel; and
(b) presides at meetings of the Panel, if present.
(2) In the absence of the chairperson, and both deputy chairper-
sons, at a meeting of the Panel the members present may choose one
of their number to preside at the meeting.
(3) The Takeover Regulations must determine the quorum for a
meeting of the Panel.
(4) The member presiding at a meeting of the Panel may deter-
mine the procedure at the meeting.
(5) The decision of a majority of the members of the Panel pre-
sent at any meeting at which there is a quorum is the decision of the
Panel.
(6) If there is an equality of votes on any question before a meet-
ing of the Panel—
(a) the member presiding at the meeting may cast a deciding
vote, if that presiding member did not initially have or cast
a vote; or
(b) the matter being voted on fails, in any other case.
(7) Proceedings of the Panel are valid despite any vacancy that
existed on the Panel at the time, or the absence of any member
during any part of those proceedings.
(8) The Panel may delegate the exercise of any of its powers or
performance of any of its functions to the chairperson, any member
of the Executive as contemplated in terms of section 200, any
committee that the Panel may establish, or any member of the Panel.
200. Executive of Panel.—(1) The Panel may subject to sub-
section (4) appoint—
(a) an Executive Director; and
(b) one or more deputy Executive Directors,
on terms and conditions determined by the Panel.
[Sub-s. (1) substituted by s. 114 (a) of Act No. 3 of 2011.]
(2) The Executive Director may—
(a) perform any function of the Panel, subject to—
(i) this Act and the Takeover Regulations; and
(ii) the policies and direction of the Panel; and
(b) appoint other officers and employees as are required for
the proper performance of functions of the Panel.
(3) A deputy Executive Director may perform any function of the
Executive Director when the office of the Executive Director is
vacant, or when the Executive Director is absent or is for any reason
unable to perform the functions of that office.
(4) The chairperson of the Panel, designated in terms of section
198, in consultation with the Minister and with the concurrence of
the Minister of Finance, may determine the remuneration, allowanc-
es, benefits, and conditions of appointment of—
(a) the Executive Director;
(b) each member of the Panel, and
(c) each member of the Takeover Special Committee.
[Sub-s. (4) inserted by s. 114 (b) of Act No. 3 of 2011.]
201. Functions of Panel.—(1) The Panel is responsible to—
(a) regulate affected transactions and offers to the extent
provided for, and in accordance with, Parts B and C of
Chapter 5 and the Takeover Regulations;
(b) investigate complaints with respect to affected transactions
and offers in accordance with Part D of Chapter 7;
(c) apply for a court order to wind up a company, in the
manner contemplated in section 81 (1) (f); and
(d) consult with the Minister in respect of additions, deletions
or amendments to the Takeover Regulations.
ss 199–203
(2) The Panel may—
(a) consult with any person at the request of any interested
party with a view to advising on the application of a provi-
sion of Parts B and C of Chapter 5, or the Takeover Regu-
lations;
(b) issue, amend or withdraw information on current policy in
regard to proposed affected transactions contemplated in
Parts B and C of Chapter 5, to serve as guidelines for the
benefit of persons concerned in such proposed transac-
tions;
(c) receive and deal with representations relating to any matter
with which it may deal in terms of this Act; and
(d) perform any other function assigned to it by legislation.
(3) In exercising its powers and performing its functions the
Panel must not express any view or opinion on the commercial
advantages or disadvantages of any transaction or proposed transac-
tion.
202. The Takeover Special Committee.—(1) There is hereby
established a committee of the Panel, to be known as the Takeover
Special Committee.
(2) The Takeover Special Committee consists of—
(a) a chairperson, who must be an attorney or advocate
whether practicing or not; and
(b) at least two other persons,
each of whom must be designated from time to time by the Panel
from among those of its members appointed by the Minister in terms
of section 197 (1) (d).
[Sub-s. (2) substituted by s. 115 of Act No. 3 of 2011.]
(3) The Takeover Special Committee may—
(a) hear and decide—
(i) any matter referred to it by the Panel; and
(ii) any matter that the Executive Director, or a deputy
Executive Director acting in the capacity of the Ex-
ecutive Director, may refer to it; and
(b) review compliance notices issued by the Executive
Director, or a deputy Executive Director acting in the
capacity of the Executive Director.
(4) Subject to this Act and the Takeover Regulations, the chair-
person of the Takeover Special Committee may determine the
procedure relating to any hearing of any matter referred to the
Takeover Special Committee.
(5) The decision of a majority of the members of the Takeover
Special Committee is the decision of the Takeover Special Commit-
tee.
(6) If there is an equality of votes on any question before a meet-
ing of the Takeover Special Committee—
(a) the member presiding at the meeting may cast a deciding
vote, if that presiding member did not initially have or cast
a vote; or
(b) the matter being voted on fails, in any other case.
Part D
Financial Reporting Standards Council
203. Establishment and composition of Council.—(1) The
Minister must establish a council, to be known as the Financial
Reporting Standards Council, consisting of—
(a) four persons, each of whom is registered and practicing as
an auditor;
(b) two persons, each of whom is responsible for preparing
financial statements on behalf of public companies;
(c) two persons responsible for preparing financial statements
for private companies, or personal liability companies;
(d) four persons who, in their capacity as holders of securities
issued by a company, or as creditors of a company, are
reasonably expected to rely on financial statements, as
contemplated in the definition of “financial statement” in
section (1);
(e) two persons knowledgeable in company law;
ss 203–206 Auditing: Legislation and Standards
(f) one person nominated by the executive officer of the
Financial Services Board as defined in the Financial Ser-
vices Board Act, 1990 (Act No. 97 of 1990), or any suc-
cessor body to it;
(g) one person nominated by the Governor of the South
African Reserve Bank, or any successor body to it; and
(h) a number of persons, nominated one each by any exchange
that imposes adherence to financial reporting standards as
a listing requirement,
each of whom must be appointed by the Minister, to serve for a term
of three years.
[Sub-s. (1) substituted by s. 116 of Act No. 3 of 2011.]
(2) The Minister must select candidates—
(a) with the qualifications, knowledge and experience neces-
sary to further the functions of the Council; and
(b) appoint the chairperson and deputy chairperson of the
Council.
(3) Persons appointed as members of the Council—
(a) must satisfy the requirements of section 205; and
(b) are subject to sections 206 and 207.
(4) A person may be reappointed to the Council, subject to sec-
tion 205.
(5) The Minister may require the Council to be a member of a
relevant international accounting standards setting organisation.
204. Functions of Financial Reporting Standards Council.—
The Financial Reporting Standards Council must—
(a) receive and consider any relevant information relating to
the reliability of, and compliance with, financial reporting
standards and adapt international reporting standards for
local circumstances and consider information from the
Commission as contemplated in section 187 (3) (b);
(b) advise the Minister on matters relating to financial report-
ing standards; and
(c) consult with the Minister on the making of regulations
establishing financial reporting standards, subject to the
requirements set out in section 29 (5).
Part E
Administrative provisions applicable to agencies
205. Qualifications for membership.—(1) To be eligible for
appointment, designation or co-option as a member of the Companies
Tribunal, the Panel, or the Council, and to continue to hold that
office, a person must, in addition to satisfying any other specific
requirements set out in this Act—
(a) not be subject to any disqualification set out in subsection
(2); and
(b) have submitted to the Minister a written declaration stating
that the person is not disqualified in terms of subsection
(2).
(2) A person may not become, or continue to be, a member of the
Companies Tribunal, the Panel, or the Council, if that person—
(a) is an office-bearer of any party, movement, organisation or
body of a partisan political nature;
(b) personally or through a related person has or acquires a
personal financial interest that may conflict or interfere
with the proper performance of the duties of a member of
the Tribunal, Panel, or Council;
(c) is disqualified in terms of section 69 from serving as a
director of a company; or
(d) is subject to an order of a competent court holding that
person to be mentally unfit or disordered.
206. Conflicting interests of agency members.—(1) A mem-
ber of the Companies Tribunal, the Panel or the Council, must
promptly inform the Minister in writing after that person or a related
A-96
persons acquires a personal financial interest that is, or is likely to
become, an interest contemplated in section 205 (2) (b).
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “or a related persons” is intended to be “or
a related person”.)
(2) A member of the Companies Tribunal, the Panel or the Coun-
cil, must not—
(a) engage in any activity that may undermine the integrity of
the Companies Tribunal, the Panel or the Council, as the
case may be;
(b) attend, participate in or influence the proceedings during a
meeting of the Companies Tribunal, the Panel, or the
Council, as the case may be if, in relation to the matter be-
ing considered, that member has a personal financial inter-
est—
(i) contemplated in section 205 (2) (b); or
(ii) that precludes that person from performing the
functions of a member of the Companies Tribunal,
the Panel or the Council, in a fair, unbiased and
proper manner;
(c) vote at any meeting of the Tribunal, Panel or Council, as
the case may be, in connection with a matter contemplated
in paragraph (b);
(d) make private use of, or profit from, any confidential
information obtained as a result of performing that per-
son’s functions as a member of the Companies Tribunal,
the Panel or the Council; or
(e) divulge any confidential information referred to in para-
graph (d) to any third party, except as contemplated in sec-
tion 212 (6), or—
(i) to—
(aa) the Commission, the Minister, or the National
Treasury to the extent required by this Act or
a law mentioned in Schedule 4;
(bb) the South African Reserve Bank;
(cc) the Independent Regulatory Board for Audi-
tors, in terms of the Auditing Profession Act;
(dd) the Financial Intelligence Centre established
by the Financial Intelligence Centre Act, 2001
(Act No. 38 of 2001); or
(ii) as otherwise required as part of that person’s official
functions as a member of the Companies Tribunal,
the Panel or the Council.
[Para. (e) amended by s. 117 of Act No. 3 of 2011.]
(3) If, at any time, it appears to a member of the Companies
Tribunal, Panel, or Council that a matter being considered at a
meeting concerns a personal financial interest of that member or a
related person, as contemplated in subsection (2) (b), that member
must—
(a) immediately and fully disclose the nature of that interest to
the meeting; and
(b) withdraw from the meeting to allow the remaining mem-
bers to discuss the matter and determine whether the mem-
ber should be prohibited from participating in any further
proceedings concerning that matter.
(4) The disclosure by a person in terms of subsection (3) (a), and
the decision by the Companies Tribunal, the Panel, or the Council in
terms of subsection (3) (b), must be expressly recorded in the
minutes of the meeting in question.
(5) Proceedings of the Companies Tribunal, the Panel, or the
Council, and any decisions taken by a majority of the members
present and entitled to participate in those decisions, are valid
despite the fact that—
(a) a member failed to disclose an interest as required by
subsection (3); or
(b) a member who had such an interest attended those pro-
ceedings, participated in them in any way, or directly or
indirectly influenced those proceedings.
A-97 Companies Act No. 71 of 2008
207. Resignation, removal from office and vacancies.—(1) A
member of the Companies Tribunal or the Council may resign by
giving to the Minister—
(a) one month written notice; or
(b) less than one month written notice, with the approval of
the Minister.
(2) A member of the Panel may resign by giving written notice
jointly to the Minister and the relevant entity responsible for the
designation of that member, if any.
(3) The Minister, after taking the steps required by subsection
(4), may remove a member of the Companies Tribunal, Panel or
Council only if that member has—
(a) become disqualified in terms of section 205 (2);
(b) acted contrary to section 206 (2);
(c) failed to disclose an interest or withdraw from a meeting as
required by section 206 (3); or
(d) neglected to properly perform the functions of their office.
(4) Before removing a person from office in terms of subsection
(3), the Minister must afford the person an opportunity to state a
case in defence of their position.
208. Conflicting interests of employees.—The Commissioner,
and each other employee of the Commission, and the Executive
Director, and each other employee of the Panel and members and
employees of the Council, must not—
(a) engage in any activity that may undermine the integrity of
the Commission or Panel, as the case may be;
(b) participate in any investigation, hearing, or decision
concerning a matter in respect of which that person has a
personal financial interest;
(c) make private use of, or profit from, any confidential
information obtained as a result of performing that per-
son’s official functions in the Commission or panel; or
(d) divulge any information referred to in paragraph (c) to any
third party, except as required as part of that person’s offi-
cial functions within the Commission or panel.
209. Appointment of inspectors.—(1) The Commissioner and
the Executive Director—
(a) may each appoint any suitable employee of the Commis-
sion or Panel, as the case may be, or any other suitable per-
son employed by the State, as an inspector; and
(b) must issue each inspector with a certificate in the pre-
scribed form stating that the person has been appointed as
an inspector in terms of this Act.
(2) When an inspector performs any function of an inspector in
terms of this Act, the inspector—
(a) must be in possession of a certificate of appointment
issued to that inspector in terms of subsection (1); and
(b) must show that certificate to any person who—
(i) is affected by the inspector’s actions in terms of this
Act; and
(ii) requests to see the certificate; and
(c) has the powers—
(i) set out in Part E of Chapter 7; and
(ii) of a peace officer as defined in section 1 of the
Criminal Procedure Act, 1977 (Act No. 51 of 1977),
and may exercise the powers conferred on a peace
officer by law.
(3) The Commissioner and Executive Director may each appoint
or contract with any suitably qualified person to assist the Commis-
sion, or the Panel, as the case may be, in carrying out its functions,
including, but not limited to, conducting research, audits, inquiries
or other investigations on behalf of the Commission or Panel, as the
case may be, but a person appointed in terms of this subsection is
not an inspector within the meaning of this Act.
(4) The Minister, with the concurrence of the Minister of Fi-
nance, may determine the remuneration to be paid to a person
ss 207–212
appointed in terms of this section, if that person is not in the full-
time service of the Commission or Panel, as the case may be.
210. Finances.—(1) The Commission, the Companies Tribunal
and the Panel, are each financed from—
(a) money appropriated by Parliament;
(b) any fees payable in terms of this Act;
(c) income derived from their respective investment and
deposit of surplus money in terms of subsection (2); and
(d) other money accruing from any source.
(2) The financial year of each of the Commission, the Companies
Tribunal, and the Panel is the period of 12 months beginning 1 April
each year, and ending on the following 31 March, except that, in
each case, the first financial year—
(a) begins on the date that the section of this Act establishing
that entity came into operation; and
(b) ends on the next following 31 March.
(3) The Commissioner or Executive Director, as the case may be,
in consultation with the Minister and with the concurrence of the
Minister of Finance, may determine the remuneration, allowances,
benefits, and conditions of appointment of each employee of the
Commission or Panel, as the case may be.
211. Reviews and reports to Minister.—(1) At least once
every five years, the Minister must conduct an audit review of the
exercise of the functions and powers of the Commission, the
Companies Tribunal, the Panel and the Council.
(2) In addition to any other reporting requirement set out in this
Act, the Commission, Tribunal, Council and Panel must each report
to the Minister at least once every year on its activities, as required
by the Public Finance Management Act, 1999 (Act No. 1 of 1999).
(3) As soon as practicable after receiving a report of a review
contemplated in subsection (1), or after receiving a report contem-
plated in subsection (2), the Minister must table it in Parliament.
212. Confidential information.—(1) When submitting infor-
mation to the Commission, the Panel, the Companies Tribunal, the
Council, or an inspector or investigator appointed in terms of this
Act, a person may claim that all or part of that information is
confidential.
(2) Any claim contemplated in subsection (1) must be supported
by a written statement explaining why the information is confiden-
tial.
(3) The Commission, Panel, Companies Tribunal, Council, in-
spector or investigator, as the case may be, must—
(a) consider a claim made in terms of subsection (1); and
(b) as soon as practicable, make a decision on the confidential-
ity of the information and access to that information, and
provide written reasons for that decision.
(4) Section 172, read with the changes required by the context,
applies to a decision in terms of subsection (3).
(5) When making any ruling, decision or order in terms of this
Act, the Commission, the Panel, the Companies Tribunal or the
Council may take confidential information into account.
(6) If any reasons for a decision in terms of this Act would reveal
any confidential information, the Commission, the Panel, the
Companies Tribunal or the Council, as the case may be, must
provide a copy of the proposed reasons to the party claiming
confidentiality at least 10 business days before publishing those
reasons.
[Sub-s. (6) substituted by s. 118 of Act No. 3 of 2011.]
(7) Within five business days after receiving a copy of proposed
reasons in terms of subsection (6), a party may apply to a court for
an appropriate order to protect the confidentiality of the relevant
information.
ss 213–219 Auditing: Legislation and Standards
CHAPTER 9
OFFENCES, MISCELLANEOUS MATTERS AND GENERAL
PROVISIONS
Part A
Offences and penalties
213. Breach of confidence.—(1) It is an offence to disclose any
confidential information concerning the affairs of any person
obtained—
(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—
(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 enforce-
ment 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
(e) when required to do so by any court or under any law.
214. False statements, reckless conduct and non-
compliance.—(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 information 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 an act or omission by a company
calculated to defraud a creditor or employee of the com-
pany, or a holder of the company’s securities, or with an-
other fraudulent purpose; or
[Para. (c) substituted by s. 119 (a) of Act No. 3 of 2011.]
(d) is a party to the preparation, approval, dissemination or
publication of a prospectus or a written statement contem-
plated in section 101, that contains an “untrue statement”
as defined and described in section 95.
[Para. (d) substituted by s. 119 (a) of Act No. 3 of 2011.]
(2) For the purposes of subsection (1) (d) and section 29 (6), 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 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 prepa-
ration of the document would cause it to be false or mis-
leading.
[Sub-s. (2) amended by s. 119 (b) of Act No. 3 of 2011.]
(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 Commis-
sion 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.
(4) A person who contravenes section 99 (1), (2), (3), (4), (5), (8)
or (9) and, if that person is a company, every director or prescribed
officer of the company who knowingly was a party to the contraven-
tion, is—
(a) guilty of an offence; and
(b) liable to any other person for any losses sustained as a
consequence of that contravention.
[Sub-s. (4) inserted by s. 119 (c) of Act No. 3 of 2011.]
A-98
215. Hindering administration of Act.—(1) It is an offence to
hinder, obstruct or improperly attempt to influence the Commission,
the Panel, the Companies Tribunal, an inspector or investigator, or a
court when any of them is exercising a power or performing a duty
delegated, conferred or imposed by this Act.
(2) A person commits an offence who—
(a) does anything calculated to improperly influence—
(i) the Commission, the Panel, the Companies Tribunal,
an inspector or investigator concerning any matter
connected with an investigation; or
(ii) the Companies Tribunal in any matter before it;
(b) anticipates any findings of the Commission, the Panel, the
Companies Tribunal, an inspector or investigator in a way
that is calculated to improperly influence the proceedings
or findings;
(c) does anything in connection with an investigation or
hearing that would have been contempt of court if the pro-
ceedings had occurred in a court of law;
(d) refuses to attend when summoned, or after attending,
refuses to answer any question or produce any document
as required by the summons, other than as contemplated in
section 176 (a);
(e) knowingly provides false information to the Commission,
the Panel, the Companies Tribunal, an inspector or investi-
gator;
(f) improperly frustrates or impedes the execution of a warrant
to enter and search, or attempts to do so;
(g) acts contrary to or in excess of a warrant to enter and
search; and
(h) without authority, but claiming to have authority in terms
of section 177—
(i) enters or searches premises; or
(ii) attaches or removes an article or document.
216. Penalties.—Any person convicted of an offence in terms of
this Act, is liable—
(a) in the case of a contravention of section 213 (1) or 214 (1),
to a fine or to imprisonment for a period not exceeding 10
years, or to both a fine and imprisonment; or
(b) in any other case, to a fine or to imprisonment for a period
not exceeding 12 months, or to both a fine and imprison-
ment.
217. Magistrate’s Court jurisdiction to impose penalties.—
Despite anything to the contrary contained in any other law, a
Magistrate’s Court has jurisdiction to impose any penalty provided
for in section 216.
Part B
Miscellaneous matters
218. Civil actions.—(1) Subject to any provision in this Act
specifically declaring void an agreement, resolution or provision of
an agreement, Memorandum of Incorporation, or rules of a compa-
ny, nothing in this Act renders void any other agreement, resolution
or provision of an agreement, Memorandum of Incorporation or
rules of a company that is prohibited, voidable or that may be
declared unlawful in terms of this Act, unless a court has made a
declaration to that effect regarding that agreement, resolution or
provision.
[Sub-s. (1) substituted by s. 120 of Act No. 3 of 2011.]
(2) Any person who contravenes any provision of this Act is
liable to any other person for any loss or damage suffered by that
person as a result of that contravention.
(3) The provisions of this section do not affect the right to any
remedy that a person may otherwise have.
219. Limited time for initiating complaints.—(1) A complaint
in terms of this Act may not be initiated by, or made to, the Com-
mission or the Panel, more than three years after—
(a) the act or omission that is the cause of the complaint; or
A-99 Companies Act No. 71 of 2008
(b) in the case of a course of conduct or continuing practice,
the date that the conduct or practice ceased.
(2) A complaint may not be prosecuted in terms of this Act
against any person that is, or has been, a respondent in proceedings
under another section of this Act relating substantially to the same
conduct.
220. Serving documents.—Unless otherwise provided in this
Act, a notice, order or other document that, in terms of this Act,
must be served on a person, will have been properly served when it
has been either—
(a) delivered to that person; or
(b) sent by registered mail to that person’s last known address.
221. Proof of facts.—(1) In any proceedings in terms of this
Act, if it is proved that a false statement, entry or record or false
information appears in or on a book, document, plan, drawing or
computer storage medium, the person who kept that item must be
presumed to have made the statement, entry, record or information,
unless the contrary is proved.
(2) A statement, entry or record, or information, in or on any
book, document, plan, drawing or computer storage medium is
admissible in evidence as an admission of the facts in or on it by the
person who appears to have made, entered, recorded or stored it
unless it is proved that that person did not make, enter, record or
store it.
222. State liability.—The State, the Commission, the Commis-
sioner, the Companies Tribunal, the Panel, an inspector, or any state
employee or similar person having duties to perform under this Act,
is not liable for any loss sustained by or damage caused to any
person as a result of any bona fide act or omission relating to the
performance of any duty under this Act, unless gross negligence is
proved.
Part C
Regulations, consequential matters and
commencement
223. Regulations.—(1) The Minister—
(a) may make any regulations expressly authorised or contem-
plated elsewhere in this Act, in accordance with subsection
(2);
(b) in consultation with the Commission, and by notice in the
Gazette, may make regulations for matters relating to the
functions of the Commission, including—
(i) forms;
(ii) time periods;
(iii) information required;
(iv) additional definitions applicable to those regulations;
(v) filing fees;
(vi) access to confidential information;
(Editorial Note: Wording as per original Government Gazette.)
COMMENCEMENT OF THIS ACT
The whole Act/
Date of commencement
Sections
1 May 2011 The whole Act except sec-
tions 11 (1) (a) (ii) and (iii).
This Act was published in Government Gazette 32121 dated 9 April 2009.
SCHEDULE 1
PROVISIONS CONCERNING NON-PROFIT COMPANIES
[Sch. 1 amended by s. 122 of Act No. 3 of 2011.]
1. Objects and policies.—(1) The Memorandum of Incorpo-
ration of a non-profit company must—
(a) set out at least one object of the company, and each such
object must be either—
(i) a public benefit object; or
s 219–Schedule 1
(vii) manner and form of participation in Commission
procedures; and
(Editorial Note: Wording as per original Government Gazette.)
(viii) forms of Memorandum of Incorporation and re-
quirements concerning the offering of securities;
(c) in consultation with the Chairperson of the Panel, and by
notice in the Gazette, may make—
(i) regulations for matters relating to the functions of
the panel, respectively; and
(ii) rules for the conduct of matters before the Panel; and
(d) may make regulations regarding—
(i) any forms required to be used for the purposes of
this Act; and
(ii) in general, any ancillary or incidental matter that is
necessary for the proper implementation and admin-
istration of this Act.
(2) Before making any regulations in terms of this Act, the Min-
ister must publish the proposed regulations for public comment,
subject to subsection (3).
(3) In the case of regulations prescribing financial reporting
standards as contemplated in section 29 (4) (a), the provisions of
subsection (2) do not apply.
(4) A regulation in terms of this Act must be made by notice in
the Gazette.
224. Consequential amendments, repeal of laws and transi-
tional arrangements.—(1) The Companies Act, 1973 (Act No. 61
of 1973), is hereby repealed, subject to subsection (3).
(2) The laws referred to in Schedule 3 are hereby amended in the
manner set out in that Schedule.
(3) The repeal of the Companies Act, 1973 (Act No. 61 of 1973),
does not affect the transitional arrangements, which are set out in
Schedule 5.
(Editorial Note: Please note that although the old Companies Act
No. 61 of 1973 is repealed it is still extensively referred to through-
out this Act. We suggest that you refer to s. 224 and Schedule 5 of
this Act which deals with Transitional Arrangements for a better
understanding of the provisions still applicable in terms of the old
Companies Act, No. 61 of 1973.)
225. Short title and commencement.—(1) This Act is called
the Companies Act, 2008, and, subject to subsection (2), comes into
operation on a date fixed by the President by proclamation in the
Gazette.
(2) Section 11 (1) (a) (ii) and (iii) shall come into operation three
years from the date of commencement of this Act.
[S. 225 substituted by s. 121 of Act No. 3 of 2011.]
Proclamation Government Date of Government
No. Gazette Gazette
R.32 34239 26 April 2011
(ii) an object relating to one or more cultural or social
activities, or communal or group interests; and
(b) be consistent with the principles set out in sub-items (2)
to (9).
[Item. (b) amended by s. 122 (a) of Act No. 3 of 2011 (English only).]
(2) A non-profit company—
(a) must apply all of its assets and income, however derived,
to advance its stated objects, as set out in its Memoran-
dum of Incorporation; and
Schedule 1 Auditing: Legislation and Standards
(b) subject to paragraph (a), may—
(i) acquire and hold securities issued by a profit
company; or
(ii) directly or indirectly, alone or with any other
person, carry on any business, trade or undertaking
consistent with or ancillary to its stated objects.
(3) A non-profit company must not, directly or indirectly, pay
any portion of its income or transfer any of its assets, regardless how
the income or asset was derived, to any person who is or was an
incorporator of the company, or who is a member or director, or
person appointing a director, of the company, except—
(a) as reasonable—
(i) remuneration for goods delivered or services
rendered to, or at the direction of, the company; or
(ii) payment of, or reimbursement for, expenses
incurred to advance a stated object of the company;
(b) as a payment of an amount due and payable by the
company in terms of a bona fide agreement between the
company and that person or another;
(c) as a payment in respect of any rights of that person, to the
extent that such rights are administered by the company
in order to advance a stated object of the company; or
(d) in respect of any legal obligation binding on the com-
pany.
[Para. (3) amended by s. 122 (b) of Act No. 3 of 2011.]
(4) Despite any provision in any law or agreement to the con-
trary, upon the winding-up or dissolution of a non-profit company—
(a) no past or present member or director of that company, or
person appointing a director of that company, is entitled
to any part of the net value of the company after its obli-
gations and liabilities have been satisfied; and
(b) the entire net value of the company must be distributed to
one or more non-profit companies, registered external
non-profit companies carrying on activities within the
Republic, voluntary associations or non-profit trusts—
(i) having objects similar to its main object; and
(ii) as determined—
(aa) in terms of the company’s Memorandum of
Incorporation;
(bb) by its members, if any, or its directors, at or
immediately before the time of its dissolution;
or
(cc) by the court, if the Memorandum of Incorpo-
ration, or the members or directors fail to
make such a determination.
[Item (b) amended by s. 122 (c) of Act No. 3 of 2011.]
(5) The Commission may apply to the court, on behalf of a
non-profit company, for a determination contemplated in sub-item
(4) (b) (ii) (cc) if the non-profit company has—
(a) no remaining members or directors; and
(b) failed to—
(i) make a determination contemplated in sub-item
(4) (b) (ii) (bb); or
[Sub-item (i) amended by s. 122 (a) of Act No. 3 of 2011 (English on-
ly).]
(ii) apply to the court for such a determination.
[Para. (5) amended by s. 122 (a) of Act No. 3 of 2011 (English only).]
(6) Incorporation as a non-profit company in terms of this
Act, or registration as an external non-profit company in terms of
this Act, and compliance by either with the provisions of this Act
does not necessarily qualify that non-profit company, or external
non-profit company, for any particular status, category, classifica-
tion or treatment in terms of the Income Tax Act, 1962 (Act No. 58
of 1962), or any other legislation, except to the extent that any such
legislation provides otherwise.
(7) Each voting member of a non-profit company has at least
one vote.
(8) The vote of each member of a non-profit company is of
equal value to the vote of each other voting member on any matter
to be determined by vote of the members, except to the extent that
the company’s Memorandum of Incorporation provides otherwise.
A-100
(9) If a non-profit company has members, the requirement in
section 24 (4) to maintain a securities register must be read as
requiring the company to maintain a membership register.
2. Fundamental transactions.—(1) A non-profit company
may not—
(a) amalgamate or merge with, or convert to, a profit com-
pany; or
(b) dispose of any part of its assets, undertaking or business
to a profit company, other than for fair value, except to
the extent that such a disposition of an asset occurs in the
ordinary course of the activities of the non-profit com-
pany.
(2) If a non-profit company has voting members, any pro-
posal to—
(a) dispose of all or the greater party of its assets or under-
taking; or
(b) amalgamate or merge with another non-profit company,
must be submitted to the voting members for approval, in a manner
comparable to that required of profit companies in accordance with
sections 112 and 113, respectively.
(3) Sections 115 and 116, read with the changes required by
the context, apply with respect to the approval of a proposal con-
templated in sub-item (2).
[Para. (3) amended by s. 122 (a) of Act No. 3 of 2011 (English only).]
3. Incorporators of non-profit company.—The incorpora-
tors of a non-profit company are its—
(a) first directors; and
(b) its first members, if its Memorandum of Incorporation
provides for it to have members.
4. Members.—(1) A non-profit company is not required to
have members, but its Memorandum of Incorporation may provide
for it to do so.
(2) If the Memorandum of Incorporation of a non-profit
company provides for the company to have members, it—
(a) must not restrict or regulate, or provide for any restriction
or regulation of, that membership in any manner that
amounts to unfair discrimination in terms of section 9 of
the Constitution;
(b) must not presume the membership of any person, regard
a person to be a member, or provide for the automatic or
ex officio membership of any person, on any basis other
than life-time membership awarded to a person—
(i) for service to the company or to the public benefit
objects set out in the company’s Memorandum of
Incorporation; and
(ii) with that person’s consent;
(c) may allow for membership to be held by juristic persons,
including profit companies;
(d) may provide for no more than two classes of members,
that is voting and non-voting members, respectively; and
(e) must set out—
(i) the qualifications for membership;
(ii) the process for applying for membership;
(iii) any initial or periodic cost of membership in any
class;
(iv) the rights and obligations, if any, of membership in
any class; and
(v) the grounds on which membership may, or will, be
suspended or lost.
5. Directors.—(1) If a non-profit company has members, the
Memorandum of Incorporation must—
(a) set out the basis on which the members choose the
directors of the company; and
(b) if any directors are to be elected by the voting members,
provide for the election each year of at least one-third of
those elected directors.
A-101 Companies Act No. 71 of 2008 Schedule 1–Schedule 3

(2) If a non-profit company has no members, the Memoran-
dum of Incorporation must set out the basis on which directors are to
be appointed by its board, or other persons.
(3) A non-profit company must not provide a loan to, secure
a debt or obligation of, or otherwise provide direct or indirect
financial assistance to, a director of the company or of a related or
inter-related company, or to a person related to any such director.
(4) Sub-item (3) does not prohibit a transaction if it—
(a) is in the ordinary course of the company’s business and
for fair value;
(b) constitutes an accountable advance to meet—
(i) legal expenses in relation to a matter concerning
the company; or
(ii) anticipated expenses to be incurred by the person
on behalf of the company;
(c) is to defray the person’s expenses for removal at the
company’s request; or
(d) is in terms of an employee benefit scheme generally
available to all employees or a specific class of employ-
ees.
[Para. (4) amended by s. 122 (a) of Act No. 3 of 2011 (English only).]
SCHEDULE 2
CONVERSION OF CLOSE CORPORATIONS TO COMPANIES
[Sch. 2 amended by s. 123 of Act No. 3 of 2011.]
1. Notice of conversion of close corporation.—(1) A close
corporation may file a notice of conversion in the prescribed manner
and form, at any time.
(2) A notice of conversion must be accompanied by—
(a) a written statement of consent approving the conversion
of the close corporation signed by members of the corpo-
ration holding in aggregate, at least 75% of the members’
interest in the corporation;
(b) a Memorandum of Incorporation consistent with the
requirements of this Act; and
(c) the prescribed filing fee.
[Para. (2) substituted by s. 123 of Act No. 3 of 2011.]
(3) Section 14, read with the changes required by the context,
applies with respect to the filing of a notice of conversion, as if it
were a Notice of Incorporation in terms of this Act.
(4) Upon conversion of a close corporation in terms of this
Schedule the Commission must—
(a) cancel the registration of that close corporation in terms
of the Close Corporations Act, 1984 (Act No. 69 of
1984);
(b) give notice in the Gazette of the conversion of a close
corporation into a company; and
(c) enable the Registrar of Deeds to effect the necessary
changes resulting from conversions and name changes.
2. Effect of conversion on legal status.—(1) Every member
of a close corporation converted under this Schedule is entitled to
become a shareholder of the company resulting from that conver-
sion, but the shares to be held in the company by the shareholders
individually need not necessarily be in proportion to the members’
interests as stated in the founding statement of the close corporation
concerned.
(2) On the registration of a company converted from a close
corporation—
(a) the juristic person that existed as a close corporation
before the conversion continues to exist as a juristic per-
son, but in the form of a company;
(b) all the assets, liabilities, rights and obligations of the
close corporation vest in the company;
(c) any legal proceedings instituted before the registration by
or against the corporation, may be continued by or
against the company, and any other thing done by or in
respect of the close corporation, is deemed to have been
done by or in respect of the company;
(d) any enforcement measures that could have been com-
menced with respect to the close corporation in terms of
the Close Corporations Act, 1984 (Act No. 69 of 1984),
for conduct occurring before the date of registration, may
be brought against the company on the same basis, as if
the conversion had not occurred; and
(e) any liability of a member of the corporation for the
corporation’s debts, that had arisen in terms of the Close
Corporations Act, 1984 (Act No. 69 of 1984), and existed
immediately before the date of registration, survives the
conversion and continues as a liability of that person, as
if the conversion had not occurred.

SCHEDULE 3
AMENDMENT OF LAWS
[Sch. 3 amended by s. 124 of Act No. 3 of 2011.]

A: Close Corporations Act, 1984

Act No. and Year Short Title Extent of amendment or repeal

1. Amendments to definitions of Close Corporations Act

Act No. 69 of 1984
Close Corporations Act, 1984 1. Amends section 1 as follows:—paragraph (a) inserts the definition of “Commis-
sion”; paragraph (b) substitutes the definition of “Companies Act”; paragraph (c)
substitutes the definition of “company”; paragraph (d) substitutes the definition of
“director”; paragraph (e) substitutes the definition of “holding company”; paragraph
(f) substitutes paragraph (b) in the definition of “officer”; paragraph (g) substitutes the
definition of “Registrar”; paragraph (h) substitutes the definition of “Registration
Office”; paragraph (i) substitutes the definition of “subsidiary”; and paragraph (j)
substitutes the definition of “this Act”.

2. Limitation of period to incorporate close corporations or convert companies

(1) Amends section 2 by substituting subsection (1).
(2) Substitutes section 13.
(3) Repeals section 27.
3. Legal status of close corporations
(1) Amends section 2 by substituting subsection (2).
Schedule 3 Auditing: Legislation and Standards A-102

Act No. and Year Short Title Extent of amendment or repeal

4. Names of corporations
(1) Substitutes section 19.
[Sub-item (1) amended by s. 124 (a) of Act No. 3 of 2011.]
(2) Substitutes section 20.
[Sub-item (2) amended by s. 124 (b) of Act No. 3 of 2011.]
(3) Repeals sections 22 (2) and (4).

(4) Substitutes section 23.

(5) Repeals section 41.
5. Transparency and accountability of close corporations
(1) Amends section 10 by inserting subsection (3).
(2) Amends section 47 as follows:—paragraph (a) repeals subsection (1) (b) (ii) and
(iii); paragraph (b) substitutes subsection (1) (c); and paragraph (c) inserts subsections
(1A), (1B) and (1C).
(3) Repeals section 55.

(4) Amends section 58 as follows:—paragraph (a) substitutes subsection (1); and

paragraph (b) inserts subsection (2A).
(5) Inserts section 62A.

6. Rescue of financially distressed close corporations

(1) Amends section 66 by inserting subsection (1A).
7. Dissolution of corporations
(1) Amends section 66 by substituting subsection (1).

(2) Substitutes section 67.

(3) Repeals section 68.

8. Deregistration of corporations
(1) Substitutes section 26.

(2) Repeals section 3 (1).

(3) Amends section 4 as follows:—paragraph (a) substitutes subsection (1); para-

graph (b) repeals subsection (2); and paragraph (c) substitutes subsections (3).
(4) Repeals sections 11 and 16 (3).
(5) Repeals sections 47 (2), 49 (5) and 58 (4).
(6) Amends section 64 by substituting subsection (2).
(7) Substitutes section 82.

B: Consequential Amendments to certain other Acts listed in Schedule 4

Act No. and Year Short Title Extent of amendment or Repeal

Act No. 62 of 1977 Registration of Copyright in Cinemato- 1. Amends section 1 as follows:—paragraph (a) inserts the
graph Films Act, 1977 definition of “Commission”; paragraph (b) substitutes the
definition of “legal practitioner”; paragraph (c) substitutes the
definition of “Registrar”; and paragraph (d) substitutes the
definition of “registration office.
2. Repeals section 2.

3. Amends section 3 by substituting subsections (1) and (2).

Act No. 57 of 1978 Patents Act, 1978 1. Amends section 2 as follows:—paragraph (a) inserts the
definition of “Commission”; paragraph (b) substitutes the
definition of “patent office”; and paragraph (c) substitutes the
definition of “registrar”.
2. Repeals section 5.
3. Amends section 7 as follows:—paragraph (a) substitutes
subsection (1); paragraph (b) repeals subsection (2); and para-
graph (c) substitutes subsection (3).
Act No. 98 of 1978 Copyright Act, 1978 1. Amends section 1 by substituting the definition of “Regis-
trar”.
A-103 Companies Act No. 71 of 2008
Act No. and Year Short Title
Act No. 59 of 1980 Share Blocks Control Act, 1980
Act No. 194 of 1993 Trade Marks Act, 1993
Act No. 195 of 1993 Designs Act, 1993
Act No. 14 of 2005 Co-operatives Act, 2005
SCHEDULE 4
LEGISLATION TO BE ENFORCED BY
COMMISSION
[Sch. 4 amended by s. 125 of Act No. 3 of 2011.]
As contemplated in section 188, the Commission is responsible
for the administration and enforcement of the following Acts:
Close Corporations Act, 1984 (Act No. 69 of 1984)
Share Blocks Control Act, 1980 (Act No. 59 of 1980)
Co-operatives Act, 2005 (Act No. 14 of 2005)
Copyright Act, 1978 (Act No. 98 of 1978)
Performers Protection Act, 1967 (Act No. 11 of 1967)
Registration of Copyright in Cinematograph Films Act, 1977
(Act No. 62 of 1977)
Counterfeit Goods Act, 1977 (Act No. 37 of 1997)
Designs Act, 1993 (Act No. 195 of 1993)
Merchandise Marks Act, 1941 (Act No. 17 of 1941)
Patents Act, 1978 (Act No. 57 of 1978)
Trade Marks Act, 1993 (Act No. 194 of 1993)
Unauthorised Use of Emblems Act, 1961 (Act No. 37 of 1961)
“Vlaglied” Copyright Act, 1974 (Act No. 9 of 1974)
Protection of Businesses Act, 1987 (Act No. 99 of 1978)
Part A of Chapter 4 of the Consumer Protection Act, 2008
(Act No. 68 of 2008)
SCHEDULE 5
TRANSITIONAL ARRANGEMENTS
[Sch. 5 amended by s. 126 of Act No. 3 of 2011.]
1. Interpretation.—(1) In this Schedule—
(a) “general effective date” means the date on which
section 1 of this Act came into operation; and
(b) “previous Act” means the Companies Act, 1973 (Act
No. 61 of 1973).
(2) A reference in this Schedule—
(a) to a section by number, is a reference to the correspond-
ing section of—
Schedule 3–Schedule 5
Extent of amendment or Repeal
1. Amends section 1 as follows:—paragraph (a) substitutes
the definition of “Companies Act”; and paragraph (b) inserts the
definition of “Registrar”.
1. Amends section 2 as follows:—paragraph (a) inserts the
definition of “Commission”; paragraph (b) substitutes the
definition of “registrar”; and paragraph (c) inserts the definition
of “trade marks office”.
2. Repeals section 5.
3. Amends section 6 as follows:—paragraph (a) substitutes
subsection (1); paragraph (b) repeals subsections (2) and (4).
1. Amends section 1 as follows:—paragraph (a) inserts the
definition of “Commission”; paragraph (b) substitutes the
definition of “designs office”; and paragraph (c) substitutes the
definition of “registrar”.
2. Repeals section 4.
3. Amends section 6 as follows:—paragraph (a) substitutes
subsection (1); paragraph (b) repeals subsections (2) and (3);
and paragraph (c) substitutes subsection (4).
1. Amends section 1 as follows:—paragraph (a) inserts the
definitions of “Commission” and “Companies Act”; paragraph
(b) deletes the definitions of “deputy registrar” and “Director-
General”; and paragraph (c) substitutes the definition of “regis-
trar”.
1. Amends section 78 as follows:—paragraph (a) substitutes
subsection (1); paragraph (b) repeals subsection (1) (b) and (c);
and paragraph (c) substitutes subsection (2).
(Editorial Note: Numbering as per original Government
Gazette.)
(i) the previous Act, if the number is followed by the
words “of the previous Act”; or
(ii) this Act, in any other case; or
(b) to an item or a subitem by number is a reference to the
corresponding item or subitem of this Schedule.
(3) Despite any other provision of this Act—
(a) the Minister, by notice in the Gazette, may determine a
date on which the Commission may assume the exercise
of any particular function or power assigned to it in terms
of this Act; and
(b) until a date determined by the Minister in terms of
paragraph (a)—
(i) the Commission may not perform that particular
function or exercise that particular power; and
(ii) the Minister has the authority to, and bears the
responsibility of, exercising any such function or
performing any such power assigned by this Act to
the Commission.
2. Continuation of pre-existing companies.—(1) As of the
general effective date, every pre-existing company that was, imme-
diately before that date,—
(a) incorporated or registered in terms of the Companies Act,
1973 (Act No. 61 of 1973); or
(b) recognised as an “existing company” in terms of the
Companies Act, 1973 (Act No. 61 of 1973),
continues to exist as a company, as if it had been incorporated and
registered in terms of this Act, with the same name and registration
number previously assigned to it, subject to item 4.
(2) Despite section 11, a pre-existing company—
(a) whose name, immediately before the effective date,
satisfied the requirements of section 49 of the previous
Act is not required to change its name to comply with
section 11 (3) (c) solely on the ground that any part of its
name was in an official language other than English; and
(b) may continue to use a translated name that, immediately
before the effective date, was registered and otherwise
met the requirements of section 50 (2) of the previous Act.
[Sub-item (2) inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
Schedule 5 Auditing: Legislation and Standards
(3) Despite the repeal of the previous Act, section 49 (5) to
(7) of the previous Act continues to apply to a pre-existing company
that was, immediately before the effective date, engaged in any
circumstances contemplated in those provisions.
[Sub-item (3) inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
(4) Despite the repeal of the previous Act, a pre-existing
company retains all of the powers set out in that Act in respect of its
shares that were issued and outstanding immediately before the
effective date, to the extent necessary to give full effect to—
(a) section 35 (6); and
(b) item 6 (2) of this Schedule.
[Sub-item (4) inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
(5) If, as a consequence of the coming into effect of the Act
and the repeal of the previous Act, a conflict, dispute or doubt arises
within two years after the effective date concerning the particular
manner or form in which, or time by which, a pre-existing company
is required to—
(a) prepare its annual financial statements, convene an
annual general meeting, provide to its shareholders copies
of its annual financial statements, any notice or any other
document;
(b) file any particular document with the Commission; or
(c) take any other particular action required in terms of this
Act or the company’s Memorandum of Incorporation,
the company may apply to the Tribunal for directions, and a member
of the Tribunal may make an administrative order that is appropriate
and reasonable in the circumstances.
[Sub-item (5) inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
(6) An external company that, immediately before the effec-
tive date, was registered as such in terms of the previous Act must
be regarded as having registered on the effective date as an external
company in terms of this Act.
[Sub-item (6) inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
(7) If, immediately before the general effective date, a partic-
ular pre-existing company has passed its financial year end but has
not completed the requirements in terms of the previous Act for
publishing, audit and approval of its annual financial statements for
that financial year—
(a) the provisions of the previous Act continue to apply with
respect to the publishing, audit and approval of those
statements; and
(b) the provisions of this Act will apply to each subsequent
financial year end and annual financial statements of that
company.
[Item 2 amended by s. 126 (1) (a) of Act No. 3 of 2011. Sub-item (7)
inserted by s. 126 (1) (b) of Act No. 3 of 2011.]
3. Pending matters.—(1) Any matter pending before the
Registrar under the previous Act, or a provision of the Close
Corporations Act, (Act No. 69 of 1984), amended by this Act,
before the effective date and not fully addressed at that time, must
be concluded by the Registrar in terms of such Act, despite its repeal
or amendment.
[Sub-item (1) substituted by s. 126 (2) (b) of Act No. 3 of 2011.]
(2) Any conversion of a company to a close corporation in
terms of section 27 of the Close Corporations Act 1984 (Act No. 69
of 1984), filed with the Registrar before the effective date and not
fully addressed at that time must be concluded by the Registrar in
terms of that Act, despite the repeal of that section.
(3) A company that is incorporated and registered in terms of
subitem (1) is regarded to—
(a) have been registered in terms of the previous Act; and
(b) be a pre-existing company for all purposes of this Act.
[Item 3 amended by s. 126 (2) (a) of Act No. 3 of 2011.]
4. Memorandum of Incorporation and Rules.—(1) Every
pre-existing company—
(a) incorporated in terms of section 21 of the previous Act is
deemed to have amended its Memorandum of Incorpora-
tion as of the general effective date to expressly state that
it is a non-profit company, and to have changed its name
in so far as required to comply with section 11 (3);
[Para. (a) amended by s. 126 (3) (a) of Act No. 3 of 2011.]
A-104
(b) the Articles of which imposed personal liability on its
directors or past directors, as contemplated in section
53 (b) of the previous Act, is deemed to have amended its
Memorandum of Incorporation as of the general effective
date to expressly state that it is a personal liability com-
pany, and to have changed its name in so far as required
to comply with section 11 (3);
[Para. (b) amended by s. 126 (3) (a) and (b) of Act No. 3 of 2011.]
(c) registered in terms of the previous Act, and falling within
the definition of a state-owned company in terms of this
Act, is deemed to have amended its Memorandum of In-
corporation as of the general effective date to have
changed its name in so far as required to comply with
section 11 (3); or
[Para. (c) amended by s. 126 (3) (a) of Act No. 3 of 2011.]
(d) limited by guarantee, other than in terms of section 21 of
the previous Act—
(i) may file a notice within 20 business days after the
general effective date electing to become a profit
company, as from the general effective date, and to
change its name in so far as required to comply
with section 11 (3);or
(ii) if it fails to file a notice in terms of subparagraph
(i), is deemed to have amended its Memorandum
of Incorporation as of the general effective date to
expressly state that it is a non-profit company, and
have changed its name in so far as required to
comply with section 11 (3).
[Para. (d) amended by s. 126 (3) (a) of Act No. 3 of 2011.]
(2) At any time within two years immediately following the
general effective date, a pre-existing company may file, without
charge—
(a) an amendment to its Memorandum of Incorporation to
bring it in harmony with this Act; and
(b) if necessary, a notice of name change and copy of a
special resolution contemplated in section 16, to alter its
name to meet the requirements of this Act.
(3) If, before the general effective date, a pre-existing com-
pany had adopted any binding provisions, under whatever style or
title, comparable in purpose and effect to the rules of a company
contemplated in section 15 (3), those provisions continue to have the
same force and effect—
(a) as of the general effective date, for a period of two years,
or until changed by the company; and
(b) after the two year period, to the extent that they are
consistent with this Act.
(3A) If, before the general effective date, the shareholders of
a pre-existing company had adopted any agreement between or
among themselves, under whatever style or title, comparable in
purpose and effect to an agreement contemplated in section 15 (7),
any such agreement continues to have the same force and effect—
(a) as of the general effective date, for a period of two years,
despite section 15 (7), or until changed by the sharehold-
ers who are parties to the agreement; and
(b) after the two-year period contemplated in paragraph (a),
to the extent that the agreement is consistent with this
Act and the company’s Memorandum of Incorporation.
[Sub-item (3A) inserted by s. 126 (3) (c) of
Act No. 3 of 2011.]
(4) During the period of two years immediately following the
general effective date—
(a) if there is a conflict between—
(i) a provision of this Act, and a provision of a pre-
existing company’s Memorandum of Incorpor-
ation, the latter provision prevails, except to the ex-
tent that this Schedule provides otherwise;
(ii) a binding provision contemplated in sub-item (3),
and this Act, the binding provision prevails; or
A-105 Companies Act No. 71 of 2008
(iii) a provision of an agreement contemplated in sub-
item (3A), and this Act or the company’s Memo-
randum of Incorporation, the provision of the
agreement prevails, except to the extent that the
agreement, or the Memorandum of Incorporation,
provides otherwise; and
(b) despite Chapter 7, until a pre-existing company has filed
an amendment contemplated in sub-item (2) (a), neither
the Commission nor the Panel may issue a compliance
notice to that company with respect to conduct that is—
(i) inconsistent with this Act; but
(ii) consistent with a provision that prevails over this
Act in terms of paragraph (a).
[Sub-item (4) substituted by s. 126 (3) (d) of Act No. 3 of 2011.]
5. Pre-incorporation contracts.—Section 21 does not apply
with respect to a pre-existing company.
6. Par value of shares, treasury shares, capital accounts
and share certificates.—(1) Section 35 (2) does not apply to a
bank, as defined in the Banks Act, 1993 (Act No. 124 of 1993), until
a date declared by the Minister, after consulting the member of the
Cabinet responsible for national financial matters.
(2) Despite section 35 (2) any shares of a pre-existing com-
pany that have been issued with a nominal or par value, and are held
by a shareholder immediately before the effective date, continue to
have the nominal or par value assigned to them when issued, subject
to any regulations made in terms of sub-item (3).
(3) The Minister, in consultation with the member of Cabinet
responsible for national financial matters, must make regulations, to
take effect as of the general effective date, providing for the optional
conversion and transitional status of any nominal or par value
shares, and capital accounts of a pre-existing company, but any such
regulations must preserve the rights of shareholders associated with
such shares, as at the effective date, to the extent doing so is com-
patible with the purposes of this item.
[Sub-item (3) substituted by s. 126 (4) (a) of Act No. 3 of 2011.]
(4) A failure of any share certificate issued by a pre-existing
company to satisfy the requirements of section 51 (1) to (4)—
(a) is not a contravention of that section; and
(b) does not invalidate that share certificate.
(5) Section 164 does not apply with respect to the conversion
by a company of par value or nominal value shares of a pre-existing
company in terms of this item, and in accordance with the regula-
tions.
[Sub-item (5) inserted by s. 126 (4) (b) of Act No. 3 of 2011.]
7. Company finance and governance.—(1) A person hold-
ing office as a director, prescribed officer, company secretary or
auditor of a pre-existing company immediately before the effective
date, continues to hold that office as from the effective date, subject
to the company’s Memorandum of Incorporation, and this Act.
[Sub-item (1) amended by s. 126 (5) (a) of Act No. 3 of 2011 (English
only).]
(2) A person contemplated in sub-item (1) who, in terms of
this Act, is ineligible to be, or disqualified from being, a director,
alternate director, prescribed officer, company secretary or auditor is
regarded as having resigned from every such office in any company
as from the effective date.
[Sub-item (2) substituted by s. 126 (5) (b) of Act No. 3 of 2011.]
(3) As from the effective date, a pre-existing company is
deemed to have a number of vacancies on the board equal to the
difference between—
(a) the minimum number of directors required by or in terms
of this Act; and
(b) the actual number of directors of that pre-existing
company immediately before the effective date, if that
number is less than the minimum referred to in paragraph
(a).
[Sub-item (3) amended by s. 126 (5) (c) of Act No. 3 of 2011.]
(4) A vacancy in the office of director, company secretary or
auditor of a pre-existing company as from the effective date,
Schedule 5
irrespective whether arising by operation of subitem (2) or (3), or
otherwise, is to be filled in accordance with this Act.
(5) Despite anything to the contrary in a company’s Memo-
randum of Incorporation, the provisions of this Act respecting—
(a) the duties, conduct and liability of directors apply to
every director of a pre-existing company as from the ef-
fective date;
(b) rights in terms of this Act of shareholders to receive any
notice or have access to any information apply as from
the
effective date to every pre-existing company;
(c) meetings of shareholders or directors, and adoption of
resolutions apply as from the effective date to every pre-
existing company; and
(d) Chapter 5 applies as from the effective date to every pre-
existing company, except to the extent it is exempted by
or in terms of that Chapter.
(6) Approval of any distribution, financial assistance, insider
share issues, or options, are subject to this Act, even if any such
action had been approved by a company’s shareholders before the
effective date, despite anything to the contrary in the company’s
Memorandum of Incorporation.
(7) A right of any person to seek a remedy in terms of this
Act applies with respect to conduct pertaining to a pre-existing
company and occurring before the effective date, unless the person
had commenced proceedings in a court in respect of the same
conduct before the effective date.
(8) A pre-existing company is not in contravention of this Act
by reason only of a failure to—
(a) maintain any record for the duration required by section
24 (1), if—
(i) the company disposed of that record before the
effective date; and
(ii) at the time the company disposed of the record it
was not required, by or in terms of any public
regulation, to continue to maintain that record; or
(b) include in its notice of incorporation in terms of the
previous Act a prominent statement comparable to that
required by section 13 (3) of this Act.
(9) A provision of the Memorandum of Incorporation of a
pre-existing company comparable to a provision contemplated in
section 15 (2) has the same validity after the effective date that it
had immediately before that date, despite any failure of the company
to have drawn attention to that provision in the manner required by
section 13 (3).
(10) Section 19 (4) applies to any provision of the Memoran-
dum of Incorporation of a pre-existing company that is comparable
to a provision contemplated in section 15 (2), from the time that the
company files a notice of that provision.
(11) The five consecutive financial years contemplated in
section 92 (1) must be calculated from the date of commencement of
this Act.
[Sub-item (11) inserted by s. 126 (5) (d) of Act No. 3 of 2011.]
8. Company names and name reservations.—(1) Any res-
ervation by the Registrar of a name in terms of section 42 of the
previous Act that was in effect immediately before the effective
date, is regarded as having been a reservation in terms of section 12
of this Act, as from the effective date, subject to subitem (2).
(2) If the Commission believes that a reserved name contem-
plated in subitem (1) does not satisfy the requirements of sec-
tion 11—
(a) the Commission must notify the person for whose use the
name was reserved, inviting the person to request the res-
ervation of a substitute name that does satisfy the re-
quirements of this Act; and
(b) the person concerned may file a request contemplated in
paragraph (a), at no charge, any time within 120 business
days after the date of the Commission’s notice.
Schedule 5 Auditing: Legislation and Standards
(3) Any registration by the Registrar of—
(a) a translation or shortened form of a name, in terms of
section 43 of the previous Act that was in effect immedi-
ately before the effective date, is deemed to be a registra-
tion of that name, as if it had been registered as a name of
the company concerned in terms of this Act; or
(b) a defensive name, or renewal of the registration of a
defensive name, in terms of section 43 of the previous
Act that was in effect immediately before the effective
date must be regarded as if it had been registered in terms
of section 12 (9) of this Act, as from the actual date on
which that registration or renewal was granted.
[Para. (b) substituted by s. 126 (6) of Act No. 3 of 2011.]
9. Continued application of previous Act to winding-up
and liquidation.—(1) Despite the repeal of the previous Act, until
the date determined in terms of subitem (4), Chapter 14 of that Act
continues to apply with respect to the winding-up and liquidation of
companies under this Act, as if that Act had not been repealed
subject to subitems (2) and (3).
(2) Despite subitem (1), sections 343, 344, 346, and 348 to
353 do not apply to the winding-up of a solvent company, except to
the extent necessary to give full effect to the provisions of Part G of
Chapter 2.
(3) If there is a conflict between a provision of the previous
Act that continues to apply in terms of subitem (1), and a provision
of Part G of Chapter 2 of this Act with respect to a solvent company,
the provision of this Act prevails.
(4) The Minister, by notice in the Gazette, may—
(a) determine a date on which this item ceases to have effect,
but no such notice may be given until the Minister is sat-
isfied that alternative legislation has been brought into
force adequately providing for the winding-up and liqui-
dation of insolvent companies; and
(b) prescribe ancillary rules as may be necessary to provide
for the efficient transition from the provisions of the re-
pealed Act, to the provisions of the alternative legislation
contemplated in paragraph (a).
10. Preservation and continuation of court proceedings
and orders.—(1) Any proceedings in any court in terms of the
previous Act immediately before the effective date are continued in
terms of that Act, as if it had not been repealed.
(2) Any order of a court in terms of the previous Act, and in
force immediately before the effective date, continues to have the
same force and effect as if that Act had not been repealed, subject to
any further order of the court.
11. General preservation of regulations, rights, duties, no-
tices and other instruments.—(1) Any right or entitlement
enjoyed by, or obligation imposed on, any person in terms of any
provision of the previous Act, that had not been spent or fulfilled
immediately before the effective date is a valid right or entitlement
of, or obligation imposed on, that person in terms of any comparable
provision of this Act, as from the date that the right, entitlement or
obligation first arose, subject to the provisions of this Act.
(2) A notice given by any person to another person in terms
of any provision of the previous Act must be considered as notice
given in terms of any comparable provision of this Act, as from the
date that the notice was given under the previous Act.
(3) A document that, before the effective date, had been
served or filed in accordance with the previous Act must be regard-
ed as having been satisfactorily served or filed for any comparable
purpose of this Act.
[Sub-item (3) substituted by s. 126 (7) of Act No. 3 of 2011.]
(4) An order given by an inspector, in terms of any provision
of the previous Act, and in effect immediately before the effective
date, continues in effect, subject to the provisions of this Act.
12. Transition of regulatory agencies.—(1) The person
who occupied the post of chief executive officer of the Companies
and Intellectual Property Registration Office immediately before the
general effective date, must be regarded as having been appointed
A-106
on the general effective date as the Commissioner in terms of
section 189, for a term to be determined by the Minister.
(2) A person in the employ of the Companies and Intellectual
Property Registration Office or the Office of Companies and
Intellectual Property Enforcement in the Department of Trade and
Industry becomes an employee of the Commission on the effective
date.
(3) The transfer of departmental employees to the Commis-
sion must be effected in accordance with—
(a) section 197 of the Labour Relations Act, 1995 (Act
No. 66 of 1995); and
(b) any collective agreement reached between the State and
the trade union parties of the Departmental Chamber of
the Public Service Bargaining Council before the effec-
tive date.
(4) A person referred to in sub-items (1) and (2) remains sub-
ject to any decisions, proceedings, rulings and directions applicable
to that person immediately before the effective date, and any
proceedings against such a person, that were pending immediately
before the effective date, must be disposed of as if this Act had not
been enacted.
[Sub-item (4) amended by s. 126 (8) (a) of Act No. 3 of 2011.]
(5) Any person transferred in terms of sub-items (1) to (3)—
(a) remains a member of the Government Employees’
Pension Fund mentioned in section 2 of the Government
Employees’ Pension Law, 1996 (Act No. 21 of 1996);
and
(Editorial Note: Please note that the reference to “Act No. 21 of
1996” should be Proclamation
No. 21 of 1996.)
(b) is entitled to pension and retirement benefits as if that
person were in service in a post classified in a division of
the public service mentioned in section 8 (1) (a) (i) of the
Public Service Act, 1994 (Proclamation No. 103 of
1994).
[Sub-item (5) amended by s. 126 (8) (b) of Act No. 3 of 2011.]
(6) As of the general effective date—
(a) all movable assets of the state which were used by or
which were at the disposal of the Companies and Intel-
lectual Property Registration Office and the Office of
Company and Intellectual Property Enforcement in the
Department immediately before the effective date, except
those assets excluded by the Minister, become the prop-
erty of the Commission;
(b) all contractual rights, obligations and liabilities of the
Company and Intellectual Property Registration Office
are vested in the Commission;
(c) all financial, administrative and other records of the
Company and Intellectual Property Registration Office,
including all relevant documents in the possession of that
office immediately before the effective date, are trans-
ferred to the Commission; and
(d) the assets and liabilities of the Securities Regulation
Panel established by section 440B of the Companies Act,
1973, are transferred to and are assets and liabilities, re-
spectively, of the Panel.
(7) Subject to subitem (8), on the general effective date—
(a) the person, if any, holding office immediately before that
date, as a member, chairperson, deputy chairperson or
Executive Director of the Securities Regulation Panel ap-
pointed in terms of the Companies Act, 1973, is regarded
to have been appointed as a member, chairperson, deputy
chairperson or Executive Director, respectively of the
Panel in terms of this Act;
(b) any person in the employ of the Securities Regulation
Panel becomes an employee of the Panel;
(c) the terms and conditions of office or employment of a
person contemplated in this subitem are identical to the
terms and conditions of office or employment subsisting
between that person and the Securities Regulation Panel
immediately before the general effective date, subject to
A-107 Companies Act No. 71 of 2008
any further determination by the Panel in the exercise of
its authority set out in sections 200 (1), 200 (2) (b) and
210 (3); and
(d) any person contemplated in this subitem who, as an
employee or office holder of the Securities Regulation
Panel immediately before the general effective date, had
any rights to participate in, or vested rights in terms of,
any pension scheme or medical scheme, retains those
rights, subject to any further determination by the Panel
in the exercise of its authority set out in sections 200 (1),
200 (2) (b) and 210 (3).
(8) If, after the general effective date, a person referred to in
subitem (7) (c) or (d)—
(a) resigns from an office in, or terminates that person’s
employment by, the Panel; and
(b) is subsequently appointed to an office within, or re-
employed by, the Panel, sections 200 (1), 200 (2) (b) and
210 (3) apply with respect to that person as if the person
were being so appointed or employed by the Panel for the
first time.
(9) The registers of companies, external companies, reserved
names, and delinquent directors, respectively, as maintained by the
Companies and Intellectual Property Registration Office in terms of
the previous Act are each continued as the register of companies,
external companies, reserved names, and directors, respectively,
required to be established by the Commission in terms of this Act.
13. Continued investigation and enforcement of previous
Act.—(1) Despite the repeal of the previous Act—
(a) any investigation by the Minister or the Registrar in
terms of the previous Act and pending immediately be-
fore the effective date, may be continued by the Commis-
sion;
Schedule 5
(b) any investigation or other matter being considered by the
Securities Regulation Panel in terms of the previous Act
and pending immediately before the effective date, may
be continued by the Panel; and
(c) for a period of three years after the effective date—
(i) the Commission may exercise any power of the
Minister, the Registrar, or the Panel may exercise
any power of the Securities Regulation Panel, in
terms of the previous Act to investigate and pros-
ecute any breach of that Act that occurred during
the period of three years immediately before the
effective date, subject to sub-item (2); and
[Sub-para. (i) substituted by s. 126 (9) of Act No. 3 of 2011.]
(ii) a court may make any order that could have been
made in the circumstances by a court under that
Act.
(2) In exercising authority under subsection (1), the Commis-
sion or Panel, respectively, must conduct the investigation or other
matter in accordance with the previous Act.
14. Regulations.—On the effective date, and for a period of
60 business days after the effective date, the Minister may make any
regulation contemplated in this Act without meeting the procedural
requirements set out in section 223 or elsewhere in this Act, provid-
ed the Minister has published those proposed regulations in the
Gazette for comment for at least 30 business days.
A-109 Companies Act No. 71 of 2008 Companies Regulations

COMPANIES REGULATIONS, 2011 23. Information to be kept concerning directors

24. Access to company information
GNR.351 of 26 April 2011 25. Company financial year and accounting records
as amended by 26. Interpretation of regulations affecting transparency and
Notice Government Date accountability
Gazette 27. Financial Reporting Standards
28. Categories of companies required to be audited
20 August 2013
29. Independent review of annual financial statements
R.619 36759 w.e.f.
1 May 2011 30. Company annual returns
R.82 37299 5 February 2014 Part D
Capitalization of Profit Companies
DEPARTMENT OF TRADE AND INDUSTRY 31. Conversion of nominal or par value shares, and related
I, Dr Rob Davies, the Minister of Trade and Industry, hereby in matters
terms of section 223 of the Companies Act, 2008 (Act No. 71 of
2008) and in consultation with the Companies and Intellectual Part E
Property Commission and the Chairperson of the Takeover Regula- Securities Registration and Transfer
tion Panel, make Companies Regulations as set out in the schedule 32. Company securities registers
hereto. 33. Instruction to convert certificated securities into uncertifi-
cated securities
(Signed) 34. Duties of company
Dr Rob Davies, (MP) Part F
Minister of Trade and Industry Governance of Companies
In terms of section 223, and Item 14 of Schedule 5, of the Com- 35. Pre-incorporation contracts
panies Act, 2008 (Act No. 71 of 2008), the Minister of Trade and 36. Uniform standards for providing information
Industry publishes the following regulations relating to the func- 37. Record dates
tions of the Companies Commission, the Takeover Regulation 38. Prescribed officers of companies
Panel and the Companies Tribunal, and other matters relating to the 39. Directors and register of persons disqualified from serving
regulation of companies, to take effect at the time that the Com- as director
panies Act, 2008 takes effect. Part G
TABLE OF CONTENTS Winding up and Deregistering companies and
external companies
CHAPTER 1 40. Winding-up, dissolution and de-registration of companies
GENERAL PROVISIONS and external companies
Part A 41. Transitional effect of previous regulations concerning
Interpretation insolvent companies
1. Short title
2. Definitions CHAPTER 3
3. Interpretation ENHANCED ACCOUNTABILITY AND TRANSPARENCY
42. Qualifications for members of audit
Part B committees
Guidelines, Practice Notes, Forms, Notices and other documents 43. Social and Ethics Committee
4. Issuing of Guidelines and Practice Notes 44. Appointment of auditor or company secretary
5. Forms and filing requirements
6. Notice of availability of documents CHAPTER 4
7. Delivery of documents OFFERINGS OF COMPANY SECURITIES
Part A
CHAPTER 2 Offering Securities
FORMATION, ADMINISTRATION AND 45. Time periods and threshold values
DISSOLUTION OF COMPANIES 46. Forms relating to securities offerings
Part A Part B
Reservation and Registration of Company Names Requirements Concerning Offering of Securities
8. Company names 47. Interpretation
9. Reservation of company names 48. Application
10. Registration of defensive names 49. Letters of allocation in respect of unlisted securities
11. Transfer of reserved names 50. Rights offers in respect of listed securities
12. Abuse of name reservation system 51. General requirements for a prospectus
13. Disputes concerning company names 52. Signing, date and date of issue, of prospectus
Part B 53. Access to supporting documents
Incorporation and Legal Status of Companies Part C
14. Notice of Incorporation Items required to be included in a Prospectus
15. Memorandum of Incorporation 54. General statement of required information
16. Rules of a company 55. Specific matters to be addressed in a prospectus for a
17. Domestication of foreign companies limited offer
18. Conversion of Close Corporations 56. Specific matters to be addressed in a prospectus for a
19. Reckless trading or trading under insolvent circumstances general offer
Part C 57. Name, address and incorporation
Transparency, accountability and 58. Directors, other office holders, or material third parties
integrity of companies 59. History, state of affairs and prospects of company
20. External Companies 60. Share capital of the company
21. Registered office of company 61. Options or preferential rights in respect of shares
22. Company records 62. Commissions paid or payable in respect of underwriting
Companies Regulations Auditing: Legislation and Standards A-110

63. Material contracts Part E

64. Interest of directors and promoters Takeover Panel Procedures
65. Loans 116. General Authority of the Panel
66. Shares issued or to be issued otherwise than for cash 117. All published documents to be approved
67. Property acquired or to be acquired 118. Consultations and Rulings
68. Amounts paid or payable to promoters 119. Procedure before the Executive Director and Takeover
69. Preliminary expenses and issue expenses Special Committee at hearings
70. Purpose of the offer 120. Reviews
71. Time and date of the opening and of the 121. Reporting to Panel
closing of the offer 122. Panel Services, fees and levies
72. Particulars of the offer
73. Minimum subscription CHAPTER 6
74. Statement as to adequacy of capital BUSINESS RESCUE
75. Report by directors as to material changes
76. Statement as to listing on stock exchange Part A
77. Report by auditor where business undertaking to be Business Rescue Proceedings
acquired 123. Notices to be issued by a company
78. Report by auditor where company will acquire a subsidiary concerning its business rescue proceedings
79. Report by auditor of company 124. Notices to be issued by affected persons
80. Requirements for prospectus of mining company concerning court proceedings
125. Notices to be issued by practitioner
concerning business rescue proceedings
CHAPTER 5
FUNDAMENTAL TRANSACTIONS AND Part B
TAKEOVER REGULATIONS Business Rescue Practitioners
Part A 126. Accreditation of professions and licensing of business
Interpretation and Application rescue practitioners
81. Definitions 127. Restrictions on practice
82. Beneficial Interests 128. Tariff of fees for business rescue practitioners
83. Effect of interests held by non-related
persons CHAPTER 7
84. Acting in concert COMPLAINTS, APPLICATIONS AND
85. Change in control TRIBUNAL HEARINGS
86. Mandatory offers
87. Comparable offers Part A
88. Partial Offers Definitions Used in this Chapter
89. Fundamental Transactions 129. Definitions
90. Independent Experts Part B
91. Application to Private Companies Forms and Notices with respect to certain remedies
Part B 130. Request for Commission or Panel to act on behalf of
General Rules Respecting Negotiations and Offers complainant
92. Information to offerors 131. Notice of availability of system to receive confidential
93. Solicitation campaigns disclosures
94. Consensual negotiations
95. Confidentiality and Transparency Part C
96. Conditional Offers Alternative Dispute Resolution
97. Variation in offers 132. Alternative dispute resolution procedures
98. Dealings disclosure and announcement 133. Forms of order resulting from alternative dispute resolution
procedures
Part C
134. Accreditation of alternative dispute resolution providers
Announcements and Offers
99. The approach Part D
100. Cautionary and other announcements Commission or Panel Complaint and
101. Firm intention announcement Investigation Procedures
102. General timeline of offers 135. Filing of complaints with the Commission
103. Extension of offers 136. Multiple complaints
104. Revision of offers 137. Investigation of complaints
105. Offers becoming unconditional 138. Resolving complaints by proposed consent order
106. Circulars 139. Compliance notices and certificates
Part D 140. Procedures following investigation
Duties and Conduct of Offeree and Directors
107. Appointments to board of offeree Part E
108. Duties of directors of offeree regulated Initiating Tribunal Procedures
companies 141. Complaint Referrals to the Tribunal
109. Requisite knowledge of independent board members 142. Applications to the Tribunal in respect of matters other than
110. Independent board opinion complaints
111. Securities dealings, pricing, confirmations and general 143. Answer
requirements 144. Reply
112. Acquisition of own securities by offeree 145. Amending documents and Notices of Motion
113. Re-investment 146. Completion of file
114. Sales during an offer period 147. Late filing, extension and reduction of time
115. Waivers 148. Withdrawals and postponements
A-111 Companies Act No. 71 of 2008 Companies Regulations

Part F (b) “principal office” means the principal location within the
Conduct of Tribunal Proceedings Republic, as determined in terms of regulation 165 (1), at
149. Pre-hearing conferences which a regulatory agency conducts its operations and is
150. Settlement conference accessible to the public;
151. Set down of matters (c) “publish a notice” means to publicise information to the
152. Matters struck-off general public, or to a particular class of persons as applic-
153. Default orders able in specific circumstances, by any means that can rea-
154. Conduct of hearings sonably be expected to bring the information to the atten-
155. Record of hearing tion of the persons for whom it is intended;
156. Costs and taxation
157. Representation of parties (d) “recording officer”, when used in relation to a particular
158. Joinder or substitution of parties matter, means—
159. Intervenors (i) the officer of the Commission, Panel, or Tribunal, as
160. Summoning witnesses the case may be, appointed or designated in terms
161. Witness fees of regulation 167; or
162. Interpreters and translators (ii) any assistant or acting recording officer having
Part G responsibility for the particular matter;
Maximum Administrative Fines and (e) “regulation” includes any Table or Form included with-
Determination of Turnover in, or referred to in, these regulations;
163. Maximum administrative fines (f) “regulatory agency” means the Commission, the Panel,
164. Manner of calculating assets and turnover or the Companies Tribunal;
CHAPTER 8 (g) “senior officer” means, in the case of—
REGULATORY AGENCIES AND (i) the Commission, the Commissioner;
ADMINISTRATION
(ii) the Panel, the chairperson of the Panel, designated
Part A in terms of section 198; or
Regulatory Agency Offices and Functions
165. Office hours and address of regulatory agencies (iii) the Companies Tribunal, the chairperson of the
166. Extension and condonation of time limits Tribunal, appointed in terms of section 194;
167. Appointment of recording officer and assignment of (h) “the Act” means the Companies Act, 2008 (Act No. 71
functions by responsible officer of 2008), as amended from time to time; and
168. Filing documents (i) “Tribunal” means the Companies Tribunal.
169. Electronic filing and payments
170. Fees 3. Interpretation.—(1) In these regulations—
171. Panel fees (a) a reference to a section by number refers to the corre-
172. Regulatory agency notices sponding section of the Act;
173. Issuing documents by regulatory agency
(b) a reference to a regulation by number refers to the
174. Content and standards for Commission registers
corresponding provision of these regulations; and
175. Form of Annual Report
(c) a reference to a sub-regulation or other partial regulation
Part B by number refers to the corresponding clause of the regu-
Access to Regulatory Agency lation in which the reference appears.
Information and Records
176. Restricted information (2) A word or expression that is defined in section 1, or else-
177. Access to information where in the Act to the extent applicable in particular circumstanc-
es, bears the same meaning in these regulations as in the Act.
Part C
Exercise of Commission Exemption Functions Part B
178. Procedures relating to requests for exemption in terms of Guidelines, Practice Notes, Forms, Notices and other documents
Section 9
179. Procedures related to withdrawing exemptions 4. Issuing of Guidelines and Practice Notes.—See s. 188 (2)
Annexure 1 (b) and s. 201 (2) (b)—(1) In this regulation—
Table CR 1 – Table of Prescribed Forms (a) “Guideline” means a document issued by a regulatory
Annexure 2 agency with respect to a matter within its authority, which
Table CR 2A – Panel Fee Schedule sets out recommended procedures, standards or forms
Table CR 2B – Commission Fee Schedule reflecting that regulatory agency’s advice as to what con-
Annexure 3 stitutes best practice on a matter; and
Table CR 3 – Methods and Times for Delivery of (b) “Practice Note” means a document issued by a regulato-
Documents ry agency with respect to a matter within its authority,
CHAPTER 1 which sets out—
GENERAL PROVISIONS (i) a procedure that will be followed by that regula-
Part A tory agency; or
Interpretation (ii) a procedure to be followed when dealing with that
1. Short title.—These regulations may be cited as the Compa- regulatory agency; or
nies Regulations, 2011. (iii) that regulatory agency’s interpretation of, or
intended manner of applying, a provision of the Act
2. Definitions.—See also s. 1, and Regulation 2: Definitions in
or these regulations.
section 1 of the Act apply equally to the regulations—In these
regulations, unless the context indicates otherwise— (2) The senior officer of a regulatory agency may—
(a) “certified copy” means a copy of a document certified as (a) issue a Guideline at any time by publishing a notice of the
such by a person having authority to do so, or electroni- Guideline to the general public in the Gazette, any gener-
cally certified in terms of the Electronic Communications ally circulated newspaper, on the regulatory agency’s
and Transactions Act, 2002 (Act No. 25 of 2002) by a website, or by any similar means of providing infor-
person having authority to do so; mation to the public generally; or
Companies Regulations Auditing: Legislation and Standards
(b) issue a Practice Note at any time by publishing it in the
Gazette, and may amend or withdraw any such Practice
Note at any time by subsequent notice in the Gazette.
(3) A Guideline or Practice Note must be consistent with the
Act and these regulations, and a provision of the Act or these
regulations prevails if there is any inconsistency between that
provision and any such Guideline or Practice Note.
(4) A regulatory agency must—
(a) maintain a notice on its website of the existence of every
Guideline or Practice Note that it has published and not
withdrawn;
(b) provide for copies of every Guideline or Practice Note to
be freely accessed or printed from its website; and
(c) provide a printed copy of any Guideline or Practice Note
freely to any person upon request.
5. Forms and filing requirements.—See s. 223 (1) (b) and
(d) (i)—(1) Whenever a document is required—
(a) in terms of a section of the Act that is listed in column 1
of Table CR 1, or a provision of these regulations that is
listed in column 1 of Table CR 1; and
(b) for a purpose listed in column 2 of that Table,
the document must be substantially in the form of the annexure
listed opposite that section number in column 3 of that Table,
and must be produced, delivered, or filed as the case may be
subject to any conditions or requirements listed opposite that
section number in column 4 of that Table.
(2) If a regulatory agency has reasonable grounds for uncertain-
ty whether a copy of a document to be filed is in fact unaltered, as
contemplated in section 6 (7), the regulatory agency may require
the person seeking to file that document to provide a certified copy
of the document.
(3) The Commission may from time to time by written notice
request a company to file a copy of any document that had previ-
ously been filed under the Act or these regulations: Provided that
no prescribed fee that would normally be required when filing any
such document will be payable when filing the copy in compliance
with the request.
6. Notice of availability of documents.—See s. 6 (11) (b) (ii)—
(1) A notice announcing the availability of a document, record or
statement, as contemplated in section 6 (11) (b) (ii), must—
(a) be in writing and delivered to each intended recipient of
the document, record or statement either—
(i) in paper form at the intended recipient’s last known
delivery address; or
(ii) in electronic form at their last known electronic
mail address; and
(b) set out clearly—
(i) the title of the document, record or statement, the
availability of which is being announced;
(ii) the extent of the period during which the document,
record or statement will remain available; and
(iii) the means by which the document, record or
statement may be acquired by a recipient of the no-
tice; and
(c) include a statement that succinctly summarizes the
purpose of the document, record or statement.
(2) A document, record or statement, the availability of which is
being announced as contemplated in section 6 (11) (b) (ii), must be
made available to intended recipients either—
(a) in paper copy, or in a printed version of an electronic
original produced by or on behalf of the company on de-
mand by an intended recipient; or
(b) electronically in a manner and form such that it can
conveniently be accessed and printed by the recipient
within a reasonable time and at a reasonable cost.
7. Delivery of documents.—See s. 6 (10) and (11)—(1) A
notice or document to be delivered for any purpose contemplated
in the Act or these regulations may be delivered in any manner—
(a) contemplated in section 6 (10) or (11); or
A-112
(b) set out in Table CR 3.
(2) A document delivered by a method listed in the second
column of Table CR 3 must be regarded as having been delivered
to the intended recipient—
(a) on the date and at the time shown opposite that method,
in the third column of that table; or
(b) if the date and time for the delivery of a document
referred to in Table CR 3 to a regulatory agency is outside
of the office hours of that regulatory agency, as set out in
regulation 165 (2), that document will be deemed to have
been delivered on the next business day, subject to regu-
lation 165 (3).
(3) If, in a particular matter, it proves impossible to deliver a
document in any manner provided for in the Act or these regula-
tions—
(a) if any person other than the Tribunal is required to deliver
the document, the person may apply to either the Tribunal
or the High Court for an order of substituted service; or
(b) if the Tribunal is required to deliver the document, the
recording officer of the Tribunal concerned may apply to
the High Court for an order of substituted service.
(4) A document that is delivered by fax must include a cover
page, and a document that is transmitted by electronic mail must be
accompanied by a cover message, in either case setting out—
(a) the name, address, and telephone number of the sender;
(b) either—
(i) the name of the person to whom it is addressed, and
the name of that person’s attorney, if applicable; or,
(ii) the name or description of the class of intended
recipients, if the document is being delivered gen-
erally to all the members of a particular class of
persons;
(c) the date of the transmission; and
(d) in the case of a fax transmission—
(i) the total number of pages sent, including the cover
page; and
(ii) the name and telephone number of the person to
contact if the transmission is incomplete or other-
wise unsuccessful.
CHAPTER 2
FORMATION, ADMINISTRATION
AND DISSOLUTION OF COMPANIES
Part A
Reservation and Registration of Company Names
8. Company names.—See s. 11—(1) In this regulation—
(a) “company concerned”, when used in relation to—
(i) an application to reserve a name—
(aa) for an entity that is contemplated, but not yet
incorporated, means that contemplated entity;
or
(bb) filed by or in respect of an existing company
contemplating changing its name, means that
company;
(ii) a notice of incorporation, means the company being
incorporated; or
(iii) a notice of Amendment of a Memorandum of
Incorporation, means the company whose Memo-
randum of Incorporation has been amended; and
(b) “proposed company name” means a name that appears
on—
(i) an application for name reservation or defensive
registration; or
(ii) either—
(aa) a Notice of Incorporation; or
(bb) a Notice of Amendment of a company’s
Memorandum of Incorporation
irrespective of whether the name has been reserved
or defensively registered before the filing of any
such notice.
A-113 Companies Act No. 71 of 2008
(2) Irrespective of the language of any words used in a proposed
company name—
(a) every word comprising part of the name must be ex-
pressed using the alphabet that is commonly used for
writing in any one of the official languages of the Repub-
lic; and
(b) every number—
(i) signifying a date must be expressed either in words
or in Arabic numerals; or
(ii) otherwise forming part of the company’s name
must be expressed either in words or in Arabic or
Roman numerals.
(3) If a proposed company name contains any word or words in
any language that is not an official language of the Republic the
application or notice filed to reserve, register or use that name must
include either—
(a) a certified translation of that word, or those words, into an
official language of the Republic; or
(b) a declaration that the word falls, or the words fall, within
the category of words contemplated in sub-regulation (4),
and that the person concerned is entitled to use that mark.
(4) If a proposed company name contains—
(a) a registered trade mark; or
(b) a mark in respect of which an application has been filed
in the Republic for registration as a trade mark; or
(c) a well known trade mark as contemplated in section 35 of
the Trade Marks Act, 1993 (Act No. 194 of 1993)
the application or notice filed to reserve, register or use
that name must include satisfactory evidence that the ap-
plicant or the company concerned is entitled to use that
mark.
(5) If a proposed company name is the same as a name regis-
tered as a business name in terms of the Consumer Protection Act,
2008 (Act No. 68 of 2008), as contemplated in section 11 (2) (a)
(ii), the application or notice filed to reserve or use that name must
include satisfactory evidence that—
(a) the name is so registered for the use of the company
concerned or of a person controlling the company; or
(b) the registered user of that name has executed the neces-
sary documents to transfer the registration of that name to
the company concerned.
(6) If a proposed company name—
(a) is similar to the name of another company, close corpora-
tion or co-operative, and is claimed to be justifiable on
the grounds that—
(i) the company concerned; and
(ii) the other company, close corporation or co-
operative, as the case may be,
are both part of the same group of companies; or
(b) falls within any category of names restricted in terms of
section 11 (2) (c), and is claimed to be justifiable on the
grounds that the company to use that name is in fact part
of, associated with, operated by, sponsored by, supported
by, endorsed by, owned by, conducted by, or enjoys the
patronage of, as the case may be, a person or entity con-
templated in that section,
the application or notice to use that name must include
satisfactory evidence supporting that claim.
(7) In addition to the symbols set out in section 11 (1) (a) (ii),
the name of a company may include the following symbol: ‘-’.
9. Reservation of company names.—See s. 12—(1) An applica-
tion to reserve a name in terms of section 12 (1) must be made in
Form CoR 9.1, may include as many as four alternative names
listed in order of preference, and must be accompanied by—
(a) the fee set out in Table CR 1; and
(b) any relevant documentation or evidence required in terms
of regulation 8 with respect to each name included in the
application.
Companies Regulations
(2) An application to extend the reservation of a name, as con-
templated in section 12 (4), must be made in Form CoR 9.2, and
must be accompanied by—
(a) the fee set out in Table CR 1; and
(b) in the case of a name in respect of which satisfactory
evidence of any facts was required in terms of regulation
8 when the name was first reserved, further satisfactory
evidence of the relevant circumstances, including any al-
teration in those circumstances since the reservation was
first applied for.
(3) As soon as practicable after receiving an application to re-
serve a name, or to extend the reservation of a name, the Commis-
sion must consider the name, or if more than one name is included
in the application for reservation, must consider the names serially
in the order in which they appear in the application, and must issue
to the applicant—
(a) a Notice Requiring Further Particulars in Form CoR 9.3,
if the Commission requires more information to satisfy
any relevant requirements in terms of section 11 or 12 or
regulation 8, before determining whether to accept the
application; or
(b) a Notice Confirming a Name Reservation or Registration
in Form CoR 9.4, if the Commission has accepted an
application to reserve a name, or extend the reservation of
a name; or
(c) a Notice Refusing a Name Reservation or Registration in
Form CoR 9.5, if—
(i) the form of the name, or in the case of an application
including alternative
names, the form of each such name, fails to satisfy
any requirements set out in section 11 or 12, or
regulation 8; or
(ii) the use of that name, or in the case of an applica-
tion including alternative names, the use of each of
those names, by the applicant is prohibited in terms
of the Act.
(4) If the Commission has accepted the reservation of a name
that the Commission considers may be contestable on any ground
contemplated in section 12 (3), the Commission, when issuing
Form 9.4 in response to that application, must also issue—
(a) a Notice of a Potentially Contested Name, in Form CoR
9.6, to the applicant if the name is contestable in terms of
section 12 (3) (a), read with section 11 (2) (b) or (c); or
(b) a Notice of a Potentially Offensive Name, in Form CoR
9.7, to the South African Human Rights Commission and
to the applicant, if the name is contestable in terms of sec-
tion 12 (3) (b), read with section 11 (2) (d).
10. Registration of defensive names.—See s. 12 (9)—(1) An
application for registration of a defensive name in terms of section
12 (9) must be—
(a) made in Form CoR 10.1; and
(b) accompanied by—
(i) the fee set out in Table CR 1; and
(ii) evidence that the applicant has a direct and material
interest in the name.
(2) An application to renew the registration of a defensive name
must be—
(a) made in Form CoR 10.2; and
(b) accompanied by—
(i) the fee set out in Table CR 1; and
(ii) evidence that the applicant continues to have a
direct and material interest in the name.
(3) As soon as practicable after receiving an application to reg-
ister a defensive name, or to renew the registration of a defensive
name, the Commission must issue to the applicant—
(a) a Notice Requiring Further Particulars in Form CoR 9.3,
if the Commission requires more information to satisfy
Companies Regulations Auditing: Legislation and Standards
any relevant requirements in terms of sub-regulation (1)
(b) (ii) or (2) (b) (ii) before determining whether to accept
the application; or
(b) a Notice Confirming the Registration in Form CoR 9.4, if
the Commission has accepted an application for registra-
tion of a defensive name, or to renew the registration of a
defensive name; or
(c) a Notice Refusing a Name Reservation or Registration in
Form CoR 9.5, if—
(i) the form of the name does not satisfy the require-
ments of section 11, or regulation 8; or
(ii) the use of that name by the applicant is prohibited
in terms of the Act.
(4) If the Commission has accepted the registration of a defen-
sive name that may be contestable on any grounds contemplated in
section 12 (3), the Commission, when issuing Form 9.4 in response
to that application, must also issue—
(a) a Notice of a Potentially Contested Name, in Form CoR
9.6, to the applicant if the name is contestable in terms of
section 12 (3) (a), read with section 11 (2) (b) or (c); or
(b) a Notice of a Potentially Offensive Name, in Form CoR
9.7 to the South African Human Rights Commission and
to the applicant, if the name is contestable in terms of sec-
tion 12 (3) (b), read with section 11 (2) (d).
11. Transfer of reserved names.—See s. 12 (5) and (10)—(1)
An application to transfer the reservation of a name, or the registra-
tion of a defensive name, to another person—
(a) must be made in Form CoR 11.1, and accompanied by the
fee set out in Table CR 1; and
(b) in the case of a—
(i) name reservation in respect of which satisfactory
evidence of any facts was required in terms of
regulation 8, must be accompanied by satisfactory
evidence of the comparable facts in relation to the
transferee; or
(ii) registration of a defensive name, must be accompa-
nied by satisfactory evidence that the transferee has
a direct and material interest in the name.
(2) As soon as practicable after receiving an application to
transfer a name reservation or the registration of a defensive name,
the Commission must issue to the applicant—
(a) a Notice Requiring Further Particulars in Form CoR 9.3, if
the Commission requires more information to satisfy any
relevant requirements in terms of regulation 8 or sub-
regulation (1) (b); or
(b) a Notice Confirming a Name Reservation or Registration
in Form CoR 9.4, if the Commission has accepted the No-
tice of Transfer of the name; or
(c) a Notice Refusing a Name Transfer in Form CoR 11.2 if
the use of that name by the transferee is prohibited on the
grounds that the evidence of matters contemplated in reg-
ulation 8 or sub-regulation (1) (b) is unsatisfactory.
12. Abuse of name reservation system.—See s. 12 (6)—
(1) A notice contemplated in section 12 (6) must be issued by the
Commission in Form CoR 12.1, and must—
(a) specify clearly the purpose of the notice in terms of the
items listed in section 12 (6) (a) to (d); and
(b) set out the grounds upon which the Commission has
formed the requisite belief that the notice is justified.
(2) If a person who has received a notice in Form CoR 12.1 to
show cause why a name should be reserved, continue to be re-
served or why a reservation should be transferred, as contemplated
in section 12 (6) (a)—
(a) fails to respond to that notice within 40 business days
after receiving it, the Commission must issue either—
(i) a notice in Form CoR 9.5, rejecting the application
to reserve the name, or
(ii) a further notice in Form CoR 12.1, cancelling the
reservation, or refusing to extend or transfer the
reservation, as the case may be.
A-114
(b) provides information to the Commission within 40
business days after receiving Form CoR 12.1, the Com-
mission, after considering that information, must issue ei-
ther—
(i) a notice in Form CoR 9.4 accepting the reservation,
extension or transfer as the case may be; or
(ii) a further notice in Form CoR 12.1, cancelling the
reservation, or refusing to extend or transfer the
reservation, as the case may be.
13. Disputes concerning company names.—See s. 160 and
Regulation 147—A person may apply in Form CTR 142 to the
Tribunal in terms of section 160 if the person has received—
(a) a Notice of a Potentially Contested Name, in Form CoR
9.6 or a Notice of a Potentially Offensive Name, in Form
CoR 9.7, or has an interest in the name of a company as
contemplated in section 160 (1);
(b) a Notice Refusing to Reserve or Register a Name, in
Form CoR 9.5;
(c) a Notice Refusing a Name Transfer, in Form CoR 11.2 in
terms of regulation 10, 11 or 12; or
(d) any notice in Form CoR 12.1, delivered in terms of
regulation 12.
Part B
Incorporation and Legal Status of Companies
14. Notice of Incorporation.—See s. 13 (2) to (4)—(1) A
Notice of Incorporation required in terms of section 13 must be
filed in Form CoR 14.1 and—
(a) must be accompanied by the fee set out in Table CR 2B,
subject to sub-regulation (2) and (4);
(b) must stipulate whether the company’s name will be—
(i) in the case of a profit company, its registration
number, as contemplated in section 11 (1) (b), in
which case the applicable spaces for the name to be
entered on Form CoR 14.1 and on the Memoran-
dum of Incorporation must be left blank to be com-
pleted by the Commission upon assignment of the
registration number;
(ii) a name that has been reserved or defensively
registered for use in terms of the Act, and which
the incorporators are entitled to use, in which case
the reservation number and that name reserved, or
defensively registered, must be set out on Form
CoR 14.1; or
(iii) a name that has not been reserved in advance, in
which case—
(aa) the applicable spaces for the name to be
entered on Form CoR 14.1 and on the Memo-
randum of Incorporation must be left blank to
be completed by the Commission in accord-
ance with sub-regulation (3);
(bb) the incorporators may include up to four
alternative names on the Notice of Incorpora-
tion, listed in order of preference; and
(cc) regulations 8 and 9, read with the changes
required by the context, apply with respect to
each alternative name listed on the notice.
(2) If the Notice of Incorporation indicates that the company is
to be known by its registration number, or by a name that has been
reserved in advance, the Commission must reduce the filing fee for
the Notice of Incorporation by an amount equivalent to the fee for
an application for name reservation.
(3) If the Notice of Incorporation indicates that the company is
to be known by a name that has not been reserved in advance—
(a) the Commission must consider each alternative name
entered on Form CoR 14.1 in the listed order of prefer-
ence, and must assign to the company as its name—
(i) the first of those names that proves to be acceptable
in terms of the Act, if any; or
A-115 Companies Act No. 71 of 2008
(ii) the registration number in the case of a profit
company, in the manner contemplated in section 14
(2) (b), if none of the listed alternative names is ac-
ceptable; and
(b) sections 11 and 12 and regulations 8 and 9, each read
with the changes required by the context, apply to the
consideration of any such name by the Commission, as if
the Commission were considering an application to re-
serve that name.
(4) The Commission may reject a Notice of Incorporation in
terms of section 13 (4) by issuing a notice to the incorporators in
Form CoR 14.2 and returning to them any documents or other
material filed with the Notice of Incorporation.
(5) The registration certificate issued by the Commission in
terms of section 14 (1) (b) must be in Form CoR 14.3.
15. Memorandum of Incorporation.—See s. 13 (1) and s. 16—
(1) If the incorporators of a company elect to use a standard form
Memorandum of Incorporation, as contemplated in section 13 (1)
(a) (i), to incorporate—
(a) a private company, that Memorandum of Incorporation
may be in either the ‘short form’ CoR 15.1A, or the ‘long
form’ CoR 15.1B;
(b) a profit company other than a private company, that
Memorandum of Incorporation must be in Form CoR
15.1B; or
(c) a non-profit company—
(i) without members, that Memorandum of Incorpora-
tion may be in either the ‘short form’ CoR 15.1C,
or the ‘long form’ CoR 15.1D; or
(ii) with members, that Memorandum of Incorporation
must be in Form CoR 15.1E.
(2) At any time after the incorporation of a company using
Form CoR 15.1A in the case of a profit company, or CoR 15.1C in
the case of a non-profit company, the company may substitute its
Memorandum of Incorporation with a Memorandum of Incorpora-
tion in the Form CoR 15.1B, or 15.1D, respectively, by filing—
(a) a Notice of Amendment in Form CoR 15.2;
(b) a copy of the completed Memorandum of Incorporation
in Form CoR 15.1B or CoR 15.1D, as applicable; and
(c) a copy of a special resolution of the company approving
the new form of Memorandum of Incorporation
together with the appropriate filing fee, as set out in Table CR
2B.
(3) Within 10 business days after an amendment to a company’s
Memorandum of Incorporation has been effected in any manner
contemplated in section 16 (1), the company must file a Notice of
Amendment in Form CoR 15.2, together with—
(a) the relevant documents required by section 16 (7); and
(b) the fee as set out in Table CR 2B, provided that such fee
shall be waived if the amendment relates to a change of
name of a company where the registration number of the
company is the name of the company as contemplated in
section 11 (1) (b), and subject to any other fee waiver
provided for in the Act or the Regulations.
[Para. (b) substituted by GNR.82 of 5 February 2014.]
(4) Within 10 business days after publishing a notice of altera-
tion of its Memorandum of Incorporation, as contemplated in
section 17 (1) (a), a company must file a Notice of Alteration in
Form CoR 15.3, together with the fee set out in Table CR 1.
(5) A filed translation of a company’s Memorandum of Incorpo-
ration must be accompanied by Form CoR 15.4, which must
include the sworn statement required by section 17 (4), together
with the fee set out in Table CR 1.
(6) A consolidated revision of a company’s Memorandum of
Incorporation must be accompanied by Form CoR 15.5, which must
include a sworn statement, or a statement by an attorney or notary,
as required by section 17 (6), together with the fee set out in Table
CR 1.
Companies Regulations
(7) A notice by the Commission requiring a company to file a
consolidated revision of its Memorandum of Incorporation must be
in Form CoR 15.6.
16. Rules of a company.—See s. 15 (3) to (5)—(1) Rules of a
company contemplated in section 15 (3) must be filed with Form
CoR 16.1 within 10 business days after being published by the
company in terms of section 15 (3) (a).
(2) Within 10 business days after any rules of a company have
been put to a ratification vote in terms of section 15 (4), the
company must file a Notice in Form CoR 16.2 indicating whether
the rules have been ratified or rejected.
(3) Within 10 business days after any rules of a company have
been amended, altered or repealed the company must file a Notice
in Form CoR 16.1 indicating clearly the extent and effect of the
change.
17. Domestication of foreign companies.—See s. 13 (5) to
(10)—(1) An application by a foreign company to transfer its
registration to the Republic, as contemplated in section 13 (5),
must be filed in Form CoR 17.1, and must be accompanied by—
(a) a copy of its Memorandum of Incorporation to be regis-
tered in the Republic, and a copy of its founding docu-
mentation in a foreign jurisdiction;
(b) a copy of the certificate of its current registration issued
by the jurisdiction in which it is registered at the time of
the application;
(c) a copy of its most recent annual financial statements;
(d) a copy of the shareholder resolution approving the
transfer of the company’s registration to the Republic, as
required by section 13 (6) (b);
(e) satisfactory evidence that the company satisfies the
requirements set out in section 13 (6) (a), and (c) to (f);
and
(f) The fee set out in Table CR 2B.
(2) As soon as practicable after receiving an application to
transfer the registration of a foreign company, the commission
must issue either—
(a) a Notice Requiring Further Information in Form CoR
17.2, if the Commission requires more information to ver-
ify that the requirements of section 13 (6) and (7) have
been satisfied; or
(b) a Certificate of Registration in Form CoR 17.3, if—
(i) the Commission has accepted the application to
transfer the company’s registration to the Republic;
and
(ii) the company’s Memorandum of Incorporation,
including its name, is consistent with the require-
ments of the Act; or
(c) a Notice Refusing to Transfer Registration, in Form CoR
17.3, if the commission believes on reasonable grounds
that the company is not entitled to transfer its registration
to the Republic in terms of section 13 (5) to (10).
(3) A foreign company may apply to the Tribunal to review a
conditional certificate of registration contemplated in sub-
regulation (2) (c), or a notice contemplated in sub-regulation (2) (d).
18. Conversion of Close Corporations.—See Schedule 2—
(1) A Notice of Conversion of a close corporation in terms of
Schedule 2 must be filed in Form CoR 18.1, and must be accompa-
nied by—
(a) a written statement of consent signed by members of the
corporation holding, in aggregate, at least 75% of the
members’ interests in the corporation;
(b) a Memorandum of Incorporation; and
(c) the fee set out in Table CR 2B.
(2) As soon as practicable after receiving a Notice of Conver-
sion, the Commission must issue either—
(a) a Notice Requiring Further Information in Form CoR
18.2, if the Commission requires more information to ver-
ify that the requirements of Schedule 2 have been satis-
fied; or
Companies Regulations Auditing: Legislation and Standards
(b) a Certificate of Registration in Form CoR 18.3, if—
(i) the Commission has accepted the Notice of conver-
sion; and
(ii) the company’s Memorandum of Incorporation,
including its name, is consistent with the require-
ments of the Act.
19. Reckless trading or trading under insolvent circum-
stances.—See s. 22—(1) The Commission may issue a notice to
show cause contemplated in section 22 (2) in Form CoR 19.1,
which must clearly set out the grounds upon which the Commis-
sion has formed the requisite belief that the notice is justified.
(2) If a person who has received a notice in Form CoR 19.1 pro-
vides information to the Commission within 20 business days after
receiving the notice, the Commission, after considering that
information, must issue either—
(a) a notice in Form CoR 19.2 accepting the information, and
confirming the company’s right to continue carrying on
its business activities; or
(b) a compliance notice, as contemplated in section 22 (3).
Part C
Transparency, accountability and integrity of
companies
20. External Companies.—See s. 23—(1) An external com-
pany must register by filing a notice in Form CoR 20.1, which
must be accompanied by—
(a) the filing fee set out in Table CR 1;
(b) a certified copy of—
(i) the company’s Memorandum of Incorporation, or
similar document filed in the jurisdiction in which
the external company is registered;
(ii) the certificate of incorporation or comparable
document issued by the jurisdiction in which the
company was incorporated,
together with a translation of any of those documents, if
the original is not in an official language of the Republic;
and
(c) a statement in Form CoR 20.1 setting out—
(i) the address of its principal office outside the
Republic; and
(ii) the names of its directors at the time that it files
that form;
(d) the address of its registered office in the Republic, as
required by section 23 (3) (b) (i) (bb) and Form CoR
20.1; and
(e) the name and address of the person within the Republic
who has consented to accept service of documents on be-
half of the external company, and has been appointed by
the company to do so, together with evidence of that per-
son’s consent and appointment in Form CoR 20.1.
(2) As soon as practicable after accepting a filed notice in terms
of sub-regulation (1), and upon entering the prescribed information
relating to the external company in the register in terms of section
23 (5) (c), the Commission must issue a registration certificate to
the external company, in Form CoR 20.2.
(3) If any change occurs or takes place in respect of the infor-
mation furnished under paragraph (e) of sub-regulation 1, the
external company must file form CoR 21.2 advising the Commis-
sion of the change.
21. Registered office of company.—See s. 23—A company or
external company must notify the Commission of a change in its
registered office by filing Form CoR 21.1 with the fee set out in
Table CR 1, indicating the effective date of the change, which must
be at least five business days after the date on which the notice is
filed.
22. Company records.—See s. 25—A company must notify
the Commission of the location, or of any change in the location, of
any company records that are not located at its registered office, by
A-116
filing Form CoR 22, indicating the date as of which the records
will be kept at the relevant location, which must be the date on
which the notice is filed, or a later date.
23. Information to be kept concerning directors.—See s. 24
(3) (b), (5) and (6)—In addition to the information required by
section 24 (5), a company’s record of directors must include, with
respect to each director of the company—
(a) the address for service for that director; and
(b) in the case of a company that is required to have an audit
committee, any professional qualifications and experience
of the director, to the extent necessary to enable the com-
pany to comply with section 94 (5) and regulation 42.
24. Access to company information.—See s. 26—(1) Any
right of access of any person to any information contemplated in
section 26 or in this regulation may be exercised only in accord-
ance with—
(a) the Promotion of Access to Information Act, 2000 (Act
No. 2 of 2000); or
(b) the provisions of section 26; and
(c) sub-regulations (3) to (4).
(2) A person claiming a right of access to any record held by a
company may not exercise that right until—
(a) a request to exercise that right has been made to the
company in terms of sub-regulation (3); or
(b) to the extent applicable, the person’s right of access to the
information has been confirmed in accordance with the
Promotion of Access to Information Act, 2000.
(3) A person claiming a right of access to any record held by a
company must make a written request, as contemplated in section
26 (4), by delivering to the company—
(a) a completed Request for Access to Information in Form
CoR 24; or
(b) to the extent applicable any further documents or other
material required in terms of the Promotion of Access to
Information Act, 2000.
(4) A company, that receives a request in terms of subsection
3 (a) must, within 14 business days, accede to the request.
25. Company financial year and accounting records.—See s.
27 and 28—(1) A company must notify the Commission of a
change in its financial year end by filing Form CoR 25.
(2) A company must keep accounting records in an official
language of the Republic, as necessary to provide an adequate
information base sufficient to—
(a) enable the company to satisfy all reporting requirements
applicable to it, as set out in section 28 (1) read with sec-
tion 29 (1); and
(b) provide for the compilation of financial statements, and
the proper conduct of an audit, or independent review, of
its annual financial statements, as applicable for the par-
ticular company.
(3) To the extent necessary for a particular company to comply
with section 28 (1), read with section 29 (1), the accounting records
of that company must include—
(a) a record of the company’s assets and liabilities including,
but not limited to—
(i) a record of the company’s non-current assets,
showing for each such asset or, in the case of a
group of relatively minor assets, each such group of
assets—
(aa) the date the company acquired it, and the
acquisition cost;
(bb) the date the company re-valued it, if applica-
ble, and the amount of the revaluation and, if
it was re-valued after the Act took effect, the
basis of, and reason for, the re-valuation; and
(cc) the date the company disposed of or retired
it, once it has been disposed of or retired, and
the value of the consideration, if any, received
A-117 Companies Act No. 71 of 2008
for it and, if it was disposed of after the Act
took effect, the name of the person to whom
it was transferred;
(ii) a record of any loan by the company to a share-
holder, director, prescribed officer or employee of
the company, or to a person related to any of them,
including the amount borrowed, the interest rate,
the terms of re-payment, and material details of any
breach, default or re-negotiation of any such loan;
and
(iii) a record of any liabilities and obligations of the
company including, but not limited to—
(aa) a record of any loan to the company from a
shareholder, director, prescribed officer or
employee of the company, or from a person
related to any of them, including the amount
borrowed, the interest rate, and the terms of
re-payment, and material details of any
breach, default or re-negotiation of any such
loan; and
(bb) a record of any guarantee, suretyship or
indemnity granted by the company in respect
of an obligation to a third party incurred by a
shareholder, director, prescribed officer or
employee of the company, or by a person re-
lated to any of them, including the amount
secured, the interest rate, the terms of re-
payment, the expiry date, and the circum-
stances in which the company may be called
upon to honour the guarantee, suretyship or
indemnity;
(b) a record of any property held by the company—
(i) in a fiduciary capacity; or
(ii) in any capacity or manner contemplated in section
65 (2) of the Consumer Protection Act, 2008 (Act
No. 68 of 2008);
(c) a record of the company’s revenue and expenditures,
including—
(i) daily records of all money received and paid out, in
sufficient detail to enable the nature of the transac-
tions and, except in the case of cash transactions,
the names of the parties to the transactions to be
identified;
(ii) daily records of all goods purchased or sold on
credit, and services received or rendered on credit,
in sufficient detail to enable the nature of those
goods or services and the parties to the transactions
to be identified; and
(iii) statements of every account maintained in a
financial institution in the name of the company, or
in any name under which the company carries on
its activities, together with vouchers or other sup-
porting documents for all transactions recorded on
any such statement; and
(d) if the company trades in goods, a record of inventory and
stock in trade, statements of the annual stocktaking, and
records to enable the value of stock at the end of the fi-
nancial year to be determined.
(4) In addition to the requirements set out above, a non-profit
company must maintain adequate records of all revenue received
from donations, grants, and member’s fees, or in terms of any
funding contracts or arrangements with any party.
(5) The accounting records required to be kept by the Act and
this regulation must be kept in such a manner as—
(a) to provide adequate precautions against—
(i) theft, loss or intentional or accidental damage or
destruction; and
(ii) falsification; and
(b) to facilitate the discovery of any falsification; and
Companies Regulations
(c) to comply with any other applicable law dealing with
accounting records, access to information, or confidenti-
ality.
(6) If a company keeps any of its accounting records in elec-
tronic form, the company must—
(a) provide adequate precautions against loss of the records
as a result of damage to, or failure of, the media on which
the records are kept; and
(b) ensure that the records are at all times capable of being
retrieved to a readable and printable form, including by
converting the records from legacy to later systems, stor-
age media, or software, to the extent necessary from time
to time.
(7) For greater certainty, the requirements of this regulation are
in addition to, and not in substitution for, any applicable require-
ments to keep accounting records set out in terms of any other law,
or any agreement to which the company is a party.
26. Interpretation of regulations affecting transparency and
accountability.—(1) For the purposes of this regulation and
regulations 27 to 29—
(a) “employee”, has the meaning set out in the Labour
Relations Act, 1995 (Act No. 66 of 1995);
(b) “IFRS” means the International Financial Reporting
Standards as issued from time to time by the International
Accounting Standards Board or its successor body; and
(c) “IFRS for SMEs” means the International Financial
Reporting Standards for Small and Medium Enterprises,
as issued from time to time by the International Account-
ing Standards Board or its successor body;
(d) “independent accounting professional” when used with
respect to any particular company, means a person who—
(i) is—
(aa) a registered auditor in terms of the Auditing
Profession Act; or
(bb) a member in good standing of a professional
body that has been accredited in terms of
section 33 of the Auditing Profession Act; or
(cc) qualified to be appointed as an accounting
officer of a close corporation in terms of sec-
tion 60 (1), (2) and (4) of the Close Corpora-
tions Act, 1984 (Act No. 69 of 1984); and
(ii) does not have a personal financial interest in the
company or a related or inter-related company; and
(iii) is not—
(aa) involved in the day to day management of
the company’s business, nor has been so in-
volved at any time during the previous three
financial years; or
(bb) a prescribed officer, or full-time executive
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; and
(iv) is not related to any person who falls within any of
the criteria set out in clause (ii) or (iii);
(e) “independently compiled and reported” means that the
annual financial statements are prepared—
(i) by an independent accounting professional;
(ii) on the basis of financial records provided by the
company; and
(iii) in accordance with any relevant financial reporting
standards;
(f) “ISRE 2400” means the International Standard for
Review Engagements, as issued from time to time, by the
International Auditing and Assurance Standards Board, or
its successor body;
(g) “SA GAAP” means the South African Statements of
Generally Accepted Accounting Practice, as adopted from
time to time by the Accounting Practices Board or its
successor body.
Companies Regulations Auditing: Legislation and Standards
(2) For the purposes of regulations 27 to 30, 43, 127 and 128,
every company must calculate its ‘public interest score’ at the end
of each financial year, calculated as the sum of the following—
(a) a number of points equal to the average number of
employees of the company during the financial year;
(b) one point for every R1 million (or portion thereof) in
third party liability of the company, at the financial year
end;
(c) one point for every R1 million (or portion thereof) in
turnover during the financial year; and
(d) one point for every individual who, at the end of the
financial year, is known by the company—
(i) in the case of a profit company, to directly or
indirectly have a beneficial interest in any of the
company’s issued securities; or
(ii) in the case of a non-profit company, to be a mem-
ber of the company, or a member of an association
that is a member of the company.
State owned and Profit companies
Category of Companies
State owned companies.
Public companies listed on an exchange.
Public companies not listed on an exchange.
Profit companies, other than state owned or public companies, whose
public interest score for the particular financial year is at least 350.
Category of Companies
Profit companies, other than state-owned or public companies—
(a) whose public interest score for the particular financial year is
at least 100 but less than 350; or
(b) whose public interest score for the particular financial year is
less than 100, and whose statements are independently com-
piled.
Profit companies, other than state-owned or public companies, whose
public interest score for the particular financial year is less than 100, and
whose statements are internally compiled.
Non-Profit Companies
Category of Companies
Non profit companies that are required in terms of regulation 28 (2) (b) to
have their annual financial statements audited.
Non profit companies, other than those contemplated in the first row above,
whose public interest score for the particular financial year is at least 350.
Non profit companies, other than those contemplated in the first row
above—
(a) whose public interest score for the particular financial year is at
least 100, but less than 350; or
(b) whose public interest score for the particular financial year is
less than 100, and whose financial statements are independent-
ly compiled.
Non profit companies, other than those contemplated in the first row above,
whose public interest score for the particular financial year is less than 100,
and whose financial statements are internally compiled.
A-118
27. Financial Reporting Standards.—See s. 29 (4)—(1) A
company’s financial statements may be compiled internally or
independently.
(2) For all purposes of this regulation and regulations 28 and 29,
a company’s financial statements must be regarded as having been
compiled internally, unless they have been ‘independently com-
piled and reported’, as defined in regulation 26 (1) (e).
(3) Nothing in this regulation precludes a company—
(a) that is required to prepare its financial statements to the
standards of IFRS for SMEs, from preparing its financial
statements to the standards of IFRS instead; or
(b) that is not subject to any prescribed standards, from
preparing its financial statements to the standards of
either IFRS or IFRS for SMEs or SA GAAP.
(4) For any particular company, any financial statements con-
templated in section 28 or 29 must comply with the applicable
standards for that category of company as follows—
Financial Reporting Standard
IFRS, but in the case of any conflict with any requirement in terms of the
Public Finance Management Act, the latter prevails.
IFRS
One of—
(a) IFRS; or
(b) IFRS for SMEs, provided that the company meets the scoping
requirements outlined in the IFRS for SME’s.
One of—
(a) IFRS; or
(b) IFRS for SMEs, provided that the company meets the scoping
requirements outlined in the IFRS for SME’s.
Financial Reporting Standard
One of—
(a) IFRS; or
(b) IFRS for SMEs, provided that the company meets the scoping
requirements outlined in the IFRS for SME’s; or
(c) SA GAAP.
The Financial Reporting Standard as determined by the company for as
long as no Financial Reporting Standard is prescribed.
Financial Reporting Standard
IFRS, but in the case of any conflict with any requirements in terms of the
Public Finance Management Act, the latter prevails.
One of—
(a) IFRS; or
(b) IFRS for SMEs, provided that the company meets the scoping require-
ments outlined in the IFRS for SME’s.
One of—
(a) IFRS; or
(b) IFRS for SMEs, provided that the company meets the scoping
requirements outlined in the IFRS for SME’s; or
(c) SA GAAP.
The Financial Reporting Standard as determined by the company for as
long as no Financial Reporting Standard is prescribed.
A-119 Companies Act No. 71 of 2008
(5) The Financial Reporting Standards prescribed by this regula-
tion apply to every company with a financial year end starting on
or after the effective date of the Act.
28. Categories of companies required to be audited.—See
s. 30 (2), read with 30 (7)—(1) This regulation applies to a company
unless, in terms of section 30 (2A), it is exempt from having its
annual financial statements either audited or independently reviewed.
(2) In addition to public companies and state owned companies,
any company that falls within any of the following categories in
any particular financial year must have its annual financial state-
ments for that financial year audited—
(a) any profit or non-profit company if, in the ordinary
course of its primary activities, it holds assets in a fiduci-
ary capacity for persons who are not related to the com-
pany, and the aggregate value of such assets held at any
time during the financial year exceeds R 5 million;
(b) any non-profit company, if it was incorporated—
(i) directly or indirectly by the state, an organ of state,
a state-owned company, an international entity, a
foreign state entity or a foreign company; or
(ii) primarily to perform a statutory or regulatory
function in terms of any legislation, or to carry out
a public function at the direct or indirect initiation
or direction of an organ of the state, a state-owned
company, an international entity, or a foreign state
entity, or for a purpose ancillary to any such func-
tion; or
(c) any other company whose public interest score in that
financial year, as calculated in accordance with regulation
26 (2)—
(i) is 350 or more; or
(ii) is at least 100, if its annual financial statements for
that year were internally compiled.
29. Independent review of annual financial statements.—
See s. 30 (2) and (7)—(1) For purposes of this regulation—
(a) “independent reviewer”, means a person referred to in
regulation 29 (4) and who has been appointed to perform
an independent review under this regulation; and
(b) “reportable irregularity” means any act or omission
committed by any person responsible for the management
of a company, which—
(i) unlawfully has caused or is likely to cause material
financial loss to the company or to any member,
shareholder, creditor or investor of the company in
respect of his, her or its dealings with that entity; or
(ii) is fraudulent or amounts to theft; or
(iii) causes or has caused the company to trade under
insolvent circumstances.
(2) This regulation applies to a company, with respect to any
particular financial year, unless the company—
(a) is exempt, in terms of section 30 (2A), from any require-
ment to have its annual financial statements for that year
audited or reviewed;
(b) is required by its own Memorandum of Incorporation, or
required in terms of the Act or regulation 28, to have its
annual financial statements for that financial year audited;
or
(c) has voluntarily had its annual financial statements for that
year audited.
(3) A company to which this regulation applies must have its
annual financial statements independently reviewed in accordance
with ISRE 2400.
(4) An independent review of a company’s annual financial
statements must be carried out—
(a) in the case of a company whose public interest score for
the particular financial year was at least 100, by a regis-
tered auditor, or a member in good standing of a profes-
sional body that has been accredited in terms of sec-
tion 33 of the Auditing Professions Act; or
Companies Regulations
(b) in the case of a company whose public interest score for
the particular financial year was less than 100, by—
(i) a person contemplated in paragraph (a); or
(ii) a person who is qualified to be appointed as an
accounting officer of a close corporation in terms
of section 60 (1), (2) and (4) of the Close Corpora-
tions Act, 1984 (Act No. 69 of 1984).
(5) An independent review of a company’s annual financial
statements must not be carried out by an independent accounting
professional who was involved in the preparation of the said annual
financial statements.
(6) (a) An independent reviewer of a company that is satisfied
or has reason to believe that a reportable irregularity has taken
place or is taking place in respect of that company must, without
delay, send a written report to the Commission.
(b) The report must give particulars of the reportable irregu-
larity referred to in paragraph (a) and must include such other
information and particulars as the independent reviewer considers
appropriate.
(7) (a) The independent reviewer must within three business
days of sending the report to the Commission notify the members
of the board of the company in writing of the sending of the report
referred to in sub-regulation (6) and the provisions of this regula-
tion.
(b) A copy of the report to the Commission must accompany the
notice.
(8) The independent reviewer must as soon as reasonably possi-
ble but not later than 20 business days from the date on which the
report referred to in sub-regulation (6) was sent to the Commis-
sion—
(a) take all reasonable measures to discuss the report referred
to in sub-regulation (6) with the members of the board of
the company;
(b) afford the members of the board of the company an
opportunity to make representations in respect of the
report; and
(c) send another report to the Commission, which report must
include—
(i) a statement that the independent reviewer is of the
opinion that—
(aa) no reportable irregularity has taken place or
is taking place; or
(bb) the suspected reportable irregularity is no
longer taking place and that adequate steps
have been taken for the prevention or recov-
ery of any loss as a result thereof, if relevant;
or
(cc) the reportable irregularity is continuing; and
(ii) detailed particulars and information supporting the
statement referred to in subparagraph (i).
(9) The Commission must as soon as possible after receipt of a
report containing a statement referred to in paragraph (c) (i) (cc) of
sub-regulation (8), notify any appropriate regulator in writing of
the details of the reportable irregularity to which the report relates
and provide it with a copy of the report and may investigate any
alleged contravention of the Act.
(10) For the purpose of the reports referred to in sub-regulations
(6) and (8), an independent reviewer may carry out such investiga-
tions as the independent reviewer may consider necessary and, in
performing any duty referred to in the preceding provisions of this
regulation the independent reviewer must have regard to all the
information which comes to the knowledge of the independent
reviewer from any source.
(11) Where a company is liquidated, whether provisionally or
finally, and an independent reviewer at the time of the liquida-
tion—
(a) has sent or is about to send a report referred to in sub-
regulation (6) or (8), the report must also be submitted to
a provisional liquidator or liquidator, as the case may be,
Companies Regulations Auditing: Legislation and Standards
at the same time as the report is sent to the Commission
or as soon as reasonably possible after his or her ap-
pointment; or
(b) has not sent a report referred to in sub-regulation (6) or
(8), and is requested by a provisional liquidator or liqui-
dator, as the case may be, to send a report, the independ-
ent reviewer must as soon as reasonably possible—
(i) send the report together with a motivation as to
why a report was not sent; or
(ii) submit a notice that in the independent reviewer’s
opinion no report needed to be submitted, together
with a justification of the opinion.
(12) Every profession recognised by the Minister under section
60 of the Close Corporations Act, 1984 (Act No. 69 of 1984),
whose members are entitled to perform an independent review as
contemplated in sub-regulation (4) (b) (ii), must annually file a
report with the Commission demonstrating that—
(a) it has proper mechanisms for ensuring that its members
participate in continued professional development and
achievement of professional competence;
(b) it has mechanisms to ensure that its members are disci-
plined where appropriate;
(c) it is, and is likely to continue to be, financially and
operationally viable for the foreseeable future;
(d) it keeps and maintains a proper register of its members;
(e) it has in place appropriate programmes and structures to
ensure that that it is actively endeavouring to achieve the
objective of being representative of all sectors of the
South African population; and
(f) it meets any other requirements that may be determined
by the Commission from time to time.
30. Company annual returns.—See s. 33—(1) A company
must file its annual return in Form CoR 30.1 together with the
prescribed fee set out in Table CR2 B, unless exempt from such
payment under sub-regulation 8, within 30 business days after the
anniversary of—
(a) its date of incorporation, in the case of a company that
was incorporated in the Republic; or
(b) the date that its registration was transferred to the Repub-
lic, in the case of a domesticated company.
(2) A company that is required by the Act or regulation 28 to
have its annual financial statements audited must file a copy of the
latest approved audited financial statements on the date that it files
its annual return.
(3) A company that is not required in terms of the Act or regula-
tion 28 to have its annual financial statements audited may file a
copy of its audited or reviewed statements together with its annual
return.
(4) A company that is not required to file annual financial
statements in terms of sub-regulation (2), or a company that does
not elect to file a copy of its audited or reviewed annual financial
statements in terms of sub-regulation (3), must file a financial
accountability supplement to its annual return in Form CoR 30.2.
(5) The Commission—
(a) must establish a system to select and review a sample of
financial accountability supplements, audited annual fi-
nancial statements or independently reviewed annual fi-
nancial statements that have been filed in terms of this
regulation, with the objective of monitoring compliance
with the financial record keeping and financial reporting
provisions of the Act; and
(b) may issue a compliance notice to any such company
setting out changes that are required to the company’s
practices to better comply with the financial record keep-
ing and financial reporting provisions of the Act.
(6) An external company must file its annual return in Form
CoR 30.3 together with the prescribed fee set out in Table CR2 B,
within 30 business days after the anniversary date of its registration
as an external company.
A-120
(7) If the information furnished by the company on Form CoR
30.1, or by an external company on Form CoR 30.3, differs from
the information on the Commissions register and pre-printed on
Form CoR 30.1 or Form CoR 30.3 respectively by the Commis-
sion, the company or external company must file the applicable
CoR form for changing the said information together with Form
CoR 30.1 or CoR 30.3 respectively, and pay the appropriate
prescribed fee (if any) for such change.
(8) A company that has been inactive during the financial year
preceding the date on which its annual return becomes due under
sub-regulation (1), may apply to the Commission for exemption
from payment of the prescribed fee contemplated in sub-regulation
(1), provided that the application is supported by the financial
statements indicating that the company had in fact no turnover
during that financial year.
Part D
Capitalization of Profit Companies
31. Conversion of nominal or par value shares, and related
matters.—(1) This regulation does not apply in respect of a pre-
existing company contemplated in Item 6 (1) of Schedule 5.
(2) A pre-existing company may not authorise any new par
value shares, or shares having a nominal value, on or after the
effective date.
(3) If, immediately before the effective date, a pre-existing
company has any authorised class of par value or nominal value
shares from which it has not issued any shares before the effective
date, or from which it has issued shares, all of which had been re-
acquired by the company before the effective date—
(a) the company must not issue any shares of that class on or
after the effective date, until it has converted that class of
shares in accordance with paragraph (b); and
(b) the board of the company may convert that class, or those
classes, of authorised shares to shares having no nominal
or par value, by adopting a board resolution to do so, and
filing a notice of that resolution in Form CoR 31, without
charge, at any time after the effective date.
(4) Sub-regulations (5) to (11) do not apply to a conversion
contemplated in sub-regulation (3) (b).
(5) If, immediately before the effective date, a pre-existing
company has any outstanding issued shares of one or more classes
of par value or nominal value shares, the company—
(a) may not increase the number of those authorised shares;
(b) may issue further authorised shares of that class at any
time on or after the effective date, until it has published a
proposal in terms of sub-regulation (6) to convert that
class of shares; and
(c) may file without charge an amendment to its Memoran-
dum of Incorporation to effect a conversion of that class,
or those classes, of shares, after adopting that amendment
in accordance with sub-regulations (6) to (11).
(6) An amendment to a pre-existing company’s Memorandum
of Incorporation to effect a conversion of one or more classes of
shares in terms of sub-regulation (5) may be proposed at any time
by the company’s board, and—
(a) must not be designed substantially or predominantly to
evade the requirements of any applicable tax legislation;
and
(b) will have been adopted only if it is approved by—
(i) a special resolution adopted by the holders of
shares of each such class of shares; and
(ii) a further special resolution adopted by a meeting of
the company’s shareholders called for that purpose.
(7) The board must cause a report to be prepared in respect of a
proposed resolution to convert any nominal or par value shares in
terms of sub-regulation (6), which must at a minimum—
(a) state all information that may affect the value of the
securities affected by the proposed conversion;
(b) identify the class of holders of the company’s securities
affected by the proposed conversion;
A-121 Companies Act No. 71 of 2008
(c) describe the material effects that the proposed conversion
will have on the rights of the holders of the company’s
securities affected by the proposed conversion, and
(d) evaluate any material adverse effects of the proposed
arrangement against the compensation that any of those
persons will receive in terms of the arrangement.
(8) The company must—
(a) publish a resolution contemplated in sub-regulation (6),
together with the report required by sub-regulation (7), to
the shareholders before the meeting at which the resolu-
tion will be considered, with at least as much notice as is
required for a special resolution of that company’s share-
holders; and
(b) file a copy of the proposed resolution and report with the
Commission and with the South African Revenue Ser-
vice, at the same time that the proposal is published to the
shareholders.
(9) At any time before a meeting called to consider a company’s
proposal contemplated in sub-regulation (6)—
(a) the company may, at the option of the company, apply to
a court for a declaratory order that the proposal satisfies
the requirements of the Act;
(b) a shareholder affected by the proposal, who believes that
the proposal does not adequately protect their rights, or
otherwise fails to satisfy the requirements of the Act, may
apply to the court for an order; or
(c) the commission, or the South African Revenue Service,
may apply to the court for a declaratory order contem-
plated in section 6 (1), on the grounds that the proposal
contravenes sub-regulation (6) (a);
and the court may make any order that is just and reasonable in the
circumstances.
(10) If an application is made to a court in terms of sub-
regulation (9), the company may not put the proposed resolution to
a vote until the court proceedings are completed and the time for
any appeal or review of any court order has expired.
(11) If, after considering an application in terms of sub-
regulation (9), the court declares that the proposed resolution—
(a) satisfies the requirements of the Act—
(i) the company may put the proposal to a vote; and
(ii) the decision of the court does not restrict, limit or
negate the right of any shareholder to vote against
that resolution; or
(b) does not satisfy the requirements of the Act, the company
must not proceed with a vote on the proposal, except to
the extent that the court order provides otherwise.
Part E
Securities Registration and Transfer
32. Company securities registers.—See s. 50 (1) (b)—(1) The
securities register of a profit company required in terms of section
24 (4) (a), read with section 50 (1) (b), must be kept in one of the
official languages of the Republic, and must comprise—
(a) for every class of authorised securities, a record of—
(i) the number of securities authorised, and the date of
authorisation;
(ii) the total number of securities of that class that have
been issued, re-acquired or surrendered to the com-
pany; and
(iii) the number of issued securities of that class that are
held in uncertificated form;
(b) in respect of every issuance, re-acquisition or surrender of
securities of any particular class, entries showing—
(i) the date on which the securities were issued, re-
acquired or surrendered to the company;
(ii) the distinguishing number or numbers of any
certificated securities issued, re-acquired or surren-
dered to the company;
Companies Regulations
(iii) the consideration for which the securities were
issued or re-acquired by, or surrendered to the
company; and
(iv) the name of the person to, from or by whom the
securities were issued, re-acquired or surrendered,
as the case may be; and
(v) in the case of uncertificated securities, a unique
identifying number of the person to, from or by
whom the securities were issued, re-acquired or
surrendered, as the case may be;
(c) for every class of authorised securities, at any time—
(i) the number of securities of that class that are
available to be issued; and
(ii) the number of securities of that class that are the
subject of options or conversion rights which, if
exercised, would require securities of that class to
be issued.
(2) In addition to the information otherwise required, the com-
pany’s securities register must also include in respect of each
person to whom the company has issued securities, or to whom
securities of the company have been transferred—
(a) the person’s—
(i) name and business, residential or postal address, as
required by section 50 (2) (b) (i); and
(ii) the person’s email address if available, unless the
person has declined to provide an email address;
(b) an identifying number that is unique to that person;
(c) in respect of each issue of securities to that person, the
consideration for which the securities were issued, as de-
termined by the company’s board in terms of section 40;
and
(d) in respect of each issue or transfer of securities to that
person—
(i) the date on which the securities were issued or
transferred to the person;
(ii) the number and class of securities issued or trans-
ferred to the person;
(iii) the distinguishing number or numbers of the
securities issued or transferred to the person, if the
securities are held in certificated form;
(e) the date on which any securities that had been issued or
transferred to the person were subsequently—
(i) transferred by that person, or by operation of law, to
another person; or
(ii) re-acquired by, or surrendered to, the company in
terms of any provision of the Act or the Memoran-
dum of Incorporation; and
(f) at any time, the total number of securities of that class
held by the person.
(3) If a company contemplated in section 56 (7) has received
any disclosure of a beneficial interest referred to in that section, the
securities register of that company, despite any additional require-
ments that may be imposed by a central securities depository, must
also include—
(a) a record of all such disclosures, including the following
information for any securities in respect of which a dis-
closure was made—
(i) the name and unique identifying number of the
registered holder of the securities;
(ii) the number, class and in the case of certificated
securities, the distinguishing numbers of the securi-
ties; and
(iii) for each person who holds a beneficial interest in
the securities, the extent of the person’s interest in
the securities, together with that person’s—
(aa) name and unique identifying number;
(bb) business, residential or postal address;
Companies Regulations Auditing: Legislation and Standards
(cc) email address if available, unless the person
has declined to provide an email address.
(4) The securities register required to be kept by the Act and this
regulation must be kept in such a manner as—
(a) to provide indexed access to all relevant entries for any
one person;
(b) to provide adequate precautions against—
(i) theft, loss or intentional or accidental damage or
destruction; and
(ii) falsification; and
(c) to facilitate the discovery of any falsification.
(5) If a company’s securities register is kept in electronic form,
the company and, in the case of an uncertificated securities regis-
ter, the relevant Participant or Central Securities Depository, as the
case may be, must—
(a) provide adequate precautions against loss of the records
as a result of damage to, or failure of, the media on which
the records are kept; and
(b) ensure that the records are at all times capable of being
retrieved to a readable and printable form, including by
converting the records from legacy to later systems, stor-
age media, or software, to the extent necessary from time
to time.
(6) In so far as the identity number and e-mail address of a
person may be entered into a register kept under this regulation,
such information may, at the instance of the company, Central
Securities Depository or relevant Participant as the case may be, be
regarded as confidential.
(7) Any entry in a securities register pertaining to a person who
has ceased to hold securities of the company may be disposed of
seven years after that person last held any securities of the company.
33. Instruction to convert certificated securities into uncer-
tificated securities.—See s. 49 (7)—(1) An instruction to a
company to convert certificated securities into uncertificated
securities must be given by the holder of the certificated securities
whose name is entered in the company’s securities register as the
holder of the certificated securities in question, or by an authorised
agent of that person.
(2) A person who lodges certificated securities with a company,
accompanied by an instruction referred to in sub-regulation (1),
must do so in the manner and form prescribed in the rules of the
Central Securities Depository and must provide complete and
accurate information about the securities to be converted; and
(3) An action that—
(a) is taken by a person authorised to take that action, and
carried out in accordance with the Act, regulation 34, and
this regulation; and
(b) results in a consequence listed in section 55 (1) (a) to (c),
is not “an unlawful action” as contemplated in section 55 (1).
34. Duties of company.—See s. 49 (7)—(1) A company that
has been instructed to convert certificated securities into uncertifi-
cated securities—
(a) must ensure that the documents and instruction lodged
with it comply with the rules of the central securities
depository;
(b) must ensure that the documents of title and other infor-
mation relating to the certificated securities correspond to
the particulars contained in the securities register;
(c) must ensure that—
(i) the distinguishing number recorded in terms of
section 50 (5) is valid;
(ii) the distinguishing number represents the document
of title evidencing the entitlement of the person
who has given the instruction to convert;
(iii) a document of title relating to the certificated
securities is valid and has not been cancelled or
recorded by the company as lost or stolen; and
A-122
(iv) the number of certificated securities to which a
document of title relates does not exceed the hold-
ing allocated to the holder of the securities con-
cerned in the securities register;
(d) must verify that the document of title relating to the
certificated securities has, on the face of it, been validly
issued by the company; and
(e) may not act on an instruction to convert if it has reason to
doubt the validity of the instruction or the document of
title relating to the certificated securities.
(2) After a company has accepted an instruction to convert
certificated securities into uncertificated securities, it must—
(a) record in the securities register the date on which the
securities are converted;
(b) indicate clearly on the face of the document of title
relating to the securities that the securities have been con-
verted;
(c) reflect the converted securities as uncertificated securities in
its securities register.
(3) After certificated securities have been converted in terms of
sub-regulation (2), the company must instruct—
(a) the participant appointed by the holder of the securities;
or
(b) in the absence of such a participant—
(i) a participant appointed by the company which has
agreed with the company to hold the securities on
behalf of the securities holder; or
(ii) the central securities depository,
to enter the number of uncertificated securities and the name of
the holder of the securities, as it appeared in the company’s
securities register before the conversion took place, in an uncer-
tificated securities register in accordance with the rules of the
central securities depository.
(4) Except in accordance with section 54, or a court order, a
company may not—
(a) require a participant or central securities depository to
remove or change the particulars of uncertificated securi-
ties from or in an uncertificated securities register; or
(b) reduce the balance of uncertificated securities recorded in
its securities register.
(5) An action that—
(a) is taken by a person authorised to take that action, and
carried out in accordance with the Act, regulation 33, and
this regulation; and
(b) results in a consequence listed in section 55 (1) (a) to (c),
is not “an unlawful action” as contemplated in section 55 (1).
Part F
Governance of Companies
35. Pre-incorporation contracts.—See s. 21 (3)—(1) A per-
son may give notice to a company of a pre-incorporation contract
or action contemplated in section 21 (1), by filing, and delivering
to the company, a notice in Form CoR 35.1.
(2) If the board of a company has completely or partially reject-
ed, or completely or partially ratified, a pre-incorporation contract
or action of which it has received notice, as contemplated in section
21 (3), the company must, within five business days—
(a) file a notice of its decision with respect to that contract or
action in Form CoR 35.2; and
(b) deliver a copy of that notice to each person who is a party
to the contract or materially affected by the action.
36. Uniform standards for providing information.—(1) A
person who holds any securities of a company may give notice to
the company for any purpose contemplated in sections 37 (8), 39,
58, 115 (8), or 165 (2) by delivering a completed Form CoR 36.1
to the company, except to the extent that the requirements of a
central securities depository provide otherwise.
A-123 Companies Act No. 71 of 2008
(2) A company may notify each person who holds any securities
of the company for any purpose contemplated in sections 39,
45 (5), 56 (5), 60, or 62 (1), by delivering a completed Form CoR
36.2 to each registered security holder, except to the extent that the
requirements of a central securities depository provide otherwise.
(3) A registered holder of any securities in which any other
person has a beneficial interest may give notice to each person who
has such an interest, as required by section 56 (11), by delivering a
completed Form CoR 36.3 to each such person, except to the extent
that the requirements of a central securities depository provide
otherwise.
(4) A director or prescribed officer of a company may give
notice of a personal financial interest to the company by delivering
a completed Form CoR 36.4.
37. Record dates.—See s. 59 (2) (b)—(1) If any securities of a
particular company are in uncertificated form, or otherwise subject
to rules of a central securities depository, the company must set the
record date in accordance with those rules.
(2) Except as contemplated in sub-regulation (1), a company
must publish a notice of a record date for any matter by—
(a) delivering a copy to each registered holder of its securi-
ties; and
(b) posting a conspicuous copy of the notice—
(i) at its principal office;
(ii) on its website, if it has one; and
(iii) in the case of a listed company, on any automated
system of disseminating information maintained by
the exchange.
38. Prescribed officers of companies.—See s. 66 (10)—
(1) Despite not being a director of a particular company, a person
is a “prescribed officer” of the company for all purposes of the Act
if that person—
(a) exercises general executive control over and management
of the whole, or a significant portion, of the business and
activities of the company; or
(b) regularly participates to a material degree in the exercise
of general executive control over and management of the
whole, or a significant portion, of the business and activi-
ties of the company.
(2) This regulation applies to a person contemplated in sub-
regulation (1) irrespective of any particular title given by the
company to—
(a) an office held by the person in the company; or
(b) a function performed by the person for the company.
39. Directors and register of persons disqualified from serv-
ing as director.—See s. 69 (8) (b) (iv) and s. 70 (6)—(1) A notice
that a person has become a director of a company, as required by
section 70 (6) must be filed in Form CoR 39, within 10 business
days after appointment.
(2) Within 10 business days after a person ceases to be a direc-
tor of a company or external company, or after the company or
external company becomes aware that any information respecting
the director has changed, the company must file a notice of that
change in Form CoR 39.
(3) In addition to the court orders received from the Registrar of
the Court under section 69 (11A), the Commission may for purpos-
es of maintaining the register of persons disqualified from serving
as directors, obtain relevant information from the official records
of the clerk of the magistrates court, the Master, the South African
police services, any regulatory authority or any institution that
regulates any profession in the Republic.
(4) The prescribed minimum value of a fine upon conviction for
certain offences, which would result in automatic disqualification
as a director in terms of section 69 (8) (b) (iv), is R 1 000.
Companies Regulations
Part G
Winding up and Deregistering companies and
external companies
40. Winding-up, dissolution and de-registration of companies
and external companies.—See s. 79 to 83—(1) A resolution by a
solvent company to wind up must be filed with Form CoR 40.1.
(2) If a company or external company has failed to file an annu-
al return for two years in succession, as contemplated in section 82
(3) (a), the Commission may deliver a demand in Form CoR 40.3
to the company or external company by registered post, or other
means of verified communication, requiring the company or
external company to provide the satisfactory information contem-
plated in section 82 (3) (a) (ii).
(3) If a company or external company responds to a demand
sent to it in terms of sub-regulation (2), the Commission—
(a) may deregister the company or external company if the
information received in response to the demand confirms
that the company or external company is no longer active; or
(b) if the information received in response to the demand
confirms that the company or external company is active—
(i) may require additional information if the infor-
mation provided is unsatisfactory in terms of sec-
tion 82 (3) (a) (ii); or
(ii) may issue a compliance notice requiring the
company or external company to file an annual re-
turn for every year that it has failed to do so; or
(iii) must issue a compliance certificate, if the infor-
mation is satisfactory and the company or external
company has filed an annual return for every year
that it had failed to do so.
(4) If a company or external company fails to respond within 20
business days after receiving a demand under sub-regulation 2 (a)
or a request or, in responding, fails to provide satisfactory addi-
tional information required in terms of sub-regulation (3) (b) (i),
the Commission may—
(a) issue a Notice of Pending Deregistration in Form CoR
40.4 to the company or external company; and
(b) deregister the company or external company at any time
more than 20 business days after delivering the Notice of
Pending Deregistration, unless during that time the com-
pany or external company has filed its annual return for
every year that it had failed to file.
(5) When any company or external company has been deregis-
tered the books and papers of the company or external company
may be disposed of in such way as the Commission may direct.
(6) The Commission may re-instate a deregistered company or
external company only after it has filed the outstanding annual
returns and paid the outstanding prescribed fee in respect thereof.
(7) An application to re-instate a de-registered company or
external company must be made in Form CoR 40.5 and must
comply with such conditions as the Commission may determine.
(8) A notice by a company to transfer its registration to a juris-
diction outside the Republic, as contemplated in section 82 (5),
must be filed in Form CoR 40.2, and must be accompanied by—
(a) a copy of a special resolution approving the transfer of
the company’s registration to that jurisdiction;
(b) satisfactory evidence that the company satisfies the
requirements to register in that jurisdiction; and
(c) the fee set out in Table CR 1.
41. Transitional effect of previous regulations concerning
insolvent companies.—Despite the repeal of the Companies Act,
1973, the regulation for the Winding-Up and Judicial Management
of Companies as promulgated under Government Notice R2490 of
28 December 1973, and as subsequently amended from time to
time, continues to apply to any matter to which Chapter 14 of the
Companies Act, 1973 continues to apply in terms of Item 9 (1) to
(3) of Schedule 5 of the Act, until the date to be determined as
contemplated in Item 9 (4) of Schedule 5.
Companies Regulations Auditing: Legislation and Standards
CHAPTER 3
ENHANCED ACCOUNTABILITY AND TRANSPARENCY
42. Qualifications for members of audit committees.—See
s. 94 (5)—For the purposes contemplated in section 94 (5), at least
one-third of the members of a company’s audit committee at any
particular time must have academic qualifications, or experience,
in economics, law, corporate governance, finance, accounting,
commerce, industry, public affairs or human resource management.
43. Social and Ethics Committee.—See s. 72 (4) to (10)—
(1) This regulation applies to—
(a) every state owned company;
(b) every listed public company; and
(c) any other company that has in any two of the previous
five years, scored above 500 points in terms of regulation
26 (2).
(2) A company to which this regulation applies must appoint a
social and ethics committee unless—
(a) it is a subsidiary of another company that has a social and
ethics committee, and the social and ethics committee of
that other company will perform the functions required by
this regulation on behalf of that subsidiary company; or
(b) it has been exempted by the Tribunal in accordance with
section 72 (5) and (6).
(3) A board of a company that is required to have a social and
ethics committee, and that—
(a) exists on the effective date, must appoint the first mem-
bers of the committee within 12 months after—
(i) the effective date; or
(ii) the determination by the Tribunal of the company’s
application, if any, if the Tribunal has not granted
the company an exemption;
(b) is incorporated on or after the effective date, must
constitute a social and ethics committee and appoint its
first members within one year after—
(i) its date of incorporation, in the case of a state
owned company;
(ii) the date it first became a listed public company, in
such a case; or
(iii) the date it first met the criteria set out in sub-
regulation (1) (c), in any other case.
(4) A company’s social and ethics committee must comprise not
less than three directors or prescribed officers of the company, at
least one of whom must be a director who is not involved in the
day-to-day management of the company’s business, and must not
have been so involved within the previous three financial years.
(5) A social and ethics committee has the following functions—
(a) To monitor the company’s activities, having regard to any
relevant legislation, other legal requirements or prevailing
codes of best practice, with regard to matters relating to—
(i) social and economic development, including the
company’s standing in terms of the goals and pur-
poses of—
(aa) the 10 principles set out in the United
Nations Global Compact Principles; and
(bb) the OECD recommendations regarding
corruption;
(cc) the Employment Equity Act; and
(dd) the Broad-Based Black Economic Empow-
erment Act;
(ii) good corporate citizenship, including the compa-
ny’s—
(aa) promotion of equality, prevention of unfair
discrimination, and reduction of corruption;
(bb) contribution to development of the communi-
ties in which its activities are predominantly
conducted or within which its products or
services are predominantly marketed; and
A-124
(cc) record of sponsorship, donations and charita-
ble giving;
(iii) the environment, health and public safety, includ-
ing the impact of the company’s activities and of its
products or services;
(iv) consumer relationships, including the company’s
advertising, public relations and compliance with
consumer protection laws; and
(v) labour and employment, including—
(aa) the company’s standing in terms of the
International Labour Organization Protocol
on decent work and working conditions; and
(bb) the company’s employment relationships,
and its contribution toward the educational
development of its employees;
(b) to draw matters within its mandate to the attention of the
Board as occasion requires; and
(c) to report, through one of its members, to the shareholders
at the company’s annual general meeting on the matters
within its mandate.
44. Appointment of auditor or company secretary.—(1) A
notice of appointment of auditor, or company secretary, or of
person ceasing to act in such capacity, as contemplated in section
85 (3), must be in Form CoR 44.
(2) A notice issued by the Commission to a company that has
failed to appoint an auditor, company secretary, audit committee or
social and ethics committee, as required by the Act must be in the
form of a compliance notice.
CHAPTER 4
OFFERINGS OF COMPANY SECURITIES
Part A
Offering Securities
45. Time periods and threshold values.—See s. 96 (2)—
(1) The minimum time required for the purposes of section 96 (1)
(g) (v) is 12 months.
(2) The threshold required in terms of section 96 (2) (a) is R1
million.
46. Forms relating to securities offerings.—(1) Documents
filed in connection with an employee share scheme, as required by
section 97 (2) (c) must be accompanied by Form CoR 46.1.
(2) A certificate required by section 97 (2) (d) must be in Form
CoR 46.2.
(3) An application to exclude categories of persons from a rights
offer, as contemplated in section 99 (7) must be filed in Form CoR
46.3.
(4) An application to register a prospectus, or file a letter of
allocation, as contemplated in section 99 (9), must be in Form CoR
46.4, must be accompanied by a copy of the prospectus with any
documents required by Parts B or C of this Chapter, and by the fee
set out in Table CR 2B.
(5) A certificate of registration of a prospectus, or of the filing
of a letter of allocation, issued by the Commission must be in Form
CoR 46.5.
(6) An application to the commission to allow required infor-
mation to be omitted from a prospectus, as contemplated in section
100 (9) and (10), must be in Form CoR 46.6.
Part B
Requirements Concerning Offering of Securities
47. Interpretation.—For the purposes of this Part, and Part C
of this Chapter, unless the context indicates otherwise—
(a) “King Report and Code” means the King Report on
Governance for South Africa and the King Report and
Code of Governance Principles (King III), as amended or
replaced from time to time;
(b) “property” includes movable and immovable property,
and securities, but does not include any property if its
market value is not material; and
A-125 Companies Act No. 71 of 2008
(c) “vendor” includes—
(i) any person who sells or otherwise disposes of any
property to a company; and
(ii) the lessor of any property hired or proposed to be
leased by a company; and
(d) “purchase money”, when used in respect of any property
hired or proposed to be leased by a company, includes the
consideration for the lease.
48. Application.—(1) A report by an auditor required by Part
C of this Chapter must not be made by any person who is—
(a) a director, prescribed officer, or employee of the com-
pany or, in the case of a company that is part of a group of
companies, of any company that is a part of that group; or
(b) a partner or employee of, or a person related to, any such
director or prescribed officer of the company or, in the
case of a company that is part of a group of companies, of
any company that is a part of that group.
(2) If a company has been carrying on business for less than
5 years, or if a business undertaking has been carried on for less
than 5 years, the annual financial statements of the company or
business undertaking required by this Chapter must be provided
only for the number of financial years that the company has
existed, or the business has been carried on.
(3) To the extent that a person making a report required by Part
C of this Chapter considers it necessary to adjust the amount of
profits, losses, assets or liabilities dealt with by the report, that
person may either—
(a) include a note setting out the adjustments the person
considers ought to be made; or
(b) make those adjustments, in which case, the person
must—
(i) clearly indicate the adjustments that have been
made; and
(ii) include a note explaining the adjustments that have
been made.
(4) Irrespective of whether a person chooses to set out an ad-
justment that ought to be made, as contemplated in sub-regulation
(3) (a), or makes the adjustment, as contemplated in sub-regulation
(3) (b), the person making the report must include a note—
(a) setting out a factual basis in support of each adjustment,
or proposed adjustment, as the case may be; and
(b) identifying which adjustments have a continuing effect on
the company, and which do not.
49. Letters of allocation in respect of unlisted securities.—
See s. 99 (4)—(1) A company desiring to issue a letter of alloca-
tion in respect of unlisted securities must—
(a) file a copy of—
(i) the letter of allocation for registration; and
(ii) any document required in the circumstances by
section 99 (4);
(b) file any agreement referred to in a document contemplat-
ed in paragraph (a), with a translation in an official lan-
guage, if the agreement is not already in an official
language; and
(c) pay the prescribed fee as set out in Table CR 2B.
(2) Upon registering the documents referred to in sub-regulation
(1), the Commission must deliver a certificate of the registration of
the letter of allocation to the company concerned or the person who
submitted them on behalf of the company.
(3) Every letter of allocation that is issued must—
(a) state on the face of it that a copy of it, together with
copies of all other documents referred to in sub-regulation
(1), have been filed; and
(b) include a statement advising that copies of every docu-
ment referred to in sub-regulation (1) are available, and
setting out the manner by which any such copy may be
obtained.
Companies Regulations
(4) Sub-regulation (3) (b) does not apply to any letter of alloca-
tion issued in connection with a renunciation of part of the rights to
subscribe in terms of the rights offer.
50. Rights offers in respect of listed securities.—See s. 96 (1)
(d)—A rights offer in respect of listed securities, and all documents
issued in connection with it, must satisfy the requirements that
would apply to a prospectus in terms of sections 100 and 102 and
regulation 51, each read with the changes required by the context.
51. General requirements for a prospectus.—See s. 100—
(1) Every prospectus must be produced in a style that satisfies the
requirements set out in section 6 (4) to (6).
(2) As far as possible the general matter of a prospectus must be
presented in narrative form, and statistical matter must be present-
ed in tabular form.
(3) The information required by the Act and these regulations to
be stated in a prospectus must—
(a) be set out in print or type;
(b) be not less conspicuous than that in which any additional
matter is printed or typed;
(c) be organised in accordance with the order, and use the
headings, of the sub-parts and each of the regulations
comprising Part C, as applicable in terms of regulation 55
or 56, as the case may be.
(4) Every prospectus issued must—
(a) state on its face that it is a copy of a registered prospec-
tus; and
(b) specify or refer to statements included in it specifying any
documents required by the Act or this Chapter to be en-
dorsed on or attached to or to accompany the prospectus
when it is filed.
52. Signing, date and date of issue, of prospectus.—(1) A
prospectus in respect of an offer for the subscription of shares of a
company must be signed by every person named in it as a director
of the company or by an agent authorised in writing by a director to
sign on behalf of that director.
(2) A prospectus in respect of any other offer must be signed by
every person making the offer, or by an agent authorised by any
such person in writing to sign on behalf of that person.
(3) If a prospectus has been signed on behalf of a juristic per-
son, every director of that juristic person is deemed to have
authorised the issue of the prospectus irrespective of whether that
director signed it, unless it is proven that it was issued without the
director’s knowledge, authority or consent.
(4) Every signature to a prospectus must be dated.
(5) The date of the prospectus is the date on which it is regis-
tered, or the later date, if any, expressly stated on the first page of
the prospectus.
53. Access to supporting documents.—The original, or a
certified copy, of each of the following documents relating to the
company, and any subsidiary of the company, must be available for
inspection at the registered office of the company from the date
that a prospectus is issued by or on behalf of that company, until at
least 10 business days after the closing date set out in the prospec-
tus in terms of regulation 71—
(a) the Memorandum of Incorporation;
(b) all material contracts referred to in regulation 63, and any
other agreement referred to in this Chapter, if the agree-
ment is written;
(c) a memorandum giving full particulars of any unwritten
agreement contemplated in paragraph (b);
(d) the written consents required by section 102; and
(e) the relevant power of attorney documents, or resolutions
authorising the signing of the prospectus, if all the direc-
tors have not signed the prospectus.
Companies Regulations Auditing: Legislation and Standards
Part C
Items required to be included in a Prospectus
54. General statement of required information.—(1) Every
prospectus must include—
(a) all material information relating to the securities being
offered including, but not limited to, the information spe-
cifically required in this Part; and
(b) a narrative statement setting out—
(i) the extent to which, and manner in which, the
company has applied the principles of the King Re-
port and Code; and
(ii) the reasons for any instance of not applying the
recommended principles in the King Report and
Code.
(2) If it is the intention to acquire a business undertaking or
property with the capital raised by the offering, the prospectus must
include a brief history of that business undertaking or property,
including—
(a) particulars of each business undertaking or property
purchased or acquired, or proposed to be purchased or
acquired by the company or any subsidiary of the com-
pany, if any part of the purchase price of that business
undertaking or property is to be defrayed out of the pro-
ceeds of the issue;
(b) the amount, if any, paid or payable in cash or securities
for any such business undertaking or property, specifying
the amount, if any, paid for goodwill;
(c) the name and address of the vendor of the business
undertaking or property; and
(d) if there is more than one vendor, the amount payable in
cash or securities to each vendor.
(3) If the offer is not being underwritten, the prospectus must
either—
(a) include a statement by the directors setting out the
manner in which, and the sources from which, any short-
fall in the amount proposed to be raised by means of the
offer is to be financed; or
(b) state that the offer is conditional on the raising of the
specified minimum amount.
55. Specific matters to be addressed in a prospectus for a
limited offer.—If a prospectus—
(a) offers unlisted securities of a company that are in all
respects uniform with previously issued securities of the
same company; and
(b) sets out an offer that is being made only to existing
holders of that company’s securities, irrespective of
whether the offer includes a right to renounce in favour of
other persons,
the prospectus must include all of the material information con-
cerning the offer, set out in separate sections and paragraphs, in the
following order—
Section 1 — Information about the company whose securities
are being offered
A separate enumerated paragraph for each topic described
in regulations 57 to 64, to the extent that the regulation ap-
plies to the offer, using the relevant regulation heading as
the paragraph title.
Section 2 — Information about the offered securities
A separate enumerated paragraph for each topic described
in regulations 70 to 72, to the extent the regulation is appli-
cable to the offer, using the relevant regulation heading as
the paragraph title.
Section 3 — Statements and Reports relating to the offer
A separate enumerated paragraph for each topic described
in regulations 74 to 78, to the extent that the regulation is
applicable to the offer, using the relevant regulation head-
ing as the paragraph title.
A-126
Section 4 — Additional material information
Separate enumerated paragraphs as required to address any
material information relating to the offer, not contemplated
in sections 1, 2 or 3 above.
Section 5 — Inapplicable or immaterial matters
A list setting out those regulation numbers and headings
contemplated in the outline for sections 1, 2 or 3 above that
are not applicable in the circumstances of the offer.
56. Specific matters to be addressed in a prospectus for a
general offer.—Any prospectus not contemplated in Regulation 55
must include all of the material information concerning the offer,
set out in separate sections and paragraphs, in the following
order—
Section 1 — Information about the company whose securities
are being offered
A separate enumerated paragraph for each topic described
in regulations 57 to 69 that is applicable to the offer, using
the relevant regulation heading as the paragraph title.
Section 2 — Information about the offered securities
A separate enumerated paragraph for each topic described
in regulations 70 to 73 that is applicable to the offer, using
the relevant regulation heading as the paragraph title
Section 3 — Statements and Reports relating to the offer
A separate enumerated paragraph for each topic described
in regulations 74 to 80 that is applicable to the offer, using
the relevant regulation heading as the paragraph title
Section 4 — Additional material information
Separate enumerated paragraphs as required to address any
material information relating to the offer, not contemplated
in sections 1, 2 or 3 above.
Section 5 — Inapplicable or immaterial matters
A list setting out those regulation numbers and headings
contemplated in the outline for sections 1, 2 or 3 above that
are not applicable in the circumstances of the offer.
57. Name, address and incorporation.—(1) Section 1, Para-
graph 1 of every prospectus must set out the following information
with respect to the company whose securities are being offered—
(a) the name of the company, and its registration number;
(b) the address of the company’s registered office, and—
(i) the address of the company’s primary place of
carrying on business in the Republic, if different
from its registered office; and
(ii) the address of the office of its transfer agent, if any;
and
(c) The date of incorporation of the company.
(2) If the company is a foreign company, in addition to the
information required by sub-regulation (1), section 1, Paragraph 1
of a prospectus must also set out—
(a) the name of the foreign jurisdiction in which it was
incorporated; and
(b) the date—
(i) and registration number of the company’s registra-
tion within the Republic as an external company in
terms of section 23, if it carries on business within
the Republic; or
(ii) on which the foreign company filed its Memoran-
dum of Incorporation and list of directors, in terms
of section 99 (1) (b).
(3) In addition to the requirements set out in sub-regulation (1),
and (2) if applicable, in any prospectus contemplated in regulation
56, if the company whose securities are being offered is—
(a) a subsidiary, the first paragraph of section 1 of the
prospectus must also include—
(i) the name of its holding company; and
(ii) the address of the registered office of its holding
company; or
A-127 Companies Act No. 71 of 2008
(b) a holding company, the first paragraph of section 1 of the
prospectus must also include, the name, date and place of
incorporation of each of its subsidiaries.
58. Directors, other office holders, or material third par-
ties.—(1) In this regulation, a reference to directors, proposed
directors or prescribed officers of a company includes any person
holding one or more material contracts to perform any executive
function for the company.
(2) Section 1, Paragraph 2 of every prospectus must set out the
following information with respect to the directors, proposed
directors and prescribed officers of the company whose securities
are being offered—
(a) the names, occupations and business addresses of the
directors and proposed directors of the company (specify-
ing any who hold, or are proposed to hold, a prescribed
office in the company), and prescribed officers of the
company, and their nationalities, if not South African;
and
(b) the name and business address of the company’s—
(i) auditors;
(ii) attorney, banker, stockbroker, and underwriter, if
any; and
(iii) company secretary, together with the company
secretary’s professional qualifications.
(3) In addition to the requirements of sub-regulation (2), in any
prospectus contemplated in regulation 56, Section (1), Paragraph 2
must also set out the following information—
(a) the term of office for which any director, proposed
director or prescribed officer has been or is to be appoint-
ed, the manner in which, and terms on which, any pro-
posed director will be appointed, and particulars of any
right held by any person relating to the appointment of
any director;
(b) particulars of any remuneration or proposed remuneration
of the directors or proposed directors in their capacity as
directors, managing directors or in any other capacity,
whether or not determined by the Memorandum of Incor-
poration or by the company or any subsidiary;
(c) any borrowing powers of the company, or any subsidiary,
exercisable by the directors, the manner in which any
such borrowing powers may be varied, and the extent to
which any such borrowing powers have been exceeded or
varied, or both, during the immediately preceding three
years; and
(d) if the business of the company or any subsidiary, or any
part thereof is managed or is proposed to be managed by
a third party under a contract—
(i) the name and business address (or the address of its
registered office, if a juristic person) of the third
party;
(ii) a description of the business so managed or to be
managed; and
(iii) a summary statement of the basis on which that
person will be compensated by the company for
performing those services.
59. History, state of affairs and prospects of company.—
(1) In this regulation, “material” has the meaning set out in section
1, having particular regard to a company’s history of profits or
losses, or assets employed or to be employed.
(2) Section 1, Paragraph 3 of every prospectus—
(a) contemplated in regulation 55 must set out a general
description of the business carried on or to be carried on
by the company and any material subsidiary and, if the
company or any such subsidiary carries on or proposes to
carry on more than one material business, information as
to the relative importance of each such business, but only
to the extent that there has been a material change in the
nature of the company’s activities since it last issued an
annual financial statement; or
Companies Regulations
(b) contemplated in regulation 56 must set out a general
description of the business carried on or to be carried on
by the company and any material subsidiary and, if the
company or any such subsidiary carries on or proposes to
carry on more than one material business, information as
to the relative importance of each such business.
(3) In addition to the requirements of sub-regulation (2) (b),
Section 1, Paragraph 3 of every prospectus contemplated in
regulation 56 must also set out the following information with
respect to the company whose securities are being offered—
(a) the general history of the company and any material
subsidiary stating, among other things—
(i) the length of time during which the business of the
company, and of any such subsidiary, has been car-
ried on; and
(ii) the date on which the company became a public
company;
(b) details of any material change in the business of the
company during the past 3 years;
(c) the opinion of the directors, stating the grounds for that
opinion, as to the prospects of the business of—
(i) the company;
(ii) any subsidiary of the company; and
(iii) any subsidiary or business undertaking to be
acquired or intended to be acquired within one year
following the date of the prospectus;
(d) a general description giving a fair presentation of the state
of affairs of—
(i) the company; and
(ii) any material subsidiary, including—
(aa) its issued securities, with details of the shares
held by the holding company, and the date on
which it became a subsidiary; and
(bb) its main business;
(e) the situation, area and tenure of the principal immovable
property held or occupied by the company and any sub-
sidiary including, in the case of leasehold property, the
rental and unexpired term of the lease;
(f) a statement of the estimated commitments, if any, of the
company or a material subsidiary, for the purchase, con-
struction or installation of buildings, plant or machinery,
the estimated date of completion and the commencement
of the operational use thereof; and
(g) with respect to the company particulars for each of the
preceding 3 years of—
(i) its turnover;
(ii) its profits or losses before and after tax;
(iii) any dividends that have been paid;
(iv) the amount of dividends paid in cents per share;
and
(v) the dividend cover for each year.
(4) If the company is a holding company, the information re-
quired by sub-regulation (3) (g) must be presented either—
(a) for the company in consolidated form; or
(b) separately for the company and each of its subsidiaries.
60. Share capital of the company.—Section 1, Paragraph 4 of
every prospectus must set out particulars of the company’s share
capital, including—
(a) the different classes of shares, and, in respect of each
such class of shares—
(i) the number of shares authorised, and issued;
(ii) a description of the respective preferential conver-
sion and exchange rights, rights to dividends, prof-
its or capital, including redemption rights and rights
on liquidation or distribution of capital assets; and
(iii) the number of founders’ and management or
deferred shares, if any, and the special rights at-
taching to those shares;
Companies Regulations Auditing: Legislation and Standards
(b) brief particulars of any alteration of capital during the
preceding 3 years; and
(c) a summary of any offers of securities of the company to
the public for subscription or sale during the preceding
3 years, including—
(i) the prices at which those securities were offered;
(ii) the number of securities allotted in pursuance
thereof; and
(iii) a statement indicating whether the securities were
issued to all holders of securities in proportion to
their holdings and, if not, to whom issued, the rea-
sons why the shares were not so issued and the ba-
sis of allotment.
61. Options or preferential rights in respect of shares.—
(1) Section 1, Paragraph 5 of every prospectus must concisely
summarize the substance of any agreement or proposed agreement,
as at the date of the prospectus, whereby any option or preferential
right of any kind was or is proposed to be given to any person to
subscribe for any shares of the company or any subsidiary of the
company, giving the number and description of any such shares,
including, in regard to the option or right, particulars of—
(a) the period during which it is exercisable;
(b) the price to be paid for shares subscribed for under it;
(c) the consideration given or to be given for it;
(d) the names and addresses of the persons to whom it was
given, other than to existing shareholders as such or to
employees under an employee share scheme;
(e) if given to existing shareholders as such, material particu-
lars thereof; and
(f) any other material fact or circumstance concerning the
granting of such option or right.
(2) For the purpose of this regulation, “subscribing for shares”
includes acquiring them from a person to whom they were allotted,
or were agreed to be allotted, with a view to that person offering
them for sale.
62. Commissions paid or payable in respect of underwrit-
ing.—(1) In this regulation, “commission” includes, but is not
limited to, an amount paid or payable to any sub-underwriter who
is a promoter or director or officer of the company.
(2) Section 1, Paragraph 6 of every prospectus must state—
(a) the amount, nature and extent of the consideration, if any,
paid within the preceding two years, or payable, as com-
mission to any person for subscribing or agreeing to sub-
scribe, or procuring or agreeing to procure, subscriptions
for any securities of the company;
(b) the name, occupation and business address of each person
to whom any commission has been paid or is payable, as
contemplated in paragraph (a);
(c) particulars of the amounts underwritten or sub-
underwritten by each person contemplated in paragraph
(a);
(d) the rate of the commission payable in terms of any
underwriting or sub-underwriting agreement with each
person contemplated in paragraph (a); and
(e) if a person contemplated in paragraph (a) is a company—
(i) the names of the directors of that company; and
(ii) the nature and extent of any interest, direct or
indirect, in that company of any promoter, director
or officer of the company in respect of which the
prospectus is issued.
63. Material contracts.—(1) Section 1, Paragraph 7 of every
prospectus must set out—
(a) a concise list of existing contracts or proposed contracts,
either written or oral, relating to the directors’ and mana-
gerial remuneration, royalties, and secretarial and tech-
nical fees payable by the company or any subsidiary of
the company; and
A-128
(b) the date and nature of, and the parties to, every other
material agreement entered into by the company, or any
subsidiary of the company, within the two years immedi-
ately before the date of the prospectus, subject to sub-
regulation (2).
(2) For the purposes of sub-regulation (1) (b), an agreement is
not material if it is entered into in the ordinary course of the
business carried on or proposed to be carried on by the company or
a subsidiary, as the case may be.
64. Interest of directors and promoters.—(1) In this regula-
tion, the expression “director or promoter” refers to a director or
promoter of a company only if its securities are being offered in a
prospectus contemplated in regulation 55.
(2) Section 1, Paragraph 8 of every prospectus must set out—
(a) a statement of any consideration paid, or agreed to be
paid, by any person within the 3 years immediately before
the date of the prospectus—
(i) to a director or a related person, or
(ii) to another company—
(aa) in which the director is beneficially interest-
ed; or
(bb) of which the director is also a director; or
(iii) to any partnership, syndicate or other association of
which the director is a member,
to induce the director to become a director, or to qualify
as a director, or for services rendered by the director or by
a company, partnership, syndicate or other association in
connection with the promotion or formation of the com-
pany; and
(b) full particulars of the nature and extent of any direct or
indirect material interest, of any director or promoter in—
(i) the promotion of the company;
(ii) any property proposed to be acquired by the
company out of the proceeds of the issue; or
(iii) any property acquired or proposed to be acquired
by the company or any subsidiary during the 3
years immediately before the date of the prospec-
tus; and
(c) if any interest of a director or promoter contemplated
above consists in being a member of a partnership, com-
pany, syndicate or other association of persons—
(i) the nature and extent of the interest of each such
partnership, company, syndicate or other associa-
tion; and
(ii) the nature and extent of each such director’s or
promoter’s interest in the partnership, company,
syndicate or other association.
65. Loans.—(1) In this regulation, “loan” includes a deben-
ture.
(2) Section 1, Paragraph 9 of a prospectus contemplated in
regulation 56 must set out—
(a) the details of material loans to the company, or to any
subsidiary of the company, at the date of the prospectus,
stating with respect to each such loan—
(i) whether it is secured or unsecured, and if secured,
the details of the security;
(ii) the names of the lenders, if not debenture-holders;
(iii) the amount, terms and conditions of repayment;
and
(iv) the interest rate; and
(b) details of any material loan advanced other than in the
ordinary course of business, by the company, or by any
subsidiary of the company, and outstanding at the date of
the prospectus, stating with respect to each such loan—
(i) the date it was advanced, and the period for which
it weas advanced;
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the word “weas” is intended to be “was”.)
A-129 Companies Act No. 71 of 2008
(ii) the person to whom it was advanced;
(iii) the interest rate;
(iv) if the interest is in arrears, the last date on which it
was paid and the extent of the arrears;
(v) details of any security held, including the value of
that security and the method of valuation;
(vi) if the loan is unsecured, the reasons therefore; and
(vii) if the loan was advanced to another company, the
names and addresses of the directors of that com-
pany.
66. Shares issued or to be issued otherwise than for cash.—
Section 1, Paragraph 10 of a prospectus contemplated in regulation
56 must state—
(a) the number, if any, of securities that were issued or
agreed to be issued by the company, or a subsidiary of the
company, within the 3 years immediately before the pro-
spectus date, to any person other than for cash; and
(b) the consideration for which those securities were issued
or were agreed to be issued.
67. Property acquired or to be acquired.—(1) In this regula-
tion, “property” means immovable property or any other fixed
asset that—
(a) is material to a company’s business, and
(b) the purchase price of which—
(i) is to be defrayed in whole or in part out of the
proceeds of the issue; or
(ii) is to be, or was within the preceding 3 years, paid
in whole or in part—
(aa) by the issue of securities of the company or
any subsidiary; or
(bb) out of the funds of the company or its
subsidiary, whether in cash or securities; or
(c) the purchase or acquisition of which has not been com-
pleted at the date of the prospectus, and the nature of the
title or interest therein acquired or to be acquired by the
company or any subsidiary.
(2) Section 1, Paragraph 11 of a prospectus contemplated in
regulation 56 must set out particulars of—
(a) any property purchased or acquired by the company, or a
subsidiary of the company, or proposed to be purchased
or acquired;
(b) the consideration given, or to be given, for the acquisition
of any such property, specifying the value payable for
goodwill, if any;
(c) the names and addresses of the vendors and the consid-
eration received or to be received by each;
(d) brief particulars of any transaction relating to the property
completed within the preceding 3 years in which any
vendor of the property to the company or any subsidiary
or any person who is or was at the time of the transaction
a promoter or a director or proposed director of the com-
pany had any interest, direct or indirect; and
(e) particulars of the price at which any property that is
immovable, or an option over immovable property, was
purchased or sold within 3 years immediately before the
date of the prospectus, if any promoter or director had any
interest, directly or indirectly, in a transaction, or any
promoter or director was a member of a partnership, syn-
dicate or other association of persons that had such an in-
terest, with the dates of any such purchases and sales and
the names of any such promoter or director, and the na-
ture and extent of that interest.
(3) In applying this regulation—
(a) if any vendor is a partnership, each member of the
partnership is not to be regarded as a separate vendor; and
(b) for the purposes of sub-regulation (2) (e), shares of a
company, the major asset of which is immovable proper-
ty, must be regarded as being immovable property.
Companies Regulations
68. Amounts paid or payable to promoters.—Section 1,
Paragraph 12 of a prospectus contemplated in regulation 56 must
state the amount, if any, paid within the preceding 3 years, or
proposed to be paid, to any promoter, or to any partnership,
syndicate or other association of which that promoter is or was a
member, and the consideration for that payment, and any other
benefit given to the promoter, partnership, syndicate or other
association within the same period or proposed to be given, and the
consideration for the giving of that benefit, and the promoter’s
name and address.
69. Preliminary expenses and issue expenses.—Section 1,
Paragraph 13 of a prospectus contemplated in regulation 56 must
state—
(a) the amount or estimated amount of any preliminary
expenses incurred within 3 years before the date of the
prospectus;
(b) the persons to whom any of the expenses referred to in
paragraph (a) were paid or are payable;
(c) the amount or estimated amount of the expenses of the
issue; and
(d) the persons to whom any of the expenses referred to in
paragraph (c) were paid or are payable.
70. Purpose of the offer.—Section 2, Paragraph 1 of every
prospectus must set out—
(a) a statement of the purpose of the offer, giving reasons
why it is considered necessary for the company to raise
the amount sought under the prospectus; and
(b) if the amount sought under the prospectus is more than
the amount of the minimum subscription referred to in
regulation 73, the reasons for the difference between
those amounts.
71. Time and date of the opening and of the closing of the
offer.—Section 2, Paragraph 2 of every prospectus must state a
time and date of the opening and the closing of the offer.
72. Particulars of the offer.—(1) Section 2, Paragraph 3 of
every prospectus must set out the particulars of the securities
offered, including—
(a) the class of securities;
(b) the number of securities offered;
(c) the issue price;
(d) if any securities are secured, particulars of the security,
specifying the property comprising the security and the
nature of the title to the property; and
(e) other conditions of the offer.
(2) If, during the 3 years immediately preceding the date of the
prospectus, the company issued any securities, a prospectus must
also include a statement setting out—
(a) the dates of issue of those securities;
(b) the price at which they were issued; and
(c) the reasons for any differentiation between those prices
and the issue price of the securities being offered by the
prospectus.
(3) If, during the 3 years immediately preceding the effective
date, the company issued any securities for a premium, the pro-
spectus must include a statement setting out—
(a) the dates of issue of those securities;
(b) the reasons for any such premium;
(c) the reasons for any differentiation between the amounts
of any such premium; and
(d) how any such premium was dealt with.
73. Minimum subscription.—(1) Section 2, Paragraph 4 of
every prospectus contemplated in regulation 56 must state the
minimum subscription contemplated in section 108 (2).
(2) In respect of any offer, the minimum subscription is the
lower of—
(a) the full amount of the offer; or
Companies Regulations Auditing: Legislation and Standards
(b) the amount, if any, determined by the company in terms
of sub-regulation (3).
(3) The company may determine a minimum subscription value,
being the amount that, in the opinion of the directors, must be
raised by the issue of securities to provide the sums, or, if any part
thereof is to be defrayed in any other manner, the balance of the
sums required, in respect of each of the matters listed in sub-
regulation (4).
(4) If the company has determined a minimum subscription
value, as contemplated in sub-regulation (3), section 2, Paragraph 4
of the prospectus must also set out—
(a) the purchase price of any property purchased or to be
purchased, if any part of the purchase price is to be de-
frayed out of the proceeds of the issue;
(b) any preliminary expenses payable by the company, and
any commission payable to any person as consideration
for—
(i) agreeing to subscribe for any securities of the
company; or
(ii) procuring or agreeing to procure subscriptions for
any securities of the company;
(c) the repayment of any money borrowed by the company or
any subsidiary in respect of any of the foregoing matters;
(d) the working capital, stating the specific purposes for
which it is to be used and the estimated amount required
for each such purpose;
(e) any other expenditure, stating the nature and purposes
thereof and the estimated amount in each case; and
(f) the amounts, if any, to be provided in respect of the
matters listed above otherwise than out of the proceeds of
the issue, and the sources from which those amounts are
to be provided.
74. Statement as to adequacy of capital.—(1) In this regula-
tion, “issued capital of the company” includes the minimum
amount to be raised in pursuance of the offer.
(2) Section 3, Paragraph 1 of every prospectus must set out
either—
(a) a statement by the directors of the company that, in their
opinion, the issued capital of the company is adequate for
the purposes of the business of the company, and of any
subsidiary of the company, for at least 12 months after the
date of the prospectus; or
(b) if the directors of the company are of the opinion that the
issued capital of the company is inadequate for the pur-
poses contemplated in paragraph (a), a statement by them
setting out—
(i) the extent of the inadequacy; and
(ii) the manner in which, and the sources from which,
the company and any subsidiary are financed, or
are proposed to be financed.
75. Report by directors as to material changes.—Section 3,
Paragraph 2 of every prospectus must be a report by the directors
of the company setting out any material change in the assets or
liabilities of the company or any subsidiary that have occurred
between—
(a) the end of the financial year of the company, or any
subsidiary of the company, in respect of which its most
recent annual financial statements report; and
(b) the date of the prospectus.
76. Statement as to listing on stock exchange.—Section 3,
Paragraph 3 of every prospectus must set out a statement as to
whether or not an application has been made for a listing of the
securities offered and, if so, the name of the relevant exchange.
77. Report by auditor where business undertaking to be
acquired.—If the proceeds, or any part of the proceeds, of the
issue of the securities or any other funds are to be applied directly
or indirectly in the purchase of any business undertaking, section 3,
A-130
Paragraph 4 of every prospectus must comprise a report made by
an auditor named in the prospectus on—
(a) the profits or losses of the business undertaking in respect
of each of the 3 financial years preceding the date of the
prospectus; and
(b) the assets and liabilities of the business undertaking at the
last date to which the financial statements of the business
undertaking were made out.
78. Report by auditor where company will acquire a subsid-
iary.—(1) This regulation applies only if the proceeds or any part
of the proceeds of the issue of the securities are to be applied in
any manner, whether directly or indirectly, resulting in the acquisi-
tion by the company or its subsidiary of securities of any other
juristic person, with the direct or indirect result that the other
juristic person will become a subsidiary of the company.
(2) In the circumstances contemplated in sub-regulation (1),
section 3, Paragraph 5 of every prospectus must comprise a report
made by an auditor named in the prospectus on—
(a) the profits or losses of the other juristic person in respect
of each of the 3 financial years preceding the date of the
prospectus; and
(a) the assets and liabilities of the other juristic person at the
last date to which the annual financial statements of the
other juristic person were made out.
(Editorial Note: Numbering as per original Government Gazette.)
(3) The auditor’s report required by sub-regulation (2) must
indicate—
(a) how the profits or losses of the other juristic person
would, in respect of the shares to be acquired, have con-
cerned shareholders of the company; and
(b) what allowance would have fallen to be made, in respect
of assets and liabilities so dealt with, for holders of other
shares,
if the company had at all material times held the shares to be
acquired.
(4) In addition to satisfying the requirements of sub-regulation
(2), if the other juristic person has a subsidiary or, had it been a
company it would have had a subsidiary, the auditor’s report must
also deal with the profits or losses and the assets and liabilities of
the other juristic person and its subsidiary, or any other juristic
person as would have been its subsidiary if it had been a company,
in the manner provided by regulation 79 (3) in relation to the
company and its subsidiary.
79. Report by auditor of company.—(1) Section 3, Para-
graph 6 of a prospectus contemplated in regulation 56 must
comprise a report by the auditor of the company with respect to—
(a) profits or losses and assets and liabilities, in accordance
with sub-regulations (2) or (3), as applicable; and
(b) the rates of the dividends, if any, paid by the company in
respect of each class of securities of the company in re-
spect of each of the 3 financial years immediately preced-
ing the issue of the prospectus, giving particulars of—
(i) each class of shares on which dividends were paid;
and
(ii) the cases in which no dividends were paid in
respect of a particular class of shares in respect of
any of those years; and
(b) if no annual financial statements were made out by or for
the company in respect of any part of the 3 years ending
on a date 3 months before the issue of the prospectus, a
statement of that fact.
(2) If the company has no subsidiary, the report—
(a) in regard to profits or losses, must deal with the profits or
losses of the company in respect of each of the 3 financial
years immediately preceding the issue of the prospectus;
and
(b) in regard to assets and liabilities, must deal with the assets
and liabilities of the company at the last date to which the
annual financial statements of the company were made out.
A-131 Companies Act No. 71 of 2008
(3) If the company is a holding company, the report—
(a) in regard to profits or losses, must deal separately with
the company’s profits or losses as provided by sub-
regulation (2), and in addition, must deal—
(i) as a whole with the combined profits or losses of
all subsidiaries, as far as they concern holders of
the company’s securities; or
(ii) individually with the profits or losses of each
subsidiary, so far as they concern holders of the
company’s securities; or
(iii) as a whole with the consolidated profits or losses of
the group of companies so far as concerns holders
of the company’s securities; and
(b) in regard to assets and liabilities, must deal separately
with the company’s assets and liabilities as provided by
sub-regulation (2) and, in addition, must deal—
(i) as a whole with the combined assets and liabilities
of all subsidiaries, indicating the interest therein of
holders of the company’s securities, other than the
company; or
(ii) individually with the assets and liabilities of each
subsidiary, indicating the interests therein of share-
holders other than the company; or
(iii) as a whole with the consolidated assets and liabili-
ties of the company and all subsidiaries, indicating
the interests therein of shareholders other than the
company;
(c) if a subsidiary incurred losses, must state the amounts of
those losses and the manner in which provision was made
for them.
(4) The auditor must include a statement in the report noting—
(a) the extent to which the auditor is satisfied that the
financial statements in relation to the company and any
subsidiary are correct and have been prepared on a basis
consistent with the Act; and
(b) whether—
(i) the debtors and creditors include any accounts
other than trade accounts;
(ii) the provisions for doubtful debts appear to be
adequate;
(iii) adequate provision has been made for obsolete,
damaged or defective goods, and for supplies pur-
chased at prices in excess of current market prices;
(iv) intercompany profits in the group have been
eliminated; or
(v) there have been any material changes in the assets
and liabilities of the company or of any subsidiary
since the date of the last annual financial state-
ments.
80. Requirements for prospectus of mining company.—
(1) This regulation applies only to a prospectus contemplated in
regulation 56, and then only if the prospectus offers securities—
(a) issued or to be issued by a mining company; or
(b) to raise capital in order to directly or indirectly acquire a
mining company or its securities or business.
(2) In this regulation, “mining company” includes a company
that carries on or proposes to carry on mining, development or
prospecting for or exploitation of any mineral resources, or that
acquires or proposes to acquire any mineral rights thereto or
options thereon.
(3) Section 3 of a prospectus contemplated in sub-regulation (1)
must include, or have appended to it, the following additional
items—
(a) a report by an expert containing information appropriate
to the subject matter of the prospectus and including with
respect to each mining company or asset, as applicable—
(i) a statement describing briefly the geological
characteristics of the occurrence;
Companies Regulations
(ii) details of previous mining operations and produc-
tion relevant to the workability and payability of
the proposed mining operations;
(iii) survey, drilling and borehole results;
(iv) ore reserves, and reserves; and
(v) an interpretation of the information available with
reference to the viability of the project.
(b) any material information not otherwise required by Part B
or this Part of this Chapter relating to the mineral rights,
or any other right to mine, mining title, including any
Government mining lease, and immovable property avail-
able for the mine, including with respect to each mining
company or asset, as applicable—
(i) whether the aforesaid is owned by the company, or
in process of transfer or is under option or lease;
(ii) the name of the farm on and district in which each
is situated;
(iii) the area of each;
(iv) the aggregate price or other consideration for which
they were or are to be acquired;
(v) relevant details of any option as aforesaid; and
(c) a statement by the directors of the plans, with respect to
each mining company or asset, for reaching the produc-
tion stage or for increasing output, including information
regarding—
(i) shaft sinking and development;
(ii) capital expenditure for each material stage of
development.
CHAPTER 5
FUNDAMENTAL TRANSACTIONS AND TAKEOVER
REGULATIONS
Part A
Interpretation and Application
81. Definitions.—In this Chapter, and in applying Part B and
Part C of Chapter 5 of the Act, unless the context indicates other-
wise—
(a) “acquisition” includes any act or transaction as a result
of which a person acquires or has an increased voting
power in a company, irrespective of whether that person
acquired any securities of the company in or as a result of
that act or transaction;
(b) “announce”,
(i) in the case of a company listed on an exchange,
means disclosure in the manner required by that
exchange for immediate public release after receiv-
ing Panel approval; or
(ii) in any other case, means disclosure in the manner
determined by the Panel;
(c) “circular” means a document issued by a company, to
holders of its securities, for the purpose of compliance
with Part B and Part C of Chapter 5 of the Act and this
Chapter;
(d) “condition as to acceptance” means a condition of an
offer, announced in a firm intention announcement, relat-
ing to the minimum percentage of securities required to
be tendered by holders of the securities of the offeree
regulated company before the offeror will be obliged to
accept all tendered securities, but does not include a con-
dition relating to the ability of an offeror to meet its cash
consideration commitment;
(e) “control” means the holding of a beneficial interest in a
regulated company equal to or exceeding the specified
percentage of voting rights in that regulated company;
(f) “controlled company” means a regulated company that
is controlled, directly or indirectly, by its pyramid;
(g) “dealings” includes acquisitions, disposals, subscrip-
tions, grants and issues of securities, however effected;
Companies Regulations Auditing: Legislation and Standards
(h) “fair and reasonable opinion” means an opinion,
expressed by an independent expert on the fairness and
reasonableness of the consideration for an offer taking
account of value and price, given to either—
(i) the independent board; or
(ii) an independent board of an offeror company, if
required;
(i) “independent” or “acts independently”, when used in
relation to a particular person and a particular offer,
means a person who—
(i) has no conflict of interest in relation to that offer;
and
(ii) is able to make impartial decisions in relation to
that offer without fear or favour;
(j) “independent board” means those directors of an
offeree regulated company whom that company has indi-
cated are independent directors;
(k) “independent board of an offeror company” means
those directors of an offeror company whom that compa-
ny has indicated are independent directors;
(l) “independent director” means a director who acts
independently;
(m) “independent expert” means an independent expert as
described in section 114 (2) of the Act;
(n) “material” means an amount equal to or greater than
10% of the value of any subject matter in relation to an
offer;
(o) “offeree regulated company” means either—
(i) each amalgamating or merging company that is
party to an amalgamation or merger agreement; or
(ii) a regulated company—
(aa) that is itself the subject of an offer; or
(bb) the securities of which are entirely or
partially the subject of an offer;
(p) “offeror” means a person who, alone or in concert with
another person, enters into or proposes any affected trans-
action, including, but not limited to—
(i) a person offering to acquire the assets or undertak-
ing of a company, as contemplated in section 117
(1) (c) (i);
(ii) an amalgamating or merging company or any new
company to be formed by the amalgamating or
merging companies that is proposed to survive as
an amalgamated or merged company, in terms of
an amalgamation or merger agreement contemplat-
ed in section 117 (1) (c) (ii);
(iii) a person other than the offeree regulated company
concerned who, with the co-operation of that com-
pany, proposes to acquire securities of that compa-
ny in terms of a scheme of arrangement
contemplated in section 117 (1) (c) (iii); and
(iv) a person offering to acquire securities in accord-
ance with section 117 (1) (c) (v), (vi) or (vii);
(q) “option” includes any right similar to an option, given or
granted by a regulated company, irrespective of—
(i) whether that right is vested or not; or
(ii) whether that right is granted or given in terms of
any formalised—
(aa) share incentive scheme;
(bb) phantom scheme;
(cc) share participation rights scheme that has
rights that could be equity settled; or
(dd) agreement with any person that has rights
that could be equity settled;
or otherwise;
(r) “other condition” means any condition of an offer other
than—
(i) a condition as to acceptance; or
A-132
(ii) a condition relating to the ability of an offeror to
meet its cash consideration commitment;
(s) “phantom scheme” means a company plan or scheme in
terms of which employees are granted a right to receive
an amount of cash at a certain time, based on the perfor-
mance of the share price of the company;
(t) “prescribed percentage” means the percentage contem-
plated in section 123 (5), and prescribed in regulation 86
(1);
(u) “price sensitive information” means any information
that satisfies the definition of—
(i) ‘price sensitive information’ as set out in the JSE
Listings Requirements as amended from time to
time; or
(ii) ‘inside information’ as set out in the Securities
Services Act, 2004;
(v) “publish” means announce, despite the meaning set out
in regulation 1;
(w) “pyramid” means the ultimate controlling juristic person,
or any intermediate juristic person that, directly or indi-
rectly, holds at least the specified percentage of a con-
trolled company and after applying consolidation
accounting principles (irrespective of whether consolida-
tion principles should be applied or not) either—
(i) derives more than 75% of its total attributable
income from that controlled company; or
(ii) the attributable net assets in that controlled compa-
ny represent more than 75% of the total attributable
net group assets of the pyramid;
(x) “reporting accountant”—
(i) in the case of listed securities, has the meaning set
out in the JSE listing requirements, as amended
from time to time; or
(ii) in any other case, means an auditor;
(y) “ruling” means a written decision issued by the Execu-
tive Director with respect to a possible affected transac-
tion, proposed affected transaction or affected transaction;
(z) “SAMVAL code” means the South African Code for
Reporting of Mineral Asset Valuation; and
82. Beneficial Interests.—(1) A compliance obligation that—
(a) falls upon a person who would be regarded as a holder of
a beneficial interest in terms of the definition of “holder”
in section 117 (1) (e), read with the definition of “benefi-
cial interest” in section 1; and
(b) arises in terms of Part B and Part C of Chapter 5 of the
Act, or this Chapter,
applies equally to a nominee entity, asset manager or similar
person who has authority, by any means, to exercise rights of
disposal or rights of voting with respect to particular securities.
(2) No compliance obligation arises from an announced inten-
tion to acquire a beneficial interest in the remaining voting securi-
ties of a regulated company, as contemplated in section 117 (1) (c)
(v), until an offer is made for all of those securities.
83. Effect of interests held by non-related persons.—(1) There
are no consequences in terms of the Part B and Part C of Chapter 5
of the Act or this Chapter, if a transaction involves only—
(a) a person with a non-controlling beneficial interest in a
regulated company, acting alone; or
(b) two or more unrelated persons who individually own non-
controlling beneficial interests in a regulated company
and are not acting in concert.
(2) If a person contemplated in sub-regulation (1) acquires con-
trol of a previously unrelated person, they become related persons.
(3) If two previously unrelated persons become related, as con-
templated in sub-regulation (2), and their aggregated interests in
the regulated company are equal to or exceed the prescribed
percentage of voting rights in the regulated company—
(a) an affected transaction has occurred; and
A-133 Companies Act No. 71 of 2008
(b) one of the related persons must make a mandatory offer,
and if necessary, comparable offers, to the holders of the
remaining securities of the regulated company.
84. Acting in concert.—(1) In addition to the presumption set
out in section 118 (5), the following persons are presumed to be
acting in concert with one another—
(a) a company, with—
(i) any of its directors;
(ii) any company controlled by one or more of its
directors;
(iii) any trust of which any one or more of its directors
is a beneficiary or a trustee; and
(b) any of the company’s pension, provident or benefit funds
and share incentive schemes with one another.
(2) If the Panel is aware of persons coming into concert or com-
ing out of concert, and those persons have not declared themselves
as having come into concert or coming out of concert in accord-
ance with this regulation, the Panel may presume those persons
came into concert or came out of concert from a date determined
by the Panel as being the date of coming into concert or coming out
of concert.
(3) A presumption that two or more persons are acting in con-
cert, coming into concert or coming out of concert in terms of
section 118 (5), or this regulation, is rebuttable in a hearing before
the Executive Director on application by any such person.
(4) After a hearing in terms of sub-regulation (3)—
(a) the Executive Director must issue a Ruling, which will be
binding on all persons concerned; and
(b) if any person concerned does not comply with the Ruling,
the Panel may re-issue it immediately as a compliance no-
tice.
(5) Within five business days after coming into concert, or com-
ing out of concert, each person involved must make a declaration,
in Form TRP 84, and deliver it to the regulated company con-
cerned, and to the Executive Director.
(6) Any compliance obligation applicable to an offeror applies
equally to any person acting in concert with the offeror.
(7) Persons who are acting in concert are not, for that reason
alone, required to make a mandatory offer, if—
(a) at the time of coming into concert, each of them was
entitled to exercise voting rights which were less than the
prescribed percentage; and
(b) as a result of coming into concert they are entitled, in
aggregate, to exercise voting rights exceeding the pre-
scribed percentage; and
(c) none of them has acquired any further securities as
defined in section 117 (1) (j).
(8) A presumption that two persons have “acted in concert”, as
a result of one of them granting an option to the other, as contem-
plated in section 118 (5), even though not rebutted in terms of
section 118 (6), does not give rise to an obligation to make a
mandatory offer—
(a) for the duration of the option if—
(i) at the date the option was granted, each of them
was entitled to exercise voting rights that were less
than the prescribed percentage;
(ii) as a result of coming into concert they are entitled,
in aggregate, to exercise voting rights equal to or
exceeding the prescribed percentage; and
(iii) neither of them acquires any further securities as
defined in section 117 (1) (j);
(b) for the duration of the option if, at the date of grant of the
option, the grantee was already entitled to exercise voting
rights that were equal to or exceeded the prescribed per-
centage; or
Companies Regulations
(c) until the grantee exercises the option, or otherwise
acquires securities, that results in the grantee being able
to exercise voting rights equal to or exceeding the pre-
scribed percentage, if—
(i) at the date the option was granted, the grantee was
not entitled to exercise voting rights that were equal
to or exceeded the prescribed percentage; and
(ii) the grantor was entitled to exercise voting rights
that were equal to or exceeded the prescribed per-
centage.
85. Change in control.—(1) If a change in control takes place
in a pyramid or intermediate pyramid, the offeror must make an
offer or offers to—
(a) holders of securities of the pyramid or intermediate
pyramid, if any is a regulated company; and
(b) holders of securities of the controlled company, excluding
securities held by the pyramid or intermediate pyramid.
(2) The principles governing mandatory offers and comparable
offers apply to offers required by this regulation.
86. Mandatory offers.—(1) The percentage to be prescribed
in terms of section 123 (5) is 35% of the issued voting securities of
the company.
(2) The acquisition of a beneficial interest as contemplated in
the definition of “affected transaction” in section 117 (1) (c) (iv)
will give rise to a mandatory offer as contemplated in the definition
of “affected transaction” in section 117 (1) (c) (vi) only if the
acquisition falls within the circumstances contemplated in section
123 (2).
(3) The obligations contemplated in section 123 (3) and (4) do
not arise if—
(a) a person, alone or in concert with other parties, becomes
entitled to exercise voting rights that exceed the pre-
scribed percentage; and
(b) the entitlement contemplated in paragraph (a) comprises
voting rights that accrue to the person as a result of a ben-
eficial interest in preference shares; and
(c) the preference shares contemplated in paragraph (b)—
(i) are not voting securities as defined in section 1;
(ii) were acquired before the entitlement arose; and
(iii) give the person voting rights in accordance with the
rights of the preference shares (e.g. arrear divi-
dends)
unless the person, or any of the concert parties, acquires any further
securities as defined in section 117 (1) (j).
(4) A transaction is exempt from the obligation to make a man-
datory offer following publication by a regulated company of a
transaction requiring the issue of securities as consideration for an
acquisition, a cash subscription or a rights offer, if the independent
holders of more than 50% of the general voting rights of all issued
securities of the regulated company have agreed to waive the
benefit of such a mandatory offer in accordance with the principles
detailed in section 125 (3) (b) (ii).
(5) Irrespective of whether an issue of securities is made condi-
tional upon a waiver, a waiver by the independent holders of more
than 50% of the general voting rights of all issued securities of the
regulated company is a nullity if any acquisitions are made by an
acquirer or a subscriber or underwriter, or by any of their respec-
tive concert parties, in the period between the transaction an-
nouncement and date of the waiver.
(6) At the date of obtaining a waiver, the acquirer, the subscrib-
er or an underwriter concerned must declare to the Panel in writing
that it has not acquired any securities in the circumstances contem-
plated in sub-regulation (5).
(7) A waiver requires a fair and reasonable opinion to be included
in the circular in all instances other than a rights offer at a discount to
the prevailing market price at the date of announcement.
Companies Regulations Auditing: Legislation and Standards
87. Comparable offers.—See s. 125 (2)—(1) In addition to
any other circumstances contemplated in section 125 (2), a compa-
rable offer must be made if—
(a) a mandatory offer has been required in terms of section
123, including a mandatory offer that is required to be
made as a result of a reacquisition of securities in terms of
section 48 or section 114; and
(b) the offeree regulated company has more than one class of
security in issue, which are required to be dealt with in
terms of section 125.
(2) Comparable offers are required for all classes of issued
security that have voting rights or could have voting rights in the
future, including options.
(3) All schemes that are cash settled and have no present or
future voting rights associated with them, such as cash settled
phantom schemes and cash settled share participation rights
schemes, which for settlement purposes, are dependent on a future
security price or value of securities (which are the subject of an
offer), must be taken account of and treated on an equitable basis,
relative to the classes of security that are subject to a comparable
offer.
(4) The offer consideration(s) in a comparable offer is to be
determined by the offeror taking account of the class of security to
which the comparable offer is to be made.
(5) The fair and reasonable opinion given by the independent
expert and the independent board opinion regarding the compara-
ble offer must have the same opinions regarding fairness and
reasonableness as the respective fair and reasonable opinions given
by the independent expert and the independent board regarding the
offer which gave rise to the comparable offer.
88. Partial Offers.—See s. 117 (1) (h) (i), 119 (6), 120 and
125—(1) A partial offer is exempt from compliance with Part B
and Part C of Chapter 5 of the Act and this Chapter—
(a) if—
(i) when making the offer, the offeror beneficially
holds securities of a class entitling the offeror to
exercise less than the prescribed percentage of vot-
ing rights; and
(ii) the offer is limited to a number of the relevant
securities; and
(iii) if the offer is successfully completed, the offeror
will still be able to exercise less than the prescribed
percentage of voting rights; or
(b) if—
(i) when making the offer, the offeror holds securities
entitling the offeror to exercise voting rights equal
to or in excess of the prescribed percentage, but
less than 100% of the voting rights; and
(ii) the offer is made for less than all the remaining
securities of the class; and
(iii) if the offer is successfully completed, the offeror
would still be able to exercise less than 100% of the
voting rights.
(2) In sub-regulation (3), “partial offer percentage” means the
percentage of securities of a particular class, which must be less
than 100 percent of those securities, that the offeror offers to
acquire on a pro rata basis from all holders of that class of securi-
ties.
(3) If, in response to a partial offer, a holder of securities tenders
a number of securities—
(a) equal to or less than the partial offer percentage, the
offeror must accept the tender in full; or
(b) greater than the partial offer percentage, the offeror must
accept—
(i) that number of securities in full equal to the partial
offer percentage; and
A-134
(ii) part or all of the excess tendered balance accepted
on an equitable basis, provided that the aggregate
of the acceptances shall not exceed the partial offer
percentage.
89. Fundamental Transactions.—See s. 112 (3), 113 (5) and
116 (1) (a) and (3)—(1) A notice of a shareholders meeting to
consider a special resolution, contemplated in section 112 (3) or
113 (5), must be published to the shareholders of the company
concerned, and delivered to them in accordance with regulation 7.
(2) A notice to creditors contemplated in section 116 (1) (a)
must be published to the known creditors of the company con-
cerned, and delivered to them in accordance with regulation 7.
(3) A Notice of Amalgamation or Merger contemplated in sec-
tion 116 (3) must be in Form CoR 89.
(4) If an amalgamation or merger, as defined in section 1, re-
sults from—
(a) the acquisition by one company of all or the greater part
of the assets or undertaking of a second company, as con-
templated in sections 112 and 117 (1) (c) (i), any provi-
sion of this Chapter applicable to such an acquisition
applies equally to that amalgamation or merger; or
(b) a scheme of arrangement, as contemplated in section 114
and 117 (1) (c) (iii), any provision of this Chapter appli-
cable to such a scheme of arrangement applies equally to
that amalgamation or merger.
90. Independent Experts.—See s. 112, 113, 117 (1) (c) (i), (ii)
and (v) and 118 (3)—(1) In any transaction contemplated in
section 117 (1) (c) (i), (ii), (v) or (vi), section 125 (2), or in regula-
tion 88, the offeree regulated company must—
(a) request a ruling from the Panel whether an independent
expert must be retained to report on the proposed transac-
tion; and
(b) retain such an independent expert if the Panel so requires.
(2) Section 114 (2) and (3), read with the changes required by
the context, apply with respect to any transaction for which an
independent expert is required in terms of this regulation.
(3) In any circumstances in which an independent expert is
required in terms of the Act or this Chapter—
(a) the independent expert must—
(i) be able to show that it is independent, and will
reasonably be perceived to be independent, taking
into account any other existing relationships and
appointments; and
(ii) satisfy the Panel that it is competent to act in
respect of the offer, which the Panel may challenge
if it is not satisfied; and
(b) despite any prior approval given by the Panel, the Panel
may at any time, either itself or in response to written rep-
resentations by holders of relevant securities, require the
appointment by either or both of the offeror and the offer-
ee regulated company of a further independent expert ap-
proved by the Panel.
(4) An independent expert’s valuation of the offeree regulated
company must be performed in accordance with generally accepted
valuation approaches and methods in use in the market from time
to time including—
(a) capitalisation, income or cash flow approach which relies
on the ‘value-in-use’ principle and requires determination
of the present value of future cash flows over the useful
life of the asset or business;
(b) comparative or market approach that relies on the princi-
ple of ‘willing buyer, willing seller’ and requires that the
amount obtainable from the sale of an asset or undertak-
ing is determined as if in an arm’s-length transaction; and
(c) cost approach that relies on historical amounts spent on
the asset or undertaking.
(5) In respect of mineral companies, the valuation approach and
methodology must comply with the SAMVAL code.
A-135 Companies Act No. 71 of 2008
(6) The content of the independent expert’s fair and reasonable
opinion in relation to an offer must, among other things, include—
(a) the date of the fair and reasonable opinion, and confirma-
tion that the fair and reasonable opinion has been given to
the relevant board concerned for the sole purpose of as-
sisting the relevant board in forming and expressing an
opinion for the benefit of holders of relevant securities,
excluding the offeror;
(b) a statement that the fair and reasonable opinion may be
included, in whole or in part, in any required regulatory
announcement or documentation;
(c) a clear expression of opinion dealing with the fairness and
reasonableness of the offer consideration(s) in regard to
holders of relevant securities, excluding the offeror;
(d) a detailed list of all source documentation used and
reviewed and work done in accordance with the scope of
the appointment;
(e) a statement of the valuation approach adopted, the
methods employed and all material assumptions underly-
ing the valuation approach and methodology;
(f) a range of final valuation values attributable to the
relevant securities or assets and a most likely value used
as the core number for purposes of the expression of the
opinion;
(g) any other valuation or pricing approaches and methodol-
ogies used in corroborating the expression of the opinion
e.g. the comparative approach or cost approach;
(h) the fee payable or paid to the independent expert for the
fair and reasonable opinion and confirmation that the fee
is not contingent on or related to the outcome of the offer;
and
(i) a declaration of the independence and competence of the
independent expert, which may require evidential justifi-
cation if the Panel is not satisfied with the declaration.
91. Application to Private Companies.—(1) The minimum
percentage to be prescribed in terms of section 118 (2) is 10%.
(2) For the purposes of Part B and Part C of Chapter 5 of the
Act and this Chapter—
(a) the percentage prescribed in sub-regulation (1) is to be
applied—
(i) at the time of each qualifying transfer, excluding
any transfers between or among related or inter-
related persons;
(ii) taking account of the number of securities trans-
ferred compared to the number of securities in is-
sue, excluding any securities of a holding company
held its by subsidiaries; and
(iii) aggregating all such transfers immediately before
effecting an affected transaction; and
(b) a buy back of securities by a company that are cancelled
is not a transfer.
Part B
General Rules Respecting Negotiations and Offers
92. Information to offerors.—(1) If an offeree company or
potential offeree company has given any information, including
particulars of holders of relevant securities, to a preferred offeror or
potential offeror, the offeree company must, on request, give the
same information equally and as promptly to a less welcome, but
bona fide, offeror or potential offeror.
(2) The directors of an offeree regulated company are entitled
to—
(a) require that a less welcome potential offeror contemplated
in sub-regulation (1) demonstrate its good faith by requir-
ing the less welcome potential offeror to give equivalent
information concerning the less welcome potential offeror
to the offeree company, at the same time the information
is to be furnished by the offeree regulated company; and
Companies Regulations
(b) determine whether any approach is on a nominee basis for
either an undisclosed ultimate offeror or an undisclosed
ultimate indirect beneficial owner.
(3) If an approach is on a nominee basis, as contemplated in
sub-regulation (2) (b), the undisclosed ultimate offeror or indirect
beneficial owner, as the case may be, is the less welcome potential
offeror.
93. Solicitation campaigns.—At any time after a firm inten-
tion announcement has been made, only previously published
information that remains accurate may be provided to a person
conducting a solicitation campaign by which holders of an offeree
regulated company are contacted regarding an offer, or their
acceptance or voting in respect of an offer.
94. Consensual negotiations.—(1) If a potential offeror and a
regulated company are negotiating on a consensual basis—
(a) an offer in good faith must be regarded as being immi-
nent; and
(b) section 126 applies to the regulated company from the
beginning of those negotiations.
(2) Until a firm intention announcement is published, a regulat-
ed company that is the subject of rumour, speculation or a caution-
ary announcement published by a potential offeror, may presume
that an offer in good faith is not imminent, unless the regulated
company is consensually negotiating with a potential offeror.
95. Confidentiality and Transparency.—(1) All negotiations
between an independent board and an offeror must be kept confi-
dential.
(2) Confidentiality must be observed before a cautionary an-
nouncement, or a firm intention announcement, containing “price
sensitive information” is made.
(3) An independent board should disclose as much detailed
information as soon as possible concerning an offer.
(4) An independent board must do all things necessary to satisfy
itself that an offeror is able to perform in terms of an offer.
(5) An independent board must ensure that all material changes
to previously announced specific information concerning an offer
is immediately announced.
(6) Price sensitive information may be provided to select per-
sons on a confidential basis.
(7) If there a leak of price sensitive information, or a reasonable
suspicion that such a leak has occurred, that information must
immediately be disclosed in a cautionary announcement.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “If there a leak” is intended to be “If
there is a leak”.)
(8) In order for any incorrect statement made in relation to an
offer to not become enforceable or binding, the statement must
immediately be repudiated by all reasonable means by the person
or persons who made it.
96. Conditional Offers.—An offer must not be subject to any
condition—
(a) that depends solely on subjective judgment by the
directors, or equivalent, of the offeror; or
(b) if the directors, or equivalent, of the offeror are able to
control whether or not the condition will be fulfilled.
97. Variation in offers.—(1) The offeror and its concert par-
ties must obtain the approval of an amended offer, as a partial
offer, by the independent holders of more than 50% of the general
voting rights of all issued securities of the offeree regulated
company if—
(a) the offeror’s original offer, or partial offer in terms of
section 125 (3) of the Act—
(i) was subject to any other conditions; and
(ii) if successfully implemented, would result in a
beneficial interest entitling an offeror and its con-
cert parties to either—
(aa) exercise voting rights exceeding the pre-
scribed percentage for the first time; or
Companies Regulations Auditing: Legislation and Standards
(bb) exercise all voting rights of a particular class
of security or all voting rights of all securi-
ties issued not already held, if voting rights
exceeding the prescribed percentage were
held before the offer; and
(b) the offer has been amended through any other conditions
being varied by a regulatory authority, and that variation
requires or permits the acquisition of a lesser beneficial
interest than originally included in the offer.
(2) If the approval required by sub-regulation (1) is not ob-
tained—
(a) the offeror and its concert parties must, within three
months, dispose of that number of relevant securities that
will reduce their beneficial interest voting rights to—
(i) a level less than the prescribed percentage; or
(ii) the beneficial interest level that existed before the
original offer was made, and
(b) during the three month period of disposal referred to in
paragraph (a), the offeror and its concert parties are enti-
tled to exercise only the voting power that does not ex-
ceed the levels contemplated in paragraph (a).
98. Dealings disclosure and announcement.—See s. 119 (1)
(a) (v)—(1) In this regulation, ‘allowable dealings’ does not
include any dealing that is in contravention of section 127 (2) or
any other provision of the Act.
(2) During an offer period, allowable dealings in securities of
the offeror or the offeree regulated company by an offeror or the
offeree regulated company, or by any person in concert with either
the offeror or the offeree regulated company, must be disclosed to
the Panel on form TRP 98 when effected—
(a) by a person with a beneficial interest for that person’s
own account, or for another person in terms of any form
of mandate; or
(b) on an agency basis.
(3) A person who is required to make a disclosure as contem-
plated in sub-regulation (2) must make an announcement at the
same time, which announcement must set out the details disclosed
in Form TRP 98 as filed.
Part C
Announcements and Offers
99. The approach.—(1) An approach with a view to an offer
being made, or an offer, must be made only to the board of the
offeree regulated company.
(2) If an offer, or an approach with a view to an offer being
made, is made by a person other than the ultimate offeror or
potential offeror, the person making the offer must disclose the
identity of the ultimate offeror or potential offeror, when the offer
is put forward to the board of the offeree regulated company.
(3) The board of an offeree regulated company that has been
approached with a view to an offer being made may require
reasonable evidence that the offeror is, or will be, in a position to
implement the offer in full.
(4) The board of an offeree regulated company that has received
an offer must be provided with evidence, acceptable to the board,
that the offeror is in a position to implement the offer in full.
100. Cautionary and other announcements.—See s. 119 (1)
(a) (iii)—(1) Despite the fact that an an offeree regulated company
may not be listed, “cautionary announcement” has the meaning
set out in the JSE Listings Requirements, as amended from time to
time, but a reference in those listing requirements to “material price
sensitive information” must be regarded as referring to “price
sensitive information” that would concern a possible or proposed
offer that is the subject of negotiations.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “Despite the fact that an an offeree” is
intended to be “Despite the fact that an offeree”.)
A-136
(2) The responsibility to publish a cautionary announcement
rests with the offeror, or the offeree regulated company, as appli-
cable.
101. Firm intention announcement.—(1) A firm intention
announcement is an announcement that must be made when a
mandatory offer is required or when an offeror has communicated
a firm intention to make an offer and is ready, able and willing to
proceed with the offer.
(2) When a firm intention announcement has been made, the
offeror must proceed with the offer.
(3) A firm intention announcement must be made immediately
when—
(a) the board of the offeree regulated company has received a
formal written offer; or
(b) a mandatory offer is required to be made in terms of
section 122 (1), read with section 123.
(4) The responsibility for making a firm intention announce-
ment under—
(a) sub-regulation (3) (a) rests with the independent board,
failing which, with Panel approval, it rests with the offe-
ror; or
(b) sub-regulation (3) (b) rests with the offeror.
(5) Each firm intention announcement must state—
(a) that the offeror, and where appropriate, the independent
board, accepts responsibility for the information con-
tained in the firm intention announcement;
(b) that to the best of their respective knowledge and belief,
the information is true; and
(c) where appropriate, that the firm announcement does not
omit anything likely to affect the importance of the in-
formation.
(6) If it is proposed that any director will be excluded from a
statement required by sub-regulation (5), the omission, and the
reasons for it, must be stated in the firm intention announcement.
(7) A firm intention announcement must contain the following
information—
(a) the identity of the offeror and any concert parties;
(b) the terms of the offer, including, but not limited to—
(i) the type of offer proposed and mechanics of
implementation;
(ii) the class or classes of securities affected;
(iii) the consideration offered, and if the offer is for
securities, the consideration offered per security,
for each class;
(iv) pro forma earnings and asset value per offeree
regulated company security, if the offer considera-
tion consists wholly or partly in offeror securities;
(v) any conditions as to acceptance, or other conditions
of the offer;
(vi) details of the cash guarantee or cash confirmation
provided to the Panel in conformity with regulation
111 (4);
(vii) confirmation that the offeror has sufficient securi-
ties available to settle any consideration payable in
securities, or has a condition as to acceptance re-
garding an increase of authorised share capital; and
(viii) estimated offeror offer circular or combined
circular posting date, and where known, other per-
tinent dates relating to the offer;
(c) if known, the details of any beneficial interest in the
offeree regulated company—
(i) held or controlled, directly or indirectly—
(aa) by the offeror;
(bb) by any person(s) acting in concert with the
offeror; or
(cc) by any other person in respect of which the
offeror has received an irrevocable commit-
ment to accept or vote in favour of the offer;
A-137 Companies Act No. 71 of 2008
(ii) in respect of which the offeror holds an option to
purchase; or
(iii) in respect of which any person acting in concert
with the offeror holds an option to purchase.
102. General timeline of offers.—See s. 119 (1) (b) (ii)—
(1) In this regulation, and in regulations 103 to 106, “general
offer” means an offer contemplated in section 117 (1) (c) (v).
(2) An offeror’s offer circular, or combined offer circular, must
be posted within—
(a) 20 business days after the date of publication of a firm
intention announcement; or
(b) such longer period allowed by the Executive Director, on
good cause shown.
(3) The opening date of a general offer, mandatory offer or
partial offer is the day after the date of posting of the offeror’s offer
circular, or combined offer circular, as the case may be.
(4) A general offer, mandatory offer or partial offer must remain
open for at least 30 business days after the opening date.
(5) Subject to sub-regulations (6) and (7), a general offer, man-
datory offer or partial offer must state—
(a) a closing date;
(b) an initial closing date, with a right to extend; or
(c) an objective method of determining the closing date.
(6) If the offeree regulated company is listed on an exchange,
the closing date must be a Friday.
(7) With respect to an exchange timetable regarding offers, the
closing date of an offer is also the last day to trade, and holders
accordingly—
(a) are entitled to acquire securities up to and including the
closing date of an offer; and
(b) are able to accept an offer in respect of all securities
beneficially held, or acquired, up to and including the
closing date of an offer.
(8) An offer relating to a section 117 (1) (c) (i) disposal, section
117 (1) (c) (ii) amalgamation or merger or section 117 (1) (c) (iii)
scheme of arrangement must state—
(a) an expected effective or operative date; or
(b) an objective method of determining the effective or
operative date.
(9) Within 20 business days after an offeror offer circular has
been posted, the independent board must post the offeree response
circular.
(10) On the 45th business day after the day upon which a condi-
tional general offer opened an announcement shall be made by no
later than 16:30 as to whether the offer is unconditional as to
acceptances, or has terminated.
(11) No announcement revising an offer consideration may be
posted on or after the 45th business day after an offer has opened
unless the offer is unconditional as to acceptances.
(12) The consideration must be settled within six business days
after the later of—
(a) the offer being declared wholly unconditional; and
(b) acceptance thereof by a holder.
(13) An offer may not be implemented or given effect to until—
(a) a request has been made to the Panel for a compliance
certificate; and
(b) the Panel has issued a compliance certificate.
103. Extension of offers.—(1) A general offer, mandatory
offer or partial offer may be extended—
(a) by an announcement made before the initial closing date
and time of the offer; but
(b) only if—
(i) the right to do so has been specifically reserved in
the offeror offer circular or combined circular; and
Companies Regulations
(ii) that right has not subsequently been withdrawn by
the offeror.
(2) If “no extension statements” in relation to an offer are in-
cluded in any announcement, circular or statement by or on behalf
of an offeror, its directors or equivalent, or its advisers, and not
withdrawn immediately if incorrect, then the offer may not subse-
quently be extended.
(3) An offeror is not entitled to extend a general offer after the
45th business day after the opening of that general offer, irrespec-
tive of whether the offer consideration is revised, or not.
(4) An general offer contemplated in sub-regulation (3) termi-
nates unless—
(a) it has been declared unconditional as to acceptance before
midnight on the 45th business day after the opening of the
offer;
(b) the independent board has consented to an extension; or
(c) a firm intention of a competing offer has been announced.
(5) If a firm intention of a competing offer has been announced,
as contemplated in sub-regulation (4) (c), the original offeror will
be entitled from time to time to extend the time periods of its offer
to coincide with the time periods applicable to the competing
offeror’s offer.
104. Revision of offers.—(1) An offer consideration may be
revised only by announcing—
(a) an increase in the original announced offer consideration;
or
(b) an alternate consideration to the original announced offer
consideration.
(2) A revised offer consideration announcement contemplated
in sub-regulation (1) must—
(a) comply with the content requirements of a firm intention
announcement; and
(b) be posted to the offeree regulated company’s relevant
holders.
(3) If an offer consideration is revised, the offer must remain
open for at least 15 business days after the date on which the
revised offer consideration is announced.
(4) If an offer consideration is revised, all holders of relevant
securities who have accepted the initial offer consideration are
entitled to revise their initial acceptance and elect to receive the
revised offer consideration.
(5) An independent board must announce a response to a re-
vised offer consideration announcement within five business days,
setting out in detail its opinion, and the opinion of its independent
expert, concerning the revised offer consideration and any other
details the board considers to be pertinent.
(6) If “no increase statements” in relation to an offer are includ-
ed in any announcement, circular or statement by or on behalf of an
offeror, its directors or equivalent, or its advisers, and not with-
drawn immediately if incorrect, then the offer consideration may
not subsequently be increased.
(7) For the purpose of sub-regulation (6), “no increase state-
ments” in relation to the offer consideration includes, but is not
limited to, a statement that—
(a) “the offer consideration will not be further increased”; or
(b) “our offer consideration remains at x cents per security
and it will not be raised”.
105. Offers becoming unconditional.—(1) When an offer
becomes unconditional as to acceptances, the offeror must an-
nounce that fact within one business day, and the announcement
must include the total number and percentage of securities—
(a) for which acceptances have been received; and
(b) which are held by the offeror at that time.
(2) A holder who has accepted a general offer may withdraw
that acceptance, by notice in writing delivered to the offeror, if the
general offer—
(a) has not been declared wholly unconditional by midnight
on the 65th business day after it opened;
Companies Regulations Auditing: Legislation and Standards
(b) has been declared unconditional as to acceptances; and
(c) still remains subject to other conditions.
(3) Subject to sub-regulation (4), a holder who has withdrawn
an acceptance, as contemplated in sub-regulation (2), may again
accept the general offer in the manner provided in terms of that
offer at any time before the closing date of the general offer, unless
the general offer has been terminated.
(4) A person may not withdraw acceptance and subsequently re-
accept a particular offer more than once.
(5) After a general offer, mandatory offer or partial offer has
become unconditional in all respects—
(a) the offer must be announced as being unconditional,
within one business day; and
(b) the now unconditional offer must remain open for at least
10 business days after the announcement required by par-
agraph (a).
106. Circulars.—(1) An offeror offer circular relating to a
general offer, mandatory offer or partial offer is the responsibility
of the offeror.
(2) A combined offer circular relating to a general offer, manda-
tory offer or partial offer is the responsibility of both the offeror
and the independent board.
(3) An offer circular relating to a section 117 (1) (c) (i) disposal,
section 117 (1) (c) (ii) amalgamation or merger, or section
117 (1) (c) (iii) scheme of arrangement, is the—
(a) responsibility of the independent board, if the proposed
affected transaction is for acquisition of 100% of the ben-
eficial interest in, or 100% of the assets or undertaking of,
the offeree company, by an offeror payable in cash or
cash equivalents;
(b) responsibility of the independent board and the offeror, if
the proposed affected transaction is for acquisition of
100% of the beneficial interest in, or 100% of the assets
or undertaking of, the offeree company, by an offeror
payable in offeror securities; or
(c) responsibility of the independent board and the offeror, if
the proposed affected transaction is for acquisition of less
than 100% of the beneficial interest in, or less than 100%
of the assets or undertaking of, the offeree company, by
an offeror payable in offeror securities.
(4) An offeror offer circular must contain—
(a) the same disclosure contents as required in—
(i) regulation 101 (7) (a); and
(ii) regulation 101 (7) (b), excluding pro forma per
security disclosure;
(b) the reasons for the offer and the offeror’s intentions
regarding the continuation of the business of the offeree
regulated company and the continuation in office of the
directors of the offeree regulated company;
(c) statements of direct and indirect beneficial interests in or
holdings of securities, or actions to be effected, or a nega-
tive statement if there are no such interests or holdings—
(i) by the offeror, including separate disclosure of
concert party holdings, in the offeree regulated
company;
(ii) by directors or equivalent of the offeror in the
offeror’s securities and in any of the offeree regu-
lated company’s securities;
(iii) in the offeror and in the offeree regulated company
by any person who, before the offeror offer circular
was posted, was irrevocably committed—
(aa) to accept or to reject the offer; or
(bb) to vote in favour of or against the offer,
together with the name of each such person;
(d) whether and in what manner the remuneration of the
offeree regulated company’s directors will be affected by
the offer or by any other associated transaction, or a
statement that there will be no such effect, if that is the
case;
A-138
(e) a statement indicating whether or not any agreement
exists between the offeror, or any person acting in concert
with the offeror, and—
(i) the offeree regulated company;
(ii) any of the directors of the offeree regulated compa-
ny, or persons who were directors within the pre-
ceding 12 months of the offeree regulated
company; or
(iii) holders of offeree regulated company securities, or
persons who were holders thereof within the pre-
ceding 12 months, if the agreement is considered to
be material to a decision regarding the offer to be
taken by the holders or offeror holders;
and material terms of any such agreement;
(f) all pertinent dates and times having relevance to a full
understanding of the offer;
(g) the fair and reasonable opinion provided in conformity
with the applicable disclosure requirements in regulation
90;
(h) a statement to the effect that settlement of the offer
consideration to which any holder is entitled under the of-
fer will be implemented in full in accordance with the
terms of the offer without regard to any lien, right of set-
off, counterclaim or other analogous right to which the
offeror may otherwise be, or claim to be, entitled against
such holder; and
(i) a statement—
(i) that the offeror accepts responsibility for the
information contained in the offeror offer circular;
and
(ii) that to the best of the offeror’s knowledge and
belief, the information contained in the offeror of-
fer circular is true; and
(iii) where appropriate, that the circular does not omit
anything likely to affect the importance of the in-
formation.
(5) If any director or equivalent of the offeror is excluded from
the statement required by sub-regulation (4) (i), the circular must
note that omission and the reasons for it.
(6) In addition to the requirements of sub-regulations (4) and
(5), a circular must also include—
(a) the details, including volumes, dates and prices, of any
dealings in the securities in question, if any party whose
holdings of securities are required to be disclosed by this
regulation has dealt for value in the securities in question
during the period beginning six months before the offer
period and ending with the latest practicable date before
the posting of the offeror offer circular;
(b) the offeror board opinion after taking account thereof, if
the offer consideration comprises wholly or partly offeror
securities as contemplated in regulation 110 (10);
(c) a description of the financing arrangements entered into
by the offeror, including capital amount, interest rate, se-
curity given, period and repayment terms, if the offer is
highly-leveraged, such that, as a result of the offer, the of-
feror will incur a high level of debt and the payment of
interest, repayments or security for the debt will substan-
tially depend on the business of the offeree regulated
company; and
(d) if the offer consideration consists wholly or partly of
offeror securities—
(i) the annual financial statements of the offeror for
the last three financial periods; and
(ii) an audit reviewed pro forma balance sheet and pro
forma income statement, and pro forma earnings
and assets per security, as at the last financial year
end, assuming a 100% successful offer result.
A-139 Companies Act No. 71 of 2008
(7) An offeree response circular must contain the following
disclosures and information by the independent board—
(a) the independent board’s views on the offer and offer
consideration, and its views of any other offers received
during the offer period or within six months before the of-
fer period;
(b) a comment on the statements contained in the offeror offer
circular, insofar as is relevant;
(c) the following financial information—
(i) the annual financial statements of the offeree
regulated company for the last three financial years
and, if completed, the latest interim results, in IFRS
interim reporting format without audit review; and
(ii) an auditor reviewed pro forma income statement
and balance sheet, as at the last financial year end
of the offeree regulated company, and the pro for-
ma effects per offeree regulated company security,
if the offeree regulated company holders will con-
tinue to hold some form of security after the offer;
(d) statements of direct and indirect beneficial interests in, or
holdings of, securities, or actions to be effected—
(i) by the offeree regulated company in the offeror;
(ii) by directors of the offeree regulated company in the
offeror and in any of the offeree regulated compa-
ny’s securities;
(iii) in the offeror and in the offeree regulated company
by any person who, before the posting of the offer-
ee response circular, was irrevocably committed—
(aa) to accept or to reject the offer; or
(bb) to vote in favour of or against the offer,
together with the name of each such person;
(iv) the details, including volumes, dates and prices of
any dealings by any party whose holdings of secu-
rities are required to be disclosed by this regulation,
if that person has dealt for value in the securities in
question during the period beginning six months
before the offer
period and ending with the latest practicable date
before the posting of the offeree response circular;
or a negative statement if there are no such holdings;
(e) material particulars of any service contract of any director
or proposed director of the offeree regulated company
with the offeree regulated company, or with any of its
subsidiaries, or a statement that there are no such con-
tracts, if that is the case;
(f) particulars of service contracts entered into or amended
within six months before the date of the offer period, or a
statement that there are no such contracts, if that is the
case;
(g) a statement indicating whether or not any agreement
exists between the offeree regulated company and—
(i) the offeror or any of its concert parties;
(ii) any of the directors or equivalent of the offeror, or
persons who were directors or equivalent within the
preceding 12 months; or
(iii) holders of offeror securities or a beneficial interest
in the offeror, or persons who were holders thereof
or interested therein within the preceding 12
months if the agreement is considered to be materi-
al to a decision regarding the offer to be taken by
the holders or offeror holders;
and material terms of any such agreement;
(h) the fair and reasonable opinion provided, in conformity
with the applicable disclosure requirements in regulation
90 and the independent board opinion after taking ac-
count thereof in compliance with regulation 110;
Companies Regulations
(i) a statement indicating whether the directors of the offeree
regulated company intend, in respect of their own benefi-
cial holdings of relevant securities, to accept or to reject
the offer, or to vote in favour of or against the offer; and
(j) a statement—
(i) that the independent board accepts responsibility
for the information contained in the offeree re-
sponse circular;
(ii) that to the best of its knowledge and belief, the
information contained in the offeree response circu-
lar is true; and
(iii) that the report does not omit anything likely to
affect the importance of such information.
(8) If any director of the independent board is excluded from a
statement required by sub-regulation (7) (j), the omission and the
reasons for it must be stated in the offeree response circular.
(9) A combined offer circular must contain the information
required by sub-regulations (4) to (8).
(10) Circulars subsequently sent to holders by an offeror or
offeree regulated company must contain details of any material
changes to previously published information contained in an earlier
circular, or a statement that there has been no material change.
(11) The following documents must lie for inspection at the
offeror or offeree regulated company’s registered office, or both, as
applicable, from the date of posting of a circular until the end of
the offer period—
(a) the auditor’s report and consent letter, if a forecast has
been made;
(b) the audit review opinion and consent letter, if pro forma
information has been disclosed;
(c) any document evidencing an irrevocable commitment to
accept or to reject or vote in favour of or against an offer;
(d) the respective memorandum of incorporation of the
offeree regulated company and of the offeror, if the offer
consideration includes offeror securities; and
(e) the issued annual financial statements for the last three
completed financial years of—
(i) the offeree regulated company; and
(ii) the offeror company, if the offer consideration
includes offeror securities;
(f) any document which is required to assist shareholders to
make an informed decision on the merits or demerits of
an affected transaction or offer and without limiting the
generality of the aforegoing, such documents includes
property valuation reports, Competent Persons Reports
compiled in accordance with SAMVAL code and Share
Incentive Scheme Trust Deeds.
Part D
Duties and Conduct of Offeree and Directors
107. Appointments to board of offeree.—From the date that a
firm intention announcement is published, until the offer is de-
clared unconditional, lapses or is withdrawn, the offeror and its
concert parties must not—
(a) appoint any person to the board of an offeree regulated
company; or
(b) exercise votes attaching to any securities held in the
offeree regulated company, unless the votes are cast—
(i) on a resolution dealing with a matter unrelated to
the offer; or
(ii) by proxy in accordance with regulation 111 (7).
108. Duties of directors of offeree regulated companies.—
(1) In this regulation, a reference to “offeror directors” applies
equally to trustees of trusts, partners of partnerships, members of a
consortium and similar personae, if the offeror is not a company.
(2) The directors of an offeree regulated company must not
resign from the board of the offeree regulated company from the
Companies Regulations Auditing: Legislation and Standards
date of the firm intention announcement until the offer is declared
unconditional, lapses or is withdrawn.
(3) In an offer, and during the entire course of the offer proceed-
ings—
(a) a director of the offeree regulated company, whether
executive or non-executive, must fully disclose to the of-
feree regulated company board, any conflict of interest or
potential conflict of interest, including its nature, in rela-
tion to such transaction immediately after the director be-
comes aware of the conflict; and
(b) the director concerned must assume a non-independent
status, and inform the Board to that effect, if the director
considers that the conflict or potential conflict may affect
the director’s independence.
(4) If a director does not make a declaration required by sub-
regulation (3) (b), and the board of the offeree regulated company
considers that director to be non-independent, the board must
declare the director to be non-independent.
(5) A non-independent director—
(a) may not tender an opinion or vote on any matter at a
meeting of the independent board; and
(b) must withdraw from any deliberations of the independent
board.
(6) Despite sub-regulation (5), the independent board may de-
termine the extent of a non-independent director’s attendance at
any of its meetings for a defined purpose, such as furnishing
factual information.
(7) A determination of independence affects primarily offeree
regulated company directors but may also be relevant to offerors.
(8) The following situations are relevant in determining inde-
pendence, but are not exhaustive—
(a) a director who is a member of the boards of both an
offeror and an offeree regulated company is presumed to
be conflicted and non-independent, but this presumption
is rebuttable at the instance of the independent board. If
such a director is declared independent by the independ-
ent board, the director is conflicted at the offeror
board/management level, and vice versa.
(b) a director of an offeree regulated company who holds
vested shares or options (“vested securities”) in the offer-
ee regulated company, which vested securities—
(i) have an intrinsic value (as defined by International
Financial Reporting Statements) which represents a
material amount of the director’s net worth; and/or
(ii) represent a material holding in the offeree regulated
company;
is presumed to be conflicted and non-independent, but the
presumption is rebuttable at the instance of the independ-
ent board.
(c) a director of an offeree regulated company is non-
independent if the director—
(i) holds unvested securities or options, and is offered
any substitute share or option scheme, separate of-
fer or acceleration of vesting periods that would
give rise to a benefit in terms of an offer; or
(ii) is partial to the outcome of an offer because of an
increased or decreased future benefit or loss of office
or employment.
(d) a director of an offeree regulated company who is related
or inter-related to any person who is, or would be consid-
ered, non-independent in relation to an offeree regulated
company concerned, in terms of an offer, is rebuttably
presumed to be non-independent.
(9) An independent board should comprise a minimum of three
independent directors, and if there are less than three independent
directors, other persons must be appointed to the independent
board by the existing board in accordance with the qualifications or
other requirements set out in the Act.
A-140
109. Requisite knowledge of independent board mem-
bers.—Each member of an independent board and, where applica-
ble, an independent board of an offeror, must—
(a) take all reasonable steps to receive all necessary information
to reach a fully informed opinion concerning an offer and
prepare it for relevant securities holders;
(b) meet with any appointed adviser to be briefed on all
details of the offer, including the offer mechanism, terms,
conditions and other relevant information;
(c) while respecting regulatory timetables,allow sufficient time
to discharge all duties and responsibilities, and resist haste
and pressured time deadlines; and
(d) become properly informed of the offeree regulated compa-
ny’s value per security or, where applicable, the offeror
company’s value per relevant security.
110. Independent board opinion.—(1) The independent
board of an offeree regulated company that is the subject of an
offer must obtain appropriate external advice from an independent
expert in the form of a fair and reasonable opinion.
(2) The independent board must take cognisance of the fair and
reasonable opinion received in forming its own opinion on an offer
consideration, which opinion must be communicated to the rele-
vant offeree regulated company’s security holders.
(3) In order to enable the independent board to express an opin-
ion on an offer and on the offer consideration, it must either—
(a) perform a valuation of the offeree regulated company’s
securities that are the subject of an offer, including an at-
tributable value per security if the offer is a disposal of
assets or undertaking in terms of section 112; or
(b) place reliance upon a valuation of the offeree regulated
company’s securities that are the subject of an offer, in-
cluding an attributable value per security if the offer is a
disposal of assets or undertaking in terms of section 112,
as performed by the appointed independent expert after
performing the requisite amount of work that satisfies the
independent board that it is justified in placing reliance
upon that valuation.
(4) An independent board must form a clear basis for the ex-
pression of an opinion to relevant holders dealing with value and
price compared to the consideration offered.
(5) If the consideration offered per security exceeds either the
estimated fair value per security or current traded price per securi-
ty, but not both, a split opinion clearly detailing the independent
board’s view is required, e.g. fair but not reasonable or reasonable
but not fair.
(6) The independent board must consider factors that are diffi-
cult to quantify, or are unquantifiable, and must disclose any such
factors, or state that there are none of which it is aware, and take
them into account in forming its opinion in respect of fairness.
(7) An independent board must form a view of a range of fair
value of the offeree regulated company securities, based upon an
accepted valuation approach.
(8) An offer with a consideration per offeree regulated company
security within the fair value range is generally considered to be
fair.
(9) An offer with an offer consideration per offeree regulated
company security above the offeree regulated company’s traded
security price at the time the offer consideration(s) per security was
announced, or at some other more appropriate identifiable time, is
generally considered to be reasonable.
(10) An offer with an offer consideration comprising or includ-
ing offeror company securities requires the independent board to
carefully consider the price and value per security of the offeror’s
securities relative to the offeree regulated company securities. In
such an offer, the offeror company must either—
(a) appoint an independent expert to provide a fair and
reasonable opinion concerning the offeror company’s rel-
evant securities value and price to the independent board
of the offeror company, the offeree regulated company’s
A-141 Companies Act No. 71 of 2008
independent board and to the offeree regulated company’s
independent expert, in which case the independent board
of the offeror company must express its opinion on the
offeror company’s securities value and price after consid-
ering the fair and reasonable opinion; or
(b) provide relevant information, as agreed between the
parties, concerning the offeror company, directly to the
independent board and to the offeree regulated company’s
independent expert, to enable the independent board and
the offeree regulated company’s independent expert to
consider and opine on that information.
(11) If the independent board is not unanimous in its opinion, all
differing opinions of members, including reasons, must be provid-
ed to holders.
111. Securities dealings, pricing, confirmations and general
requirements.—(1) Except for prohibited acquisitions in terms of
section 127 (2) (b), an acquisition of securities in an offeree
regulated company, that is or may be the subject of an offer, may
be made before or during an offer period without Panel consent.
(2) If an offer is made and the offeror, or any person acting in
concert with the offeror, has acquired relevant securities in the
offeree regulated company within the six month period before the
commencement of the offer period, the offer consideration, per
security, to the offeree regulated company’s holders of securities of
the same class must be—
(a) identical to, or where appropriate, similar to, the highest
consideration paid, excluding commission, tax and duty,
for those acquisitions; and
(b) accompanied by a cash consideration, at not less than the
highest cash consideration paid per security, excluding
commission, tax and duty, if securities that carry 5% or
more of the voting rights currently exercisable at a class
meeting of that class were acquired for cash.
(3) If the offeror considers that the highest consideration per
relevant security paid ought not to apply in a particular case, the
offeror may consult the Panel, which in its discretion may agree to
an adjusted offer consideration.
(4) When an offer consideration is wholly or partly in cash, the
offeror offer circular must include a statement, a copy of which
must have been provided to the Panel, including—
(a) an irrevocable unconditional guarantee issued by a South
African registered bank; or
(b) an irrevocable unconditional confirmation from a third
party that sufficient cash is held in escrow;
in favour of the holders of relevant securities for the sole purpose
of fully satisfying the cash offer commitments.
(5) A guarantee or confirmation contemplated in sub-regulation
(4) must be written in a form that empowers the Panel to exercise
the guarantee or confirmation, in whatever manner is required, on
behalf of all holders of relevant securities once all conditions have
been satisfied, if the offeror and its concert parties have failed to
pay the cash consideration owing to holders of relevant securities
entitled thereto by the due date.
(6) If, after the firm intention announcement and before the
offer closes, an offeror or any person acting in concert with it
acquires relevant securities in the offeree regulated company at
above the offer consideration per relevant security, the offeror
must—
(a) increase the offer consideration per security to not less
than the highest consideration paid for the securities so
acquired; and
(b) immediately announce the revised offer consideration per
relevant security and relevant dates, which announcement
must be posted to the offeree regulated company’s rele-
vant securities holders.
(7) An offeror may require a holder of relevant securities of an
offeree regulated company, to give the offeror a proxy to vote in
Companies Regulations
respect of those securities, as a stated term of acceptance, until the
acceptance is withdrawn in terms of Regulation 105, and such a
proxy may be exercisable—
(a) on all matters in order to satisfy any announced condi-
tions of the offer, if the offer is conditional; or
(b) on all matters, if the offer is unconditional.
(8) Parties to an offer must take care not to issue statements
that, while not factually inaccurate, may mislead holders of
relevant securities and the market or may create uncertainty.
(9) If a profit forecast or estimate is made on or after the date of
publication of a firm intention announcement—
(a) by an offeree regulated company, involved in an offer, on
itself or on the offeror; or
(b) by an offeror, involved in an offer, on itself or on the
offeree regulated company,
any such forecast must be prepared in accordance with the Forecast
Guide and reported upon by an auditor, or a similar professional
registered with regulatory or professional body for auditors in
another jurisdiction.
(10) For the purpose of sub-regulation (9), “forecast(s)”—
(a) has the meaning defined in the Revised Guide on Fore-
casts issued by the South African Institute of Chartered Ac-
countants (“SAICA”), as amended from time to time (“the
Forecast Guide”)); and
(b) includes trading statements, general forecasts and specific
forecasts as defined in the JSE Listings Requirements, as
amended from time to time.
112. Acquisition of own securities by offeree.—During an
offer period, an offeree regulated company and its subsidiary
companies may not acquire the offeree regulated company’s own
securities without—
(a) the prior written approval of the Panel, and the approval
of the holders of relevant securities; or
(b) in terms of a pre-existing obligation or agreement entered
into before the time contemplated in section 126 (1).
113. Re-investment.—(1) In terms of section 119 (6), the
Panel may grant an exemption from the application of section
127 (1) to the extent required to allow a re-investment alternative
of the consideration offered (“re-investment consideration”) only to
specific directors and management of an offeree regulated compa-
ny if—
(a) a fair and reasonable opinion from an independent expert
has been obtained stating that the re-investment consider-
ation is fair and reasonable to the independent sharehold-
ers of the offeree regulated company; and
(b) a majority vote of independent shareholders of the offeree
regulated company has been obtained in general meeting.
(2) An independent board must establish and disclose any benefits
offered to any offeree regulated company director or employee by an
offeror.
114. Sales during an offer period.—(1) The Panel must not
give consent for sales by an offeror, or by persons acting in concert
with the offeror, of offeree regulated company securities that are the
subject of a mandatory offer during the offer period.
(2) The Panel may give consent for sales only if—
(a) an offer, other than a mandatory offer, is being made; and
(b) the sale is not considered to be price manipulative, and is
considered justified in the circumstances.
(3) Proposed sales that have been consented to by the Panel
must be made at the offer price.
(4) The Panel must require notice of any proposed sales, during
an offer period, that it has consented to, which notice must be
published at least 24 hours in advance of selling, and must state—
(a) the name of the offeror, or any person(s) acting in concert
with the offeror, who proposes to sell;
(b) the number or maximum number of securities that may be
sold;
Companies Regulations Auditing: Legislation and Standards
(c) the price, including a ratio arising from a securities swap, at
which the number or maximum number of securities will
be sold, or alternatively, a statement that the price, includ-
ing a ratio arising from a securities swap, at which the secu-
rities are sold, will constitute the relevant offer price if an
offer is made;
(d) that neither the offeror nor any persons acting in concert
with the offeror may acquire any securities in the offeree
regulated company concerned during the offer period other
than as contemplated in an offer subject to Part B and Part
C of Chapter 5 of the Act and this Chapter; and
(e) that an announcement or announcements will be made
detailing the number and price, including a ratio arising
from a securities swap, of securities sold, within 24 hours
of any such sale being effected.
115. Waivers.—With respect to a waiver that is obtained in
terms of regulation 86, for a period of six months immediately
following the waiver—
(a) the acquirer;
(b) the subscriber or underwriter; and
(c) any person who is acting in concert with a person con-
templated in paragraphs (a) or (b),
must not make an offer to any holder of securities of the offeree
regulated company, or acquire any interest in any such securities,
on more favourable terms than those acquired or subscribed for in
terms of the transaction in question.
Part E
Takeover Panel Procedures
116. General Authority of the Panel.—(1) The Panel works
on a day-to-day basis through its Executive Director, deputy
Executive Director(s) and other officers and employees as contem-
plated in section 200.
(2) The Panel is empowered to co-operate with any regulatory
bodies in or outside South Africa for the purpose of obtaining or
furnishing information relevant to any aspect of the duties of the
Panel or of such other regulatory bodies.
(3) A quorum for any properly convened meeting of the Panel is
six members.
(4) If a quorum is not present when a meeting of the Panel is to
begin, that meeting is postponed for a period of not less than five
days, as determined by the Chairperson, and at the quorum for the
postponed meeting, will be three members.
(5) The provisions of section 73 (3), read with the changes re-
quired by the context, apply with respect to meetings of the Panel,
other than appeals or hearings, but a reference in that section to the
board of a company must be read as referring to the Panel.
117. All published documents to be approved.—See s. 119
(4) (a)—All documents relating to an Affected transaction as
defined under section 117 (c) of the Act, including announcements
and circulars must be approved by the Panel before being posted or
published.
118. Consultations and Rulings.—(1) Any person may ap-
proach the Panel through the Executive Director in accordance
with section 201.
(2) Advice given by the Executive Director during a consulta-
tion shall not constitute a Ruling of the Executive Director and as
such shall not be binding on the panel and cannot be used by any
party in any manner.
(3) A Ruling may be made by the Executive Director upon
written application, or after a hearing.
(4) In exercising the power to make a ruling, the Executive
Director must—
(a) follow the principle of audi alteram partem, unless it is
fair, reasonable and justifiable to do otherwise; and
A-142
(b) respect confidentiality, except to the extent that the
circumstances require otherwise.
(5) Rulings will be given on the assumption that all information
considered or provided is correct and complete.
(6) Rulings may be formally withdrawn by the Executive Direc-
tor or the Takeover Special Committee, in writing, if any infor-
mation considered or provided proves to be incomplete or incorrect
or if the parties by agreement applies that the ruling should be
withdrawn.
(7) If the Executive Director determines that a Ruling should be
made available to the public—
(a) the Executive Director may require publication of a
notice within a specified time stating that the Ruling has
been placed on the Panel website;
(b) the Ruling is suspended until the required notice has been
published; and
(c) if the person directed to publish the notice fails to do so
within the specified time, the Executive Director may
procure publication of the notice at the expense of that
person.
(8) Any person issued with a Ruling may apply to the Takeover
Special Committee for a hearing regarding the Ruling within—
(a) 5 business days after receiving that Ruling; or
(b) such longer period as may be allowed by the Committee
on good cause shown.
(9) After considering any representations by the applicant and
any other relevant information, the Takeover Special Committee
may confirm, modify or cancel all or part of a Ruling.
(10) If the Takeover Special Committee confirms or modifies
all or part of a Ruling, the applicant must comply with that Ruling
as confirmed or modified, within the time period specified in it.
(11) A decision by the Takeover Special Committee in terms of
this regulation is binding, subject to any right of review or appeal
by a court.
119. Procedure before the Executive Director and Takeover
Special Committee at hearings.—(1) At any hearing before the
Executive Director or the Takeover Special Committee—
(a) each party is entitled to—
(i) state its case in writing beforehand;
(ii) call witnesses to give relevant evidence, and
question any witness called by another party; and
(iii) present argument orally, in writing, or both;
(b) the Executive Director or Takeover Special Committee,
as the case may be, may call any evidence;
(c) neither the Executive Director nor the Takeover Special
Committee is obliged to apply the law of evidence;
(d) the Executive Director or the Takeover Special Commit-
tee, as the case may be, must follow the principle of audi
alteram partem, unless it is fair, reasonable and justifiable
to do otherwise; and
(e) the procedures may be conducted in as informal a manner
as is consistent with the requirements of the Act and this
regulation.
(2) The proceedings of hearings may be recorded at the discretion
of the Executive Director or Take-over Special Committee, as the
case may be, and any such recording may be transcribed, subject to
any conditions that the Executive Director or Takeover Special
Committee may prescribe.
(3) The Executive Director or chairperson of the Takeover Spe-
cial Committee, as the case may be—
(a) must preside and control the proceedings at hearings; and
(b) may prescribe the date and time of each hearing, and the
time within which any particular action is to be taken; and
(c) must give written decisions, supported by reasons and a
background summary of the matter, to the parties as soon
as reasonably practicable.
A-143 Companies Act No. 71 of 2008
(4) If the Executive Director or the Takeover Special Commit-
tee, as the case may be, determines that a decision should be made
available to the public—
(a) the Executive Director or the Takeover Special Commit-
tee may require publication of a notice within a specified
time, stating that the decision has been placed on the Pan-
el website; and
(b) if the person directed to publish the notice fails to do so
within the specified time the Executive Director may pro-
cure publication of the notice at the expense of that per-
son.
120. Reviews.—The provisions of regulation 119 (2), (3) and
(4), read with the changes required by the context, apply with
respect to the hearing of reviews by the Takeover Special Commit-
tee.
121. Reporting to Panel.—(1) A person who has acquired or
disposed of any beneficial interest in a class of securities of a
regulated company in a sufficient quantity that, as a result of that
transaction, the person’s total holdings of that class of securities
transitted a percentage threshold contemplated in section 122 (1)
must give the notice required by that section in Form TRP 121.1.
(2) For the purposes of Part B and Part C of Chapter 5 of the
Act and this Chapter reporting compliance by a company in terms
of—
(a) section 122 (3) (a) requires completion and delivery to
the Panel of Form TRF 121.2; and
(b) section 122 (3) (b) of the Act must take the form of an
announcement, as defined in Part B and Part C of Chapter
5 of the Act and this Chapter.
(3) If a regulated company becomes aware that a person has
failed to make a disclosure required by section 122, the regulated
company must lodge a complaint with the Panel in terms of Section
168 of the Act.
122. Panel Services, fees and levies.—(1) The services pro-
vided by the Panel fall into the following categories—
(a) providing verbal information and advice of a preliminary
and general nature on the provisions of Chapter 5 of the
Act and this Chapter;
(b) consultations in the course of which specific or general
advice may be provided orally or in writing, which in any
case is not binding and does not constitute a Ruling;
(c) Rulings issued in specific matters;
(d) examination of documents submitted for the Panel’s
approval; and
(e) hearings and reviews.
(2) The fees and levies chargeable for the Panel’s services are as
set out in Annexure 2 – Table CR 2A.
(3) If a charge is to be calculated on the basis of the value of
securities to be issued as consideration, that value will be computed
by reference to—
(a) the ruling market price of the relevant securities on the
JSE Limited on the business day immediately before the
firm intention announcement of the affected transaction;
or
(b) by reference to the estimate of the value of any unlisted
securities consideration offered.
(4) If the offeree regulated company is unlisted, a further fee of
R11 400 (VAT inclusive) will be payable.
(5) If there are alternative offers, the alternative offer with the
highest value will be used to calculate the value of the affected
transaction.
(6) Comparable offers require all classes of securities to be
included in the calculation of the consideration value for fee
purposes.
(7) For hearings or reviews before the Executive Director or the
Takeover Special Committee, the fees will be charged at the rate of
R3 420 (VAT inclusive) per billable hour, or part thereof;
Companies Regulations
(8) In addition to the fees and charges referred to above, the
following items may also be charged in respect of any particular
matter—
(a) the cost of serving any subpoenas;
(b) the cost of recording proceedings;
(c) the cost of any expert engaged by the Panel; and
(d) any other necessary or desirable disbursements incurred
in connection with the particular matter.
(9) Fees and charges must be paid—
(a) in the case of services referred to in sub-regulation
(1) (b), by the party requesting the service;
(b) in the case of services referred to in sub-regulation (1) (c),
by the party requesting the service;
(c) in the case of services referred to in sub-regulation (1) (d),
by the offeror or offeree regulated company, as the case
may be;
(d) in the case of services referred to in sub-regulation
(1) (e), by the applicant or appellant, but subject to a
discretion on the part of the Executive Director or the
Takeover Special Committee, as the case may be, to or-
der any other party involved in a hearing or review to
pay the fees and charges or to make a contribution in re-
spect of them.
(10) The Panel may in its discretion waive or reduce any fees or
charges.
(11) The Panel may require interest at the statutory rate to be
added to an offer consideration(s) per security if the offeror has
failed to open an offer or make payment in the time detailed in
regulation 102.
(12) The Panel shall not have power to order any party involved
in hearings to pay the costs of any other party, other than its own
costs.
CHAPTER 6
BUSINESS RESCUE
Part A
Business Rescue Proceedings
123. Notices to be issued by a company concerning its busi-
ness rescue proceedings.—See s. 129 (3), (4) (b) and (7), and s.
131 (8)—(1) A Notice of Commencement of Business Rescue
Proceedings, contemplated in section 129, must be in form CoR
123.1, and filed in accordance with section 129, together with a
copy of the board resolution to commence business rescue proceed-
ings.
(2) After filing its Notice of Commencement of Business Res-
cue Proceedings, the company must publish that Notice as required
in section 129 (3) (a), by—
(a) delivering a copy of the Notice and resolution to every
affected person in accordance with regulation 7; and
(b) conspicuously displaying a copy of the Notice—
(i) at the registered office of the company, the princi-
pal places of conducting the business activities of
the company and at any workplace where employ-
ees of the company are employed;
(ii) on any website that is maintained by the company
and intended to be accessible by affected persons; and
(iii) if it is a listed company, on any electronic system
maintained by the relevant exchange for the com-
munication and inter-change of information by and
among companies listed on that exchange.
(3) A Notice of Appointment of a Business Rescue Practitioner
by the company, as contemplated in section 129 (3), must be in
form CoR 123.2, and filed in accordance with section 129 (4) (a).
(4) After filing its Notice of Appointment of a Business Rescue
Practitioner, the company must publish a copy of that Notice as
required in section 129 (4) (b), by either—
(a) delivering a copy of the Notice to each affected person in
accordance with regulation 7; or
Companies Regulations Auditing: Legislation and Standards
(b) informing each affected person of the availability of a
copy of the Notice, in the manner contemplated in section
6 (11) (b) (ii) and regulation 6.
(5) A company whose board is required in terms of section 129
(7) to deliver a notice to affected persons advising that it has not
resolved to commence business rescue proceedings, must either—
(a) deliver a notice in Form CoR 123.3 to each affected
person in accordance with regulation 7; or
(b) inform each affected person of the availability of a copy
the Notice, in the manner contemplated in section 6 (11)
(b) (ii) and regulation 6.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “copy the Notice” is intended to be “copy
of the Notice”.)
(6) A company that is placed under business rescue proceedings
by a court order in terms of section 131, must notify each affected
person, as required by section 131 (8) (b), by—
(a) delivering a copy of the court order to every affected
person in accordance with regulation 7; and
(b) conspicuously displaying a copy of the court order—
(i) at the registered office of the company, the princi-
pal places of conducting the business activities of
the company and at any workplace where employ-
ees of the company are employed;
(ii) on any website that is maintained by the company
and intended to be accessible by affected persons;
and
(iii) if it is a listed company, on any electronic system
maintained by the relevant exchange for the com-
munication and interchange of information by and
among companies listed on that exchange.
124. Notices to be issued by affected persons concerning
court proceedings.—See s. 130 (3) (b) and 131 (2) (b)—An
applicant in court proceedings who is required, in terms of either
section 130 (3) (b) or 131 (2) (b), to notify affected persons that an
application has been made to a court, must deliver a copy of the
court application, in accordance with regulation 7, to each affected
person known to the applicant.
125. Notices to be issued by practitioner concerning busi-
ness rescue proceedings.—See s. 132 (3) (b), 141 (2) (b), 144 (3),
145 (1) (a), 146 (a), 151 (2) and 152 (8)—(1) A business rescue
practitioner who is required by section 132 (3) (b) to report to
affected persons on the progress of business rescue proceedings, or
required by section 141 (2) (b) to inform the court, the company
and affected persons as to the prospects for rescue of the company,
must prepare and file a Notice Concerning the Status of Business
Rescue Proceedings in Form CoR 125.1, deliver a copy of that
Notice to the court and to the company, and must either—
(a) deliver a copy of that notice to each affected person in
accordance with regulation 7; or
(b) inform each affected person of the availability of a copy
of that notice, in the manner contemplated in section
6 (11) (b) (ii) and regulation 6.
(2) A business rescue practitioner must give any notice to which
a person is entitled in terms of section 144 (3), 145 (1) (a), 146 (a)
or 151 (2), by—
(a) serving any such notice to the head office of a relevant
trade union, as required by section 144 (3) (a);
(b) either—
(i) delivering a copy of any such notice in accordance
with regulation 7 to any affected person entitled to
receive it, and who has not been served in terms of
paragraph (a); or
(ii) informing each affected person of the availability
of a copy of the notice, in the manner contemplated
in section 6 (11) (b) (ii) and regulation 6; and
(c) conspicuously displaying a copy of the notice—
(i) at the registered office of the company that is
undergoing business rescue proceedings, the princi-
pal places of conducting the business activities of
A-144
the company and any workplace where employees
of the company are employed;
(ii) on any website that is maintained by the company
and intended to be accessible by affected persons; and
(iii) if it is a listed company, on any electronic system
maintained by the relevant exchange for the com-
munication and interchange of information by and
among companies listed on that exchange.
(3) A business practitioner must publish a proposed business
rescue plan, as required by section 150 (5), by—
(a) informing each affected person of the availability of the
plan, in the manner contemplated in section 6 (11) (b) (ii)
and regulation 6;
(b) conspicuously displaying a notice of the availability of
the plan—
(i) at the registered office of the company that is
undergoing business rescue proceedings, the prin-
cipal places of conducting the business activities of
the company and at any workplace where employ-
ees of the company are employed;
(ii) on any website that is maintained by the company
and intended to be accessible by affected persons;
and
(iii) if it is a listed company, on any electronic system
maintained by the relevant exchange for the com-
munication and interchange of information by and
among companies listed on that exchange; and
(c) providing a free copy of the plan to any affected person
who requests such a copy.
(4) A Notice of Termination of Business Rescue Proceedings, as
contemplated in section 141 (2) (b) (ii), must be in Form CoR
125.2.
(5) A Notice of Substantial Implementation of a Business Res-
cue Plan, as contemplated in section 152 (8), must be in Form CoR
125.3.
(6) A business rescue practitioner who has filed a Notice of
Termination of Business Rescue Proceedings, or a Notice of
Substantial Implementation of a Business rescue Plan, must—
(a) conspicuously display a copy of the notice—
(i) at the registered office of the company that is
undergoing business rescue proceedings, the prin-
cipal places of conducting the business activities of
the company and at any workplace where employ-
ees of the company are employed;
(ii) on any website that is maintained by the company
and intended to be accessible by affected persons;
and
(iii) if it is a listed company, on any electronic system
maintained by the relevant exchange for the com-
munication and inter-change of information by and
among companies listed on that exchange; and
(b) either—
(i) deliver a copy of the notice to each affected person
in accordance with regulation 7; or
(ii) inform each affected person of the availability of a
copy of that notice, in the manner contemplated in
section 6 (11) (b) (ii) and regulation 6.
Part B
Business Rescue Practitioners
126. Accreditation of professions and licensing of business
rescue practitioners.—See s. 138 (1) (a), (2) and (3)—
(1) (a) The Commission must, when considering an application
for accreditation of a profession under section 138 (1), have due
regard to the qualifications and experience that are set as condi-
tions for membership of any such profession, and the ability of
such profession to discipline its members and the Commission may
revoke any such accreditation if it has reasonable grounds to
believe that the profession is no longer able to properly monitor or
discipline its members.
A-145 Companies Act No. 71 of 2008
(b) Sub-regulation (2) – (8) do not apply to any person who is
eligible to be appointed as a business rescue practitioner in terms of
section 138 (1) (a).
(2) A person may apply to the Commission for a license to serve
as a business rescue practitioner, as contemplated in section 138 (1)
(b), by filing Form CoR 126.1, together with the fee set out in
Table CR 1.
(3) When considering an application in terms of sub-regulation
(2), the Commission may require the applicant to provide—
(a) further information relevant to the application; or
(b) evidence in support of any facts set out in the application.
(4) Subject to sub-regulation (5), the Commission may issue a
business rescue practitioner’s licence to an applicant if the Com-
mission is satisfied that—
(a) the applicant is of good character and integrity; and
(b) the applicant’s education and experience are sufficient to
equip the applicant to perform the functions of a business
rescue practitioner.
(5) The Commission must not issue a license to an applicant
who is disqualified from appointment as a practitioner in terms of
section 138 (1) (c) or (d).
(6) After considering an application, the Commission must
either—
(a) issue a license as applied for in Form CoR 126.2;
(b) issue a conditional license, on terms that are reasonable
having regard to the applicant’s education and experi-
ence; or
(c) refuse to issue the license, by notice in writing to the
applicant, setting out the reasons for the refusal.
(7) The Commission, by notice in writing to a licensee—
(a) must revoke the license of a person who, after being
licensed, becomes disqualified from appointment as a
practitioner in terms of section 138 (1) (c) or (d); and
(b) may suspend or revoke a license if the Commission has
reasonable grounds to believe that the person is no longer
qualified to be licensed, or has contravened the conditions
of the license.
(8) An applicant whose application has been refused, or who
has been issued a conditional license, or a licensee whose license
has been suspended or revoked, may apply to the Tribunal to
review the Commission’s decision in the matter, and the Tribunal
may partially or entirely confirm or set aside the Commission’s
decision.
127. Restrictions on practice.—See s. 138 (3) (b)—(1) This
regulation—
(a) applies to any person who is eligible to be appointed as a
business rescue practitioner in terms of section 138 (1) (a)
and (b), irrespective of whether that eligibility arises in
terms of a license issued by the Commission, or otherwise
as contemplated in section 138 (1) (a); and
(b) is subject to any more restrictive condition imposed by
the Commission in terms of regulation 126 (6) (b), in the
case of a licensee contemplated in section 138 (1) (b).
(2) For the purposes of this regulation, and in Regulation 128—
(a) “business turnaround practice” means activities of a
professional nature engaged in before the effective date,
that are comparable to the functions of a business rescue
practitioner in terms of the Act;
(b) Companies undergoing business rescue proceedings are
classified in the following three groups—
(i) “large companies”, being any company, other than
a state owned company, whose most recent public
interest score, as calculated in terms of regulation
26 (2), is 500 or more;
(ii) “medium companies” being—
(aa) any public company whose most recent
public interest score, as calculated in terms
of regulation 26 (2), is less than 500; or
Companies Regulations
(bb) any other company, other than a state owned
company, whose most recent public interest
score, as calculated in terms of regulation 26
(2), is at least 100 but less than 500; and
(iii) “small companies” being any company, other
than a state owned or public company, whose
most recent public interest score, as calculated in
terms of regulation 26 (2), is less than 100; and
(c) Persons eligible to be appointed as practitioners are
classified in the following three groups—
(i) “senior practitioner” means a person who is
qualified to be pointed as a business rescue practi-
tioner in terms of section 138 (1) and who, imme-
diately before being appointed as practitioner for a
particular company, has actively engaged in busi-
ness turnaround practice before the effective date
of the Act, or as a business rescue practitioner in
terms of the Act, for a combined period of at least 10
years;
(ii) “experienced practitioner” being a person who is
qualified to be appointed as a business rescue prac-
titioner in terms of section 138 (1) and who, imme-
diately before being appointed as practitioner for a
particular company, has actively engaged in busi-
ness turnaround practice before the effective date
of the Act, or as a business rescue practitioner in
terms of the Act, for a combined period of at least 5
years;
(iii) “junior practitioner” means a person who is
qualified to be appointed as a business rescue prac-
titioner in terms of section 138 (1) and who, imme-
diately before being appointed as practitioner for a
particular company, has either—
(aa) not previously engaged in business turna-
round practice before the effective date of the
Act, or acted as a business rescue practitioner
in terms of the Act; or
(bb) has actively engaged in business turnaround
practice before the effective date of the Act,
or as a business rescue practitioner in terms
of the Act, for a combined period of less than
5 years.
(3) A junior practitioner—
(a) may be appointed as the practitioner for any particular
small company; but
(b) may not be appointed as the practitioner for any medium
or large company, or for a state owned company unless as
an assistant to an experienced or senior practitioner.
(4) An experienced practitioner—
(a) may be appointed as the practitioner for any particular
small or medium company; but
(b) may not be appointed as the practitioner for any large
company, or for a state owned company unless as an as-
sistant to a senior practitioner.
(5) A senior practitioner may be appointed as the practitioner
for any company.
128. Tariff of fees for business rescue practitioners.—See s.
143—(1) The basic remuneration of a business rescue practitioner,
as contemplated in section 143 (1), to be determined at the time of
the appointment of the practitioner by the company, or the court, as
the case may be, may not exceed—
(a) R1250 per hour, to a maximum of R15 625 per day,
(inclusive of VAT) in the case of a small company;
(b) R1500 per hour, to a maximum of R18 750 per day,
(inclusive of VAT) in the case of a medium company; or
(c) R2000 per hour, to a maximum of R25 000 per day,
(inclusive of VAT) in the case of a large company, or a
state owned company.
Companies Regulations Auditing: Legislation and Standards
(2) Sub-regulation (1) does not apply to, limit or restrict any
‘further remuneration’ for a business rescue practitioner, as
contemplated in section 143 (2) to (4).
(3) In addition to the remuneration determined in accordance
with section 143 (1) to (4), and this regulation, a practitioner is
entitled to be reimbursed for the actual cost of any disbursement
made by the practitioner, or expenses incurred by the practitioner
to the extent reasonably necessary to carry out the practitioner’s
functions and facilitate the conduct of the company’s business
rescue proceedings.
CHAPTER 7
COMPLAINTS, APPLICATIONS AND TRIBUNAL HEARINGS
Part A
Definitions Used in this Chapter
129. Definitions.—In this Chapter, unless the context indicates
otherwise—
(a) “Answer” means a document as described in regulation
143 and filed by a respondent;
(b) “applicant” means a person who submits an application
to the Tribunal in terms of the Act or this Chapter;
(c) “Application” means a request submitted to the Tribunal
in terms of the Act or these regulations;
(d) “complaint” means—
(i) a matter that has been submitted to the Commission
in terms of section 168 (1) (b);
(ii) a matter initiated by the Commission in terms of
section 168 (2); or
(iii) a matter that the Minister has directed the Commis-
sion to investigate, in terms of section 168 (3);
(e) “Complaint Referral” means an initiating document as
described in regulations 140 (3) and 141 for the purposes
contemplated in section 170 (1) (b);
(f) “Dispute Referral” means an initiating document as
described in regulation 132 for the purposes of referring a
dispute for alternative resolution to the Tribunal or an ac-
credited entity, as contemplated in section 166 (1);
(g) “initiating document”, depending on the context, means
either an Application, Complaint Referral, or a Dispute
Referral;
(h) “initiating party”—
(i) in the case of a Complaint Referral, means the
Commission, or other person referred to in regula-
tion 141;
(ii) in the case of a Dispute Referral, means the person
who referred the matter to the Tribunal or accredit-
ed entity in terms of section 166 (1), read with reg-
ulation 132;
(iii) in any other proceedings before the Tribunal,
means the Applicant;
(i) “intervenor” means any person who has been granted
standing to participate in particular proceedings before
the Tribunal in terms of section 181 (c), read with regula-
tion 159;
(j) “presiding member” means the member of the Tribunal
designated by the chair to preside over particular proceed-
ings;
(k) “Reply” means a document as described in regulation
144 and filed by an initiating party in response to an An-
swer;
(l) “respondent”, when used in respect of—
(i) an application to review a notice issued by, or a
decision of, the Commission, means—
(aa) the Commission; and
(bb) any other person concerned, except the
applicant;
(ii) any other application, means the person against
whom the relief is sought;
A-146
(iii) a Complaint Referral, means the person against
whom that complaint has been initiated; or
(iv) a Dispute Referral, means any party to the dispute
other than the initiating party;
(m) “sheriff” means a person appointed in terms of section 2
of the Sheriff’s Act, 1986 (Act No. 90 of 1986), and in-
cludes a person appointed in terms of section 5 and sec-
tion 6 of that Act as an acting sheriff and a deputy sheriff,
respectively.
Part B
Forms and Notices with respect to certain remedies
130. Request for Commission or Panel to act on behalf of
complainant.—See s. 157 (2)—A complainant may give written
authorization to the Commission or the Panel to commence
proceedings in the name of the complainant, as contemplated in
section 157 (2), by so indicating on Form CoR 135.1 at the time of
filing a complaint.
131. Notice of availability of system to receive confidential
disclosures.—See s. 159 (7)—A company that is required by
section 159 (7) to establish and maintain a system to receive
disclosures contemplated in section 159 must publicize the availa-
bility of that system by conspicuously displaying a notice to that
effect, setting out the contact details of the person responsible for
receiving any such disclosure—
(a) at the registered office of the company, the principal
places of conducting the business activities of the compa-
ny, and at any workplace where employees of the compa-
ny are employed;
(b) on any website that is maintained by the company and
intended to be accessible by the categories of persons
enumerated in section 159 (4); and
(c) if it is a listed company, on any electronic system main-
tained by the relevant exchange for the communication
and inter-change of information by and among companies
listed on that exchange.
Part C
Alternative Dispute Resolution
132. Alternative dispute resolution procedures.—See s. 156
(a), 157, 158, 166 (1) and 169 (1) (b)—(1) A person may refer a
matter for alternative dispute resolution to the Tribunal or to an
accredited entity, as contemplated in section 166 (1) and elsewhere
in the Act, by filing a completed Form CTR 132.1 with the Tribu-
nal or the accredited entity.
(2) The Commission or the Panel may refer a complaint to be
resolved by alternative dispute resolution, as contemplated in
section 169 (1) (b), by delivering a copy of Form CTR 132.2, to the
complainant, the respondent and the Tribunal or accredited dispute
resolution entity.
(3) A Certificate of Failed Dispute Resolution, as contemplated
in section 166 (2), must be in Form CTR 132.3.
133. Forms of order resulting from alternative dispute reso-
lution procedures.—See s. 167—A consent order, as contemplat-
ed in section 167, must be set out in a form satisfactory to the High
Court, in terms of its rules.
134. Accreditation of alternative dispute resolution provid-
ers.—See s. 166 (4) (a) (iii) and (5)—(1) An application for
accreditation as an alternative dispute resolution provider must be
made to the Commission in Form CoR 134.1.
(2) A certificate accrediting an entity as an alternative dispute
resolution provider must be in Form CoR 134.2.
Part D
Commission or Panel Complaint and Investigation Procedures
135. Filing of complaints with the Commission.—See s.
156 (d), 157, 168 and 169 (1)—(1) A complaint filed with the
Commission or the Panel must be in Form CoR 135.1.
A-147 Companies Act No. 71 of 2008
(2) At any time before the Commission or Panel has concluded
its consideration of a complaint, the complainant may withdraw the
complaint.
(3) The Commission or the Panel may continue to investigate a
complaint after it has been withdrawn, as if the Commission or
Panel had initiated it as contemplated in section 168 (2).
(4) A notice of non-investigation of a complaint by the Com-
mission or the Panel, as contemplated in section 169 (1) (a), must
be in Form CoR 135.2.
136. Multiple complaints.—(1) At any time after a complaint
has been initiated by the Commission or the Panel, or submitted by
another person, the Commission or Panel, as the case may be, may
publish a notice disclosing an alleged contravention of the Act and
inviting any person who believes that the alleged contravention has
affected or is affecting a material interest of that person to file a
further complaint in respect of that matter.
(2) The Commission or the Panel may consolidate two or more
complaints under a common investigation if they concern the same
person as potential respondent, and substantially the same conduct
by that person.
(3) If the Commission or the Panel consolidates two or more
complaints as permitted by sub-regulation (2)—
(a) each of those complaints must continue to be separately
identified by its own complaint number;
(b) each person who submitted one of those complaints
remains the complainant with respect to the complaint
that they submitted; and
(c) after referring one of those consolidated complaints to the
Tribunal, or issuing a notice of non-referral in respect of
it, the Commission or the Panel may continue to investi-
gate any of the remaining consolidated complaints.
137. Investigation of complaints.—See s. 169 and 176 to
179—(1) A notice to investigate issued by the Commission or the
Panel in terms of section 169 (1) (c) must be in Form CoR 137.1.
(2) A summons issued by the Commission or the Panel in terms
of section 176 (1) must be in Form CoR 137.2.
(3) If a person to whom a summons has ben issued is required to
produce in evidence any document or thing in the witness’s
possession, the summons must specify the document or thing to be
produced.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the word “ben” is intended to be “been”.)
(4) After the summons has been issued, it must be served by the
sheriff in any manner authorised by the High Court Rules.
(5) A person who has been required to produce any document or
thing to the Commission must hand it over to the recording officer
as soon as possible after service of the summons, unless the person
claims that the document or thing is privileged.
(6) At any time during an investigation, the Commission or the
Panel, as the case may be, may—
(a) informally request additional information from a party; or
(b) require a party to provide additional information, at any
time, by delivering to the party a demand in Form 137.3,
setting out the specific information that is required.
(7) If, at any time, the Commission or the Panel has reasonable
grounds to believe that a document filed in respect of an investiga-
tion contains false or misleading information, the Commission or
Panel may issue a Demand for Corrected Information in Form
137.4 to the person who filed that document.
(8) Within 5 business days after being served with a Demand
for Corrected Information, the person concerned may apply to the
Tribunal for an order confirming or setting aside the Demand.
(9) If a person does not apply to the Tribunal within the time
allowed by sub-regulation (8) or, if the Tribunal, on hearing the
appeal, partially or entirely confirms the Demand, the person
concerned must file corrected information.
Companies Regulations
(10) If the Tribunal, on hearing an application in terms of sub-
regulation (8), sets aside the Demand entirely, the Demand is a
nullity.
138. Resolving complaints by proposed consent order.—See
s. 170 (1) (d) and 173—(1) If, at any time before concluding its
consideration of a complaint, the Commission believes that the
respondent may be prepared to agree terms of a proposed order, the
Commission may—
(a) notify the complainant, in writing, that a consent order
may be recommended; and
(b) invite the complainant to inform the Commission in writing
within 10 business days after receiving that notice—
(i) whether the complainant is prepared to accept
damages or an alternative remedy under such an
order; and
(ii) if so, the amount of damages claimed or particulars
of the alternative remedy.
(2) If the Commission and the respondent agree to the terms of
an appropriate order, the Commission must—
(a) refer the complaint to the High Court in accordance with
its Rules;
(b) attach to the referral—
(i) a draft order in a form consistent with the High
Court Rules, and—
(aa) setting out each section of the Act or of a
company’s Memorandum of Incorporation or
Rules that has been contravened;
(bb) setting out the terms agreed between the
Commission and the respondent, including, if
applicable, the amount of damages agreed
between the respondent and the complainant;
and
(cc) signed by the Commission and the respond-
ent indicating their consent to the draft order;
and
(ii) a Consent to Order in Form CoR 138, completed by
the complainant, if applicable; and
(c) serve a copy of the referral and draft order on the re-
spondent and the complainant.
(3) The Commission must not include an order of damages in a
draft consent order unless the complainant expressly consented that
order for damages in Form CoR 138.
(4) A draft consent order may be submitted to the Court in terms
of section 173 and this Rule notwithstanding the refusal by a
complainant to consent to including an award of damages in that
draft order.
139. Compliance notices and certificates.—See s. 170 (1) (g),
171 and 172—(1) A Compliance Notice issued by the Commis-
sion, or by the Executive Director of the Panel, as contemplated in
section 171, must be in Form CoR 139.1.
(2) A Compliance Certificate issued by the Commission, or by
the Executive Director of the Panel, as contemplated in section
171, must be in Form CoR 139.2.
140. Procedures following investigation.—See s. 170—(1) A
Notice of Referral by the Commission or the Panel of a complaint
to another regulatory agency, as contemplated in section 170 (1)
(b), must be in form CoR 140.1 and delivered to the complainant,
the respondent, and the other relevant regulatory agency.
(2) A Notice of Non-referral issued by the Commission or the
Panel, as contemplated in section 170 (1) (c), must be in Form CoR
140.2.
(3) A Complaint Referral to the Tribunal must be in Form CTR
140, and—
(a) may allege alternative contraventions of the Act based on
the same facts; and
(b) must be supported by an affidavit setting out in numbered
paragraphs—
(i) a concise statement of the particulars of the com-
plaint; and
Companies Regulations Auditing: Legislation and Standards
(ii) the points of law, or material facts relevant to the
complaint; and
(c) must be served on each person named as a respondent.
Part E
Initiating Tribunal Procedures
141. Complaint Referrals to the Tribunal.—A complaint
proceeding to be adjudicated by the Tribunal may be initiated only
by filing a Complaint Referral as contemplated in section
170 (1) (b), and in accordance with regulation 140.
142. Applications to the Tribunal in respect of matters oth-
er than complaints.—(1) A person may apply to the Tribunal for
an order in respect of any matter contemplated by the Act, or these
regulations, by completing and filing with the Tribunal’s recording
officer—
(a) an Application in Form CTR 142; and
(b) a supporting affidavit setting out the facts on which the
application is based.
(2) The applicant must serve a copy of the application and affi-
davit on each respondent named in the application, within 5
business days after filing it.
(3) An application in terms of this regulation must—
(a) indicate the basis of the application, stating the section of
the Act or these regulations in terms of which the Appli-
cation is made; and
(b) depending on the context—
(i) set out the Commission’s decision that is being
appealed or reviewed;
(ii) set out the decision of the Tribunal that the appli-
cant seeks to have varied or rescinded;
(iii) set out the regulation in respect of which the
applicant seeks condonation; or
(c) indicate the order sought; and
(d) state the name and address of each person in respect of
whom an order is sought.
143. Answer.—(1) Within 20 business days after being served
with a Complaint Referral, or an application, that has been filed
with the Tribunal, a respondent who wishes to oppose the com-
plaint or application must—
(a) serve a copy of an Answer on the initiating party; and
(b) file the Answer with proof of service.
(2) An Answer that raises only a point of law must set out the
question of law to be resolved.
(3) Any other Answer must be in affidavit form, setting out in
numbered paragraphs—
(a) a concise statement of the grounds on which the com-
plaint or application is opposed;
(b) the material facts or points of law on which the respond-
ent relies; and
(c) an admission or denial of each ground, and of each
material fact relevant to each ground, set out in the com-
plaint or application.
(4) An allegation of fact set out in an initiating document that is
not specifically denied or admitted in an Answer must be regarded
as having been admitted.
(5) In an Answer, the respondent must qualify or explain a deni-
al of an allegation, to the extent necessary in the circumstances.
144. Reply.—(1) Within 15 business days after being served
with an Answer that raises issues not addressed in the initiating
document, other than a point of law alone, the initiating party may—
(a) serve a Reply on the other parties; and
(b) file a copy of the Reply and proof of service.
(2) A Reply must be in affidavit form, setting out in numbered
paragraphs—
(a) an admission or denial of each new ground or material
fact raised in the Answer; and
A-148
(b) the position of the replying party on any point of law
raised in the Answer.
(3) If the initiating party does not file a Reply, they will be
deemed to have denied each new issue raised in the Answer, and
each allegation of fact relevant to each of those issues.
145. Amending documents and Notices of Motion.—(1) The
initiating party may apply to the Tribunal by Notice of Motion at
any time before the end of the hearing of the matter for an order
authorising them to amend their initiating document as filed.
(2) If the Tribunal allows an amendment, it must allow any
other party affected by the amendment to file additional documents
consequential to those amendments within a time period allowed
by the Tribunal.
(3) A Notice of Motion to be made before the Tribunal, for any
purpose in terms of the Act and these regulations, must be in Form
CTR 145.
146. Completion of file.—Subject to any order made by the
Tribunal, the filing of documents is complete when a initiating
document or Answer has not been responded to within the time
allowed.
147. Late filing, extension and reduction of time.—(1) A
party to any matter may apply to the Tribunal to condone late filing
of a document, or to request an extension or reduction of the time
for filing a document, by filing a request in form CTR 147.
(2) Upon receiving a request in terms of sub-regulation (1), the
recording officer, after consulting the parties to the matter, must set
the matter down for hearing at the earliest convenient date.
148. Withdrawals and postponements.—(1) At any time
before the Tribunal has determined a matter, the initiating party
may withdraw all or part of the matter by—
(a) serving a Notice of Withdrawal in form CTR 148 on each
party; and
(b) filing the Notice of Withdrawal with proof of service.
(2) If the parties agree to postpone a hearing, the initiating party
must notify the recording officer as soon as possible.
(3) Subject to any provision of the Act to the contrary—
(a) a Notice of Withdrawal may include a consent to pay
costs; and
(b) if no consent to pay costs is contained in a Notice of
Withdrawal the other party may apply to the Tribunal by
Notice of Motion for an appropriate order for costs.
Part F
Conduct of Tribunal Proceedings
149. Pre-hearing conferences.—(1) Before, or within 20
business days after, the filing of documents is completed, a mem-
ber of the Tribunal assigned by the Chairperson may convene a
pre-hearing conference on a date and at a time determined by that
member with—
(a) the initiating party;
(b) each complainant in the matter;
(c) each Respondent; and
(d) any intervenors.
(2) If a point of law has been raised, and it appears to the as-
signed member of the Tribunal at a pre-hearing conference to be
practical to resolve that question before proceeding with the
Conference, the member may—
(a) direct the recording officer to set only that question down
for hearing by the Tribunal; and
(b) may adjourn the pre-hearing conference pending the
resolution of that question by the Tribunal.
(3) The assigned member of the Tribunal may adjourn a pre-
hearing conference from time to time.
(4) Pre-hearing conferences may be conducted in person or by
telephone or both, need not follow formal rules of procedure, and
are not open to the public.
A-149 Companies Act No. 71 of 2008
(5) At a pre-hearing conference, the assigned member of the
Tribunal may—
(a) establish procedures for protecting confidential infor-
mation, including the terms under which participants may
have access to that information;
(b) direct the Commission to investigate specific issues or
obtain certain evidence; or
(c) give directions in respect of—
(i) technical or formal amendments to correct errors in
any documents filed in the matter;
(ii) any pending Notices of Motion;
(iii) clarifying and simplifying the issues;
(iv) obtaining admissions of particular facts or docu-
ments;
(v) the production and discovery of documents whether
formal or informal;
(vi) witnesses to be called by the Tribunal at the
hearing, the questioning of witnesses and the lan-
guage in which each witness will testify;
(vii) a timetable for—
(aa) the exchange of summaries of expert opinions
or other evidence that will be presented at the
hearing; and
(bb) any other pre-hearing obligations of the parties;
(viii) determine the procedure to be followed at the
hearing, and its expected duration;
(ix) a date, time and schedule for the hearing; or
(x) any other matters that may aid in resolving the
matter.
(6) At a pre-hearing conference, the assigned member of the
Tribunal may require each participant to submit at a date to be
determined, but before the hearing, a written statement summarising
its argument, if any, with respect to the complaint, and identifying
what it believes are the major unresolved issues.
(7) After concluding a pre-hearing conference, the assigned
member of the Tribunal must issue an order recording any agree-
ments or rulings arising from matters considered at the pre-hearing
conference.
(8) A member of the Tribunal assigned by the Chairperson may
schedule a further pre-hearing conference on their own motion, and
the provisions of this regulation apply to such a conference.
150. Settlement conference.—At any time before the Tribunal
makes a final order in a matter, the Tribunal, on its own initiative
or at the request of the participants, may order an adjournment of
the proceedings to allow the participants to attempt to reach
agreement on any outstanding issue.
151. Set down of matters.—(1) If a matter has been post-
poned to a date to be determined in the future, any party to the
matter may apply to the recording officer for it to be re-enrolled,
but no preference may be given to that matter on the roll, unless the
Chairperson decides otherwise.
(2) The recording officer must allocate a time, date and place
for the hearing and send a Notice of Hearing in form CTR 151 to
each party.
(3) If a matter is postponed to a specific date, the recording
officer need not send a Notice of Set Down to the parties.
152. Matters struck-off.—(1) The Tribunal member presiding
at a hearing may strike a matter off the Roll if the initiating party is
not present.
(2) If a matter is struck off the roll, the matter may not be re-
enrolled unless—
(a) the party concerned files an affidavit setting out a satis-
factory explanation for the failure to attend the hearing;
and
(b) a member of the Tribunal assigned by the Chairperson, on
considering the explanation offered, orders the matter to
be re-enrolled.
Companies Regulations
153. Default orders.—(1) If a person served with an initiating
document has not filed a response within the prescribed period, the
initiating party may apply to have the order, as applied for, issued
against that person by the Tribunal.
(2) On an application in terms of sub-regulation (1), the Tribu-
nal may make an appropriate order—
(a) after it has heard any required evidence concerning the
motion; and
(b) if it is satisfied that the notice or application was ade-
quately served.
(3) Upon an order being made in terms of sub-regulation (2), the
recording officer must serve the order on the person described in
subsection (1) and on every other party.
154. Conduct of hearings.—(1) If, in the course of proceed-
ings, a person is uncertain as to the practice and procedure to be
followed, the member of the Tribunal presiding over a matter—
(a) may give directions on how to proceed; and
(b) for that purpose, if a question arises as to the practice or
procedure to be followed in cases not provided for by the-
se regulations, the member may have regard to the High
Court Rules.
(2) Subject to these regulations, the member of the Tribunal
presiding over a matter may determine the time and place for the
hearing before the Tribunal.
(3) The Tribunal may condone any technical irregularities aris-
ing in any of its proceedings.
155. Record of hearing.—The recording officer must compile
a record of any proceeding in which a hearing has been held,
including—
(a) the initiating document, and any answers or replies filed
in the matter;
(b) the notice of any hearing;
(c) any interlocutory orders made by the Tribunal or a
member;
(d) all documentary evidence filed with the Tribunal;
(e) the transcript, if any, of the oral evidence given at the
hearing; and
(f) the final decision of the Tribunal and the reasons.
156. Costs and taxation.—(1) Upon making an order, the
Tribunal may make an order for costs.
(2) If the Tribunal has made an award of costs, the following
provisions apply—
(a) the fees of one representative may be allowed between
party and party, unless the Tribunal authorises the fees of
additional representatives;
(b) the fees of any additional representative authorised in
terms of sub-regulation (1) must not exceed one half of
those of the first representative, unless the Tribunal di-
rects otherwise;
(c) the costs between party and party allowed in terms of an
order of the Tribunal, or any agreement between the par-
ties, must be calculated and taxed by the taxing master at
the tariff determined by the order or agreement, but if no
tariff has been determined, the tariff applicable in the
High Court will apply;
(d) qualifying fees for expert witnesses may not be recovered
as costs between party and party unless otherwise di-
rected by the Tribunal during the proceedings;
(e) the recording officer may perform the functions and
duties of a taxing master or appoint any person as taxing
master who in the recording officer’s opinion is fit to per-
form the functions and duties signed to or imposed on a
taxing master by these regulations;
(f) the taxing master is empowered to tax any bill of costs for
services actually rendered in connection with proceedings
in the court;
Companies Regulations Auditing: Legislation and Standards
(g) at the taxation of any bill of costs, the taxing master may
call for any book, document, paper or account that in the
taxing master’s opinion is necessary to determine proper-
ly any matter arising from the taxation;
(h) the taxing master must not proceed to the taxation of any
bill of costs unless the taxing master has been satisfied by
the party requesting the taxation (if that party is not the
party liable to pay the bill) that the party liable to pay the
bill has received due notice as to the time and place of the
taxation and of that party’s entitlement to be present at
the taxation;
(i) despite sub-regulation (h), notice need not be given to a
party—
(i) who failed to appear at the hearing either in person
or through a representative; or
(ii) who consented in writing to the taxation taking
place in that party’s absence;
(j) any decision by a taxing master is subject to the review of
the High Court on application.
157. Representation of parties.—(1) A representative acting
on behalf of any person in any proceedings must notify the record-
ing officer and every other party, advising them of the following
particulars—
(a) the representative’s name;
(b) the postal address and place of employment or business;
and
(c) if a fax number, telephone number or email address are
available, those details.
(2) A person who terminates their representative’s authority to
act in any proceedings, and then acts in person or appoints another
representative, must notify the recording officer and every other
party of that termination, and of the appointment of another
representative, if any, and include that representative’s particulars,
as set out in sub-rule (1).
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the word “sub-rule” is intended to be “sub-
regulation”.)
(3) On receipt of a notice in terms of sub-regulation (1) or (2),
the address of the representative or the party, as the case may be,
will become the address of record for notices to and for service on
that party of all documents in the proceedings.
(4) Despite sub-regulation (3), a person who, before receiving
a notice in terms of sub-regulation (1) or (2), has sent a notice to,
or effected service on, a party somewhere other than at the address
of record will be deemed to have validly served that item, unless
the Tribunal orders otherwise.
(5) A representative in any proceedings who ceases to act for a
party must deliver a notice to that effect to that party and every
other party concerned.
(6) A notice delivered in terms of sub-regulation (5) must state
the names and addresses of each party who is being notified.
(7) After receiving a notice referred to in sub-regulation (5), the
address of the party formerly represented becomes the address for
notices to, and for service on, that party of all documents in the
proceedings, unless a new address is furnished for that purpose.
158. Joinder or substitution of parties.—(1) The Tribunal, or
the assigned member, as the case may be, may combine any
number of persons, whether jointly, jointly and severally, separate-
ly, or in the alternative, as parties in the same proceedings, if their
respective rights to relief depend on the determination of substan-
tially the same question of law or facts.
(2) If a party to any proceedings has been incorrectly or defec-
tively cited, the Tribunal or the assigned member, as the case may
be, on application and on notice to the party concerned, may
correct the error or defect and may make an order as to costs.
(3) If in any proceedings it becomes necessary to substitute a
person for an existing party, any party to those proceedings, on
application and on notice to every other party, may apply to the
Tribunal or the assigned member, as the case may be, for an order
substituting that party for an existing party, and the Tribunal or the
A-150
assigned member, as the case may be, may make an order, includ-
ing an order as to costs, or give directions as to the further proce-
dure in the proceedings.
(4) An application to join any person as a party to proceedings,
or to be substituted for an existing party, must be accompanied by
copies of all documents previously delivered, unless the person
concerned or that person’s representative is already in possession
of those documents.
(5) No joinder or substitution in terms of this rule will affect any
prior steps taken in the proceedings.
159. Intervenors.—(1) At any time after an initiating docu-
ment is filed with the Tribunal, any person who has a material
interest in the relevant matter may apply to intervene in the Tribu-
nal proceedings by filing a Notice of Motion, which must—
(a) include a concise statement of the nature of the person’s
interest in the proceedings, and the matters in respect of
which the person will make representations; and
(b) be served on every other participant in the proceedings.
(2) No more than 10 business days after receiving a Notice of
Motion to intervene, a member of the Tribunal assigned by the
Chairperson must either—
(a) make an order allowing the applicant to intervene, subject
to any limitations—
(i) necessary to ensure that the proceedings will be
orderly and expeditious; or
(ii) on the matters with respect to which the person
may participate, or the form of their participation; or
(b) deny the application, if the member concludes that the
interests of the person are not within the scope of the
Act, or are already represented by another participant in
the proceeding.
(3) Upon making an order in terms of sub-regulation (2), the
assigned member may make an appropriate order as to costs.
(4) If an application to intervene is granted—
(a) the recording officer must send to the intervenor a list of
all documents filed in the proceedings before the day on
which the request for leave to intervene was granted; and
(b) access by an intervenor to a document filed or received in
evidence is subject to any outstanding order of the Tribu-
nal restricting access to the document.
160. Summoning witnesses.—(1) If the Tribunal requires a
witness to attend any proceedings to give evidence it may have a
summons issued by the recording officer in form CTR 160 for that
purpose.
(2) If a witness is required to produce in evidence any document
or thing in the witness’s possession, the summons must specify the
document or thing to be produced.
(3) After the summons has been issued, it must be served by the
sheriff in any manner authorised by the High Court Rules.
(4) A witness who has been required to produce any document
or thing at the proceedings must hand it over to the recording
officer as soon as possible after service of the summons, unless the
witness claims that the document or thing is privileged.
161. Witness fees.—(1) A witness in any proceedings before
the Tribunal is entitled to be paid in accordance with the tariff of
allowances prescribed by the Minister of Justice and published by
notice in the Gazette in terms of section 42 of the Supreme Court
Act, 1959 (Act No. 59 of 1959).
(2) Despite sub-regulation (1), the Tribunal may order that no
allowance or only a portion of the prescribed allowances be paid to
any witness.
162. Interpreters and translators.—(1) Before an interpreter
may interpret in Tribunal proceedings, the interpreter must take an
oath or make an affirmation in the following form before a member
of the Tribunal—
“I, ……………………………………….……………. (full name)
swear/affirm that whenever I am called on to interpret in any
A-151 Companies Act No. 71 of 2008
proceedings before the Tribunal, I will correctly interpret to the
best of my ability from the language I am called on to interpret into
one or other of the official languages, and vice versa.”
(2) An oath or affirmation must be taken or made in the manner
prescribed for the taking of an oath or the making of an affirmation
in the High Court Rules, read with the changes required by context
and a printed copy of the oath or affirmation must be signed by the
interpreter.
(3) Any person admitted and enrolled as a sworn translator of
any division of the High Court is deemed to be a sworn translator
for the Tribunal.
Part G
Maximum Administrative Fines and Determination of Turnover
163. Maximum administrative fines.—See s. 175—The max-
imum administrative fine, as contemplated in section 175 (5), is R
1 million.
164. Manner of calculating assets and turnover.—See s. 175 (3)
and 223—(1) For purposes of section 175 of the Act, the assets
and turnover of a company at any particular time must be calculat-
ed in accordance with—
(a) the financial reporting standards applicable to that
company, as set out in regulation 27; or
(b) SA GAAP, as defined in regulation 26 (1) (f), in the case
of a company in respect of which no financial reporting
standards have been prescribed.
(2) At any particular time, the asset value of—
(a) a company, other than a holding company, is equal to the
gross value of the company’s assets as shown on the
company’s balance sheet in its most recent annual finan-
cial statements; or
(b) a holding company is equal to the gross value of the
consolidated assets of the company and its subsidiaries, as
shown on the company’s balance sheet in its most recent
annual financial statements,
adjusted in either case in accordance with sub-regulation (3).
(3) If, between the date of the most recent annual financial
statements and the date at which a calculation of a company’s asset
value is to be calculated, the company has acquired or divested
itself of any subsidiary, or has entered into a joint venture not
shown on those statements—
(a) the following items must be added to the calculation of
the company’s asset value, to the extent that any such
item would be required to be included in the company’s
assets on its annual financial statements—
(i) the value of each such recently acquired asset; and
(ii) any asset received by the company in exchange for
a recently divested asset; and
(b) the following items may be deducted from the company’s
asset value, to the extent that any such item was included
as an asset on the company’s most recent annual financial
statements—
(i) the value of each such recently divested asset at the
date of divestiture; and
(ii) any asset that was used by the company to acquire
a recently acquired asset.
(4) At any particular time, the annual turnover of—
(a) a company other than a holding company is the gross
revenue of that company from income in, into or from the
Republic, arising from the following transactions or
events, as recorded on the company’s most recent annual
financial statements—
(i) the sale of goods;
(ii) the rendering of services; or
(iii) the use by other persons of the company’s assets
yielding interest, royalties, or dividends; or
Companies Regulations
(b) a holding company is the consolidated gross revenue of
that company and each of its subsidiaries from income in,
into or from the Republic, arising from the following
transactions or events, as recorded on the company’s most
recent annual financial statements—
(i) the sale of goods;
(ii) the rendering of services; or
(iii) the use by other persons of the company’s assets
yielding interest, royalties, or dividends,
adjusted in accordance with sub-regulations (5) and (6), in either
case.
(5) In calculating the annual turnover of a company—
(a) any amount contemplated in sub-regulation (4) may be
excluded to the extent that it is properly excluded from
gross revenue in accordance with the applicable financial
reporting standards referred to in sub-regulation (1);
(b) taxes, rebates, or similar amounts calculated and paid or
to be paid in direct relation to revenue as, for example,
sales tax, VAT, excise duties or sales rebates, may be de-
ducted from gross revenue; and
(c) gains arising from non-current assets or from foreign
currency transactions may be excluded from gross reve-
nue.
(6) If, between the date of the most recent annual financial
statements and the date at which a calculation of a company’s
annual turnover is to be calculated, the company has acquired or
divested itself of any subsidiary, or entered into a joint venture not
shown on those statements—
(a) the turnover generated by any such newly acquired asset
must be included in the calculation of the company’s an-
nual turnover, to the extent that any such item would be
required to be included in the company’s income state-
ments on its annual financial statements; and
(b) the turnover generated in the previous financial year by
any such newly divested asset may be excluded in the
calculation of the company’s annual turnover, to the ex-
tent that any such item was included in the company’s in-
come statements on its most recent annual financial
statements.
CHAPTER 8
REGULATORY AGENCIES AND ADMINISTRATION
Part A
Regulatory Agency Offices and Functions
165. Office hours and address of regulatory agencies.—
(1) The senior officer of a regulatory agency, after consulting the
Minister—
(a) must publish a notice designating a principal office for
that regulatory agency, including in the notice all relevant
particulars for public contact with that office; and
(b) may at any time publish a notice—
(i) designating other offices, and their respective
contact particulars; or
(ii) change the designated principal office, or any other
office, or any relevant contact particulars.
(2) The offices of a regulatory agency are open to the public
every Monday to Friday, from 08h00 to 15h30, excluding any
public holiday established or declared in terms of the Public
Holidays Act, 1994 (Act No. 36 of 1994).
(3) Despite sub-paragraph (2)—
(a) in exceptional circumstances a regulatory office may—
(i) close to the public if the senior officer considers it
necessary to do so in the interests of safety, securi-
ty, inability to properly perform its functions or
other appropriate reason; or
(ii) accept documents for filing on any day and at any
time; and
Companies Regulations Auditing: Legislation and Standards
(b) a regulatory agency must accept documents for filing as
directed by either the Tribunal or a member of the Tribu-
nal assigned by its chairperson.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “sub-paragraph (2)” is intended to be
“sub-regulation (2)”.)
(4) Subject to regulations 7 and 169, any communication to a
regulatory agency, or to a member of the staff of a regulatory
agency, may be—
(a) delivered by hand at, or addressed by post to, the regulatory
agency’s principal office;
(b) communicated by telephone on a number designated in
terms of sub-regulation (1);
(c) transmitted by fax on a number designated in terms of
sub-regulation (1);
(d) transmitted by electronic mail to an address designated in
terms of sub-regulation (1); or
(e) transmitted electronically through the medium of any
internet facility maintained by the regulatory agency for
that purpose.
166. Extension and condonation of time limits.—(1) The
senior officer of a regulatory agency may generally extend any
particular time limit set out in the Act or these regulations for filing
any document with that agency, to the extent necessary or desirable
having regard to the public demand for access to the agency’s
services, the administrative capacity of the agency to meet that
demand, and the interests of efficiency and equality of access.
(2) On good cause shown, the recording officer of a regulatory
agency may condone late performance of an act in respect of which
the Act or these regulations prescribe a time limit, other than a time
limit that is binding on the regulatory agency itself.
167. Appointment of recording officer and assignment of
functions by responsible officer.—The senior officer of a regula-
tory agency, in writing—
(a) must designate at least one member of its staff to serve as
the recording officer for that regulatory agency; and
(b) may assign any function or power of that regulatory
agency to a member of its staff, either generally or in
connection with a particular matter.
168. Filing documents.—(1) A regulatory agency—
(a) must assign a distinctive number to each document filed
for the first time with the recording officer of that body;
(b) must ensure that every document subsequently filed in
respect of a matter is marked with the same distinguishing
number;
(c) may refuse to accept a document subsequently filed in
respect of the same matter that is not properly marked
with the assigned distinguishing number.
(2) Before serving a copy of an initiating document on any
person, the initiating party must—
(a) obtain a distinguishing number for that document from
the recording officer of the Tribunal; and
(b) note the distinguishing number on every copy of that
document.
(3) A person who files any document with a regulatory agency
in terms of the Act or these regulations must provide to that
regulatory agency the person’s—
(a) legal name;
(b) address for delivery of documents;
(c) telephone number;
(d) if available, email address and fax number; and
(e) if the person is not an individual, the name of the individ-
ual authorised to deal with the regulatory agency on be-
half of the person filing the document.
(4) The recording officer of a regulatory agency—
(a) must take reasonable steps to—
(i) confirm the identity of any person filing a docu-
ment with that regulatory agency;
A-152
(ii) verify that the person filing a document on behalf
of, or in relation to a juristic person, has the right to
file that document in their own name, or is author-
ised to file the document on behalf of another per-
son who has the right to file the document;
(iii) verify the authenticity of every document being
filed;
(b) may demand that the person seeking to file a document
supply reasonable evidence for the purposes contemplat-
ed in paragraph (a); and
(c) may reject any document on the grounds that the re-
quirements of paragraph (a), or a demand issued in terms
of paragraph (b), have not been satisfied.
(5) If the Commission has refused to accept a document in
terms of sub-regulation (4) (c), the person who was prevented from
filing that document may apply to the Tribunal for an order
requiring the recording officer to accept the document for filing,
and the Tribunal may grant an appropriate order in the circum-
stances.
(6) A company may challenge any document filed with the
Commission within 10 business days by filing a notice in Form
CoR 168.
(7) A filing that has been challenged in terms of sub-regulation
(6) is a nullity and must be removed from the register.
169. Electronic filing and payments.—(1) The senior officer
of a regulatory agency, by notice in the Gazette, may direct that
any requirement set out in the Act or these regulations to file a
document or communicate with, or make a payment to, that
regulatory agency may or must be satisfied in electronic form,
subject to any operational requirements published in terms of sub-
regulation (2).
(2) If the senior officer of a regulatory agency has published a
notice contemplated in sub-regulation (1), the recording officer of
that regulatory agency must publish operational requirements
setting out the processes and procedures to be followed to effect
any filing of a document or communication with, or payment to,
that regulatory agency, including, but not limited to—
(a) application procedures;
(b) registration procedures;
(c) form and format of records;
(d) manner and form of payment;
(e) information security requirements; and
(f) record retention requirements.
(3) At any time, a regulatory agency may suspend or terminate
any electronic services contemplated in this regulation.
170. Fees.—(1) A regulatory agency may not charge a fee to
any person for filing a complaint in terms of the Act, except with
the approval of the Tribunal.
(2) The fee for filing a document with a regulatory agency, or
requesting any action by a regulatory agency, is as set out in Table
CR1, CR2 A or B.
(3) In the case of electronic payment of fees, payment will be
deemed to be received by a regulatory agency on the date and at
the time that a direct deposit or an electronic transfer of funds or
other electronic payment, in the amount of that fee is credited to
the account of the regulatory agency at the financial institution to
which it is transferred.
(4) The recording officer of a regulatory agency may not waive
or reduce a fee imposed in terms of the Act, except as authorized
by the Act or these regulations.
(5) Subject to regulation 40 (3) (b) (ii) and (6), no prescribed fee
referred to in regulation 30 (1) or (6) which is outstanding due to
non-compliance by the company or external company with the
requirements of section 33 to file an annual return, will after 6
months from the date on which the annual return was due to be
filed, for financial accounting purposes of the Commission be
regarded as a debt owing to the Commission.
A-153 Companies Act No. 71 of 2008
171. Panel fees.—(1) On 1 March each year, the Panel may
levy a fee on each company listed on an exchange in the Republic,
equal to a percentage, as determined by the Panel in consultation
with the Minister, of—
(a) the annual listing fee charged by the relevant exchange to
each listed entity in accordance with its Listings Re-
quirements; or
(b) the initial listing fee charged by the relevant exchange in
accordance with its Listings Requirements to a company
that is listed during a year and is not charged the annual
listing fee.
(2) An exchange must provide the necessary information to the
Panel to enable it to administer the fees contemplated in sub-
regulation (1).
(3) The fees and levies to be paid to the Panel must be published
in the Gazette.
(4) Other fees payable to the panel are as set out in Table
CR 2A.
172. Regulatory agency notices.—(1) A regulatory agency
must publish any notice required or contemplated by the Act or
these regulations—
(a) in the Gazette, if expressly required to do so by the Act or
these regulations; or
(b) on its website, in any other case.
(2) Whenever a regulatory agency is required, either in terms of
the Act or these regulations, to publish a notice in the Gazette, that
notice must contain at least the following information—
(a) the name of any person directly affected by the notice;
(b) the file number assigned by the regulatory agency to the
relevant matter;
(c) the provision of the Act or regulations in terms of which
the notice is being issued;
(d) a brief and concise description of the nature of the
relevant matter;
(e) if the notice invites submissions, the last date on which
submissions may be received;
(f) if the notice reports a decision—
(i) a brief and concise description of the nature of the
relevant decision;
(ii) a statement indicating whether reasons for the
decision have been published, and if so, how a
copy of those reasons may be obtained; and
(iii) a statement of any right of review of, or appeal
from, that decision, including the period during
which a review or appeal may be lodged;
(g) the name, address and contact numbers of the person in
the regulatory agency responsible for publishing the no-
tice.
173. Issuing documents by regulatory agency.—If the Act or
these regulations require a regulatory agency to issue a docu-
ment—
(a) the document will have been issued by the regulatory
agency when it has been signed, and delivered to any per-
son to whom it is addressed; and
(b) the document may be signed and delivered at any time of
day, despite regulation 165 (2).
174. Content and standards for Commission registers.—
(1) A regulatory agency must keep any register required in terms
of the Act in an official language of the Republic, in a manner
sufficient to provide an adequate information base to—
(a) enable the regulatory agency to satisfy all reporting
requirements applicable to it, in terms of the Act or any
other applicable law;
(b) provide simple and efficient access to the public to
information required to exercise any right in terms of the
Act, or any other applicable law.
Companies Regulations
(2) The registers required to be kept by the Act must be kept in
such a manner as—
(a) to provide adequate precautions against—
(i) theft, loss or intentional or accidental damage or
destruction; and
(ii) falsification; and
(b) to facilitate the discovery and correction of any error or
falsification.
(3) If a regulatory agency keeps any register partially or com-
pletely in electronic form, the regulatory agency must—
(a) provide adequate precautions against loss of the records
as a result of damage to, or failure of, the media on which
the records are kept; and
(b) ensure that information in the register is capable of being
retrieved to a readable and printable form, including by
converting the records from legacy to later storage media,
or software, to the extent necessary from time to time.
(4) Each regulatory agency may determine the specific form of
any register, and the particular manner in which information is
recorded in or compiled from any register.
175. Form of Annual Report.—The Annual Report to be
submitted by a regulatory agency in terms of the Act must be
divided into the following Parts—
(a) Statement of Progress, being a statement setting out the
progress during the preceding year towards realization of
the purposes of the Act, to the extent applicable to the
particular regulatory agency;
(b) The Proceedings of the Regulatory Agency, being a
summary report of the regulatory agency’s work in rela-
tion to its functions;
(c) The External Relations of the Regulatory Agency,
being a summary report on the following matters—
(i) the regulatory agency’s public awareness programs.
(ii) relationships between the regulatory agency and
other regulatory authorities.
(iii) relationships between the regulatory agency and
foreign agencies.
(iv) research activities undertaken by the regulatory
agency and any proposals for law reform published
by the regulatory agency;
(d) The Administrative Activities of the Regulatory
Agency, being a summary report concerning the regulato-
ry agency’s management, staff, infrastructure, and related
matters;
(e) The Regulatory Agency’s Finances, including any
information required in terms of the Public Finance Man-
agement Act.
Part B
Access to Regulatory Agency Information and Records
176. Restricted information.—(1) The provisions of this Part
are subject to the Promotion of Access to Information Act, 2000
(Act No. 2 of 2000), and the provisions of that Act prevail in the
case of a conflict between any such provisions and any provision of
this Part.
(2) For the purpose of this Part, the following five classes of
information are restricted—
(a) information that has been determined to be confidential
information in terms of section 212;
(b) identity of a complainant, in the following circumstanc-
es—
(i) a person who provides information in terms of
section 159 may request that the Commission or
Panel treat their identity as restricted information;
but that person may be a complainant in the rele-
vant matter only if they subsequently waive the re-
quest in writing;
Companies Regulations Auditing: Legislation and Standards
(ii) if a person has requested in terms of sub-paragraph
(i) that the Commission or Panel treat their identity
as restricted information—
(aa) The Commission or Panel must accept that
request; and
(bb) That information is restricted unless the
person subsequently waives the request in
writing.
(c) information that has been received by the Commission or
Panel in a particular matter, other than that referred to in
paragraphs (a) and (b), as follows—
(i) the description of conduct attached to a complaint,
and any other information received by the Com-
mission or Panel during its investigation of the
complaint, is restricted information until the Com-
mission or Panel issues a referral or notice of non-
referral in respect of that complaint, but a complet-
ed Form CoR 135.1 is not restricted information;
(d) A document—
(i) that contains—
(aa) an internal communication between officials
of a regulatory agency, or between one or
more such officials and their advisors;
(bb) an opinion, advice, report or recommendation
obtained or prepared by or for a regulatory
agency;
(cc) an account of a consultation, discussion or
deliberation that has occurred, including, but
not limited to, minutes of a meeting, for the
purpose of assisting to formulate a policy or
take a decision in the exercise of a power or
performance of a duty conferred or imposed
on a regulatory agency by law; or
(ii) the disclosure of which could reasonably be
expected to frustrate the deliberative process of a
regulatory agency by inhibiting the candid—
(aa) communication of an opinion, advice, report
or recommendation; or
(bb) conduct of a consultation, discussion or
deliberation; or
(iii) the disclosure of which could, by premature
disclosure of a policy or contemplated policy, rea-
sonably be expected to frustrate the success of that
policy;
(e) any other document to which a public body would be
required or entitled to restrict access in terms of the Pro-
motion of Access to Information Act, 2000 (Act No. 2 of
2000).
177. Access to information.—(1) Any person, upon payment
of the prescribed fee, may inspect or copy any record of a regulato-
ry agency—
(a) if it is not restricted information; or
(b) if it is restricted information, to the extent permitted, and
subject to any conditions imposed, by—
(i) this regulation; or
(ii) an order of the Tribunal, or a Court.
(2) In a particular complaint, the Commission or Panel may
release otherwise restricted information, other than confidential
information, relating to a possible agreement of terms of an
appropriate order, or the consent of a complainant for an order to
include an award of damages, to—
(a) the respondent; or
(b) any person who, in signing Form CoR 138 in respect of
that complaint, has consented to the inclusion of an order
of damages in a consent order, as contemplated in regula-
tion 138 (3).
A-154
(3) In addition to the provisions of sub-regulation (1) and (2), a
regulatory agency may release restricted information to, or permit
access to it by, only the following persons—
(a) the person who provided that information to the regulato-
ry agency;
(b) the person to whom the confidential information belongs;
(c) a person who requires it for a purpose mentioned in the
Act; or
(d) any other person, with the written consent of the person to
whom the information belongs.
(4) When a regulatory agency submits a Complaint Referral to
the Tribunal, or supplies any other information to the Tribunal, or
the Minister, the regulatory agency must identify any information
included in its submission—
(a) in respect of which a claim has been made in terms of
section 212 that has not yet been determined by the Tri-
bunal; or
(b) that has been finally determined to be confidential
information.
Part C
Exercise of Commission Exemption Functions
178. Procedures relating to requests for exemption in terms
of section 9.—(1) In this Part, ‘requester’ means a person who has
requested the Minister to grant an exemption in terms of section 9
(2).
(2) Upon receiving a request for advise respecting a proposed
exemption, referred by the Minister in terms of section 9 (3), the
Commission, by issuing Form CoR 178 to the requester, may
require the requester to provide the necessary particulars before the
request will be considered, if the application does not specify
sufficient particulars of—
(a) the specific company or categories of state owned
companies for whom the exemption is sought;
(b) the specific provisions of the Act from which exemption
is sought; or
(c) the specific relevant alternative legislation contemplated
in section 9 (2).
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the word “advise” is intended to be “advice”.)
(3) If the requester—
(a) does not respond to the Commission within 40 business
days after receiving Form CoR 178, the request will be
deemed to have been abandoned; or
(b) responds to the Commission, but does not, to the satisfac-
tion of the Commission, meet the requirements set out in
Form CoR 178 as issued, the Commission, by issuing a
new Form CoR 178 to the requester, may again stipulate
any further information, or clarification, required before
the application will be considered, and the provisions of
this sub-regulation (3) apply afresh to any such new Form
CoR 178.
(4) If a request is deemed to have been abandoned in terms of
sub-regulation (3), the Commission may close its file on that
application by giving notice of that fact to the Minister, but without
providing any further advice to the Minister as contemplated in
section 9 (3).
(5) After receiving adequate information to begin consideration
of a request, the Commission—
(a) must publish in the Gazette the notice of the request; and
(b) may request further information from any person who
submits a representation in response to a notice published
in terms of paragraph (a).
179. Procedures related to withdrawing exemptions.—
(1) An exemption granted by the Minister in terms of section 9 is
valid until withdrawn by the Minister in accordance with this
section.
A-155 Companies Act No. 71 of 2008 Companies Regulations

(2) The Commission—
(a) must monitor any national legislation that forms the basis
on which an exemption is granted in terms of section
9 (2); and
(b) may recommend to the Minister that an exemption be
withdrawn if the national legislation contemplated in sec-
tion 9 (2), and on the basis of which the exemption was
granted, has subsequently been amended or repealed to
the extent that the grounds for the exemption no longer
exist.
(3) If the Commission is contemplating making a recommenda-
tion to the Minister in terms of sub-regulation (2) (b), the Commis-
sion must so notify the Minister, the Minister of Public Enterprises,
or the Minister responsible for Local Government Affairs, as the
case may require, and the company concerned, in writing, of the
possible intention to do so, as well as publishing a notice of that
intention in the Gazette.
(4) The Commission may request further information from a
person who submits a representation in response to a notice
published in terms of sub-regulation (3).
(5) After considering any submissions or other information
received in relation to the proposed withdrawal of exemption, the
Commission must advise the Minister whether or not to withdraw
the exemption.
Annexure 1
Table CR 1 – Prescribed Forms
(in terms of Regulation 5)
(1) For ease of reference, the Form number corresponds with the
number of the relevant regulation.
(2) Whenever a document is required—
(a) in terms of a section of the Act or a provision of these
regulations as listed in column 1 of this Table; and
(b) for a purpose listed in column 2,
the document must be substantially in the form of the annexure
listed opposite that section number in column 3, and must be
produced, delivered, or filed as the case may be subject to any
conditions or requirements listed opposite that section number in
column 4.

1 2 3 4
Authority Purpose of Form Form Conditions
S. 12 (1) Application to reserve a company name. CoR 9.1 Must be accompanied by a filing fee of R75 if filed manual-
R.9 ly, or R50 if filed electronically; and any relevant documen-
tation or evidence required in terms of regulation 8.
S. 12 (4) Application for extension of name CoR 9.2 Must be accompanied by filing fee of R50 if filed manually,
R.9 reservation. or R30 if filed electronically; and a statement required by in
regulation 9 (2) (b), and evidence required by regulation 9
(2) (c), if applicable.
R. 9 (3) (a) Notice requiring further particulars in CoR 9.3
respect of name reservation, issued by
the Commission.
R. 9 (3) (b) Confirming notice of name reservation, CoR 9.4
issued by the Commission.
R. 9 (3) (c) Notice refusing name reservation or CoR 9.5
defensive registration, issued by the
Commission.
S. 12 (3) (a) Notice of potentially contested name, CoR 9.6
R. 9 (4) (a) issued by the Commission.
S. 12 (3) (b) Notice of potentially offensive name, CoR 9.7
R. 9 (4) (b) issued by Commission.
S. 12 (9) Application for Defensive Name CoR 10.1 Must be accompanied by a filing fee of R250 if filed manually,
R 10 (1) Registration. or R200 if filed electronically, and evidence of a direct and
material interest in the name.
S. 12 (9) Application for Renewal of Defensive CoR 10.2 Must be accompanied by a filing fee of R50 if filed manually,
R. 10 (2) Name Registration. or R30 if filed electronically, and evidence of a direct and
material interest in the name.
S. 12 (5) Application to transfer reserved or CoR 11.1 Must be accompanied by a filing fee of R100 if filed manual-
R. 11 defensive name. ly, or R75 if filed electronically, and evidence as required by
regulation 11 (1) (b).
S. 12 (5) Notice refusing name transfer, issued by CoR 11.2
R. 11 the Commission.
Authority Purpose of Form Form Conditions
S. 13 (4) Notice rejecting a Notice of Incorpora- CoR 14.2
R. 14 (5) tion, issued by the Commission.
S. 14 (1) (b) Registration Certificate. CoR 14.3
R. 14 (6)
S.13 (1) (a) Standard Form Memorandum of CoR 15.1 Refer to Annexure 2, Table CR 2B for Incorporation fees.
R.15 (1) Incorporation.
May be in any of Form A, B, C, D or E as allowed by
regulation 15 (1).
Companies Regulations Auditing: Legislation and Standards A-156

1 2 3 4
Authority Purpose of Form Form Conditions
S. 16 (1) (b) Notice of Amendment to the Memoran- CoR 15.2 Payment of a filing fee, unless it is the first such filing by a
R. 15 (2) dum of Incorporation. pre-existing company, as contemplated in Schedule 5, Item 4
(2).
Must be accompanied by either the Special Resolution of the
company setting out—
(a) the amendment to the Memorandum of Incorpora-
tion; or
(b) a copy of the complete Memorandum of Incorpora-
tion, as amended.
Payment of a filing fee of R250.

S. 17 (1) (a) Notice of Alteration of Memorandum of CoR 15.3 Payment of filing fee of R250.
R.15 (5) Incorporation.

S. 17 (4) Notice of Translation of Memorandum CoR 15.4 Payment of a filing fee of R250.
R. 15 (6) of Incorporation.
Must be accompanied by a copy of the translated Memoran-
dum of Incorporation, and a sworn statement, as required by
section 17 (4).

S. 17 (6) Notice of Consolidation of Memoran- CoR 15.5 Payment of R250 fee.

R. 15 (7) dum of Incorporation.
Must be accompanied by the consolidated revision of the
Memorandum of Incorporation, together with a sworn
statement, or a statement of an attorney or notary public, as
required by section 17 (6).

S. 17 Notice to consolidate the Memorandum CoR 15.6

R. 15 (8) of Incorporation, to be issued by
Commission.

S. 15 (3)–(5) Notice concerning company rules. CoR 16.1 Payment of a filing fee of R100.
R. 16 (1)

S. 15 (3)–(5) Notice of result of vote on company CoR 16.2 Payment of a filing fee of R100.
R. 16 (2) rules.

S. 13 (5) Application to transfer registration of CoR 17.1 Must be accompanied by R400 fee and all materials listed in
R. 17 foreign company. regulation 17.
S. 13 (6)–(7) Notice requiring further particulars of CoR 17.2
R. 17 (2) foreign company.
S. 13 (6)–(7) Registration Certificate of domesticated CoR 17.3
R.17 (2) company.
S. 13 (6)–(7) Notice of Refusal to transfer registration CoR 17.4
R. 17 (3) of a foreign company.
Schedule 2 Application to convert a close corpora- CoR 18.1 Must be accompanied by a filing fee, the Memorandum of
R. 18 tion. Incorporation, and the consents required by regulation 18 (1)
(a).
Refer to Annexure 2, Table CR 2B for fees related to
Incorporation.
Schedule 2 Notice Requiring Further Particulars of CoR 18.2
R. 18 conversion of close corporation.
Schedule 2 Registration Certificate. CoR 18.3
R. 18
S. 22 Notice to show cause regarding reckless CoR 19.1
R. 19 trading or trading under insolvent
circumstances, to be issued by the
Commission.
S. 22 Confirmation notice. CoR 19.2
R. 19
S. 23 (3) Notice of Registration of External CoR 20.1 Payment of R400 filing fee. Must be accompanied by a copy
R. 20 Company. of the certificate of registration or comparable document
issued by the jurisdiction within which the company was
incorporated, and other items required by regulation 20.
S. 23 Registration certificate of External CoR 20.2
R. 20 Company.
S. 23 (3) (ii) Notice of change of Registered Office. CoR 21.1 The prescribed fee is Nil.
R. 21
S. 23 Notice of change of particulars of CoR 21.2 The prescribed fee is Nil.
R. 20 person to accept service.
A-157 Companies Act No. 71 of 2008 Companies Regulations

1 2 3 4
Authority Purpose of Form Form Conditions
S. 25 Notice of Location of Company CoR 22 To be filed only if company records are not kept at its
R. 22 records. registered office.
S. 26 Request for Access to company CoR 24
R. 24 information.
S. 27 (4) Notice of Change of CoR 25 Payment of a filing fee of R100.
R. 25 Financial year end.

S. 33 Annual return. CoR 30.1 Refer to Annexure 2, Table CR 2B for fees related to
R. 30 Annual Returns.
S. 33 Financial Accountability Supplement CoR 30.2 To be filed only by companies that do not file audited or
R. 30 (4) to Annual Return. independently reviewed annual financial statements.
S. 33 Annual return for External companies. CoR 30.3 Refer to Annexure 2, Table CR 2B for fees related to
R. 30 (7) Annual Returns.
Schedule 5 Notice of Board Resolution to convert CoR 31 No fee to be charged.
Item 6 par value shares.
R. 31
S. 21 Notice of Pre-incorporation contract. CoR 35.1
R. 35
S. 21 Notice of action concerning Pre- CoR 35.2
R. 35 Incorporation contract.
Various General security holder notice to CoR 36.1 Not to be filed with commission.
sections company and proxy form.
R. 36
Various General company notice to security CoR 36.2 Not to be filed with commission.
sections holders.
R. 36
R. 36 (3) General company notice to holders of CoR 36.3 Not to be filed with commission.
beneficial interest.
S. 75 Notice of directors personal financial CoR 36.4 Not to be filed with commission.
R. 36 interest.
S. 70 (6) Notice of Change of company and CoR 39 Prescribed fee is Nil.
R. 39 external company Directors.
S. 80 to 82 Notice of special resolution to wind up CoR 40.1 Payment of R250 filing fee.
R. 40 solvent company.
S. 80 to 82 Notice of foreign registration of com- CoR 40.2 Payment of R250 filing fee.
R. 40 pany.

S. 80 to 82 Demand notice concerning inactive CoR 40.3

R. 40 company or external company, to be
issued by Commission.

S. 80 to 82 Notice of pending de-registration of CoR 40.4

R. 40 company or external company, to be
issued by Commission.

S. 97 (2) Notice of Employee Share Scheme. CoR 46.1

R. 46

S. 97 (2) Annual certificate of Employee Shares CoR 46.2

R. 46 Scheme.

S. 99 (7) Application concerning rights offer CoR 46.3 Payment of R 100 filing fee.
R. 46 exclusion.

S. 99 Registration of Prospectus or Letter of CoR 46.4 Must have prospectus appended. Refer to Annexure 2,
R. 46 Allocation. Table CRS 2B for fees.

S. 99 Registration Certificate of Prospectus CoR 46.5

R. 46 or Letter of Allocation.
S. 99 Application to exclude information CoR 46.6 Payment of R300 filing fee.
R. 46 from Prospectus.
S. 116 (3) Notice of Amalgamation or Merger. CoR 89 Payment of R250 filing fee, plus ancillary fees for any
R. 89 registration of new company, or de-registration of existing
company.
Companies Regulations Auditing: Legislation and Standards A-158

1 2 3 4
Authority Purpose of Form Form Conditions
R. 84 Declaration of coming into or out of TRP 84 To be filed with the Panel.
concert.
R. 98 Notice of disclosure of dealings in TRP 98 To be filed with the Panel.
securities.

S. 122 (1) Notice of disclosure of acquisition or TRP 121.1

R. 121 disposal of securities.
S. 122 (3) Notice of acquisition or disposal of TRP 121.2 To be filed with the Panel.
R. 121 securities.
S. 129, 131 Notice of beginning of Business CoR 123.1
R. 123 Rescue Proceedings.
S. 129 (7) Notice of appointment of Business CoR 123.2
R. 123 (3) Rescue Practitioner.

S. 129 (7) Notice of decision not to begin busi- CoR 123.3

R. 123 (5) ness rescue proceedings.

S. 132, 141 Notice of Business Rescue Status. CoR 125.1

R. 125

S. 125 (4) Notice of Termination of Business CoR 125.2

Rescue Proceedings.
S. 138 Certificate of Business Rescue Practi- CoR 126.2
R. 126 tioner License.
S. 166 R. 132 Application for ADR. CTR 132.1
S. 166 R. 132 Referral for ADR. CTR 132.2
S. 166 R. 132 Certificate of failed ADR. CTR 132.3
S. 166 R. 134 Application for accreditation (as ADR CoR 134.1 Payment of R500 application fee.
provider).
S. 166 R. 134 Registration certificate as ADR pro- CoR 134.2
vider.
S. 168 R. 135 Complaint to Commission. CoR 135.1
S. 169 R. 135 Commission Notice of Non- CoR 135.2
investigation.
R. 137 Commission Notice to Investigate. CoR 137.1
R. 137 Commission Summons. CoR 137.2
R. 137 Commission request for additional CoR 137.3
information.
R. 137 Commission Demand for corrected CoR 137.4
information.
R. 138 Consent to Order. CoR 138
R. 139 Compliance Notice. CoR 139.1
R. 139 Compliance Certificate. CoR 139.2
R. 140 Referral by Commission or Panel to CoR 140.1
another regulator.
R. 140 Commission Notice of Non referral. CoR 140.2
R. 140 Commission referral to CTR 140
Tribunal.
R. 142 Application to Tribunal. CTR 142
R. 145 Notice of Motion. CTR 145
R. 147 Request for Condonation. CTR 147
R. 148 Notice of Withdrawal. CTR 148
R. 168 (6) Notice challenging filed CTR 168
information.
S. 9 Request for particulars CoR 178
R. 188 regarding requested exemption.
A-159 Companies Act No. 71 of 2008 Companies Regulations

Annexure 2 Table CR 2B –
Table CR 2A – Panel Fee Schedule Commission Fee Schedule
(in terms of Regulations 122, 155, 170 and 171) (in terms of Regulation 170)
1. Except as set out below, the fee for filing any particular
1. The fees chargeable (inclusive of VAT) for the several
document with the Commission is as set out in Annexure 1,
categories of service rendered by the Panel, and referred to
with respect to that document.
in regulation 122 (1) are as follows—
2. The fee for filing a Notice of Incorporation of a company
(a) No fees will be charged for services under regulation 122 varies, depending on the form of the company’s attached
(1) (a). Memorandum of Incorporation, as follows—
(b) Services under regulation 122 (1) (b) will be charged at (a) If the Memorandum is in Form 15.1 A or 15.1 C, the
the rate of R1 710 per billable hour of work or part there- filing fee is R175, subject to any reduction allowed in
of. terms of regulation 14 (2).
(c) Services under regulation 122 (1) (c) will be charged at the (b) In any other case, the filing fee is R475, subject to any
rate of R3 420 per billable hour of work or part thereof. reduction allowed in terms of regulation 14 (2).
(d) Services under regulation 122 (1) (d), including a circular 3. The fee for filing a Notice of Conversion of a close corpora-
dealing with a waiver, payable upon first submission of tion to a company is—
documentation for which a VAT invoice will be issued by (a) nil, if filed within three years after the effective date, and
the Panel, will depend on the value of the offer, being the the current name of the close corporation is retained as
consideration payable for acquiring, merging or amal- the name of the company; or
gamating the securities or assets/undertaking of each/all (b) the same as filing a Notice of Incorporation, in any other
offeree regulated company/ies involved, and will be case.
charged according to the scale set out below:
4. The fee for filing a Notice of Amendment of the Memo-
Consideration value of affected transaction (R Fee including VAT randum of Incorporation with the special resolution and
million) (R) amendment attached, subject to any fee exemption set out in
Up to 50 57 000 a particular regulation, is R250, in any other case.
Over 50 to 100 85 500 5. The fee for filing any special resolution not otherwise
Over 100 to 250 114 000 addressed in Annexure 1 or this Table, is R80.
Over 250 to 500 142 500 6. The fee for filing a Prospectus to be registered is R5000
Over 500 to 1 000 171 000 for each day or part thereof.
Over 1 000 to 10 000 228 000 7. The fee for filing a letter of allocation is R100.
Over 10 000 285 000 8. The fee for filing an annual return varies according to the
company or external company turnover, and time of filing,
2. Fees to be levied by the Panel in terms of regulation 171 will
as set out below:
be as published from time to time in the Gazette.

Annual Turnover Filing within 30 business days after anni- Filing more than 30 business days after anniver-
versary sary
Less than R1 Million R100 R150
At least R 1 Million, but less than R 10 Million R450 R600
At least R 10 Million, but less than R 25
Million R2000 R2500
R 25 Million or more R3000 R4000
9. The Commission may perform the ancillary services, and charge the fees, set out below:
Service to be provided Fee
Vetting a draft of a proposed amendment to the Memorandum of Incorporation R150
Vetting a draft prospectus R2000
Issuing an electronic certificate R30
Allowing inspection of a company file R100
Certifying a copy of a document on file R20
Issuing a certificate relating to company information R50
Providing photocopies of documents R1.50 per page
Providing data extracts and reports of standard information on the registry, in electronic form R10, plus R .04
per record
Providing data extracts and reports of standard information on the registry, in paper form, to a maximum of 500 R10, plus R .04
records per record
10. For the purpose of Item 9, the fee for a data extract and report will be based on the following rules—
(a) Basic company information constitutes a single record.
(b) Information concerning directors or auditors, constitutes a single record per director or auditor.
(c) A request for a paper report that exceeds 500 records will be divided, with every 500 record increment, or part thereof, constituting
a separate request.

Annexure 3
Table CR 3 – Methods and Times for Delivery of Documents
(in terms of Regulation 7)
A notice or document to be delivered for any purpose contemplated in the Act or these regulations may be delivered in any manner set out in
this Table.
Subject to regulation 7 (2) (b), a document delivered by a method listed in the second column of this Table will be deemed to have been
delivered to the intended recipient on the date and at the time shown opposite that method, in the third column of that table.
Companies Regulations Auditing: Legislation and Standards A-160

Nature of Person to whom the document Date and Time of

Method of Delivery
is to be delivered Deemed delivery
ANY PERSON By faxing the notice or a certified copy of the On the date and at the time recorded by the fax receiv-
document to the person, if the person has a fax er, unless there is conclusive evidence that it was
number; or delivered on a different date or at a different time.
By sending the notice or a copy of the document by On the date and at the time recorded by the computer
electronic mail, if the person has an address for used by the sender, unless there is conclusive evidence
receiving electronic mail; or that it was delivered on a different date or at a different
time.
By sending the notice or a certified copy of the On the 7th day following the day on which the notice or
document by registered post to the person’s last- document was posted as recorded by a post office,
known address; or unless there is conclusive evidence that it was delivered
on a different day.
By any other means authorised by the High Court; In accordance with the order of the High Court.
or
By any other method allowed for that person in As provided for that method of delivery.
terms of the following rows of this Table.
ANY NATURAL PERSON By handing the notice or a certified copy of the On the date and at the time recorded on a receipt for the
document to the person, or to any representative delivery.
authorised in writing to accept service on behalf of
the person; or
By leaving the notice or a certified copy of the On the date and at the time recorded on a receipt for the
document at the person’s place of residence or delivery.
business with any other person who is apparently at
least 16 years old and in charge of the premises at
the time; or
By leaving the notice or a certified copy of the On the date and at the time recorded on a receipt for the
document at the person’s place of employment with delivery.
any person who is apparently at least 16 years old
and apparently in authority.
THE TRIBUNAL By entering the required information in an electron- On the date and at the time recorded by the Tribunal’s
ic representation of that form on the internet web- computer system, as verified by fax reply to the sender
site, if any, maintained by the Tribunal, if the of the information.
document is a prescribed form; or
By transmitting the documents as a separate file On the data and at the time recorded by the Tribunal’s
attached to an electronic mail message addressed to computer system, unless, within 1 business day after
the recording officer of the Tribunal; or that date, the recording officer advises the sender that
the file is unreadable.
By sending a computer disk containing the docu- On the date and at the time of delivery of the registered
ment in electronic form, by registered post ad- post to the recording officer of the Tribunal, as record-
dressed to the recording officer of the Tribunal; or ed by the post office, unless, within 1 business day after
that date, the recording officer advises the sender that
the disk is unreadable.
By handing the document, or a computer disk On the date and at the time noted in a receipt issued by
containing the document in electronic form, to the the recording officer of the Tribunal unless, the docu-
recording officer of the Tribunal. ment is on a computer disk, and, within 1 business day
after that date, the recording officer advises the sender
that the disk is unreadable.
THE COMMISSION By entering the required information in an electronic On the date and at the time recorded by the Commis-
representation of that form on the internet website, if sion’s computer system, as verified by fax reply to the
any, maintained by the Commission, if the document sender of the information.
is a prescribed form; or
By transmitting the document as a separate file attached On the date and at the time recorded by the Commis-
to an electronic mail message addressed to the Commis- sion’s computer system, unless, within 1 business day
sion; or after that date, the Commission advises the sender that
the file is unreadable.
By sending a computer disk containing the document On the date and at the time of delivery of the registered
in electronic form, by registered post addressed to post to the Commission, as recorded by the post office,
the Commission; or unless, within 1 business day after that date, the Commis-
sion advises the sender that the disk is unreadable.
By handing the document, or a computer disk contain- On the date and at the time noted in a receipt issued by the
ing the document in electronic form, to the Commis- Commission unless, the document is on a computer disk,
sion, or a responsible employee who is apparently in and, within 1 business day after that date, the Commission
charge of the Commission’s office. advises the sender that the disk is unreadable.
A COMPANY OR SIMILAR BODY By handing the notice or a certified copy of the On the date and at the time recorded on a receipt for the
CORPORATE document to a responsible employee of the company delivery.
or body corporate at its registered office or its
principal place of business within the Republic; or
If there is no employee willing to accept service, by On the date and at the time sworn to by affidavit of the
affixing the notice or a certified copy of the document person who affixed the document, unless there is conclusive
to the main door of the office or place of business. evidence that the document was affixed on a different date or
at a different time.
A-161 Companies Act No. 71 of 2008 Companies Regulations

Nature of Person to whom the document Date and Time of

Method of Delivery
is to be delivered Deemed delivery
THE STATE OR A PROVINCE By handing the notice or a certified copy of the docu- On the date and at the time recorded on a receipt for the
ment to a responsible employee in any office of the delivery.
State Attorney.
A MUNICIPALITY By handing the notice or a certified copy of the On the date and at the time recorded on a receipt for the
document to the town clerk, assistant town clerk or delivery.
any person acting on behalf of that person.
A TRADE UNION By handing the notice or a certified copy of the docu- On the date and at the time recorded on a receipt for the
ment to a responsible employee who is apparently in delivery.
charge of the main office of the union or for the
purposes of section 13 (2), if there is a union office
within the magisterial district of the firm required to
notify its employees in terms of these regulations, at
that office.
If there is no person willing to accept service, by On the date and at the time sworn to by affidavit of the
affixing a certified copy of the notice or document person who affixed the document, unless there is
to the main door of that office. conclusive evidence that the document was affixed on a
different date or at a different time.
EMPLOYEES OF FIRM By fixing the notice or certified copy of the docu- On the date and at the time sworn to by affidavit of the
ment, in a prominent place in the workplace where it person who affixed the document, unless there is conclu-
can be easily read by employees. sive evidence that the document was affixed on a different
date or at a different time.
A PARTNERSHIP, FIRM OR By handing the notice or a certified copy of the docu- On the date and at the time recorded on a receipt for the
ASSOCIATION ment to a person who is apparently in charge of the delivery.
premises and apparently at least 16 years of age, at the
place of business of the partnership, firm or association;
or
If the partnership, firm or association has no place of On the date and at the time recorded on a receipt for the
business, by handing the notice or a certified copy of delivery.
the document to a partner, the owner of the firm, or the
chairman or secretary of the managing or other control-
ling body of the association, as the case may be.
A STATUTORY BODY OTHER THAN By handing the notice or a certified copy of the On the date and at the time recorded on a receipt for the
THE COMMISSION AND TRIBUNAL document to the secretary or similar officer or delivery.
member of the board or committee of that body, or
any person acting on behalf of that body.
Companies Regulations Auditing: Legislation and Standards A-162
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A-181 Companies Act No. 71 of 2008 Companies Regulations

FORM CoR 15.1A

Short Standard Form for Private Companies
Memorandum of Incorporation
[Form CoR 15.1A substituted by GNR.619 of 20 August 2013.]
Companies and Intellectual Property Commission
Republic of South Africa

Form CoR 15.1A Memorandum of Incorporation of

Short Standard Form for (Insert Name of Company) __________________________________________________________________
Private Companies
which is a private company, has at least __________________ director(s) and ________________________
• This form is issued in terms of section
13 of the Companies Act, 2008 and alternate director(s), is authorised to issue no more than ______________________________________ shares
Regulation 15 of the Companies of a single class of shares as described in Article 2, and is referred to in the rest of this Memorandum of Incor-
Regulations, 2011. poration as “the Company”.
• This form may be used only to
incorporate a private company. In this Memorandum of Incorporation—
• A private company may be incorpo-
rated by one or more persons. (a) a reference to a section by number refers to the corresponding section of the Companies Act, 2008;
• The Incorporators must complete this
form by— (b) words that are defined in the Companies Act, 2008 bear the same meaning in this Memorandum as in that
(a) filling in the Name of the Act.
Company, unless it is to be
completed by the Commission
in terms of Regulation 14 (1) (b) Adoption of Memorandum of Incorporation
(i) or (iii);
(b) inserting the number of directors This Memorandum of Incorporation was adopted by the incorporators of the Company, in accordance with
and alternate directors in the section 13 (1), as evidenced by the following signatures made by each of them, or on their behalf (only required
spaces provided; in the case of new company registrations):
(c) inserting the number of
authorised shares, in the space Name and address of Identity or
Signature Date
provided; and incorporator Registration #
(d) each signing and dating the form
on a line of the Table at left.
• There are 4 pages in this form. If filing
by paper, all 4 pages must be filed.
• This Form must be filed with Form
CoR 14.1, Notice of Incorporation,
and required annexures and fees.
Contacting theCommission
The Companies and Intellectual Property
Commission of South Africa

Postal Address
PO Box 429
Pretoria
0001
Republic of South Africa
Tel: 086 100 2472
www.cipc.co.za

This form is prescribed by the Minister of Trade and Industry in terms of section 223 of the Companies Act, 2008 (Act No. 71 of 2008).

Article 1 – Incorporation and Nature of the Company (2) The purposes and powers of the Company are not subject
to any restriction, limitation or qualification, as contem-
1.1 Incorporation plated in section 19 (1) (b) (ii).
(1) The Company is incorporated as a private company, as
defined in the Companies Act, 2008. 1.3 Memorandum of Incorporation and Company rules
(2) The Company is incorporated in accordance with, and (1) This Memorandum of Incorporation of the Company may
governed by— be altered or amended only in the manner set out in sec-
(a) the provisions of the Companies Act, 2008, tion 16, 17 or 152 (6) (b).
without any limitation, extension, variation or (2) The authority of the Company’s Board of Directors to
substitution; and make rules for the Company, as contemplated in section
(b) the provisions of this Memorandum of Incorpo- 15 (3) to (5), is not limited or restricted in any manner by
ration. this Memorandum of Incorporation.
(3) The Board must publish any rules made in terms of
1.2 Powers of the Company section 15 (3) to (5) by delivering a copy of those rules to
(1) The Company is not subject to any provision contemplat- each shareholder by ordinary mail.
ed in section 15 (2) (b) or (c). (4) The Company must publish a notice of any alteration of
the Memorandum of Incorporation or the Rules, made in
Companies Regulations Auditing: Legislation and Standards
terms of section 17 (1), by delivering a copy of the notice
to each shareholder by ordinary mail.
1.4 Optional provisions of Companies Act, 2008 do not
apply
(1) The Company does not elect, in terms of section 34 (2), to
comply voluntarily with the provisions of Chapter 3 of
the Companies Act, 2008.
(2) The Company does not elect, in terms of section
118 (1) (c) (ii), to submit voluntarily to the provisions of
Parts B and C of Chapter 5 of the Companies Act, 2008,
and to the Takeover Regulations provided for in that Act.
Article 2 – Securities of the Company
2.1 Securities
(1) The Company is authorised to issue no more than the
number of shares of a single class of shares with no nom-
inal or par value as shown on the cover sheet, and each
such issued share entitles the holder to—
(a) vote on any matter to be decided by a vote of
shareholders of the company;
(b) participate in any distribution of profit to the
shareholders; and
(c) participate in the distribution of the residual
value of the company upon its dissolution.
(2) The Company must not make an offer to the public of any
of its securities and an issued share must not be trans-
ferred to any person other than—
(a) the company, or a related person;
(b) a shareholder of the company, or a person related
to a shareholder of the company;
(c) a personal representative of the shareholder or
the shareholder’s estate;
(d) a beneficiary of the shareholder’s estate; or
(e) another person approved by the company before
the transfer is effected.
(3) The pre-emptive right of the Company’s shareholders to
be offered and to subscribe for additional shares, as set—
(a) out in section 39, is not limited, negated or
restricted in any manner contemplated in section
39 (3), or subject to any conditions contemplated
in that section.
(Editorial Note: Wording as per original Government Gazette.)
(4) This Memorandum of Incorporation does not limit or
restrict the authority of the Company’s Board of Directors
to—
(a) authorise the Company to issue secured or
unsecured debt instruments, as set out in section
43 (2); or
(b) grant special privileges associated with any debt
instruments to be issued by the Company, as set
out in section 43 (3);
(c) authorise the Company to provide financial
assistance to any person in relation to the sub-
scription of any option or securities of the Com-
pany or a related or inter-related company, as set
out in section 44;
(d) approve the issuing of any authorised shares of
the Company as capitalisation shares, as set out
in section 47 (1); or
(e) resolve to permit shareholders to elect to receive
a cash payment in lieu of a capitalisation share,
as set out in section 47 (1).
2.2 Registration of beneficial interests
The authority of the Company’s Board of Directors to
allow the Company’s issued securities to be held by and
registered in the name of one person for the beneficial in-
terest of another person, as set out in section 56 (1), is not
limited or restricted by this Memorandum of Incorporation.
A-182
Article 3 – Shareholders and Meetings
3.1 Shareholders’ right to information
Every person who has a beneficial interest in any of the
Company’s securities has the rights to access information
set out in section 26 (1).
3.2 Shareholders’ authority to act
(1) If, at any time, there is only one shareholder of the
company, the authority of that shareholder to act without
notice or compliance with any other internal formalities,
as set out in section 57 (2), is not limited or restricted by
this Memorandum of Incorporation.
(2) If, at any time, every shareholder of the Company is also
a director of the Company, as contemplated in section 57
(4), the authority of the shareholders to act without notice
or compliance with any other internal formalities, as set
out in that section is not limited or restricted by this
Memorandum of Incorporation.
3.3 Shareholder representation by proxies
(1) This Memorandum of Incorporation does not limit,
restrict or vary the right of a shareholder of the Compa-
ny—
(a) to appoint 2 or more persons concurrently as
proxies, as set out in section 58 (3) (a); or
(b) to delegate the proxy’s powers to another person,
as set out in section 58 (3) (b).
(2) The requirement that a shareholder must deliver to the
Company a copy of the instrument appointing a proxy be-
fore that proxy may exercise the shareholder’s rights at a
shareholders meeting, as set out in section 58 (3) (c) is
not varied by this Memorandum of Incorporation.
(3) The authority of a shareholder’s proxy to decide without
direction from the shareholder whether to exercise, or ab-
stain from exercising, any voting right of the shareholder,
as set out in section 58 (7) is not limited or restricted by
this Memorandum of Incorporation.
3.4 Record date for exercise of shareholder rights
If, at any time, the Company’s Board of Directors fails to
determine a record date, as contemplated in section 59,
the record date for the relevant matter is as determined in
accordance with section 59 (3).
3.5 Shareholders meetings
(1) The Company is not required to hold any shareholders
meetings other than those specifically required by the
Companies Act, 2008.
(2) The right of shareholders to requisition a meeting, as set
out in section 61 (3), may be exercised by the holders of
at least 10% of the voting rights entitled to be exercised in
relation to the matter to be considered at the meeting.
(3) The authority of the Company’s Board of Directors to
determine the location of any shareholders meeting, and
the authority of the Company to hold any such meeting in
the Republic or in any foreign country, as set out in sec-
tion 61 (9) is not limited or restricted by this Memoran-
dum of Incorporation.
(4) The minimum number of days for the Company to deliver
a notice of a shareholders meeting to the shareholders, is
as provided for in section 62 (1).
(5) The authority of the Company to conduct a meeting
entirely by electronic communication, or to provide for
participation in a meeting by electronic communication,
as set out in section 63 is not limited or restricted by this
Memorandum of Incorporation.
(6) The quorum requirement for a shareholders meeting to
begin, or for a matter to be considered is as set out in sec-
tion 64 (1) without variation.
(7) The time periods allowed in section 64 (4) and (5) apply
to the Company without variation.
(8) The authority of a meeting to continue to consider a
matter, as set out in section 64 (9) is not limited or re-
stricted by this Memorandum of Incorporation.
A-183 Companies Act No. 71 of 2008
(9) The maximum period allowable for an adjournment of a
shareholders meeting is as set out in section 64 (13),
without variation.
3.6 Shareholders resolutions
(1) For an ordinary resolution to be adopted at a shareholders
meeting, it must be supported by the holders of more than
50% of the voting rights exercised on the resolution, as
provided in section 65 (7).
(2) For a special resolution to be adopted at a shareholders
meeting, it must be supported by the holders of at least
75% of the voting rights exercised on the resolution, as
provided in section 65 (9).
(3) A special resolution adopted at a shareholders meeting is
not required for a matter to be determined by the Compa-
ny, except those matters set out in section 65 (11), or
elsewhere in the Act.
Article 4 – Directors
4.1 Composition of the Board of Directors
(1) The Board of Directors of the Company comprises at
least the number of directors, and alternate directors
shown on the cover sheet, each of whom is to be elected
by the holders of the Company’s securities as contem-
plated in section 68.
(2) The manner of electing directors of the Company is as set
out in section 68 (2), and each elected director of the
Company serves for an indefinite term, as contemplated
in section 68 (1).
4.2 Authority of the Board of Directors
(1) The authority of the Company’s Board of Directors to
manage and direct the business and affairs of the Compa-
ny, as set out in section 66 (1) is not limited or restricted
by this Memorandum of Incorporation.
(2) If, at any time, the Company has only one director, as
contemplated in section 57 (3), the authority of that direc-
tor to act without notice or compliance with any other in-
ternal formalities, as set out in that section is not limited
or restricted by this Memorandum of Incorporation.
Companies Regulations
(3) The Company’s Board of Directors must not register the
transfer of any shares unless the conditions for the trans-
fer contemplated in article 2.1 (2) have been met.
4.3 Directors’ Meetings
(1) The right of the Company’s directors to requisition a
meeting of the Board, as set out in section 73 (1), may be
exercised by at least 25% of the directors, if the Board
has 12 or more members, or by 2 (two) directors, in any
other case.
(1) This Memorandum of Incorporation does not limit or
restrict the authority of the Company’s Board of Directors
to—
(a) conduct a meeting entirely by electronic commu-
nication, or to provide for participation in a
meeting by electronic communication, as set out
in section 73 (3); or
(b) determine the manner and form of providing
notice of its meetings, as set out in section 73
(4); or
(c) proceed with a meeting despite a failure or defect
in giving notice of the meeting, as set out in sec-
tion 73 (5); or
(d) consider a matter other than at a meeting, as set
out in section 74.
(Editorial Note: Numbering as per original Government Gazette.)
4.4 Directors compensation and financial assistance
This Memorandum of Incorporation does not limit the
authority of the Company to—
(a) pay remuneration to the Company’s directors, in accord-
ance with a special resolution approved by the Compa-
ny’s shareholders within the previous two years, as set
out in section 66 (9) and (10);
(b) advance expenses to a director, or indemnify a director, in
respect of the defence of legal proceedings, as set out in
section 78 (4);
(c) indemnify a director in respect of liability, as set out in
section 78 (5); or
(d) purchase insurance to protect the Company, or a director,
as set out in section 78 (7).
Companies Regulations Auditing: Legislation and Standards A-184

FORM CoR 15.1B

Long Standard Form for Profit Companies
Memorandum of Incorporation
[Form CoR 15.1B substituted by GNR.619 of 20 August 2013.]
Companies and Intellectual Property Commission
Republic of South Africa

Form CoR 15.1B Memorandum of Incorporation of

Long Standard Form (Insert Name of Company) ___________________________________________________________________
for Profit Companies which is a profit company, has at least __________________ director(s) and _________________________
• This form is issued in terms of section alternate director(s), is authorised to issue securities as described in Article 2, and is referred to in the rest of
13 of the Companies Act, 2008 and this Memorandum of Incorporation as “the Company”.
Regulation 15 of the Companies Regu-
lations, 2011.
• This form may be used only to Adoption of Memorandum of Incorporation
incorporate a profit company.
• A profit company may be incorporated This Memorandum of Incorporation was adopted by the incorporators of the Company, in accordance with
by one or more persons. section 13 (1), as evidenced by the following signatures made by each of them, or on their behalf (only required
• The Incorporators must complete this in the case of new company registrations):
form by—
(a) filling in the Name of the Identity or
Company, unless it is to be com- Name and address Signature Date
Registration #
pleted by the Commission in
terms of Regulation 14 (b) (i) or
(iii);
(b) inserting the number of directors
and alternate directors in the
spaces provided;
(c) inserting the number of author-
ised shares, in the space provid-
ed; and
(d) each signing and dating the form
on a line of the Table at left.
• There are 11 pages in this form. If
filing by paper, all 11 pages must be
filed.
• This Form must be filed with Form
CoR 14.1, Notice of Incorporation, and
required annexures and fees.
Contacting the Commission
The Companies and Intellectual Property
Commission of South Africa

Postal Address
PO Box 429
Pretoria
0001
Republic of South Africa
Tel: 086 100 2472
www.cipc.co.za

This form is prescribed by the Minister of Trade and Industry in terms of section 223 of the Companies Act, 2008 (Act No. 71 of 2008).

Article 1 – Incorporation and Nature of the Company ______ private company, as defined in section
In this Memorandum of Incorporation— 8 (2) (b).
(a) a reference to a section by number refers to the corre- ______ personal liability company, as defined in
sponding section of the Companies Act, 2008; section 8 (2) (c).
(b) words that are defined in the Companies Act, 2008, bear ______ public company, as defined in section
the same meaning in this Memorandum as in that Act; 8 (2) (d).
(c) words appearing to the right of an optional check line are (2) The Company is incorporated in accordance with and
void unless that line contains a mark to indicate that it has governed by—
been chosen as the applicable option. (a) the unalterable provisions of the Companies Act,
The Schedules attached to this Memorandum are part of the 2008; and
Memorandum of Incorporation. (b) the alterable provisions of the Companies Act,
2008, subject to the limitations, extensions, vari-
1.1 Incorporation
ations or substitutions set out in this Memoran-
(1) The Company is incorporated as from—as a— dum; and
______ state owned company, as defined in section (c) the provisions of this Memorandum of
8 (2) (a). Incorporation.
A-185 Companies Act No. 71 of 2008
1.2 Powers of the Company
(1) The Company—
______ is not subject to any provisions contem-
plated in section 15 (2) (b) or (c).
______ is subject to provisions contemplated in
section 15 (2) (b) or (c), as set out in Part
A of Schedule 1.
(2) The purposes and powers of the Company—
______ are not subject to any restrictions, limita-
tions or qualifications, as contemplated in
section 19 (1) (b) (ii).
______ are subject to the restrictions, limitations or
qualifications contemplated in section 19
(1) (b) (ii), as set out in Part A of Schedule
1.
1.3 Memorandum of Incorporation and Company rules
(1) This Memorandum of Incorporation of the Company—
______ may be altered or amended only in the
manner set out section 16, 17 or 152 (6)
(b).
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “manner set out section 16” is intended to
be “manner set out in section 16”.)
______ may be altered or amended in the manner
set out in section 16, 17 or 152 (6) (b), sub-
ject to the provisions contemplated in sec-
tion 16 (2), as set out in Part B of Schedule
1.
(2) The authority of the Company’s Board of Directors to
make rules for the Company, as contemplated in sec-
tion 15 (3) to (5)—
______ is not limited or restricted in any manner
by this Memorandum of Incorporation.
______ is limited or restricted to the extent set out
in Part B of Schedule 1.
(3) The Board must publish any rules made in terms of
section 15 (3) to (5)—
______ by delivering a copy of those rules to each
shareholder by ordinary mail.
______ in accordance with the requirements set out
in Part B of Schedule 1.
(4) The Company must publish a notice of any alteration of
the Memorandum of Incorporation or the Rules, made
in terms of section 17 (1)—
______ by delivering a copy of those rules to each
shareholder by ordinary mail.
______ in accordance with the requirements set out
in Part B of Schedule 1.
1.4 Application of optional provisions of Companies Act,
2008
[This sub-article is not to be used in the case of a public
company]
(1) The Company—
does not elect, in terms of section 34 (2), to
comply voluntarily with the provisions of Chapter
3 of the Companies Act, 2008.
______ does elect, in terms of section 34 (2), to
comply voluntarily with the provisions of
Chapter 3 of the Companies Act, 2008, to
the extent set out in Part C of Schedule 1.
(2) The Company—
______ does not elect, in terms of section 118
(1) (c) (ii), to submit voluntarily to the
provisions of Parts B and C of Chapter 5 of
the Companies Act, 2008, and to the Take-
over Regulations provided for in that Act.
Companies Regulations
______ elects in terms of section 118 (1) (c) (ii) to
submit voluntarily to the provisions of
Parts B and C of Chapter 5 of the Compa-
nies Act, 2008, and to the Takeover Regu-
lations in terms of that Act, to the extent
set out in Part C of Schedule 1.
Article 2 – Securities of the Company
2.1 Shares
(1) The Company is authorised to issue no more than—
______ _______ shares of a single class of shares with
no nominal or par value, each of which entitles the
holder to—
(a) vote on any matter to be decided by a vote of
shareholders of the company;
(b) participate in any distribution of profit to the
shareholders; and
(c) share in the distribution of the Company’s
residual value upon its dissolution.
______ the maximum number of each of the
classes of shares set out in Part A of
Schedule 2, subject to the preferences,
rights, limitations and other terms associat-
ed with each such class, as set out in Part A
of Schedule 2.
(2) The authority of the Company’s Board of Directors to
increase or decrease the number of authorised shares of
any class of the Company’s shares, to reclassify any
shares that have been authorised but not issued, to clas-
sify any unclassified shares, or to determine the prefer-
ences, rights, limitations or other terms of any class of
shares, as set out in section 36 (2) (b) and (3)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part A of Schedule 2.
[In the case of a public company]
(2A) The Company—
______ must not make an offer to the public of any
of its securities.
[In the case of a private or personal liability company]
______ may make an offer to the public of any of
its securities.
(2B) The transferability of the shares of the Company—
______ is not restricted.
______ is restricted as set out in Part F of Schedule
2.
[In the case of a private or personal liability company]
(3) The shareholders of the Company—
______ do not have any pre-emptive right to be
offered and to subscribe for additional
shares of the company.
______ have a common pre-emptive right to be
offered and to subscribe for additional
shares of the Company, as set out in Part A
of Schedule 2.
______ have only such pre-emptive rights to be
offered and to subscribe additional shares
of the company, if any, as are set out in the
preferences, rights, limitations and other
terms associated with their respective clas-
ses of shares.
(4) The pre-emptive right of the Company’s shareholders
to be offered and to subscribe for additional shares, as
set out in section 39—
______ is unconditional, and is not limited, negated
or restricted in any manner contemplated in
subsection (3) of section 39.
______ is subject to the conditions, limitations, or
restrictions set out in Part A of Schedule 3.
Companies Regulations Auditing: Legislation and Standards
______ does not apply with respect to any shares of
the Company.
[In the case of a private or personal liability company]
(5) The authority of the Company’s Board of Directors to
authorise the Company to provide financial assistance
in relation to the subscription of any option or securities
of the Company or a related or inter-related company,
as set out in section 44—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part B of Schedule 2.
(6) The authority of the Company’s Board of Directors to
approve the issuing of any authorised shares of the
Company as capitalisation shares, to issue shares of one
class as capitalisation shares in respect of shares of an-
other class, and to resolve to permit shareholders to
elect to receive a cash payment in lieu of a capitalisa-
tion share, as set out in section 47 (1)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part C of Schedule 2.
(7) Securities of the Company are to be issued—
______ in uncertificated form, as contemplated in
section 49 (2) (b).
______ in either certificated or uncertificated form,
as the Board may determine.
2.2 Debt instruments
(1) The authority of the Company’s Board of Directors to
authorise the Company to issue secured or unsecured
debt instruments, as set out in section 43 (2)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part D of Schedule 2.
(2) The authority of the Company’s Board of Directors to
grant special privileges associated with any debt in-
struments to be issued by the Company, as set out in
section 43 (3)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part D of Schedule 2.
2.3 Registration of beneficial interests
The authority of the Company to allow the Company’s
issued securities to be held by, and registered in the name
of, one person for the beneficial interest of another per-
son, as set out in section 56 (1)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part E of Schedule 2.
Article 3 – Shareholders
3.1 Shareholders’ right to information
In addition to the rights to access information set out in
section 26 (1), every person who has a beneficial interests
in any of the Company’s securities or any other specified
person, has the further rights to information, if any, set
out in Part A of Schedule 3 of this Memorandum of In-
corporation.
(Editorial Note: Wording as per original Government Gazette.)
3.2 Shareholders’ authority to act
(1) If, at any time, there is only one shareholder of the
Company, the authority of that shareholder to act with-
out notice or compliance with any other internal for-
malities, as set out in section 57 (2)—
(a) is not limited or restricted by this Memorandum
of Incorporation.
A-186
(b) is limited or restricted to the extent set out in Part
A of Schedule 3.
(2) If, at any time, every shareholder of the Company is
also a director of the Company, as contemplated in sec-
tion 57 (4), the authority of the shareholders to act
without notice or compliance with any other internal
formalities, as set out in that section—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part A of Schedule 3.
3.3 Representation by concurrent proxies
The right of a shareholder of the Company to appoint
persons concurrently as proxies, as set out in section 58
(3) (a)—
______ is not limited, restricted or varied by this
Memorandum of Incorporation.
______ is limited, restricted or varied to the extent set
out in Part B of Schedule 3.
3.4 Authority of proxy to delegate
The authority of a shareholder’s proxy to delegate the
proxy’s powers to another person, as set out in section 58
(3) (b)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part B of Schedule 3.
3.5 Requirement to deliver proxy instrument to the Company
The requirement that a shareholder must deliver to the
Company a copy of the instrument appointing a proxy be-
fore that proxy may exercise the shareholder’s rights at a
shareholders meeting, as set out in section 58 (3) (c)—
______ is not varied by this Memorandum of Incorpo-
ration.
______ is varied to the extent set out in Part B of
Schedule 3.
3.6 Deliberative authority of proxy
The authority of a shareholder’s proxy to decide without
direction from the shareholder whether to exercise, or
abstain from exercising any voting right of the share-
holder, as set out in section 58 (7)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part B of Schedule 3.
3.7 Record date for exercise of shareholder rights
If, at any time, the Company’s Board of Directors fails to
determine a record date, as contemplated in section 59,
the record date for the relevant matter is—
______ as determined in accordance with section 59
(3).
______ as determined in the manner set out in Part C of
Schedule 3.
Article 4 – Shareholders Meetings
4.1 Requirement to hold meetings
The Company—
______ is not required to hold any shareholders
meetings other than those specifically required
by the Companies Act, 2008.
______ is required to hold shareholders meetings, in
addition to those specifically required by the
Companies Act, 2008, as set out in Part A of
Schedule 4.
4.2 Shareholders’ right to requisition a meeting
The right of shareholders to requisition a meeting, as set
out in section 61 (3), may be exercised—
______ by the holders of at least 10% of the voting
rights entitled to be exercised in relation to the
A-187 Companies Act No. 71 of 2008
matter to be considered at the meeting, as
provided for in that section.
______ by the holders of at least ____% of the voting
rights entitled to be exercised in relation to the
matter to be considered at the meeting, despite
the provisions of that section.
[In the case of a percentage lower than 10]
4.3 Location of shareholders meetings
The authority of the Company’s Board of Directors to
determine the location of any shareholders meeting, and
the authority of the Company to hold any such meeting in
the Republic or in any foreign country, as set out in sec-
tion 61 (9)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part B of Schedule 4.
4.4 Notice of shareholders meetings
The minimum number of days for the Company to deliver
a notice of a shareholders meeting to the shareholders, as
required by section 62—
______ is as provided for in section 62 (1).
______ is _______ business days before the meeting is
to begin.
4.5 Electronic participation in shareholders meetings
The authority of the Company to conduct a meeting
entirely by electronic communication or to provide for
participation in a meeting by electronic communication,
as set out in section 63—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is prohibited, limited or restricted to the extent
set out in Part C of Schedule 4.
4.6 Quorum for shareholders meetings
(1) The quorum requirement for a shareholders meeting to
begin, or for a matter to be considered are—
______ as set out in section 64 (1) without varia-
tion.
______ as set out in section 64 (1) subject to a
minimum of _____% in substitution for the
25% required by that section.
(2) The time periods allowed in section 64 (4) and (5)—
______ apply to the Company without variation.
______ apply to the Company, subject to the
variations set out in Part D of Schedule 4.
(3) The authority of a meeting to continue to consider a
matter, as set out in section 64 (9)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part D of Schedule 4.
4.7 Adjournment of shareholders meetings
The maximum period allowable for an adjournment of a
shareholders meeting is—
______ as set out in section 64 (12), without variation.
______ as set out in section 64 (12), subject to the
variations set out in Part E of Schedule 4.
4.8 Shareholders resolutions
(1) For an ordinary resolution to be adopted at a sharehold-
ers meeting, it must be supported by the holders of—
______ more than 50% of the voting rights exer-
cised on the resolution, as provided in sec-
tion 65 (7).
______ at least _____% of the voting rights
exercised on the resolution, despite section
65 (7).
Companies Regulations
______ at least the minimum percentage of the
voting rights exercised on the resolution, as
set out in Part F of Schedule 4.
(2) For a special resolution to be adopted at a shareholders
meeting, it must be supported by the holders of at least—
______ 75% of the voting rights exercised on the
resolution, as provided in section 65 (9).
______ _____% of the voting rights exercised on the
resolution, despite section 65 (7).
______ the minimum percentage of the voting
rights exercised on the resolution, as set
out in Part F of Schedule 4.
(3) A special resolution adopted at a shareholders meeting
is—
______ not required for a matter to be determined
by the Company, except those matters set
out in section 65 (11), or elsewhere in the
Act.
______ required, in addition to the matters set out
in section 65 (11), for the matters set out in
Part G of Schedule 4.
Article 5 – Directors and Officers
5.1 Composition of the Board of Directors
(1) The Board of Directors of the Company comprises of at
least directors, and __________ alternate directors,
to be elected by holders of the companies securities en-
titled to exercise voting rights, as contemplated in sec-
tion 68.
(2) In addition to the elected directors—
______ there are no appointed or ex officio direc-
tors of the Company, as contemplated in
section 66 (4).
______ there are appointed, and ex
officio directors of the Company, as con-
templated in section 66 (4), to be designat-
ed in the manner specified in Part A of
Schedule 5.
(3) In addition to satisfying the qualification and eligibility
requirements set out in section 69, to become or remain a
director or a prescribed officer of the Company, a per-
son—
______ need not satisfy any further eligibility
requirements or qualifications.
______ must satisfy the additional eligibility
requirements and qualifications set out in
Part B of Schedule 5.
(4) Each elected director of the Company serves for—
______ an indefinite term, as contemplated in
section 68 (1).
______ a term of _____________ years.
______ a term determined in the manner set out in
Part C of Schedule 5.
(5) The manner of electing directors of the Company is—
______ as set out in section 68 (2).
______ as set out in Part C of Schedule 5.
(6) The authority of the Company’s Board of Directors to
fill any vacancy on the Board on a temporary basis, as
set out in section 68 (3)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part D of Schedule 5.
5.2 Authority of the Board of Directors
(1) The authority of the Company’s Board of Directors to
manage and direct the business and affairs of the Com-
pany, as set out in section 66 (1)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
Companies Regulations Auditing: Legislation and Standards
______ is limited or restricted to the extent set out
in Part E of Schedule 5.
(2) If, at any time, the Company has only one director, as
contemplated in section 57 (3), the authority of that di-
rector to act without notice or compliance with any oth-
er internal formalities, as set out in that section—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part F of Schedule 5.
5.2A Liability of Directors
The Company is a personal liability company and the
directors and past directors are jointly and severally liable
for the debts and liabilities of the company as contem-
plated in section 19 (3).
5.3 Board of Directors Meetings
(1) The authority of the Company’s Board of Directors to
consider a matter other than at a meeting, as set out in
section 74—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part G of Schedule 5.
(2) The right of the Company’s directors to requisition a
meeting of the Board, as set out in section 73 (1), may
be exercised—
______ by at least 25% of the directors, if the
Board has 12 or more members, or by 2
(two) directors, in any other case, as pro-
vided in that section; or
______ by at least ______ % of the direc-
tors, or by at least _______ directors, de-
spite the provisions of that section.
(3) The authority of the Company’s Board of Directors to
conduct a meeting entirely by electronic communica-
tion, or to provide for participation in a meeting by
electronic communication, as set out in section 73 (3)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part H of Schedule 5.
(4) The authority of the Company’s Board of Directors to
determine the manner and form of providing notice of
its meetings, as set out in section 73 (4)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part H of Schedule 5.
(5) The authority of the Company’s Board of Directors to
proceed with a meeting despite a failure or defect in giv-
ing notice of the meeting, as set out in section 73 (5)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part H of Schedule 5.
(6) The quorum requirement for a directors meeting to
begin, the voting rights at such a meeting, and the re-
quirements for approval of a resolution at such a meet-
ing, are—
______ as set out in section 73 (5), without varia-
tion.
______ as set out in section 73 (5) subject to the
variations set out in Part H of Schedule 5.
5.4 Director’s compensation and financial assistance
(1) The authority of the Company to pay remuneration to
the Company’s directors, in accordance with a special
A-188
resolution approved by the Company’s shareholders
within the previous two years, as set out in section 66
(8) and (9)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part I of Schedule 5.
(2) The authority of the Company’s Board of Directors, as
set out in section 45, to authorise the Company to pro-
vide financial assistance to a director, prescribed officer
or other person referred to in section 45 (2)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part I of Schedule 5.
5.5 Indemnification of Directors
(1) The authority of the Company to advance expenses to a
director, or indemnify a director, in respect of the de-
fence of legal proceedings, as set out in section 78
(4)—
______ is not limited, restricted or extended by this
Memorandum of Incorporation.
______ is limited, restricted or extended to the
extent set out in Part J of Schedule 5.
(2) The authority of the Company to indemnify a director
in respect of liability, as set out in section 78 (5)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part J of Schedule 5.
(3) The authority of the Company to purchase insurance to
protect the Company, or a director, as set out in section
78 (7)—
______ is not limited, restricted or extended by this
Memorandum of Incorporation.
______ is limited, restricted or extended to the
extent set out in Part J of Schedule 5.
5.6 Committees of the Board
(1) The authority of the Company’s Board of Directors to
appoint committees of directors, and to delegate to any
such committee any of the authority of the Board, as set
out in section 72 (1), and to include in any such com-
mittee persons who are not directors, as set out in sec-
tion 72 (2) (a)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part K of Schedule 5.
(2) The authority of a committee appointed by the
Company’s Board of Directors, as set out in section 72
(2) (b) and (c)—
______ is not limited or restricted by this Memo-
randum of Incorporation.
______ is limited or restricted to the extent set out
in Part K of Schedule 5.
Article 6 – General Provisions
Insert any further provisions desired in this or additional Articles.
Schedule 1 – Incorporation and nature of the Company
Part A
Insert—
(a) any ‘Ring fencing’ provisions as contemplated in section
15 (2) of the Act; and
(b) any provisions limiting the purposes or powers of the
Company, as contemplated in section 19 (1) (b) of the
Act.
A-189 Companies Act No. 71 of 2008
Part B
Insert—
(a) any provisions relating to the amendment of the Memo-
randum of Incorporation, as contemplated in section 16
(2) of the Act;
(b) any provisions relating to the Board’s authority to make
rules for the Company, as contemplated in section 15 (3)
to (5) of the Act; and
(c) any provisions relating to the publication of the notice of
alteration as contemplated in section 17 (1) of the Act.
Part C
Insert—
(a) any provisions to subject the Company to Chapter 3 of
the Act on a voluntary basis, as contemplated in section
34 (2) of the Act; and
(b) any provisions to subject the Company to Parts B and C
of Chapter 5 of the Act, and to the Takeover Regulations,
on a voluntary basis as contemplated in section 118
(1) (c) (ii) of the Act.
Schedule 2 – Company Securities
Part A
Insert—
(a) any provisions setting out the classes of authorised
shares, and maximum number of authorised shares of
each class, and the preferences, rights, limitations and
other terms of each class of shares as contemplated in
section 36 (1) of the Act; and
(b) any provisions respecting the authority of the Board to
exercise powers relating to shares, as contemplated in
section 36 (3) of the Act.
Part B
Insert any provisions restricting or limiting the authority
of the Board to provide financial assistance to any person
in relation to the subscriptions of securities or options, as
contemplated in section 44 of the Act.
Part C
Insert any provisions restricting or limiting the authority
of the Board with respect to the issuing of capitalisation
shares, as contemplated in section 47 (1) of the Act.
Part D
Insert any provisions restricting or limiting the authority
of the Board with respect to the issuing of debt instru-
ments, as contemplated in section 43 (2) or (3) of the Act.
Part E
Insert any provisions restricting or limiting the authority
of the Company with respect to the registration of benefi-
cial interests in the Company’s securities, as contemplat-
ed in section 56 (1) of the Act.
Part F
Insert any provisions restricting or limiting the transfera-
bility of the securities of the Company as contemplated in
section 8 (2) (b) (ii) (bb).
Schedule 3 – Shareholders
Part A
Insert—
(a) any provisions relating to information rights of any
person in addition to those set out in section 26 (3) of the
Act;
(b) any provisions limiting or restricting the right of share-
holders to act without meeting formal requirements, as
contemplated in section 57 (2) or (4) of the Act;
(c) any provisions limiting or restricting or setting conditions
for the pre-emptive right of the Company’s shareholders
to be offered and to subscribe for additional shares, as set
out in section 39.
Companies Regulations
Part B
Insert any provisions relating to the powers of sharehold-
ers to appoint proxies, the appointment of proxies, and
the powers of any such proxy, as contemplated in section
58 of the Act.
Part C
Insert any provisions respecting the fixing of a record
date, as contemplated in section 59 of the Act.
Schedule 4 – Shareholders Meetings
Part A
Insert any provisions imposing a requirement to hold a
shareholder’s meeting.
Part B
Insert any provisions limiting or restricting the authority
of the Board to determine the location of shareholders
meetings, or the authority of the Company to meet outside
the Republic.
Part C
Insert any provision prohibiting, limiting or restricting
the authority of the Board with respect to the use of elec-
tronic communication for shareholders meetings, as con-
templated in section 63 of the Act.
Part D
Insert any provision respecting the quorum requirements
for shareholders meetings, or varying the provisions of
section 64 of the Act.
Part E
Insert any provision varying section 64 (13) of the Act
with respect to the maximum period for adjournment of a
shareholders meeting.
Part F
Insert—
(a) any provision establishing different requirements for
adoption of an ordinary resolution for different matters;
(b) any provision establishing different requirements for
adoption of an special resolution for different matters; or
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “an special resolution” is intended to be
“a special resolution”.)
(c) any provision imposing the requirement of a special
resolution to approve any matter, as contemplated in sec-
tion 65 (11) of the Act.
Part G
Insert any provisions requiring a special resolution to be
adopted for any matter in addition to the matters set out
in section 65 (11) or elsewhere in the Act.
Schedule 5 – Directors of the Company
Part A
Insert any provisions establishing the rights of any person
to appoint a director, or establishing the right of any per-
son to be an ex officio director of the Company, or provid-
ing for the appointment or election of alternate directors.
Part B
Insert any provision imposing additional eligibility or
qualification requirements for directors and prescribed
officers of the Company.
Part C
Insert—
(a) any provision establishing an alternative manner of
electing directors, as contemplated in section 68 of the
Act;
(b) any provisions establishing an alternative manner of
determining the term to be served by any director.
Part D
Insert any provision limiting or restricting the authority
of the Board to temporarily fill a vacancy on the Board,
as contemplated in section 68 (3) of the Act.
Companies Regulations Auditing: Legislation and Standards A-190

Part E Part I
Insert any provision limiting or restricting the authority Insert any provision limiting or restricting the authority
of the Board to manage and direct the business and af- of the Company to pay remuneration to its Directors, as
fairs of the Company, as contemplated in section 66 (1) of contemplated in section 66 (8) of the Act, or limiting or
the Act. restricting the authority of the Board to authorise the
Company to provide financial assistance to a director,
Part F prescribed officer or any other party contemplated in sec-
Insert any provision limiting or restricting the authority tion 45 (2) of the Act.
of a lone director to act without regard for formalities, as Part J
contemplated in section 57 (3) of the Act. Insert any provision limiting, restricting or extending the
Part G authority of the Company to advance expenses to a direc-
tor, indemnify a director, or purchase insurance to pro-
Insert any provision limiting or restricting the authority
tect the Company or a director, as contemplated in
of the Board to consider a matter other than at a meeting,
section 78 of the Act.
as contemplated in section 74 of the Act.
Part K
Part H Insert any provision limiting or restricting the authority
Insert any provision limiting, restricting or varying the of the Board with respect to the establishment of commit-
authority of the Board with respect to the conduct of its tees, or limiting or restricting the authority of a commit-
meetings, as contemplated in section 73 of the Act. tee, as contemplated in section 72 of the Act.
FORM CoR 15.1C
Short Standard Form
Non Profit Companies without members
Memorandum of Incorporation
[Form CoR 15.1C substituted by GNR.619 of 20 August 2013.]
Companies and Intellectual Property Commission
Republic of South Africa

Form CoR 15.1C Memorandum of Incorporation of

Short Standard Form (Insert Name of Company) ___________________________________________________________________
Non Profit Companies without
which is referred to in the rest of this Memorandum of Incorporation as “the Company”.
members
• This form is issued in terms of section
13 of the Companies Act, 2008, and The Company is a Non Profit company without members, with the following objects:
Regulation 15 of the Companies Regu-
lations, 2011.
• This form may be used only to
incorporate a Non Profit company
without members.
• A Non Profit company may be
incorporated by three or more persons.
• The Incorporators must complete this
form by—
(a) filling in the Name of the
Company, unless it is to be com-
pleted by the Commission in terms
of Regulation 14 (1) (b) (iii);
The Company has at least ____________ directors and ______________ alternate director(s), to be appoint-
(b) inserting a statement of the
objects of the company in the
ed in the following manner:
space provided;
(c) inserting the number of directors
and alternate directors in the spac-
es provided; and
(d) each signing and dating the form
on a line of the Table.
• There are 3 pages in this form. If filing
by paper, all 3 pages must be filed. Use
additional sheets if required to provide
information.
• This Form must be filed with Form
CoR 14.1, Notice of Incorporation, and
required annexures and fees. Adoption of Memorandum of Incorporation
Contacting the Commission This Memorandum of Incorporation was adopted by the incorporators of the Company, in accordance with
The Companies and Intellectual Property section 13 (1), as evidenced by the following signatures made by each of them, or on their behalf (only required
Commission of South Africa in the case of new company registrations):
Postal Address
PO Box 429 Identity or
Name and address Signature Date
Pretoria, 0001 Registration #
Republic of South Africa
Tel: 086 100 2472
www.cipc.co.za

This form is prescribed by the Minister of Trade and Industry in terms of section 223 of the Companies Act, 2008 (Act No. 71 of 2008).
A-191 Companies Act No. 71 of 2008
In this Memorandum of Incorporation—
(a) a reference to a section by number refers to the corre-
sponding section of the Companies Act, 2008;
(b) words that are defined in the Companies Act, 2008, bear
the same meaning in this Memorandum as in that Act.
Article 1 – Incorporation and Nature of the Company
1.1 Incorporation
(1) The Company is incorporated as a Non Profit company,
as defined in the Companies Act, 2008.
(2) The Company is incorporated in accordance with, and
governed by—
(a) the provisions of the Companies Act, 2008 that are
applicable to Non Profit companies, without any
limitation, extension, variation or substitution; and
(b) the provisions of this Memorandum of Incorpora-
tion.
1.2 Objects and Powers of the Company
(1) The Objects of the Company are as set out on the cover
sheet and, except to the extent necessarily implied by the
stated objects, the purposes and powers of the Company
are not subject to any restriction, limitation or qualifica-
tion, as contemplated in section 19 (1) (b) (ii).
(2) The Company is not subject to any provision contemplat-
ed in section 15 (2) (b) or (c).
(3) Upon dissolution of the Company, it net assets must be
distributed in the manner determined in accordance with
Item 1 (4) (b) of Schedule 1 of the Companies Act, 2008.
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “it net assets” is intended to be “its net
assets”.)
1.3 Memorandum of Incorporation and Company rules
(1) This Memorandum of Incorporation of the Company may
be altered or amended only in the manner set out in sec-
tion 16, 17 or 152 (6) (b).
(2) The authority of the Company’s Board of Directors to
make rules for the Company, as contemplated in section
15 (3) to (5), is not limited or restricted in any manner by
this Memorandum of Incorporation.
(3) The Board must publish any rules made in terms of
section 15 (3) to (5) by delivering a copy of those rules to
each director by ordinary mail.
(4) The Company must publish a notice of any alteration of
the Memorandum of Incorporation or the Rules, made in
terms of section 17 (1), by delivering a copy of the notice
to each director by ordinary mail.
1.4 Optional provisions of Companies Act, 2008 do not
apply
The Company does not elect, in terms of section 34 (2), to
comply voluntarily with the provisions of Chapter 3 of
the Companies Act, 2008.
1.5 Company not to have members
As contemplated in Item 4 (1) of Schedule 1 of the Act,
the Company has no members.
Companies Regulations
Article 2 – Directors and Officers
2.1 Composition of the Board of Directors
The Board of Directors of the Company comprises at
least the number of directors, and alternate directors
shown on the cover sheet, each of whom—
(a) is to be appointed in the manner set out on the cover
sheet; and
(b) serves for an indefinite term until substituted by the
person or entity that appointed the director.
2.2 Authority of the Board of Directors and Committees
(1) This Memorandum of Incorporation does not limit or
restrict the authority of the Company’s Board of Directors
to—
(a) manage and direct the business and affairs of the
Company, as set out in section 66 (1);
(b) consider a matter other than at a meeting, as set out
in section 74;
(c) conduct a meeting entirely by electronic communi-
cation, or to provide for participation in a meeting
by electronic communication, as set out in section
73 (3);
(d) determine the manner and form of providing notice
of its meetings, as set out in section 73 (4);
(e) proceed with a meeting despite a failure or defect in
giving notice of the meeting, as set out in section 73
(5);
(f) appoint committees of directors, and to delegate to
any such committee any of the authority of the
Board as set out in section 72 (1), or to include in
any such committee persons who are not directors,
as set out in section 73 (2) (a).
(2) The right of the Company’s directors to requisition a
meeting of the Board, as set out in section 73 (1), may be
exercised by at least 25% of the directors, if the Board
has 12 or more members, or by 2 (two) directors, in any
other case, as provided in that section.
(3) The quorum requirement for a directors meeting to begin,
the voting rights at such a meeting, and the requirements
for approval of a resolution at such a meeting, are as set
out in section 73 (5).
(4) This Memorandum of Incorporation does not limit or
restrict the authority of any committee appointed by the
Company’s Board of Directors, as set out in section 72 (2).
2.3 Indemnification of Directors
This Memorandum of Incorporation does not limit,
restrict or extend the authority of the Company’s Board of
Directors to—
(a) advance expenses to a director, or indemnify a director, in
respect of the defence of legal proceedings, as set out in
section 78 (4);
(b) indemnify a director in respect of liability, as set out in
section 78 (5); or
(c) purchase insurance to protect the Company, or a director,
as set out in section 78 (7).
2.4 Officers
The Board of Directors may appoint any officers it
considers necessary to better achieve the objects of the
Company.
Companies Regulations Auditing: Legislation and Standards A-192

FORM CoR 15.1D

Long Standard Form
Non Profit Companies without members
Memorandum of Incorporation
[Form CoR 15.1D substituted by GNR.619 of 20 August 2013.]
Companies and Intellectual Property Commission
Republic of South Africa

Form CoR 15.1D Memorandum of Incorporation of

Long Standard Form
Non Profit Companies without members (Insert Name of Company) _______________________________________________________________
• This form is issued in terms of section 13 which is referred to in the rest of this Memorandum of Incorporation as “the Company”.
of the Companies Act, 2008, and Regula-
tion 15 of the Companies Regulations,
2011. The Company is a Non Profit company without members, with the following objects:
• This form may be used only to incorpo-
rate a Non Profit company without mem-
bers.
• A Non Profit company may be incorpo-
rated by three or more persons.
• The Incorporators must complete this
form by—
(a) filling in the Name of the Company,
unless it is to be completed by the
Commission in terms of Regulation
14 (1) (b) (iii);
(b) inserting a statement of the objects The Company has at least _______ directors and _______ alternate director(s), to be appointed in the
of the company in the space provid- following manner:
ed;
(c) inserting the number of directors
and alternate directors in the spaces
provided; and
(d) each signing and dating the form on
a line of the Table.
• There are 5 pages in this form. If filing by
paper, all 5 pages must be filed. Use addi-
tional sheets if required to provide infor-
mation.
• This Form must be filed with Form CoR
14.1, Notice of Incorporation, and re- Adoption of Memorandum of Incorporation
quired annexures and fees.
This Memorandum of Incorporation was adopted by the incorporators of the Company, in accordance with
Contacting the Commission section 13 (1), as evidenced by the following signatures made by each of them, or on their behalf (only
The Companies and Intellectual Property required in the case of new company registrations):
Commission of South Africa
Postal Address Identity or
Name of incorporator Signature Date
PO Box 429 Registration #
Pretoria
0001
Republic of South Africa
Tel: 086 100 2472
www.cipc.co.za

This form is prescribed by the Minister of Trade and Industry in terms of section 223 of the Companies Act, 2008 (Act No. 71 of 2008).

In this Memorandum of Incorporation—
(a) a reference to a section by number refers to the corre-
sponding section of the Companies Act, 2008;
(b) words that are defined in the Companies Act, 2008 bear
the same meaning in this Memorandum as in that Act;
and
(c) words appearing to the right of an optional check line are
void unless that line contains a mark to indicate that it has
been chosen as the applicable option.
The Schedules attached to this Memorandum are part of the
Memorandum of Incorporation.
Article 1 – Incorporation and Nature of the Company
1.1 Incorporation
(1) The Company is incorporated as a Non Profit company,
as defined in the Companies Act, 2008.
(2) The Company is incorporated in accordance with, and
governed by—
(a) the unalterable provisions of the Companies Act,
2008 that are applicable to Non Profit Companies;
(b) the alterable provisions of the Companies Act, 2008,
that are applicable to Non Profit Companies, subject
to any limitation, extension, variation or substitution
set out in this Memorandum; and
(c) the provisions of this Memorandum of Incorporation.
1.2 Objects and Powers of the Company
(1) The Objects of the Company are as set out on the cover
sheet and, except to the extent necessarily implied by the
stated objects, the purposes and powers of the Company—
_______ are not subject to any restriction, limitation or
qualification, as contemplated in section 19
(1) (b) (ii).
A-193 Companies Act No. 71 of 2008
_______ are subject to any restriction, limitation or
qualification, contemplated in section 19
(1) (b) (ii), as set out in Part A of Schedule 1.
(2) The Company—
_______ is not subject to any provision contemplated
in section 15 (2) (b) or (c).
_______ is subject to the provision contemplated in
section 15 (2) (b) or (c), as set out in Part B
of Schedule 1.
(3) Upon dissolution of the Company, its net assets must be
distributed in the manner determined in accordance
with—
(a) Item 1 (4) (b) of Schedule 1 of the Companies Act,
2008; and
(b) the provisions, if any, set out in Part D of Schedule 1
of this Memorandum.
1.3 Memorandum of Incorporation and Company rules
(1) This Memorandum of Incorporation of the Company—
_______ may be altered or amended only in the
manner set out in section 16, 17 or 152
(6) (b).
_______ may be altered or amended in the manner set
out in section 16, 17 or 152 (6) (b), subject to
the provisions contemplated in section 16 (2),
and set out in Part C of Schedule 1.
(2) The authority of the Company’s Board of Directors to
make rules for the Company, as contemplated in section
15 (3) to (5)—
_______ is not limited or restricted in any manner by
this Memorandum of Incorporation.
_______ is limited or restricted to the extent set out in
Part C of Schedule 1.
(3) The Board must publish any rules made in terms of
section 15 (3) to (5)—
_______ by delivering a copy of those rules to each
director by ordinary mail.
_______ in accordance with the requirements set out in
Part C of Schedule 1.
(4) The Company must publish a notice of any alteration of
the Memorandum of Incorporation or the Rules, made in
terms of section 17 (1)—
_______ by delivering a copy of those rules to each
director by ordinary mail.
_______ in accordance with the requirements set out in
Part C of Schedule 1.
1.4 Optional provisions of Companies Act, 2008 do not
apply
The Company—
_______ does not elect, in terms of section 34 (2), to
comply voluntarily with the provisions of
Chapter 3 of the Companies Act, 2008.
_______ elects, in terms of section 34 (2), to comply
voluntarily with the provisions of Chapter 3
of the Companies Act, 2008.
1.5 Company not to have members
As contemplated in Item 4 (1) of Schedule 1 of the Act,
the Company has no members.
Article 2 – Directors and Officers
2.1 Composition of the Board of Directors
(1) The Board of Directors of the Company comprises the
number of directors, and alternate directors shown on the
cover sheet, each of whom—
(a) is to be appointed in the manner set out on the
cover sheet; and
(b) serves for—
_______ an indefinite term, until substituted
by the person or entity that appointed
the director.
Companies Regulations
_______ a term of ____ years.
_______ a term determined in the manner set
out on the cover sheet.
(2) In addition to the appointed directors—
______ there are no ex officio directors of the
company, as contemplated in section
66 (4).
______ there are _________ ex officio
directors of the company, as contem-
plated in section 66 (4), to be desig-
nated in the manner specified in Part A
of Schedule 2.
(3) In addition to satisfying the qualification and eligibility
requirements set out in section 69, to become or remain a
director of the Company, a person—
______ need not satisfy any further eligibility
requirements or qualifications.
______ must satisfy the additional eligibility
requirements and qualifications set
out in Part B of Schedule 2.
2.2 Authority of the Board of Directors
The authority of the Company’s Board of Directors to
manage and direct the business and affairs of the Compa-
ny, as set out in section 66 (1)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part C of Schedule 2.
2.2 Board of Directors meetings
(1) The authority of the Company’s Board of Directors to
consider a matter other than at a meeting, as set out in
section 74—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part D of Schedule 2.
(2) The right of the Company’s Directors to requisition a
meeting of the Board, as set out in section 73 (1), may be
exercised by—
______ at least 25% of the directors, if the board has 12
or more members, or by 2 (two) directors, in
any other case, as provided in that section.
_____ at least _______________ % of the directors,
or by at least ________directors, despite the
provisions of that section.
(3) The authority of the Company’s Board of Directors to
conduct a meeting entirely by electronic communication,
or to provide for participation in a meeting by electronic
communication, as set out in section 73 (3)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part E of Schedule 2.
(4) The authority of the Company’s Board of Directors to
determine the manner and form of providing notice of its
meetings, as set out in section 73 (4)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part E of Schedule 2.
(5) The authority of the Company’s Board of Directors to
proceed with a meeting despite a failure or defect in giv-
ing notice of the meeting, as set out in section 73 (5)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part E of Schedule 2.
Companies Regulations Auditing: Legislation and Standards
(6) The quorum requirement for a directors’ meeting to begin,
the voting rights at such a meeting, and the requirements
for approval of a resolution at such a meeting, are—
______ as set out in section 73 (5).
______ as set out in section 73 (5), subject to the
variations set out in Part E of Schedule 2.
(Editorial Note: Numbering as per original Government Gazette.)
2.3 Indemnification of Directors
(1)The authority of the Company’s Board of Directors to
advance expenses to a director, or indemnify a director, in
respect of the defence of legal proceedings, as set out in
section 78 (3)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part F of Schedule 2.
(2) The authority of the Company’s Board of Directors to
indemnify a director in respect of liability, as set out in
section 78 (5)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part F of Schedule 2.
(3) The authority of the Company’s Board of Directors to
purchase insurance to protect the Company, or a director,
as set out in section 78 (6)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part F of Schedule 2.
2.4 Officers and Committees
(1) The Board of Directors may appoint any officers it
considers necessary to better achieve the objects of the
Company.
(2) The authority of the Company’s Board of Directors to
appoint committees of directors, and to delegate to any
such committee any of the authority of the Board as set
out in section 72 (1), or to include in any such committee
persons who are not directors, as set out in section
72 (2) (a)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part G of Schedule 2.
(3) The authority of a committee appointed by the Compa-
ny’s Board, as set out in section 72 (2) (b) and (c)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part G of Schedule 2.
Article 3 – General Provisions
Insert any further provisions desired in this or additional Articles.
Schedule 1 – Incorporation and nature of the Company
Part A
Insert any provisions limiting the purposes or powers of the
Company, as contemplated in section 19 (1) (b) of the Act.
A-194
Part B
Insert any ‘Ring fencing’ provisions as contemplated in
section 15 (2) of the Act.
Part C
Insert—
(a) any provisions relating to the amendment of the Memo-
randum of Incorporation, as contemplated in section 16
(2) of the Act;
(b) any provisions relating to the Board’s authority to make
rules for the Company, as contemplated in section 15 (3)
to (5) of the Act; and
(c) any provisions relating to the publication of the notice of
alteration as contemplated in section 17 (1) of the Act.
Part D
Insert provisions establishing, or providing for the
establishment of, a scheme of distribution of the net assets
of the Company upon its dissolution, as required by Item
1 (4) of Schedule 2 of the Companies Act, 2008.
Schedule 2 – Directors of the Company
Part A
Insert any provisions establishing the right of any person
to be an ex officio director of the Company.
Part B
Insert any provision imposing additional eligibility or
qualification requirements for directors and prescribed
officers of the Company.
Part C
Insert any provision limiting or restricting the authority
of the Board to manage and direct the business and af-
fairs of the Company, as contemplated in section 66 (1) of
the Act.
Part D
Insert any provision limiting or restricting the authority
of the Board to consider a matter other than at a meeting,
as contemplated in section 74 of the Act.
Part E
Insert any provision limiting, restricting or varying the
authority of the Board with respect to the conduct of its
meetings, as contemplated in section 73 of the Act.
Part F
Insert any provision limiting, restricting or extending the
authority of the Company to advance expenses to a direc-
tor, indemnify a director, or purchase insurance to pro-
tect the Company or a director, as contemplated in
section 78 of the Act.
Part G
Insert any provision limiting, restricting or varying the
authority of the Board with respect to the establishment of
committees, or limiting or restricting the authority of a
committee, as contemplated in section 72 of the Act.
A-195 Companies Act No. 71 of 2008 Companies Regulations

FORM CoR 15.1E

Long Standard Form
Non Profit Companies with members
Memorandum of Incorporation
[Form CoR 15.1E substituted by GNR.619 of 20 August 2013.]
Companies and Intellectual Property Commission
Republic of South Africa

Form CoR 15.1E Memorandum of Incorporation of

Long Standard Form
Non Profit Companies with members (Insert Name of Company) ___________________________________________________________________
• This form is issued in terms of section which is referred to in the rest of this Memorandum of Incorporation as “the Company”.
13 of the Companies Act, 2008, and
Regulation 15 of the Companies Regu- The Company is a Non Profit company with members, with the following objects:
lations, 2011.
• This form may be used only to
incorporate a Non Profit company with
members.
• A Non Profit company may be
incorporated by three or more persons.
• The Incorporators must complete this
form by—
(a) filling in the Name of the
Company, unless it is to be com-
pleted by the Commission in terms
of Regulation 14 (1) (b) (iii);
(b) inserting a statement of the
objects of the company in the
space provided;
(c) inserting the number of directors
and alternate directors in the spac-
es provided; and
(d) each signing and dating the form
on a line of the Table.
• There are 9 pages in this form. If filing Adoption of Memorandum of Incorporation
by paper, all 9 pages must be filed. Use
additional sheets if required to provide This Memorandum of Incorporation was adopted by the incorporators of the Company, in accordance with
information. section 13 (1), as evidenced by the following signatures made by each of them, or on their behalf (only required
• This Form must be filed with Form in the case of new company registrations):
CoR 14.1, Notice of Incorporation, and
required annexures and fees. Name of incorpora- Identity or
Signature Date
Contacting the Commission tor Registration #
The Companies and Intellectual Property
Commission of South Africa
Postal Address
PO Box 429
Pretoria, 0001
Republic of South Africa

Tel: 086 100 2472

www.cipc.co.za

This form is prescribed by the Minister of Trade and Industry in terms of section 223 of the Companies Act, 2008 (Act No. 71 of 2008).

In this Memorandum of Incorporation— (2) The Company is incorporated in accordance with, and
governed by—
(a) a reference to a section by number refers to the corre-
sponding section of the Companies Act, 2008; (a) the unalterable provisions of the Companies Act,
2008 that are applicable to Non Profit companies;
(b) words that are defined in the Companies Act, 2008 bear
(b) the alterable provisions of the Companies Act, 2008
the same meaning in this Memorandum as in that Act;
that are applicable to Non Profit companies, subject
and
to any limitation, extension, variation or substitu-
(c) words appearing to the right of an optional check line are tion set out in this Memorandum; and
void unless that line contains a mark to indicate that it has (c) the provisions of this Memorandum of Incorporation.
been chosen as the applicable option.
The Schedules attached to this Memorandum are part of the 1.2 Objects and Powers of the Company
Memorandum of Incorporation. (1) The Objects of the Company are as set out on the cover
sheet and, except to the extent necessarily implied by the
Article 1 – Incorporation and Nature of the Company stated objects, the purposes and powers of the Company—
________ are not subject to any restriction, limitation
1.1 Incorporation or qualification, as contemplated in section
(1) The Company is incorporated as a Non Profit company, 19 (1) (b) (ii).
as defined in the Companies Act, 2008.
Companies Regulations Auditing: Legislation and Standards
_______ are subject to any restriction, limitation or
qualification, contemplated in section 19
(1) (b) (ii), as set out in Part A of Schedule
1.
(2) The Company—
_______ is not subject to any provision contemplated
in section 15 (2) (b) or (c).
_______ is subject to the provision contemplated in
section 15 (2) (b) or (c), as set out in Part B
of Schedule 1.
(3) Upon dissolution of the Company, its net assets must be
distributed in the manner determined in accordance
with—
(a) Item 1 (4) (b) of Schedule 1 of the Companies Act,
2008; and
(b) the provisions, if any, set out in Part C of Schedule
1 of this Memorandum.
1.3 Memorandum of Incorporation and Company rules
(1) This Memorandum of Incorporation of the Company—
_______ may be altered or amended only in the
manner set out in section 16, 17 or 152
(6) (b).
_______ may be altered or amended in the manner
set out in section 16, 17 or 152 (6) (b), sub-
ject to the provisions contemplated in sec-
tion 16 (2), and set out in Part D of
Schedule 1.
(2) The authority of the Company’s Board of Directors to
make rules for the Company, as contemplated in section
15 (3) to (5)—
_______ is not limited or restricted in any manner by
this Memorandum of Incorporation.
_______ is limited or restricted to the extent set out
in Part D of Schedule 1.
(3) The Board must publish any rules made in terms of
section 15 (3) to (5)—
_______ by delivering a copy of those rules to each
director and member by ordinary mail.
_______ in accordance with the requirements set out
in Part D of Schedule 1.
(4) The Company must publish a notice of any alteration of
the Memorandum of Incorporation or the Rules, made in
terms of section 17 (1)—
_______ by delivering a copy of those rules to each
director and member by ordinary mail.
_______ in accordance with the requirements set out
in Part D of Schedule 1.
1.4 Optional provisions of Companies Act, 2008 do not
apply
The Company—
______ does not elect, in terms of section 34 (2), to
comply voluntarily with the provisions of
Chapter 3 of the Companies Act, 2008.
______ elects, in terms of section 34 (2), to comply
voluntarily with the provisions of Chapter 3 of
the Companies Act, 2008.
1.5 Members of the Company
(1) As contemplated in Item 4 (1) of Schedule 1 of the Act,
the Company has members, who—
______ are all in a single class, being voting members,
each of whom has an equal vote in any matter
to be decided by the members of the Company.
______ are in either of two classes, being voting and
non-voting members, respectively.
(2) The terms and conditions of membership in the company
are as set out in Part E of Schedule 1 to this Memoran-
dum.
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Article 2 – Rights of Members
2.1 Members’ authority to act
If, at any time, every member of the Company is also a
director of the Company, as contemplated in section 57
(4), the authority of the members to act without notice or
compliance with any other internal formalities, as set out
in that section—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part A of Schedule 2.
2.2 Members’ right to Information
In addition to the rights to access information set out in
section 26 (1), a member of the Company has the further
rights to information, if any, set out in Part B of Schedule
2 of this Memorandum of Incorporation.
2.3 Representation by concurrent proxies
The right of a member of the Company to appoint persons
concurrently as proxies, as set out in section 58 (3) (a)—
______ is not limited, restricted or varied by this
Memorandum of Incorporation.
______ is limited, restricted or varied to the extent set
out in Part C of Schedule 2.
2.4 Authority of proxy to delegate
The authority of a member’s proxy to delegate the
proxy’s powers to another person, as set out in section 58
(3) (b)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part C of Schedule 2.
2.5 Requirement to deliver proxy instrument to the
Company
The requirement that a member must deliver to the
Company a copy of the instrument appointing a proxy be-
fore that proxy may exercise the member’s rights at a
members meeting, as set out in section 58 (3) (c)—
______ is not varied by this Memorandum of Incorpo-
ration.
______ is varied to the extent set out in Part C of
Schedule 2.
2.6 Deliberative authority of proxy
The authority of a member’s proxy to decide without
direction from the member whether to exercise, or abstain
from exercising any voting right of the member, as set out
in section 58 (7)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part C of Schedule 2.
2.7 Record date for exercise of member rights
If, at any time, the Company’s Board of Directors fails to
determine a record date, as contemplated in section 59,
the record date for the relevant matter is—
______ as determined in accordance with section 59
(3).
______ as determined in the manner set out in Part D of
Schedule 2.
Article 3 – Members Meetings
3.1 Requirement to hold meetings
The Company—
______ is not required to hold any members meetings
other than those specifically required by the
Companies Act, 2008.
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______ is required to hold members meetings, in
addition to those specifically required by the
Companies Act, 2008, as set out in Part A of
Schedule 3.
3.2 Members’ right to requisition a meeting
The right of members to requisition a meeting, as set out
in section 61 (3), may be exercised—
______ by at least 10% of the voting members, as
provided for in that section.
______ by at least ______ % of the voting members.
[In the case of a percentage lower than 10].
3.3 Location of members meetings
The authority of the Company’s Board of Directors to
determine the location of any members meeting, and the
authority of the Company to hold any such meeting in the
Republic or in any foreign country, as set out in section 61
(9)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part B of Schedule 3.
3.4 Notice of members meetings
The minimum number of days for the Company to deliver
a notice of a members meeting to the members, as re-
quired by section 62—
______ is as provided for in section 62 (1).
______ is _______ business days before the meeting is
to begin.
3.5 Electronic participation in members meetings
The authority of the Company to conduct a meeting
entirely by electronic communication, or to provide for
participation in a meeting by electronic communication,
as set out in section 63—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is prohibited, limited or restricted to the extent
set out in Part C of Schedule 3.
3.6 Quorum for members meetings
(1) The quorum requirement for a members meeting to begin,
or for a matter to be considered are—
______ as set out in section 64 (1) without variation.
______ as set out in section 64 (1) subject to a mini-
mum of ______% in substitution for the 25%
required by that section.
(2) The time periods allowed in section 64 (4) and (5)—
______ apply to the Company without variation.
______ apply to the Company, subject to the variations
set out in Part D of Schedule 3.
(3) The authority of a meeting to continue to consider a
matter, as set out in section 64 (9)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part D of Schedule 3.
3.7 Adjournment of members meetings
The maximum period allowable for an adjournment of a
members meeting is—
______ as set out in section 64 (12), without variation.
______ as set out in section 64 (12), subject to the
variations set out in Part E of Schedule 3.
3.8 Members resolutions
(1) For an ordinary resolution to be adopted at a members
meeting, it must be supported by—
______ more than 50% of the members who voted on
the resolution, as provided in section 65 (7).
Companies Regulations
______ at least _____ % of the members who voted on
the resolution, despite section 65 (7).
______ at least the minimum percentage of members
voting on the resolution, as set out in Part F of
Schedule 3.
(2) For a special resolution to be adopted at a members
meeting, it must be supported by at least—
______ 75% of the members who voted on the resolu-
tion, as provided in section 65 (7).
______ ___________ % of the members who voted on
the resolution, despite section 65 (7).
______ the minimum percentage of the members who
voted on the resolution, as set out in Part F of
Schedule 3.
(3) A special resolution adopted at a members meeting is—
______ not required for a matter to be determined by
the Company, except those matters set out in
section 65 (11).
______ required, in addition to the matters set out in
section 65 (11), for the matters set out in Part F
of Schedule 3.
Article 4 – Directors and Officers
4.1 Composition of the Board of Directors
(1) The Board of Directors of the Company comprises of at
least ___________ directors, and _________ alternate di-
rectors each of whom—
(a) is to be elected in the manner set out in Part A of
Schedule 4; and
(b) serves for a term of years.
(2) In addition to the elected directors—
______ there are no appointed or ex officio directors of
the company, as contemplated in section 66 (4).
______ there are ____ appointed, and ______ ex
officio, directors of the company, as contem-
plated in section 66 (4), to be designated in the
manner specified in Part B of Schedule 4.
(3) In addition to satisfying the qualification and eligibility
requirements set out in section 69, to become or remain a
director of the Company, a person—
______ need not satisfy any further eligibility require-
ments or qualifications.
______ must satisfy the additional eligibility require-
ments and qualifications set out in Part C of
Schedule 4.
(4) Each appointed director of the Company serves for an
indefinite term, until substituted by the person or entity
that made the appointment.
4.2 Authority of the Board of Directors
The authority of the Company’s Board of Directors to
manage and direct the business and affairs of the Compa-
ny, as set out in section 66 (1)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part D of Schedule 4.
4.3 Board of Directors meetings
(1) The authority of the Company’s Board of Directors to
consider a matter other than at a meeting, as set out in
section 74—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part E of Schedule 4.
(2) The right of the Company’s Directors to requisition a
meeting of the Board, as set out in section 73 (1), may be
exercised by—
______ at least 25% of the directors, if the Board has
12 or more members, or by 2 (two) directors, in
any other case, as provided in that section.
Companies Regulations Auditing: Legislation and Standards
______ at least _____ % of the directors or by at least
______ directors, despite the provisions of that
section.
(3) The authority of the Company’s Board of Directors to
conduct a meeting entirely by electronic communication, or
to provide for participation in a meeting by electronic com-
munication, as set out in section 73 (3)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part F of Schedule 4.
(4) The authority of the Company’s Board of Directors to
determine the manner and form of providing notice of its
meetings, as set out in section 73 (4)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part F of Schedule 4.
(5) The authority of the Company’s Board of Directors to
proceed with a meeting despite a failure or defect in giv-
ing notice of the meeting, as set out in section 73 (5)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited or restricted to the extent set out in
Part F of Schedule 4.
(6) The quorum requirement for a directors meeting to begin,
the voting rights at such a meeting, and the requirements
for approval of a resolution at such a meeting, are—
______ as set out in section 73 (5).
______ as set out in section 73 (5), subject to the
variations set out in Part F of Schedule 4.
4.4 Indemnification of Directors
(1) The authority of the Company’s Board of Directors to
advance expenses to a director, or indemnify a director, in
respect of the defence of legal proceedings, as set out in
section 78 (3)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part G of Schedule 4.
(2) The authority of the Company’s Board of Directors to
indemnify a director in respect of liability, as set out in
section 78 (5)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part G of Schedule 4.
(3) The authority of the Company’s Board of Directors to
purchase insurance to protect the Company, or a director,
as set out in section 78 (6)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part G of Schedule 4.
4.5 Officers and Committees
(1) The Board of Directors may appoint any officers it
considers necessary to better achieve the objects of the
Company.
(2) The authority of the Company’s Board of Directors to
appoint committees of directors, and to delegate to any
such committee any of the authority of the Board as set
out in section 72 (1), or to include in any such committee
persons who are not directors, as set out in sec-
tion 72 (2) (a)—
______ is not limited or restricted by this Memorandum
of Incorporation.
______ is limited, restricted or extended to the extent
set out in Part H of Schedule 4.
(3) The authority of a committee appointed by the Compa-
ny’s Board, as set out in section 72 (2) (b) and (c)—
______ is not limited or restricted by this Memorandum
of Incorporation.
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______ is limited, restricted or extended to the extent
set out in Part H of Schedule 4.
Article 5 – General Provisions
Insert any further provisions desired in this or additional Articles.
Schedule 1 – Incorporation and nature of the Company
Part A
Insert any provisions limiting the purposes or powers of the
Company, as contemplated in section 19 (1) (b) of the Act.
Part B
Insert any ‘Ring fencing’ provisions as contemplated in
section 15 (2) of the Act.
Part C
Insert provisions establishing, or providing for the
establishment of a scheme of distribution of the net assets
of the Company upon its dissolution, as required by Item
1 (4) of Schedule 2 of the Companies Act, 2008.
Part D
Insert—
(a) any provisions relating to the amendment of the Memo-
randum of Incorporation, as contemplated in section 16
(2) of the Act;
(b) any provisions relating to the Board’s authority to make
rules for the Company, as contemplated in section 15 (3)
to (5) of the Act; and
(c) any provisions relating to the publication of the notice of
alteration as contemplated in section 17 (1) of the Act.
Part E
Insert provisions setting out the terms and conditions of
membership.
Schedule 2 – Rights of Members
Part A
Insert any provisions limiting or restricting the right of
members to act without meeting formal requirements, as
contemplated in section 57 (4) of the Act.
Part B
Insert any provisions creating addition information rights
of members, as contemplated in section 26.
(Editorial Note: Wording as per original Government Gazette.)
Part C
Insert any provisions relating to the powers of members
to appoint proxies, the appointment of proxies, and the
powers of any such proxy, as contemplated in section 58
of the Act.
Part D
Insert any provisions respecting the fixing of a record
date, as contemplated in section 59 of the Act.
Schedule 3 – Members Meetings
Part A
Insert any provisions imposing a requirement to hold a
members meeting.
Part B
Insert any provision limiting or restricting the authority
of the Board to determine the location of members meet-
ings, or the authority of the Company to meet outside the
Republic.
Part C
Insert any provision prohibiting, limiting or restricting
the authority of the Board with respect to the use of elec-
tronic communication for members meetings, as contem-
plated in section 63 of the Act.
Part D
Insert any provision respecting the quorum requirements for
members meetings, or varying the provisions of section 64 of
the Act.
Part E
Insert any provision varying section 64 (13) of the Act
with respect to the maximum period for adjournment of a
members meeting.
Part F
Insert—
(a) any provision establishing different requirements for
adoption of an ordinary resolution for different matters;
A-199 Companies Act No. 71 of 2008
(b) any provision establishing different requirements for
adoption of an special resolution for different matters; or
(Editorial Note: Wording as per original Government Gazette. It is
suggested that the phrase “an special resolution” is intended to be
“a special resolution”.)
(c) any provision imposing the requirement of a special
resolution to approve any matter, as contemplated in sec-
tion 65 (11) of the Act.
Schedule 4 – Directors of the Company
Part A
Insert provisions setting out the process for the election of
Directors by the voting members.
Part B
Insert any provisions establishing the rights of any person
to appoint a director, or establishing the right of any per-
son to be an ex officio director of the Company or
providing for the appointment or election of alternate di-
rectors.
Part C
Insert any provision imposing additional eligibility or
qualification requirements for directors and prescribed
officers of the Company.
Companies Regulations
Part D
Insert any provision limiting or restricting the authority
of the Board to manage and direct the business and af-
fairs of the Company, as contemplated in section 66 (1) of
the Act.
Part E
Insert any provision limiting or restricting the authority
of the Board to consider a matter other than at a meeting,
as contemplated in section 74 of the Act.
Part F
Insert any provision limiting, restricting or varying the
authority of the Board with respect to the conduct of its
meetings, as contemplated in section 73 of the Act.
Part G
Insert any provision limiting, restricting or extending the
authority of the Company to advance expenses to a direc-
tor, indemnify a director, or purchase insurance to pro-
tect the Company or a director, as contemplated in
section 78 of the Act.
Part H
Insert any provision limiting or restricting the authority
of the Board with respect to the establishment of commit-
tees, as contemplated in section 72 of the Act.
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EDITORIAL NOTE
Please note that Form CoR 21.1 was not published in Government Gazette 34239 but is available on the CIPC website, hence its
inclusion herein.
A-221 Companies Act No. 71 of 2008 Companies Regulations

EDITORIAL NOTE
Please note that Form CoR 21.2 was not published in Government Gazette 34239 but is available on the CIPC website, hence its
inclusion herein.
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References are to sections and schedules of the Act. Act (continued)

Public Finance Management, 1999 (Act No. 1 of 1999), definition
A “state-owned company”, s. 1
Accounting records, s. 28 Public Investment Corporation, 2004 (Act No. 23 of 2004),
accurate and complete, s. 28(1) s. 96(1)(a)(ii)
auditor has right of access at all times to, s. 93(1)(a) purposes of this, s. 7
company must maintain copies of all, s. 24(3)(c)(iii) Serving documents in terms of this, s. 220
definition, s. 1 Trade Marks, 1941 (Act No. 17 of 1941), s. 11(2)(a)(iii)
financial affairs, information concerning, definition “accounting Advertisement
records”, s. 1 believe that the, is a prospectus, s. 98(2)(b)(i)
kept at registered office of the company, s. 28(2) definition, s. 1
offence to fail to keep accurate or complete, s. 28(3)(a)(i)(aa) direct or indirect communication, definition “advertisement”, s. 1
drawn to the attention of the public by an, s. 98(2)
offence to falsify any, s. 28(3)(a)(ii)
first issued as a newspaper, s. 110(2)(a)
Accredited entity
mislead a person reading the, s. 98(2)(b)
association of persons accredited by Commission, s. 166(3)(a)
offer made by way of an, s. 98(1)
Commission must monitor the effectiveness of any, s. 166(4)(b)
offer not accompanied by, s. 96(1)(g)
definition, s. 166(3)
publishing or disseminating the, s. 98(3)(b)
designated by the Minister, s. 166(3)(b)(ii)
relating to offers, s. 98
juristic person accredited by Commission, s. 166(3)(a)
Affected persons
organ of state mandated to perform mediation, s. 166(3)(b)(i)
act independently of practitioner, must, s. 149(1)(c)
person may refer application or complaint to, s. 166(1)(a) committee of, may consult with the practitioner, s. 149(1)(a)
Acquiring party functions, duties and membership of committees of, s. 149
acquire or establish direct or indirect control, definition “acquiring Agreement
party”, s. 1 company rejects an, s. 21(7)
definition, s. 1 contract, or an agreement or understanding, definition “agree-
person related to, or acting in concert with, s. 115(4) ment”, s. 1
voting rights controlled by an, s. 115(4) definition, s. 1
Act shareholder, s. 15
Administration of Estates, 1965 (Act No. 66 of 1965), definition All or the greater part of the assets of the undertaking
“master”, s. 1; s. 101(3)(a)(i) definition, s. 1
Auditing Profession, 2005 (Act No. 26 of 2005), s. 5(4)(b)(i)(aa) more than 50% of its gross assets, s. 1
Banks, 1990 (Act No. 94 of 1990), definition “Banks Act”, s. 1 Alterable provision
Business Names, 1960 (Act No. 27 of 1960), s. 11(2)(a)(ii) definition, s. 1
Close Corporation, 1984 (Act No. 69 of 1984), definition “close memorandum may include any provision altering the effect of an,
corporation”, s. 1 s. 15(2)(a)(ii)
Collective Investment Schemes, 2002 (Act No. 45 of 2002), defini- Alternate director
tion “beneficial interest”, s. 1 definition, s. 1
Companies, 1973 (Act No. 61 of 1973), definition “company”, s. 1 substitution for a particular director, definition “alternate director”,
Competition, 1998 (Act No. 89 of 1998), definition “Competition s. 1
Act”, s. 1 Amalgamation or merger
continued investigation and enforcement of the previous, sch. 5, companies must enter into written agreement before, s. 113(2)
para. 13 definition, s. 1
Co-operatives, 2005 (Act No. 14 of 2005), definition “co- formation of one or more new companies, definition “amalgama-
operative”, s. 1 tion or merger”, s. 1
Criminal Procedure, 1977 (Act No. 51 of 1977), s. 209(2)(c)(ii) implementation of, s. 116
Electronic Communications and Transactions, 2002 (Act No. 25 of notice of, given to every creditor of each company, s. 116(1)(a)
2002), definition, s. 1 proposals for, s. 113
Financial Advisory and Intermediary Services, 2002 (Act No. 37 survival of at least one of the companies, definition “amalgama-
of 2002), s. 96(1)(a)(iv) tion or merger”, s. 1
Financial Markets Act, 2012 (Act No. 19 of 2012), definition “cen- written agreement must set out,
tral securities depository”, s. 1 allocation of assets and liabilities, s. 113(2)(f)
Financial Services Board, 1990 (Act No. 97 of 1990), s. details of subsequent management, s. 113(g)
96(1)(a)(v) estimated cost of, s. 113(2)(h)
hindering administration of, s. 215 manner in which securities are to be converted, s. 113(2)(c)
Income Tax, 1962 (Act No. 58 of 1962), name and identity number of each proposed director, s.
sch. 1, para. 1(6) 113(2)(b)
Insolvency, 1936 (Act No. 24 of 1936), s. 136(2A)(a)(ii) proposed memorandum of new company, s. 113(2)(a)
Labour Relations, 1995 (Act No. 66 of 1995), definition “regis- Amend
tered trade union”, s. 1; s. 136(1)(b) Memorandum of Incorporation. s. 16
limited time for initiating complaints in terms of this, s. 219 name, enter in the company register, s. 14(2)(b)(iii)(aa)
Local Government: Municipal Systems, 2000 (Act No. 32 of Notice of Incorporation, s. 14(2)(b)(ii)
2000), definition “state-owned company”, s. 1 registration certificate, s. 14(2)(b)(iii)(bb)
Merchandise Marks, 1941 (Act No. 17 of 1941), s. 11(2)(a)(iv) Annual general meeting
National Payment System, 1998 (Act No. 78 of 1998), s. appoint an auditor at every, s. 90(1)
5(4)(b)(i)(ii) definition, s. 1
Pension Funds, 1956 (Act No. 24 of 1956), s. 96(1)(a)(vi) meeting of a public company, definition “annual general meeting”,
Prescribed Rate of Interest, 1975 (Act No. 55 of 1975), s. 38(3)(b); s. 1
s. 108(7) public company must convene, of its shareholders, s. 61(7)
Promotion of Access to Information, 2000 (Act No. 2 of 2000), Annual return, s. 33
s. 5(4)(b)(i)(cc) Commission may remove company from the register if it fails to
Promotion of Administrative Justice, 2000 (Act No. 3 of 2000), file an, s. 82(3)(a)(i)
s. 5(4)(b)(i)(dd) company must file an, s. 33(1)
Promotion of Equality and Prevention of Unfair Discrimination, Audit
2000 (Act No. 4 of 2000), s. 159(3)(b)(4) committees, s. 94
Protected Disclosures, 2000 (Act No. 26 of 2000), s. 159(1) considerations for company before required,
Public Audit, 2004 (Act No. 25 of 2004), s. 84(3)(a) annual turnover, s. 30(2)(b)(i)(aa)
Index Auditing: Legislation and Standards A-288

Audit (continued) Business rescue plan (continued)

considerations for company before required, (continued)
nature and extent of its activities, s. 30(2)(b)(i)(cc)
size of the workforce, s. 30(2)(b)(i)(bb)
definition, s. 1
Auditor
appointment of, s. 90
definition, s. 1
entitled to,
attend any general shareholders meeting, s. 93(1)(c)(i)
be heard at any general shareholders meeting, s. 93(1)(c)(iii)
receive all notices and communications, s. 93(1)(c)(ii)
must not be,
accountant or bookkeeper, s. 90(2)(b)(iv)
appointed for more than five consecutive years, s. 92(1)
company secretary, s. 90(2)(b)(iii)
director or prescribed officer, s. 90(2)(b)(i)
employee or consultant of the company, s. 90(2)(b)(ii)
registered, must be to be appointed, s. 90(2)(a)
registration of company, s. 85
resignation of, and vacancies, s. 91
right of access at all times to accounting records, s. 93(1)(a)
rights and restricted functions of, s. 93
rotation of, s. 92
B just and equitable, s. 131(4)(a)(iii)
Beneficial interest
definition, s. 1
person regarded to have a, if that person,
acts in terms of an agreement with another person, s. 56(2)(c)
is married in community of property, s. 56(2)(a)
is the holding company of another company, s. 56(2)(d)
is the parent of a minor child, s. 56(2)(b)
security is held nomine officii by another person, s. 56(2)
person who holds, may vote at a shareholders meeting, s. 56(9)
Board
appoint any number of committees, may, s. 72(1)(a)
authorise the company to issue secured or unsecured debt instru-
ments, may, s. 43(2)(a)
authorise the company to provide financial assistance, s. 44(2)
change its financial year end at any time, may, s. 27(4)
classify any unclassified shares, may, s. 36(3)(c)
committees, s. 72
definition, s. 1
delegate to any committee any of its authority, s. 72(1)(b)
determine the consideration and terms of share issues, must,
s. 40(2)
determine the location of shareholders meeting, s. 61(9)(a)
distributions must be authorised by the, s. 46
increase or decrease the number of shares, may, s. 36(3)(a)
issue shares only as a capitalisation share, may, s. 40(1)(c)
issue shares only for adequate consideration, may, s. 40(1)(a)
meeting may be conducted by electronic means, s. 73(3)(a)
meetings, s. 73
ratify or reject any pre-incorporation contract, s. 21(4)
reclassify any classified shares, may, s. 36(3)(b)
resolve to issue shares at any time, may, s. 38(1)
shareholders meeting, may call at any time, s. 61(1)
vacancies on the, s. 70
Breach of confidence, s. 213
Business days
definition, s. 1
exclude public holiday, Saturday or Sunday, s. 5(3)(c)
exclude the day on which first event occurs, s. 5(3)(a)
include the day on which second event is to occur, s. 5(3)(b)
Business rescue plan
binding on the company, if adopted, s. 152(4)
conclude with a certificate from practitioner, must, s. 150(4)
consideration of, s. 152
contain all the information reasonably required, s. 150(2)
discharge of debts and claims, s. 154
division into three parts,
assumptions and conditions, s. 150(2)(c)
background, s. 150(2)(a)
proposals, s. 150(b)
failure to adopt, s. 153
meeting to determine future of the company, s. 151
practitioner must prepare, for consideration, s. 150(1)
proposal of, s. 150
published by the company, must be, s. 150(5)
Business rescue proceedings
applications and definition applicable to,
affected person, s. 128(a)
business rescue, s. 128(b)
business rescue plan, s. 128(c)
business rescue practitioner, s. 128(d)
court, s. 128(e)
financially distressed, s. 128(f)
independent creditor, s. 128(g)
rescuing the company, s. 128(h)
supervision, s. 128(i)
voting interest, s. 128(j)
approved, s. 137(1)(b)
begin when the company files a resolution, s. 132(1)(a)(i)
company may obtain finance during, s. 135(2)
company must appoint a business rescue practitioner, s. 129(3)(b)
company resolution to begin, s. 129
court may issue order if it is satisfied that,
company has failed to pay employment-related matters,
s. 131(4)(a)(ii)
company is financially distressed, s. 131(4)(a)(i)
reasonable prospect of rescuing the company, s. 131(4)(a)(iii)
court order to begin, s. 131
creditor is entitled to,
form a creditors’ committee, s. 145(3)
make proposals for business rescue plan, s. 145(1)(d)
notice of proceeding, decision or meeting, s. 145(1)(a)
participate in business rescue proceedings, s. 145(1)(c)
participate in court proceedings, s. 145(1)(b)
propose the development of an alternative plan, s. 145(2)(b)
vote to amend, approve or reject a plan, s. 145(2)(a)
duration of, s. 132
effect of, on employees and contracts, s. 136
effect on shareholders and directors, s. 137
employees continue to be employed during, s. 136(1)(a)
end when the court sets aside the resolution, s. 132(2)(a)(i)
guarantee or surety may not be enforced during, s. 133(2)
moratorium against legal proceedings against company, s. 133
objections to company resolution, s. 130
participation by creditors, s. 145
participation by holders of company’s securities, s. 146
post-commencement finance, s. 135
protection of property interests, s. 134
right of employees, s. 144
C
Cabinet
body of the national executive, definition “cabinet”, s. 1
definition, s. 1
Central Securities Depository
definition, s. 1
provide a regular statement to each person for whom uncertifi-
cated securities are held, must, s. 52(4)(a)
rules of the, s. 37(9)(a)(ii)
transfer of uncertificated securities cannot be effected by,
s. 49(6)(b)
Close corporation
conversion, juristic person continues to exist in the form of a com-
pany, sch. 2, para. 2(2)(a)
definition, s. 1
effect of conversion on legal status, sch. 2, para. 2
notice of conversion of, sch. 2, para. 1
Commission
assign to the company a unique registration number, must,
s. 14(1)(a)
Companies and Intellectual Property Commission, definition
“commission”, s. 1
confidential information, s. 212
definition, s. 1
endorse the Notice of Incorporation, s. 14(1)(b)(ii)
establish and maintain companies register, must, s. 187(4)(a)(i)
establishment of, s. 185
A-289 Companies Act No. 71 of 2008
Commission (continued)
excuse any person as a respondent in a complaint, may,
s. 170(1)(a)
external company must register with the, s. 23
finances, s. 210
functions of, s. 187
impartial, without fear, favour or prejudice, s. 185(2)(c)
independent, is, s. 185(2)(b)
initiating a complaint with, s. 168
investigation by, s. 169
issue and enforce compliance notices, must, s. 187(2)(g)
jurisdiction throughout the Republic, s. 185(2)(a)
juristic person to function as an organ of state, s. 185(1)
maintain a register of external companies, must, s. 23(5)(b)
Minister may direct policy and require investigation, s. 190
objectives of, s. 186
promote reliability of financial statements, must, s. 187(3)
promote voluntary resolution of disputes, must, s. 187(2)(a)
receive directions from the Minister, must, s. 187(2)(d)
record the dissolution of a company, must, s. 82(2)(a)
refer complaint to the Companies Tribunal, may, s. 170(1)(b)
refer to, may,
Competition Commission, s. 188(5)(a)
Independent Regulatory Board for Auditors, s. 188(5)(c)
South Africa Revenue Service, s. 188(5)(b)
reject a Notice of Incorporation, may, s. 13(4)(a)
remove a company from the register, may, s. 82(3)
reporting, research, public information and relations with other
regulators, s. 188
reviews and reports to Minister, s. 211
Commissioner
accounting authority of the Commission, s. 189(3)
appointment of, s. 189
definition, s. 1
holds office for term not exceeding five years, s. 189(1)(a)(i)
Minister must appoint suitably qualified person to be, s. 189
person appointed to or acting in the office, definition “commis-
sioner”, s. 1
reappointed on expiry of term, may be, s. 189(2)
Companies register
company is dissolved as at the date its name is removed from the,
s. 83(1)
Commission must,
enter the company’s amended name in the, s. 14(2)(b)(iii)(bb)
enter the prescribed information in the, s. 14(1)(b)
definition, s. 1
Companies Tribunal
adjudication hearings before, s. 180
appointment of, s. 194
confidential information, s. 212
definition, s. 1
establishment of, s. 193
finances, s. 210
following persons may participate in hearing,
applicant or complainant, s. 181(b)
Commission, s. 181(a)
person who has a material interest in the hearing, s. 181(c)
functions of, s. 195
jurisdiction throughout the Republic, s. 193
Minister must appoint chairperson and members, s. 194(1)(a)
person may apply for an administrative order, s. 6(2)
person may file application or complaint to, s. 166(1)(a)
powers of, adjudication hearing, s. 182
qualifications for membership, s. 205
reviews and reports to Minister, s. 211
right to participate in hearing before the, s. 181
rules of procedure, s. 183
witnesses, s. 184
Company
accountability requirements for certain, s. 34
acquire its own shares, board may determine that it will,
s. 48(2)(a)
advance expenses to a director to defend litigation, may,
s. 78(4)(a)
categories of, s. 8
compromise between, and creditors, s. 155
continuation of pre-existing, sch. 5, para. 2
Index
Company (continued)
date and time of incorporation, juristic person, s. 19(1)(a)
debt instrument issued by, may grant special privileges, s. 43(3)
definition, s. 1; s. 95(1)(a)
dissolution of, and removal from register, s. 82
dissolved by, may be,
voluntary winding-up, s. 79(1)(a)
winding-up and liquidation by court order, s. 79(1)(b)
engaging in prohibited conduct, s. 22(2)
establish a register of its issued securities, must, s. 50(1)(a)
finance and governance, sch. 5, para. 7
financial year of, s. 27
indemnify a director of any liability, may, s. 78(5)
issue options for the allotment of shares, may, s. 42
juristic person in terms of this Act, definition “company”, s. 1
legal powers and capacity of a natural person, s. 19(1)(b)
legal status of, s. 19
maintain, must,
copies of all financial statements for seven years, s. 24(3)(c)(ii)
copies of all reports for seven years, s. 24(3)(c)(i)
copy of Memorandum, s. 24(3)(a)
notice and minutes of all meetings, s. 24(3)(d)
record of its directors, s. 24(3)(b)
record of secretaries and auditors, s. 85(1)(a)
securities register, s. 24(4)(a); s. 50(1)(b)
names and name reservation, sch. 5, para. 8
pay remuneration to its directors, may, s. 66(8)
person is not liable for liabilities or obligations of the, s. 19(2)
public and state-owned, must appoint,
audit committee, s. 84(4)(c)
person to serve as auditor, s. 84(4)(b)
person to serve as secretary, s. 84(4)(a)
purchase insurance to protect,
company against contingency, s. 78(7)(b)
director against liability, s. 78(7)(a)
reckless trading prohibited, s. 22
registration of, s. 14
removal from register, effect of, s. 83
right to incorporate or transfer registration of foreign, s. 13
two types, profit and non-profit, s. 8(1)
unable to pay its debts as they become due, s. 22(2)
validity of actions, s. 20
wilful misconduct or – breach of trust, may not indemnify direc-
tor, s. 78(6)(a)(ii)
Company secretary
accountable to company’s board, s. 88(1)
appointed by,
directors of the company, s, 86(3)(b)(i)
incorporators of the company, s. 86(3)(a)
ordinary resolution of the holders of the company’s securities,
s. 86(3)(b)(ii)
duties of, s. 88
certifying company’s annual financial statements true, correct
and up to date, s. 88(2)(e)
ensuring all minutes are properly recorded, s. 88(2)(d)
making directors aware of relevant laws, s. 88(2)(b)
providing guidance to directors, s. 88(2)(a)
reporting to the board any non-compliance, s. 88(2)(c)
ensuring annual financial statements are sent to every entitled
person, s. 88(2)(f)
juristic person or partnership may be appointed as, s. 87
mandatory appointment of, s. 86
Minister must monitor the effectiveness of any, s. 166(4)(b)
permanent resident of the republic, must be, s. 86(2)(b)
requisite knowledge of, or experience in, relevant laws, must have,
s. 86(2)(a)
resignation or removal of, s. 89
Compliance notice
issuance of, s. 171
objection to, s. 172
remains in force until set aside by,
Companies Tribunal, s. 171(5)(a)(i)
Takeover Special Committee, s. 171(5)(a)(ii)
requiring a person to,
cease, correct or reverse any action, s. 171(2)(a)
provide a community service, s. 171(2)(d)
restore assets or their value to a company, s. 171(2)(c)
Index Auditing: Legislation and Standards
Compliance officer
definition, s. 95(1)(b)
required for qualifying an employee share scheme, s. 97(1)(a)(i)
responsible for administration of share scheme, s. 97(2)(a)
Consideration
anything of value given and accepted, definition “consideration”,
s. 1
company must deposit, into interest bearing bank account,
s. 124(7)
definition, s. 1
fair and reasonable, s. 124(3)(b)(iii)
offeror must pay or transfer, for securities, s. 124(5)(a)
Constitution, 159(3)(b)(iv)
Constitution of the Republic of South Africa, definition “Constitu-
tion”, s. 1
definition, s. 1
Control
ability to materially influence the policy, s. 2(2)(d)
exercise of the majority of voting rights, s. 2(2)(a)(ii)(aa)
juristic person is a subsidiary of another person, s. 2(2)(a)(i)
owns majority of members’ interest, s. 2(2)(b)
right to appoint or elect the directors, s. 2(2)(a)(ii)(bb)
Convertible
converted into other securities of the company, definition “con-
vertible, s. 1
definition, s. 1
Council
definition, s. 1
Financial Reporting Standards Council, definition “council”,
s. 1
Creditors
business rescue results in a better return for, s. 128(b)(iii)
determine whether to appoint a committee, s. 147(1)(b)
failed to fully pay all of its, s. 162(7)(b)(ii)
first meeting of, s. 147
reasonably expected to rely on financial statements, s. 203(1)(d)
winding-up initiated by the company’s, s. 79(1)(a)(ii)
D notice of the availability delivered to each intended recipient,
Departmental Chamber of the Public Service Bargaining Council,
sch. 5, para. 12(3)(b)
Director
application to declare, delinquent or under probation, s. 162
appointed to more than one committee, may be, s. 66(12)
board of a private company must have at least one, s. 66(2)(a)
board of a public company must have at least three, s. 66(2)(b)
ceases to be, when,
becomes incapacitated, s. 70(1)(b)(iii)
declared delinquent by a court, s. 70(1)(b)(iv)
ineligible or disqualified, becomes, s. 70(1)(b)(v)
removed by a resolution, s. 70(1)(b)(vi)
resigns or dies, s. 70(1)(b)(i)
term of office expires, s. 70(1)(a)
definition, s. 1
disclose any personal financial interest, must, s. 75(4)
disqualified if,
convicted of fraud, theft, forgery or perjury, s. 69(8)(b)(iv)
court has prohibited that person to be a, s. 69(8)(a)
prohibited in terms of public regulation, s. 69(8)(b)(ii)
removed from an office of trust, s. 69(8)(b)(iii)
unrehabilitated insolvent, s. 69(8)(b)(i)
election of, s. 68
election of, conducted as a series of votes, s. 68(2)(a)
exercise the powers of,
best interest of the company, in the, s. 76(3)(b)
degree of care, skill and diligence expected, with the,
s. 76(3)(c)
good faith and for proper cause, in, s. 76(3)(a)
first, s. 67
incorporator of a company is a first, s. 67(1)
indemnification and insurance, s. 78
ineligibility and disqualification of, s. 69
ineligible if,
juristic person, s. 69(7)(a)
unemancipated minor, s. 7(b)
A-290
Director (continued)
liable for loss, damages or costs if,
breach of duty, s. 77(2)(b)
party to an act of fraud, s. 77(3)(c)
signed false financial statement, s. 77(3)(d)(i)
unauthorised action in the name of the company, s. 77(3)(a)
liability is joint and several with other liable persons, s. 77(6)
liability of, s. 77
loans or other financial assistance to, s. 45
member of the board of a company, definition “director”, s. 1
personal financial interest of, s. 75
personal gain, not use position of, for, s. 76(2)(a)
record of, to include,
date of most recent appointment, s. 24(5)(e)
full name and former names, s. 24(5)(a)
identity number, s. 24(5)(b)
nationality and passport number, s. 24(5)(c)
occupation, s. 24(5)(d)
removal of, s. 71
shareholder is also a, s. 57(4)
standards of conduct, s. 76
Dispute
alternative resolution, s. 166
consent order may include award for damages, s. 167(3)(a)
internal to a particular company, s. 169(2)(b)
resolution may result in consent order, s. 167
Tribunal record resolution of, in the form of an order, s. 167(1)(a)
Distribution
authorised by the board, must be, s. 46
debt or other obligation, takes the form of, s. 46(4)
definition, s. 1
pursuant to an existing legal obligation, must be, s. 46(1)(a)(i)
satisfy solvency and liquidity test after completing the, must,
s. 46(1)(b)
Document
accessible for inspection at an office of the company, s. 19(4)(b)
conveniently be printed by recipient, s. 6(11)(b)(i)
kept for period of seven years, s. 24(1)(b)
kept in written form, s. 24(1)(a)
s. 6(11)(b)(ii)
sufficient if published by electronic communication, s. 6(11)(b)
sufficient to retain electronic original or reproduction, s. 6(11)(a)
E
Effective date
definition, s. 1
general, definition, sch. 5, para. 1(a)
pending matters before the, must be concluded by the Registrar,
sch. 5, para. 3(1)
person holding office before, continues to hold office after, sch. 5,
para. 7(1)
Employee share scheme
definition, s. 95(1)(c)
grant of options for shares in the company, s. 95(1)(c)(ii)
issue of shares in the company, s. 95(1)(c)(i)
standards for qualifying, s. 97
Enter and search
conduct of, s. 179
conduct with strict regard to decency and order, s. 179(1)
female may search female, only, s. 179(2)
issue a receipt if anything removed from premises, must,
s. 179(4)(a)
male may search male, only, s. 179(2)
person’s right to dignity, freedom, security and privacy, regard for,
s. 179(1)
police officer may use as much force as is reasonably required,
s. 179(7)
powers to, s. 178
Exchange
bills of, s. 32(4)
definition, s. 1
documents approved by the relevant, s. 99(4)(b)
granted or has agreed to grant a listing, s. 96(1)(d)(i)
letter of allocation must be approved by the relevant, s. 99(4)(b)
secondary offer effected through an, s. 95(1)(h)(ii)(bb)
A-291 Companies Act No. 71 of 2008 Index

Exercise Group of companies

definition, s. 1 definition, s. 1
voting by proxy, nominee, trustee or other person, definition “ex- holding company and all of its subsidiaries, definition “group of
ercise”, s. 1 companies”, s. 1
Ex officio director Guardian’s Fund of the Master of the High Court, s. 124(8)
definition, s. 1
Expert H
competent to make statement, s. 105(2)(b) High Court
consented to the inclusion of statement in prospectus, s. 106(2)(a) restrain the company, shareholders may apply to the, s. 20(5)
definition, s. 95(1)(d) Holding company
liability of, s. 105 definition, s. 1
report or valuation of an, s. 104(3)(b) juristic person that controls the subsidiary, definition “holding
statement made by, in prospectus, s. 102(b)(i) company”, s. 1
written consent required to use statement in prospectus, Human Rights Commission, see South African Human Rights
s. 102(1)(b)(iii) Commission,

F I
File Incorporation
definition, s. 1 Notice filed in the prescribed form, s. 13(2)(a)
Financial assistance pre-, contracts, s. 21
board may authorise the company to provide, s. 45(2) Individual
directors, to, s. 45 definition, s. 1
fair and reasonable to company, must be, s. 45(3)(b)(ii) natural person, definition “individual”, s. 1
guaranteeing a loan or other obligation, s. 45(a) Initial public offering
lending money, s. 45(a) accompanied by a registered prospectus, must be, s. 99(2)
securing any debt or obligation, s. 45(a) definition, s. 95(1)(e)
Financial Reporting Standards Council Inspector
advise the Minister on matters relating to financial reporting appointment of, s. 209
standards, s. 204(b) definition, s. 1
confidential information, s. 212 International Accounting Standards Board, s. 29(5)(b)
establishment and composition of, s. 203 International Financial Reporting Standards, s. 29(5)(b)
functions of, s. 204 Investigator
qualifications for membership, s. 205 definition, s. 1
reviews and reports to Minister, s. 211
Financial Services Board, s. 203(1)(f) J
Financial statements, s. 29 Judge President of a High Court, s. 128(3)
access to, or related documents, s. 31 Juristic person
annual, s. 30 definition, s. 1
amount of pensions paid, must show, s. 30(4)(b)(i)
approved by the board, must be, s. 30(3)(c) L
audited in the case of a public company, must be, s. 30(2)(a) Letter of allocation
auditor’s report must be included, s. 30(3)(a) definition, s. 95(1)(f)
prepared within six months of year end, s. 30(1) document conferring right to subscribe to shares, s. 95(1)(f)
presented to the shareholders meeting, s. 30(3)(d) Letters Patent
remuneration and benefits of directors, show, s. 30(4)(a) association formed pursuant to, s. 8(3)(c)
report by the directors, must include, s. 30(3)(b) Liquidator
audited, presented at annual general meeting, must be, apply to a court to declare dissolution void, s. 83(4)(a)
s. 61(8)(a) appointed in a voluntary winding-up, s. 80(5)
date published, must show, s. 29(1)(d)
definition, s. 1
M
false or misleading, must not be, s. 29(2)(a)
Master
incomplete in any material particular, must not be, s. 29(2)(b)
company obtain consent of, to dispense with security when wind-
present fairly the state of affairs of the business, must, s. 29(1)(b) ing-up, s. 80(3)(b)
satisfy the financial reporting standards, must, s. 29(1)(a) definition, s. 1
show the company’s assets, liabilities and equity, must, s. 29(1)(c) file a certificate of winding up of a company, must, s. 82(1)
Foreign company officer of the High Court, definition “master”, s. 1
acquire interest in property in the Republic, s. 23(2A)(f) Material
apply to transfer its registration to the Republic, s. 13(5) definition, s. 1
conduct business if party to employment contracts within the Re- significant in the circumstances, definition “material”, s. 1
public, s. 23(2)(a) Member
create or acquire debts in the Republic, s. 23(2A)(d) definition, s. 1
definition, s. 1 Memorandum, s. 15
entity incorporated outside the Republic, definition “foreign com- additional information rights of any person, may establish, s. 26(3)
pany”, s. 1 alterations, translations and consolidations of, s. 17
establish or maintain bank accounts in the Republic, s. 23(2A)(b) amended in compliance with a court order, may be, s. 16(1)(a)
establish or maintain offices in the Republic, s. 23(2A)(c) amendment, effected by a resolution of the board, s. 16(4)(a)
fails to register, Commission must issue a compliance notice, authenticity of versions of, s. 18
s. 23(6) binding between company and each shareholder, s. 15(6)(a)
hold a meeting in the Republic, s. 23(2A)(a) binding between shareholders, s. 15(6)(b)
maintain one office in the Republic, continuously, s. 23(3)(a) classes and number of shares, must set out, s. 36(1)
register the address of its office, must, s. 23(3)(b) consistent with the Act, must be, s. 15(1)(a)
secure or collect any debt in the Republic, s. 23(2A)(e) contain any restrictive conditions, may, s. 15(2)(b)
definition, s. 1
G document sets out rights, duties and responsibilities, definition
Governor of the South African Reserve Bank, s. 203(1)(g) “memorandum”, s. 1
Index Auditing: Legislation and Standards A-292

Memorandum, (continued) Non-profit company (continued)

impose, may objects and policies, sch. 1, para. 1
additional grounds of ineligibility of directors, s. 69(6)(a) provisions that do not apply to, s. 10(2)
minimum qualifications for directors, s. 69(6)(b) Notice of Amendment
more onerous requirements on the company, s. 15(2)(a)(iii) include a copy of the amendment with the, s. 16(7)(b)(ii)(aa)
latest version prevails in case of conflict, s. 18(2) file, s. 16(7)
limits, restricts or qualifies the powers of the company, if, s. 20(1)
preferences, rights, limitations of shares, must set out, O
s. 36(1)(b)(ii) Offer
prohibit amendment of any provision, s. 15(2)(c) advertisement relating to, s. 98
rules, and, sch. 5, para. 4 comparable and partial, s. 125
translation accompanied by a sworn statement, s. 17(4) definition, s. 95(1)(g)
translation filed in any official languages, s. 17(3) general requirement concerning, s. 121
Minister mandatory, s. 123
definition, s. 1 partial, made to all holders of that class of security, s. 125(3)(a)
establishment of specialist committees, s. 191 prohibited dealings before and during an, s. 127
Finance, of, s. 116(4)(a)(iii) restrictions on frustrating action, s. 126
member of the Cabinet, definition “Minister”, s. 1 Offer to the public
prescribe, may, definition, s. 95(1)(h)
category of companies that must have committees, s. 72(4)(a)
general restrictions on, s. 99
criteria and procedures for de-registration, s. 82(6)
Official language
functions to be performed by committees, s. 72(4)(b)
definition, s. 1
minimum qualifications to act as a practitioner, s. 138(3)(b)
Ordinary resolution
rules governing composition and conduct of committees,
definition, s. 1
s. 72(4)(c)
rule is binding on a permanent basis if ratified by, s. 15(4)(c)(ii)
prescribed percentage by the, s. 123(1)
Organ of state
regulations, may make, s. 223
definition, s. 1
N
P
Name of company
Panel
advocacy of hatred, not include any word that constitute,
s. 11(2)(d)(iii) definition, s. 1
Commission may, Executive Director of the, s. 171(1)
alter the, s. 14(2)(a) initiate complaints or conduct investigations, s. 119(4)(c)
cancel a reservation, refuse to, s. 12(6)(d) initiating a complaint with the, s. 168
extend a reservation upon expiry, refuse to, s. 12(6)(b) investigation by, s. 169
transfer a reserved, refuse to, s. 12(6)(c) issue compliance certificates, may, s. 119(b)
Commission must reserve each, as applied for, s. 12(2) regulate affected transactions in order to ensure,
comprise one or more words in any language, s. 11(1)(a) adequate time to obtain and provide advice, s. 119(1)(b)(ii)
confusingly similar, not be, s. 11(2)(b) fairness to the holders of securities, s. 119(1)(a)
criteria for, s. 11 integrity of the marketplace, s. 119(1)(a)
disputes concerning reservation or registration of, s. 160 provision of necessary information, s. 119(1)(b)(i)
falsely imply or suggest as would reasonably mislead, not, regulation of affected transactions, s. 119
s. 11(2)(c) require the filing of any document, may, s. 119(4)(a)
incitement of violence, not include any word that constitute, Takeover Regulation Panel, definition “panel”, s. 1
s. 11(2)(d)(ii) Par value
name of another company, not the same as, s. 11(2)(a)(i) shares, treasury shares, capital accounts and share certificates,
non-profit company, end with NPC, s. 11(3)(c)(v) sch. 5, para. 6
personal liability company, end with Incorporated or Inc., Penalties, s. 216
s. 11(3)(c)(i) Magistrate’s Court jurisdiction to impose, s. 217
private company, end with Proprietary Limited or (Pty) Ltd, Personal financial interest
s. 11(3)(c)(ii) definition, s. 1
propaganda for war, not include any word that constitutes, Plain language
s. 11(2)(d)(i) understand the content, significance and import, s. 6(5)
public company, end with Limited or Ltd, s. 11(3)(c)(iii) Practitioner
registered trade mark, not the same as, s. 11(2)(a)(iii) appointed as, only if the person,
reservation continues for six months, s. 12(4) does not have a compromising relationship, s. 138(1)(e)
reservation of, and defensive names, s. 12 disqualified to act as a director, is not, s. 138(1)(d)
state-owned company, end with SOC Ltd, s. 11(3)(c)(iv) licensed by the Commission, is, s. 138(1)(b)
words together with any other symbol, s. 11(1)(a)(iii) member of good standing approved by the Commission, is a,
National Prosecuting Authority s. 138(1)(a)
Commission refer alleged offences to, s. 187(2)(h) subject to an order of probation, is not, s. 138(1)(c)
National Revenue Fund, s. 175(4) Commission may license any qualified person to act as a, s. 138(2)
Non-profit company court may remove, on grounds of,
amalgamate or merge with, or convert to, a profit company, may conflict of interest or lack of independence, s. 139(2)(e)
not, sch. 1, para. 2(a) engaging in illegal acts or conduct, s. 139(2)(c)
apply all of its assets and income to advance its stated objects, failure to exercise proper care, s. 139(2)(b)
sch. 1, para. 1(2)(a) incapacitation, s. 139(2)(f)
directors of, sch. 1, para, 5 incompetence or failure to perform duties, s. 139(2)(a)
fundamental transactions, sch. 1, para. 2 delegate any power or function, may, s. 140(1)(b)
incorporators of, sch. 1, para. 3 directors to co-operate with and assist, s. 142
members, sch. 1, para. 4 investigation of affairs of the company, s. 141
membership may be held by juristic persons, including profit management control of the company, has full, s. 140(1)(a)
companies, sch. 1, para. 4(2)(c) powers and duties of, s. 140
memorandum must set out at least one object of the company, sch. qualification of, s. 138
1, para. 1(1)(a) removal and replacement of, s. 139
modified application with respect to, s. 10 remuneration of, s. 143
A-293 Companies Act No. 71 of 2008 Index

Pre-incorporation contract Records

definition, s. 1 access to company, s. 26
written agreement entered into before the incorporation, definition accessible within the Republic, s. 25(1)
“pre-incorporation contract”, s. 1 definition, s. 1
Premises form and standards for company, s. 24
definition, s. 1 kept for a period of seven years, s. 24(1)(b)
land, building, structure, vehicle, ship, boat, vessel aircraft or con- kept in written form, s. 24(1)(a)
tainer, definition “premises”, s. 1 location of company, s. 25
Prescribed offence for a company to refuse access to any, s. 26(9)(a)
definition, s. 1 Registered auditor, see also Auditor
ineligibility and disqualification of, officers, s. 69 definition, s. 1
officers, s. 66 Registered office
percentage, definition, s. 125(1)(b) definition, s. 1
Present at a meeting Registered prospectus, see also Prospectus
able to participate, definition “present at a meeting”, s. 1 definition, s. 95(1)(k)
definition, s. 1 Registration certificate
present in person, definition “present at a meeting”, s. 1 conclusive evidence that all the requirements complied with,
s. 14(4)(a)
represented by proxy, definition “present at a meeting”, s. 1
conclusive evidence that company is incorporated, s. 14(4)(b)
Primary offering
definition, s. 1
definition, s. 95(1)(i)
Registration of external companies and registered office, s. 23
Profit company
Registry
definition, s. 1 definition, s. 1
incorporated for the purpose of financial gain, definition “profit depository of documents to be kept, definition “registry”, s. 1
company”, s. 1 Regulatory authority
Promoter definition, s. 1
definition, s. 95(1)(j) entity established in terms of national or provincial legislation,
Prospectus definition “regulatory authority”, s. 1
consent to use of name in, s. 102 Related
contain all information regarding, definition, s. 1
assets and liabilities of company, s. 100(2)(a)(i) individual controls the juristic person, s. 2(1)(b)
cash flow of company, s. 100(2)(a)(i) inter-related persons, and control, s. 2
financial position of company, s. 100(2)(a)(i) married or live together, s. 2(1)(a)(i)
profit and losses of company, s. 100(2)(a)(i) persons who are connected to one another, definition “related”,
prospects of the company, s. 100(2)(a)(i) s. 1
securities being offered and rights attached to them, Remedies
s. 100(2)(a)(ii) extended standing to apply for, s. 157
contains or is accompanied by report of expert, s. 106(2)(a) promote purpose of Act, to, s. 158
liability for untrue statements in, s. 104 Remuneration includes,
produced in prescribed form and plain language, s. 6(4) contributions paid under any pension scheme, s. 30(6)(d)
registered, must be, s. 99(8) expense allowances, s. 30(6)(c)
requirements concerning, s. 100 fees paid to directors for services rendered, s. 30(6)(a)
requirements of this Act must be complied with before registration financial assistance to a director, s. 30(6)(f)
of, s. 99(9) salary, bonuses and performance related payments, s. 30(6)(b)
responsibility for untrue statements in, s. 106 value of any option or right given to a director, s. 30(6)(e)
variation of agreement mentioned in, s. 103 value of interest deferred, waived or forgiven, s. 30(6)(g)(i)
Proxy Resolutions
appoint two or more persons concurrently as, s. 58(3)(a) company may be wound up by special, s. 80(1)
appointment as, company must keep minutes of every, adopted, s. 73(6)(b)
in writing, dated and signed, must be, s. 58(2)(a) dated and sequentially numbered, s. 73(7)(a)
valid for one year, s. 58(2)(b) effective as at the date of the, s. 73(7)(b)
appointment must be delivered to the company, s. 58(3)(c) Rights offer
delegate its own authority, may, s. 58(3)(b) definition, s. 95(1)(l)
exercise any voting right, must be entitled to, s. 58(7) Royal Charter
association formed pursuant to, s. 8(3)(c)
revoke the appointment in writing, s. 58(4)(c)
Rules
shareholder may appoint any individual as a, s. 58(1)
binding between company and each shareholder, s. 15(6)(a)
shareholder right to be represented by, s. 58
binding between shareholders, s. 15(6)(b)
Public regulation board may make, amend or repeal any, s. 15(3)
definition, s. 1 company, of, s. 15
national, provincial or local government legislation, definition consistent with this Act, must be, s. 15(4)(a)
“public regulation”, definition, s. 1
s. 1 non-ratification, company must file notice of, s. 15(5)(b)(i)

R S
Record date
definition, s. 1
determines the identity of the shareholders and their shareholding,
definition “record date”, s. 1
determining shareholder rights, for, s. 59
published to shareholders in prescribed manner, s. 59(2)(b)
purpose to determine which shareholders are entitled to,
distribution, receive a, s. 59(1)(e)
notice of shareholders meeting, receive, s. 59(1)(a)
other rights, be allotted or exercise, s. 59(1)(f)
pre-emptive rights, exercise, s. 59(1)(d)
shareholders meeting, participate in and vote at, s. 59(1)(b)
Secondary offering
accompanied by the registered prospectus, must be, s. 101(2)(a)
definition, s. 95(1)(m)
public, to, s. 101
Securities
application to protect rights of, holders, s. 161
board may implement arrangement by way of,
consolidation of, into different classes s. 114(1)(a)
division of, into different classes, s. 114(1)(b)
exchanging any of its, for other, s. 114(1)(d)
expropriation of, from the holders, s. 114(1)(c)
re-acquisition by the company of its, s. 114(1)(e)
Index Auditing: Legislation and Standards
Securities (continued)
certificate must state on its face,
name of the issuing company, s. 51(1)(a)(i)
name of the person to whom issued, s. 51(1)(a)((ii)
number and class of shares, s. 51(1)(a)(iii)
restriction on the transfer of the securities, s. 51(1)(a)(iv)
signed by two authorised persons, s. 51(1)(b)
certificated or uncertificated, s. 49
definition, s. 1
financial assistance for subscription of, s. 44
liability relating to uncertificated, s. 55
minimum interval before allotment or acceptance, s. 110
name and address of registered owner of, s. 50(2)(b)(iv)(bb)
options for subscription of, s. 42
person who holds or has a beneficial interest in, s. 26(1)
proposal for scheme of arrangement, s. 114
register and numbering, s. 50
register, definition, s. 1
registration and transfer of certificated, s. 51
registration of uncertificated, s. 52
restrictions on allotment, s. 108
right to inspect or copy the, of a profit company, s. 26(1)
secured or unsecured, document must clearly indicate whether,
s. 43(4)
shares, debentures or other instruments, definition “securities”,
s. 1
substitution of certificated or uncertificated, s. 54
time limit for allotment or acceptance, s. 107
transfer of uncertificated, s. 53
effected only by a participant or central securities depository,
s. 53(1)(a)
receipt of an instruction only, on, s. 53(1)(b)
voidable allotment, s. 109
Share
approved by special resolution if issued to,
director, future director or officer, s. 41(1)(a)
nominee of director or inter-related company, s. 41(1)(c)
related person or inter-related company, s. 41(1)(b)
authorisation for, s. 36
authorised, of a company has no rights until it has been issued,
s. 35(4)
board may approve the issuing of capitalisation, s. 47(1)(a)
capitalisation, s. 47
company may not issue, to itself, s. 35(3)
company or subsidiary acquiring company’s, s. 48
consideration for, s. 40
definition, s. 1
general voting right, each has associated with it one, s. 37(2)
irrevocable right of the shareholder to vote, associated with every,
s. 37(3)(a)
issued but in trust may not be transferred, s. 40(6)(d)(i)
issued by a company is movable property, s. 35(1)
issued in terms of options or conversion rights, s. 39(1)(b)(i)(aa)
issuing, s. 38
legal nature of company, s. 35
nominal or par value, does not have, s. 35(2)
preferences, rights, limitations and other terms, s. 37
required disclosure concerning certain transactions, s. 122
securities other than, s. 43
subscription of, s. 39
transferred to a third party, to be held in trust, s. 40(5)(b)(ii)
unit into which the proprietary interest in a profit company is
divided, definition “share”, s. 1
Shareholder
agreements, s. 15
appoint any individual as a proxy, s. 58(1)
appraisal rights, s. 48(1)(a)
approval for issuing shares in certain cases, s. 41
court determines whether any person is a dissenting, s. 164(14)(c)
definition, s. 1
dissenting, appraisal rights, s. 164
holder of a share issued by a company, definition “shareholder”,
s. 1
meetings, s. 61
adjourned from time to time, s. 64(10)
conduct of, s. 63
A-294
Shareholder (continued)
meetings, (continued)
conducted entirely by electronic communication, may be,
s. 63(2)(a)
definition, s. 1
notice of, s. 62
quorum and adjournment, s. 64
quorum, at least 25% of all voting rights, s. 64(1)(a)
voting by show of hands or polling, s. 63(4)
notice of meeting must be in writing, s. 62(3)
ratify any action by special resolution, s. 20(2)
requirement to have, s. 35
resolution, s. 65
board may propose any, to be considered, s. 65(2)
challenged or impugned, s. 65(6)
ordinary or special, either, s. 65(1)
ordinary, to be approved, need 50% of votes, s. 65(7)
special, to be approved, need 75% of votes, s. 65(9)
voted on in writing by, s. 60(1)(b)
right to be represented by proxy, s. 58
right to subscribe for a percentage of new shares, s. 39(2)
subscribe for fewer shares than entitled to, may, s. 39(4)(a)
Social and ethics committee
company must pay all reasonable expenses incurred by, s. 72(9)
entitled to, is,
attend any general shareholders meeting, s. 72(8)(c)
heard at any shareholders meeting, s. 72(8)(e)
receive all notices of shareholders meeting, s. 72(8)(d)
request from an employee any information, s. 72(8)(b)
require from any director any information, s. 72(8)(a)
Solvency and liquidity test, s. 4
able to pay its debts as they become due, s. 4(1)(b)
assets of the company equal or exceed the liabilities, s. 4(1)(a)
definition, s. 1
fair valuation of the company’s assets and liabilities, s. 4(2)(b)(i)
financial assistance, immediately after the company must pass the,
s. 45(3)(b)(i)
South African Human Rights Commission
apply to the Companies Tribunal for a determination, s. 12(3)(b)
Commission may refer application and name reservation to,
s. 12(3)(b)(i)
definition, s. 1
Special resolution
approved by, must be,
disposal of all or greater part of assets, s. 112(2)(a)
grant of any other rights exercisable for securities, s. 41(1)
grant of options, s. 41(1)
issue of shares or securities convertible into shares, s. 41(1)
definition, s. 1
required to,
amend the company’s Memorandum, s. 65(11)(a)
approve a decision of the board for re-acquisition of shares,
s. 65(11)(g)
approve an application to transfer the registration of the com-
pany, s. 65(11)(k)
approve an issue of shares or grant of rights, s. 65(11)(d)
approve any proposed fundamental transaction, s. 65(11)(l)
approve the voluntary winding up of the company, s. 65(11)(i)
authorise the basis for compensation of directors, s. 65(11)(h)
authorise the board to grant financial assistance, s. 65(11)(f)
ratify a revision of the Memorandum, s. 65(11)(b)
ratify actions by the company or directors, s. 65(11)(c)
revoke a resolution, s. 65(11)(m)
Specified shares
definition, s. 95(1)(n)
State-owned companies
modified application with respect to, s. 9
Subsidiary
acquire shares of its holding company, board may determine that it
will, s. 48(2)(b)
control the exercise of a majority of voting rights, s. 3(1)(a)(i)
definition, s. 1
relationships, s. 3
right to appoint or elect directors of that company, s. 3(1)(a)(ii)
Summons, s. 176
Commission or Panel may issue a, s. 176(1)
A-295 Companies Act No. 71 of 2008 Index

Summons, (continued) V
issued to any person to, Voting
appear before the Commission to be questioned, s. 176(1)(a) power, definition, s. 1
deliver or produce any book, document or other object, rights,
s. 176(1)(b) definition, s. 1
served in the same manner as a subpoena, s. 176(2)(b) held by a person as nominee for another person, s. 3(2)(c)
signed by the Commissioner, must be, s. 176(2)(a) held by a person in a fiduciary capacity, s. 3(2)(c)(ii)
securities, definition, s. 1
T
Takeover Regulation Panel W
apply for court order to wind up a company, s. 201(1)(c) Warrant
chairperson, authority to enter and search under, s. 177
determine date, time and place of meetings, s. 199(1)(a) conduct of entry and search, s. 179
presides at meetings of the, s. 199(1)(b) executed only during the day, s. 177(4)
chairperson and deputy chairperson, s. 198 issued at any time and must specifically,
composition of, s. 197 authorise an inspector or police officer to search and enter,
comprises, s. 177(2)(b)
Commissioner, s. 197(1)(a) identify the premises that must be entered and searched,
Commissioner of the Competition Commission, s. 197(1)(b) s. 177(2)(a)
persons designated by each exchange named for the purpose, judge of the High Court or a magistrate may issue a, s. 177(1)
s. 197(1)(c) powers to enter and search, s. 178
confidential information, s. 212 valid until,
establishment of, s. 196 cancelled by the person who issued it, s. 177(3)(b)
executive of, s. 200 executed, is, s. 177(3)(a)
finances, s. 210 expiry of one month after it was issued, s. 177(3)(d)
functions of, s. 201 purpose for issuing it has lapsed, s. 177(3)(c)
jurisdiction throughout the Republic, s. 196(2)(a) Whistle-blowers
juristic person as an organ of state, s. 196(1) disclosure of information in good faith to,
meetings of, s. 199 Commission, Companies Tribunal or Panel, s. 159(3)(a)
proceedings are valid despite any vacancy, s. 199(7) company secretary or auditor, s. 159(3)(a)
qualifications for membership, s. 205 exchange or regulatory authority, s. 159(3)(a)
reviews and reports to Minister, s. 211 legal adviser, director or prescribed officer, s. 159(3)(a)
Takeover Regulations, s. 120 immune from any civil, criminal or administrative liability,
definition, s. 1 s. 159(4)(b)
definitions applicable to, protection for, s. 159
acquisition, s. 117(a) Wholly-owned subsidiary
act in concert, s. 117(b) definition, s. 1
affected transaction, s. 117(c) general voting rights, s. 3(1)(b)
Executive Director, s. 117(d) transaction between,
Holder, s. 117(e) holding company, and its, s. 112(1)(b)
offer, s. 117(f) two or more, of the same company, s. 112(1)(c)(i)
offer period, s. 117(g) Winding-up
partial offer, s. 117(h) company remains a juristic person while, s. 80(8)(a)
regulated company, s. 117(i) continued application of previous Act to, sch. 5, para. 9
securities, s. 117(j) court may order if,
determine the quorum for a meeting of the Panel, s. 199(3) Commission or Panel has applied for, s. 81(1)(f)
Takeover Special Committee, s. 202U one or more creditors applied for, s. 81(1)(c)
Unit one or more directors applied for, s. 81(1)(d)
definition, s. 95(1)(o) shareholders have applied for, s. 81(1)(e)
right or interest in any securities, s. 95(1)(o) solvent companies by court order, of, s. 81
Untrue statement solvent companies, of, s. 79
correct and fair copy or extract from report, s. 104(3)(b)(i) voluntary, of solvent companies, s. 80
definition, s. 95(1)(p)
expert person became aware of, s. 105(2)(b)
purporting to be made by an official person, s. 104(3)(c)
 Close Corporations Act
No. 69 of 1984

EDITORIAL NOTE

In terms of section 14 of Close Corporations Amendment Act, Act No. 22 of 2001, the expression
“certified post”, wherever it occurs, is substituted by the expression “registered post”.
In terms of section 4 of the Close Corporations Amendment Act, Act No. 25 of 2005, the words “he”,
“him”, “his” and “himself”, wherever they occur except in sections 10 (1) (m) and (o), 13, 14, 15 (1),
72 and 76 (3) (b), are substituted by the words “he or she”, “him or her”, “his or her” and “himself or
herself”, respectively.
A-299 Close Corporations Act No. 69 of 1984 Arrangement of sections

CLOSE CORPORATIONS ACT 18. ......

NO. 69 OF 1984 19. Undesirable names and reservation of names
20. Objections to names
[ASSENTED TO 19 JUNE 1984] 21. Effect of change of name
[DATE OF COMMENCEMENT: 1 JANUARY 1985] 22. Formal requirements as to names and registration numbers
22A. Improper references to incorporation in terms of Act
(English text signed by the State President)
23. Use and publication of names
as amended by 24. Contributions by members
Close Corporations Amendment Act, No. 38 of 1986 25. Postal address and registered office
Close Corporations Amendment Act, No. 64 26. Deregistration
of 1988 27. ......
Close Corporations Amendment Act, No. 17
of 1990 PART IV
Close Corporations Amendment Act, No. 81 MEMBERSHIP
of 1992 28. Number of members
Close Corporations Amendment Act, No. 26 29. Requirements for membership
of 1997 30. Nature of member’s interest
Close Corporations Amendment Act, No. 22 31. Certificate of member’s interest
32. Representation of members
of 2001
33. Acquisition of member’s interest by new member
Corporate Laws Amendment Act, No. 39 of 2002
34. Disposal of interest of insolvent member
Judicial Matters Amendment Act, No. 16 of 2003 34A. Attachment and sale in execution of
[with effect from 9 July 2004] member’s interest
Prevention and Combating of Corrupt Activities Act, No. 12 of 35. Disposal of interest of deceased member
2004 36. Cessation of membership by order of Court
[with effect from 27 April 2004]
37. Other dispositions of members’ interests
Close Corporations Amendment Act, No. 25 38. Maintenance of aggregate of members’ interests
of 2005 39. Payment by corporation for members’ interests acquired
Corporate Laws Amendment Act, No. 24 of 2006 40. Financial assistance by corporation in respect of acquisition
Companies Act, No. 71 of 2008 of members’ interests
41. ......

PART V
ACT INTERNAL RELATIONS
To provide for the formation, registration, incorporation, 42. Fiduciary position of members
management, control and liquidation of close corporations; and 43. Liability of members for negligence
for matters connected therewith. 44. Association agreements
45. No access to or constructive notice of association agree-
ARRANGEMENT OF SECTIONS ments
1. Definitions 46. Variable rules regarding internal relations
47. Disqualified persons regarding management of corporation
PART I 48. Meetings of members
FORMATION AND JURISTIC PERSONALITY OF CLOSE
49. Unfairly prejudicial conduct
CORPORATIONS
2. Formation and juristic personality of close corporations 50. Proceedings against fellow-members on behalf of corpora-
tion
51. Payments by corporation to members
PART II
ADMINISTRATION OF ACT 52. Prohibition of loans and furnishing of security to members
3. Registration Office and register and others by
4. Registrar corporation
5. Inspection and copies of documents in Registration Office
6. Payment of fees PART VI
7. Courts having jurisdiction in respect of corporations EXTERNAL RELATIONS
8. Security for costs in legal proceedings by corporations 53. Pre-incorporation contracts
9. Transmission of copies of Court orders to Registrar and 54. Power of members to bind corporation
Master 55. ......
10. Regulations and policy
11. ...... PART VII
ACCOUNTING AND DISCLOSURE
PART III 56. Accounting records
REGISTRATION, DEREGISTRATION AND CONVERSION 57. Financial year of corporation
12. Founding statement
58. Annual financial statements
13. Registration of founding statement
14. Certificate of incorporation 59. Appointment of accounting officers
15. Registration of amended founding statement 60. Qualifications of accounting officers
15A. Annual return 61. Right of access and remuneration of
16. Keeping of copies of founding statements by corporations accounting officers
17. No constructive notice of particulars in founding statement 62. Duties of accounting officers
and other documents 62A. Application of accountability provisions of Companies Act
Arrangement of sections–s 1 Auditing: Legislation and Standards A-300

PART VIII “deregistration”, in relation to a corporation, means the cancel-

LIABILITY OF MEMBERS AND OTHERS FOR DEBTS OF lation of the registration of the corporation’s founding statement;
CLOSE CORPORATION and “deregister” has a corresponding meaning;
63. Joint liability for debts of corporation “director”, in relation to a company, has the meaning set out in
64. Liability for reckless or fraudulent section 1 of the Companies Act;
carrying-on of business of corporation
[Definition of “director” substituted by s. 224 (2) of Act No. 71 of
65. Powers of Court in case of abuse of separate juristic 2008.]
personality of corporation
“electronic” includes created, recorded, transmitted or stored in
digital or other intangible form of electronic, optical or similar
PART IX
means;
WINDING-UP
[Definition of “electronic” inserted by s. 1 (a) of Act No. 22 of 2001.]
66. Application of Companies Act, 1973
67. Dissolution of corporations “founding statement”, in relation to a corporation, means the
68. ...... founding statement of the corporation referred to in section 12
69. Circumstances under which corporation deemed unable to which has been registered in terms of section 13, and also any
pay debts amended founding statement in respect of that corporation regis-
70. Repayments by members tered in terms of section 15 (1) or (2);
71. Repayment of salary or remuneration by members “holding company”, in relation to a company, has the meaning
72. Composition set out in section 1 of the Companies Act;
73. Repayments, payments of damages and restoration of [Definition of “holding company” substituted by s. 224 (2) of Act No.
property by members and others 71 of 2008.]
74. Appointment of liquidator
75. Vacancies in office of liquidators “Master” means the Master of the Supreme Court, and in rela-
tion to—
76. Refusal by Master to appoint nominated person as liquida-
tor (a) a corporation in respect of which application is made to a
77. Resignation and absence of liquidator Court for a winding-up order, the Master having jurisdic-
78. First meeting of creditors and members tion in the area of jurisdiction of the Court where applica-
79. Report to creditors and members tion is made;
80. Repayments by members or former members (b) a corporation being wound up by a Court, the Master
81. Duties of liquidator regarding liability of members to having jurisdiction in the area of jurisdiction of the Court
creditors or corporation which issued the winding-up order;
(c) a corporation other than a corporation referred to in
PART X paragraph (a) or (b), the Master having jurisdiction in the
PENALTIES AND GENERAL area in which the registered office of that corporation is
82. Application of Companies Act to situated;
enforcement of Act “member”, in relation to a corporation, means a person quali-
83. Short title and commencement fied for membership of a corporation in terms of section 29 and
1. Definitions.—(1) In this Act, unless the context otherwise designated as a member in a founding statement of the corporation,
indicates— including, subject to the provisions of this Act, a trustee, adminis-
trator, executor or curator, or other legal representative, referred to
“accounting records”, in relation to a corporation, includes in paragraph (c) of subsection (2) of section 29, in respect of any
accounts, deeds, writings and such other documents as may be such person who is insolvent, deceased, mentally disordered or
prescribed; otherwise incapable or incompetent to manage his or her affairs,
“association agreement”, in relation to any corporation or the but excluding any such person who has in terms of this Act ceased
members thereof, means an association agreement which has been to be a member;
entered into in terms of section 44 by the members of the cor- “member’s interest” or “interest”, in relation to a member of a
poration, including any such agreement which has been altered or corporation, means the interest of the member in the corporation
added to as contemplated in subsection (3) of section 49, or an expressed in accordance with section 12 (e) as a percentage in the
agreement which has replaced it as contemplated in that subsec- founding statement of the corporation;
tion;
“Minister”, in relation to any matter to be dealt with in the
“Commission” means the Companies and Intellectual Property office of a Master in connection with the winding-up of a corpora-
Commission, established by section 185 of the Companies Act; tion, means the Minister of Justice and, in relation to any other
[Definition of “Commission” inserted by s. 224 (2) of Act No. 71 of matter, means the Minister of Trade and Industry;
2008.]
[Definition of “Minister” substituted by s. 1 of Act No. 38 of 1986.]
“Companies Act” means the Companies Act, 2008; “name”, in relation to a corporation, means the full registered
[Definition of “Companies Act” substituted by s. 224 (2) of Act No. 71 name of that corporation, or a registered literal translation of that
of 2008.]
name into any one other official language of the Republic, or a
“company” has the meaning set out in section 1 of the Compa- registered shortened form of that name or any such translation
nies Act; thereof, referred to in section 12 (a);
[Definition of “company” substituted by s. 224 (2) of Act No. 71 of [Definition of “name” inserted by s. 1 (b) of Act No. 26 of 1997.]
2008.]
“officer”, in relation to—
“corporation” means a close corporation referred to in section (a) a corporation, means any manager or secretary thereof,
2 (1) which has been registered under Part III of this Act; whether or not such manager or secretary is also a mem-
“Court”, in relation to— ber of the corporation;
(a) any corporation, means any court having jurisdiction in (b) a company, means a prescribed officer as defined in
terms of section 7; and section 1 of the Companies Act;
(b) any offence under this Act, means any court having [Para. (b) substituted by s. 224 (2) of Act No. 71 of 2008.]
jurisdiction in respect of that offence; “prescribe” means prescribe by regulation; and “prescribed”
[Definition of “Court” substituted by s. 1 (a) of Act No. 26 of 1997.] has a corresponding meaning;
A-301 Close Corporations Act No. 69 of 1984
“Registrar” means the Commissioner, appointed in terms of
section 189 of the Companies Act;
[Definition of “Registrar” substituted by s. 224 (2) of Act No. 71 of
2008.]
“registration”, in relation to—
(a) any corporation, means the registration of the founding
statement of the corporation referred to in section 12;
(b) the founding statement or any amended founding state-
ment of a corporation, means the registration thereof in
terms of section 13 or section 15 (1) or (2), as the case
may be;
(c) any matter in connection with a corporation, or any
member thereof, particulars of which are specified in
terms of this Act in a founding statement of the corpora-
tion, means the specifying of particulars thereof in any
such statement; and
(d) any other matter in connection with which any duty or
power in relation to the registration thereof is in terms of
this Act imposed on or granted to the Registrar, means the
registration thereof by him or her in accordance with any
applicable provision of this Act; and “registered” has a
corresponding meaning;
“Registration Office” means the office of the Commission;
[Definition of “Registration Office” substituted by s. 224 (2) of Act
No. 71 of 2008.]
“regulation” means any regulation made under this Act;
“signature” includes an electronic signature and an advanced
electronic signature as defined in section 1 of the Electronic
Communications and Transactions Act, 2002 (Act No. 25 of 2002);
[Definition of “signature” inserted by s. 57 of Act No. 24 of 2006.]
“subsidiary”, in relation to a company, has the meaning deter-
mined in accordance with section 3 of the Companies Act;
[Definition of “subsidiary” substituted by s. 224 (2) of Act No. 71 of
2008.]
“this Act” includes the regulations, and any regulations made in
terms of the Companies Act, to the extent that they apply to this
Act.
[Sub-s. (1), previously s. 1, amended by s. 1 (b) of Act No. 22 of 2001.
Definition of “this Act” substituted by s. 224 (2) of Act No. 71 of
2008.]
(2) Subject to subsection (3), the performance of the acts denot-
ed by any of the following words or expressions, namely—
(a) “give notice”;
(b) “issue, distribute, deliver or cause it to be done”;
(c) “lodge”;
(d) “lodge in the prescribed form”;
(e) “lodge in the prescribed manner”;
(f) “lodge under cover of”;
(g) “notify in the prescribed form”;
(h) “payment of prescribed fee”;
(i) “publish”;
(j) “registration”; and
(k) “written application”,
and any word or expression derived therefrom, must be regarded as
including all electronic methods of performing such acts.
[Sub-s. (2) added by s. 1 (b) of Act No. 22 of 2001.]
(3) (a) Subsection (2) shall not apply to a section of this Act
until the Registrar publishes a notice in the Gazette making it
applicable to that section.
(b) Different dates may be determined by the Registrar in re-
spect of the application of subsection (2) to different sections of
this Act.
[Sub-s. (3) added by s. 1 (b) of Act No. 22 of 2001.]
ss 1–5
PART I
FORMATION AND JURISTIC PERSONALITY OF CLOSE
CORPORATIONS
2. Formation and juristic personality of close corpora-
tions.—(1) At any time before section 13 of the Companies Act
comes into operation, any one or more persons, not exceeding ten,
who qualify for membership of a close corporation in terms of this
Act, may form a close corporation and secure its incorporation by
complying with the requirements of this Act in respect of the
registration of its founding statement referred to in section 12.
[Sub-s. (1) substituted by s. 224 (2) of Act No. 71 of 2008.]
(2) A corporation formed in accordance with the provisions of
this Act is on registration in terms of those provisions a juristic
person and continues, subject to the provisions of this Act, to exist
as a juristic person notwithstanding changes in its membership, or
its conversion to a company in terms of Schedule 2 of the Compa-
nies Act, until it is deregistered or dissolved—
(a) in terms of this Act; or
(b) in terms of the Companies Act, in the case of a juristic
person that has been converted to a company.
[Sub-s. (2) substituted by s. 224 (2) of Act No. 71 of 2008.]
(3) Subject to the provisions of this Act, the members of a cor-
poration shall not merely by reason of their membership be liable
for the liabilities or obligations of the corporation.
(4) A corporation shall have the capacity and powers of a natu-
ral person of full capacity in so far as a juristic person is capable of
having such capacity or of exercising such powers.
PART II
ADMINISTRATION OF ACT
3. Registration Office and register.—
(1) . . . . . .
[Sub-s. (1) repealed by s. 224 (2) of Act No. 71 of 2008.]
(2) Registers of names and registration numbers and such other
matters concerning corporations as may be prescribed, shall be
kept in the Registration Office.
4. Registrar.—(1) The Commission—
(a) may exercise the powers and must perform the duties
assigned to the Registrar by this Act; and
(b) is responsible for the administration of the Registration
Office.
[Sub-s. (1) substituted by s. 224 (2) of Act No. 71 of 2008.]
(2) . . . . . .
[Sub-s. (2) repealed by s. 224 (2) of Act No. 71 of 2008.]
(3) The Commission may delegate any of the powers and entrust
any of the duties of the Registrar to any officer or employee in the
Commission.
[Sub-s. (3) substituted by s. 224 (2) of Act No. 71 of 2008.]
5. Inspection and copies of documents in Registration Of-
fice.—(1) Subject to the availability of the original document, any
person, any person may, on payment of the prescribed fee (includ-
ing an additional fee if any document is not collected personally at
the Registration Office)—
(a) inspect any document kept under this Act by the Registrar
in respect of any corporation; or
(b) obtain a certificate from the Registrar as to the contents or
part of the contents of any such document open to inspec-
tion; or
(c) obtain a copy of or extract from any such document.
[Sub-s. (1) amended by s. 58 (a) of Act No. 24 of 2006.]
(1A) Any person may, on payment of the prescribed fee,
through any electronic medium approved by the Registrar—
(a) inspect any document which has been lodged with the
Registrar under this Act and converted into electronic
format;
[Para. (a) amended by s. 58 (b) of Act No. 24 of 2006.]
ss 5–10 Auditing: Legislation and Standards
(b) obtain a copy of or extract from any such converted
document; or
[Para. (b) amended by s. 58 (c) of Act No. 24 of 2006.]
(c) obtain a certificate from the Registrar as to the contents or
part of the contents of any documentation kept by him or
her in terms of this Act in respect of any corporation.
[Sub-s. (1A) inserted by s. 2 (a) of Act No. 22 of 2001. Para. (c) inserted
by s. 58 (d) of Act No. 24 of 2006.]
(2) If the Registrar is satisfied—
(a) that any such inspection, certificate, copy or extract is
required on behalf of a foreign government accredited to
the Government of the Republic; and
(b) that no fee is payable in the foreign country concerned in
respect of a corresponding inspection, certificate, copy or
extract required on behalf of the Government of the Re-
public,
no fee referred to in subsection (1) or (1A) shall be payable.
[Sub-s. (2) amended by s. 2 (b) of Act No. 22 of 2001.]
(3) If the Registrar is satisfied that any such inspection, certifi-
cate, copy or extract is required for purposes of research by or under
the control of an institution for higher education, he or she may
permit such inspection or furnish such certificate, copy or extract
without payment of fees.
6. Payment of fees.—(1) The payment of any fee, additional
fee or other money payable to the Registrar in terms of this Act
shall, subject to the provisions of subsection (3), be effected—
(a) . . . . . .
[Para. (a) deleted by s. 7 of Act No. 39 of 2002, with effect from 1 April
2007.]
(b) ......
[Para. (b) deleted by s. 7 of Act No. 39 of 2002, with effect from 1 April
2007.]
(bA) by means of such electronic form of transfer of money as
the Registrar may approve; or
[Para. (bA) inserted by s. 3 (a) of Act No. 22 of 2001.]
(c) in such other manner as the Registrar may direct.
(2) No document, form, return or notice in respect of which any
fee is payable or any payment is required to be done in terms of this
Act, shall be complete unless proof of payment of the required fee
or other money has been lodged with, or acknowledged as having
been received by, the Registrar.
[Sub-s. (2) substituted by s. 3 (b) of Act No. 22 of 2001.]
(3) For the purposes of subsection (1) the decision of the Regis-
trar as to the manner in which in any particular case, or category of
cases determined by him or her, any fee, additional fee or other
money is in terms of this Act to be paid, shall be final.
(4) Any fees and other moneys payable in terms of this Act to the
Registrar, shall be debts due to the State recoverable by the Minister
in any competent court.
7. Courts having jurisdiction in respect of corporations.—
For the purposes of this Act any High Court and any magistrate’s
court, within whose area of jurisdiction the registered office or the
main place of business of the corporation is situated, shall have
jurisdiction.
[S. 7 substituted by s. 1 of Act No. 64 of 1988 and by s. 2 of
Act No. 26 of 1997.]
8. Security for costs in legal proceedings by corporations.—
When a corporation in any legal proceedings is a plaintiff or appli-
cant or brings a counter-claim or counter-application, the court
concerned may at any time during the proceedings if it appears that
there is reason to believe that the corporation or, if it is being wound
up, the liquidator thereof, will be unable to pay the costs of the
defendant or respondent, or the defendant or respondent in recon-
vention, if he or she is successful in his or her defence, require
security to be given for those costs, and may stay all proceedings till
the security is given.
A-302
9. Transmission of copies of Court orders to Registrar and
Master.—When a Court makes any order in terms of this Act in
relation to any corporation, the Registrar or clerk of the Court shall
without delay by registered post transmit a copy of the order to the
Registrar and, if such order relates to the winding-up of any corpora-
tion, a copy thereof to the Master as well.
10. Regulations and policy.—(1) The Minister may make
regulations—
(a) providing for the conduct and administration of the
Registration Office, and prescribing the practice and pro-
cedure to be observed therein;
(b) prescribing the practice and procedure to be observed in
the office of the Master in connection with the winding-up
of corporations;
(c) providing for the reproduction of any records relating to
corporations in the Registration Office or the office of the
Master by means of microfilm, microcard, miniature pho-
tographic process, the conversion into electronic format in
such a way as to allow such records to be reconverted to
their original form without changing their original contents
or form or any other process deemed suitable by the Minis-
ter;
(d) providing for the use for official purposes and the admissi-
bility in evidence in any proceedings, whether in a court of
law or otherwise, of any reproduction contemplated in par-
agraph (c);
(e) providing for the keeping and preservation of any records,
or any reproductions thereof contemplated in paragraph
(c), in the Registration Office or the office of the Master,
the removal from such offices of such records or reproduc-
tions and the preservation thereof in any other place, and
prescribing the circumstances under which such records or
reproductions may be destroyed;
(f) prescribing how records required under this Act to be kept
by a corporation may be kept, and prescribing the circum-
stances under which such records may be destroyed;
(g) prescribing the procedure to be followed with respect to
any matter in connection with the winding-up of corpora-
tions;
(h) prescribing the form and the contents of any return, notice
or document provided for by this Act;
(i) prescribing when an additional copy or copies of docu-
ments to be lodged under this Act shall require to be
lodged, and whether such additional copy or copies shall
be in the form of a copy or copies certified in a defined
manner or shall be in duplicate original form;
(j) with the concurrence of the Minister of Finance, prescrib-
ing the matters in respect of which fees shall be payable,
the persons by whom and to whom the fees shall be paya-
ble and the tariff of such fees;
(k) providing for a table of fees, subject to taxation by the
Master, which shall be payable to a liquidator as remunera-
tion;
(l) prescribing a tariff of remuneration payable to any person
performing on behalf of a liquidator any act relating to the
winding-up of a corporation which the liquidator is not re-
quired to perform personally, and prohibiting the charging
or recovery of remuneration at a higher tariff than the tariff
so prescribed;
(m) providing for the appointment by the Registrar in specified
circumstances of an inspector to investigate the affairs of a
corporation, for the powers of an inspector in conducting
any such investigation, for the duty of any member, of-
ficer, employee or accounting officer of a corporation to
make available books and documents in his or her custody
or under his or her control and to afford such assistance as
an inspector may require in connection with any such in-
vestigation; for reporting by an inspector to the Registrar;
A-303 Close Corporations Act No. 69 of 1984
for the making available by the Registrar of any such
report to other persons; for the admissibility of any such
report as evidence in legal proceedings; and for defraying
the expenses of, and in connection with, any such investi-
gation;
(n) as to any other matter required or permitted by this Act to
be prescribed; and
(o) generally, as to any matter which he or she considers it
necessary or expedient to prescribe in order that the pur-
poses of this Act may be achieved.
(1A) (a) The Minister may determine policy for the appointment
of a liquidator by the Master in order to promote consistency,
fairness, transparency and the achievement of equality for persons
previously disadvantaged by unfair discrimination.
(b) Any policy determined in accordance with the provisions of
paragraph (a) must be tabled in Parliament before publication in the
Gazette.
(2) Regulations made under subsection (1) may prescribe penal-
ties for any contravention thereof or failure to comply therewith, not
exceeding a fine or imprisonment for a period of six months or both
a fine and such imprisonment.
(3) Regulations made by the Minister in terms of section 29 (4)
and (5), and 30 (7) of the Companies Act apply to a corporation as if
those regulations had been made in terms of this Act, but any
reference in those regulations to a company must be read as a
reference to a corporation.
[S. 10 amended by s. 2 of Act No. 38 of 1986 and by s. 4 of Act No. 22
of 2001 and substituted by s. 20 of Act No. 16 of 2003. Sub-s. (3)
inserted by s. 224 (2) of Act No. 71 of 2008.]
11. . . . . . .
[S. 11 repealed by s. 224 (2) of Act No. 71 of 2008.]
PART III
REGISTRATION, DEREGISTRATION AND CONVERSION
12. Founding statement.—Any person qualified for member-
ship in terms of section 29 or, subject to section 28, any number of
such persons who intend to form a corporation, shall draw up a
founding statement in the prescribed form in one of the official
languages of the Republic, which shall be signed by or on behalf of
every person who is to become a member of the corporation upon its
registration and which shall, subject to the provisions of this Act,
contain the following particulars—
(a) the full name of the corporation: Provided that a literal
translation of that name into any one other official lan-
guage of the Republic, or a shortened form of that name or
such translation thereof, may in addition be given;
[Para. (a) substituted by s. 3 of Act No. 26 of 1997.]
(b) the principal business to be carried on by the corporation;
(c) (i) a postal address for the corporation; and
(ii) the address (not being the number of a post office
box) of the office of the corporation referred to in
section 25 (1);
(d) the full name of each member, his or her identity number
or, if he or she has no such number, the date of his or her
birth, and his or her residential address;
[Para. (d) substituted by s. 1 of Act No. 81 of 1992.]
(e) the size, expressed as a percentage, of each member’s
interest in the corporation;
(f) particulars of the contribution of each member to the
corporation in accordance with section 24 (1), including—
(i) any amounts of money; and
(ii) a description, and statement of the fair value, of any
property (whether corporeal or incorporeal) or any
service referred to in section 24 (1);
(g) (i) the name and postal address of a qualified person
who or firm which has consented in writing to his or
her or its appointment as accounting officer of the
corporation; and
ss 10–15
(ii) the date of the end of the financial year of the
corporation.
13. Registration of founding statement.—If a founding state-
ment referred to in section 12 complying with the requirements of
this Act is lodged with the Registrar in the manner prescribed at any
time before section 13 of the Companies Act comes into operation,
and if the business to be carried on by the corporation is lawful, the
Registrar shall upon payment of the prescribed fee register such
statement in his or her registers and shall give notice of the registra-
tion in the prescribed manner.
[S. 13 substituted by s. 3 of Act No. 38 of 1986, by s. 5 of Act No. 22 of
2001, by s. 59 of Act No. 24 of 2006 and by s. 224 (2) of Act No. 71 of
2008.]
14. Certificate of incorporation.—(1) Upon the registration of
such founding statement the Registrar shall assign a registration
number to the corporation concerned and endorse under his or her
hand on the statement, or otherwise issue in writing, a certificate
that the corporation is incorporated: Provided that the Registrar may
change or amend such registration number in order to rectify
duplications of such numbers or to achieve any other objective
which it is necessary or expedient to achieve for the proper mainte-
nance of the register of close corporations.
[Sub-s. (1) substituted by s. 6 of Act No. 22 of 2001.]
(2) A certificate of incorporation given by the Registrar in terms
of subsection (1) or section 27 (4) (c), or a copy thereof, as the case
may be, shall upon its mere production, in the absence of proof of
fraud or error, be conclusive evidence that all the requirements of
this Act in respect of registration of the corporation concerned and
of matters precedent and incidental thereto have been complied
with, and that the corporation concerned is duly incorporated under
this Act.
[Sub-s. (2) substituted by s. 4 of Act No. 38 of 1986.]
15. Registration of amended founding statement.—(1) If any
change is made or occurs in respect of any matter particulars of
which are stated in a founding statement of a corporation in accord-
ance with paragraph (b), (d), (e) or (f) of section 12, the corporation
shall, subject to the provisions of section 29 (3) (c) and (d), within
28 days after such change lodge with the Registrar for registration in
his or her registers an amended founding statement, in the pre-
scribed form together with the prescribed fee, signed by or on behalf
of every member of the corporation and by or on behalf of any
person who will become a member on such registration, and which
contains particulars and the date of the change.
[Sub-s. (1) substituted by s. 2 (a) of Act No. 81 of 1992 and by s. 7 (a)
of Act No. 22 of 2001.]
(2) If any change is made or occurs in respect of any matter par-
ticulars of which are so stated in accordance with paragraph (a), (c)
or (g) of section 12, an amended founding statement shall in accord-
ance with the requirements of subsection (1) be lodged with the
Registrar for registration, and any such change shall only take effect
when such statement has been so registered in the relevant registers,
or upon a later date mentioned in such statement: Provided that a
statement in the prescribed form which may also be in such elec-
tronic format as the Registrar may allow and which upon registra-
tion thereof shall form part of the founding statement or amended
founding statement, shall, instead of an amended founding state-
ment, be lodged with the Registrar for registration if any such
change is made or occurs in respect of—
(a) any matter of which particulars are so stated in accordance
with paragraph (c) of section 12, in which case the ac-
counting officer may sign such statement on behalf of the
members if the corporation has approved of the said
change and the accounting officer so certifies in writing; or
(b) the name or address of the duly appointed accounting
officer, in which case the accounting officer may sign such
statement on behalf of the members, and the said change
shall take effect upon the date mentioned in the statement.
[Sub-s. (2) amended by s. 2 (b) of Act No. 81 of 1992 and by s. 60 (a) of
Act No. 24 of 2006.]
ss 15–22 Auditing: Legislation and Standards
(2A) If a founding statement is altered or something is added
thereto by an order of court subsection (1), in relation to the lodging
of an amended founding statement therein referred to, shall apply
with the necessary changes in respect of such founding statement.
[Sub-s. (2A) inserted by s. 5 (a) of Act No. 38 of 1986 and substituted
by s. 60 (b) of Act No. 24 of 2006.]
(2B) Upon registration of any amended founding statement in
accordance with the requirements of subsection (1), (2) or (2A), the
Registrar shall issue a certificate to the effect that the amended
founding statement has been registered.
[Sub-s. (2B) inserted by s. 7 (b) of Act No. 22 of 2001.]
(3) (a) If a corporation fails to lodge an amended founding
statement in terms of and in accordance with the provisions of
subsection (1), (2) or (2A), as the case may be, the Registrar may on
his or her own initiative or on application by any member or creditor
of the corporation serve on the members of the corporation in
accordance with section 25 (2) (a) a reminder by registered post to
make good the default within 28 days of the date of the reminder.
[Para. (a) substituted by s. 5 (b) of Act No. 38 of 1986.]
(b) If the members concerned fail to comply with any such re-
minder, the Registrar may direct those members by written notice,
so served on the members by registered post, to make good the
default within 28 days of the date of the notice.
(c) If the members concerned fail to comply with any such direc-
tion, the Registrar may by further written notice so served on the
members by registered post, impose on the members, or any of
them, a penalty not exceeding five rand per day from the date upon
which the reminder referred to in paragraph (a) was sent.
(d) When the Registrar has served a notice referred to in para-
graph (c) on the members, he or she may not less than 21 days after
the date of that notice forward a certified copy thereof to the clerk of
the magistrate’s court in whose area of jurisdiction the registered
office of the corporation is situated, who shall record it, and there-
upon such notice shall have the effect of a civil judgment of that
magistrate’s court against every such member for the amount of the
penalty in question.
(e) On application by one or more of the members concerned the
court in question may reduce or rescind the penalty, or exempt any
one or some of the members from the effect of the notice.
15A. Annual return.—(1) In order to assist the Registrar to
determine whether the information required to be disclosed in terms
of this Act by a corporation has been disclosed and is still valid,
every corporation shall not later than the end of the month following
upon the month within which the anniversary of the date of its
incorporation occurs, on payment of the prescribed fee, lodge with
the Registrar a return in the prescribed form.
(2) A copy of the annual return contemplated in subsection (1)
shall be kept at the registered office of the corporation, and the
provisions of section 16 relating to the inspection of the founding
statement and proof of its registration shall apply mutatis mutandis
to the annual return by a corporation.
(3) Any corporation which has failed to lodge a return required
by subsection (1) within the period prescribed therein, may thereaf-
ter lodge such return, subject to the payment to the Registrar of the
prescribed additional fee in respect of each such failure: Provided
that the Registrar may, upon good cause shown, waive payment of
the fee concerned.
(4) The information required to be disclosed in terms of this Act
as disclosed in the latest annual return of a corporation will, in the
absence of any subsequent compliance with any relevant disclosure
requirement of this Act, be regarded as the latest disclosed infor-
mation in respect of the corporation concerned.
[S. 15A inserted by s. 8 of Act No. 39 of 2002, with effect from 1 April
2007. Sub-s. (4) inserted by s. 61 of Act No. 24 of 2006.]
16. Keeping of copies of founding statements by corpora-
tions.—(1) A corporation shall keep a copy of its founding state-
ment and any proof of its registration at the registered office of the
corporation.
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(2) A document referred to in subsection (1) shall during the
business hours of the corporation be open to inspection by any
person upon payment to the corporation, in the case of a person who
is not a member of the corporation, of one rand or such lesser
amount as the corporation may determine.
(3) . . . . . .
[Sub-s. (3) repealed by s. 224 (2) of Act No. 71 of 2008.]
17. No constructive notice of particulars in founding state-
ment and other documents.—No person shall be deemed to have
knowledge of any particulars merely because such particulars are
stated, or referred to, in any founding statement or other document
regarding a corporation registered by the Registrar or lodged with
him or her, or which is kept at the registered office of a corporation
in accordance with the provisions of this Act.
18. . . . . . .
[S. 18 repealed by s. 4 of Act No. 26 of 1997.]
19. Undesirable names and reservation of names.—(1) Part
A of Chapter 2 of the Companies Act, read with the changes
required by the context, applies to a corporation and to an applicant
for name reservation in terms of subsection (2), but—
(a) a reference in any of those provisions to a company must
be regarded as a reference to a corporation for the purposes
of this Act; and
(b) the application of section 11 (3) of the Companies Act to a
corporation is subject to the provisions of section 22 (1) of
this Act.
(2) Any person who intends to form a corporation or any corpo-
ration which intends to change its name may apply to the Registrar
for the reservation of a name, on the prescribed form and on pay-
ment of the prescribed fee.
(3) . . . . . .
[S. 19 substituted by s. 5 of Act No. 26 of 1997 and by s. 224 (2) of Act
No. 71 of 2008.]
20. Objections to names.—Sections 14 (2) and (3), 16 (8), and
160 of the Companies Act, each read with the changes required by
the context, apply to a corporation or with respect to a reserved
name, or an application to reserve a name in terms of section 19 (2),
but a reference in any of those provisions to a company must be
regarded as a reference to a corporation for the purposes of this Act.
[S. 20 amended by s. 3 (a) of Act No. 81 of 1992, by s. 8 of Act No. 22
of 2001 and substituted by s. 224 (2) of Act No. 71 of 2008.]
21. Effect of change of name.—(1) A change in terms of this
Act of a name of a corporation shall not affect any right or obliga-
tion of the corporation or any legal proceedings instituted by or
against the corporation, and any legal proceedings that could have
been continued or commenced by or against the corporation prior to
the change of name may, notwithstanding such change of name,
after the change be continued or commenced by or against the
corporation, as the case may be.
(2) Upon the production by a corporation of a certified copy of a
founding statement reflecting a change of name of that corporation
to any registrar or other officer charged with the maintenance of a
register under any law, and on compliance with all the requirements
pursuant to any such law as to the form of application (if any) and
the payment of any required fee, such registrar or other officer shall
make in his or her register all such alterations as are necessary by
reason of the change of name in respect of the corporation.
22. Formal requirements as to names and registration num-
bers.—(1) The abbreviation CC, in capital letters, or its equivalent
in any other official language, shall be subjoined to the name used
by a corporation.
[Sub-s. (1) substituted by s. 6 (a) of Act No. 26 of 1997.]
(2) . . . . . .
[Sub-s. (2) repealed by s. 224 (2) of Act No. 71 of 2008.]
A-305 Close Corporations Act No. 69 of 1984
(3) If a corporation is being wound up, the statement “In Liquida-
tion” or “In Voluntary Liquidation”, as the case may be, shall for the
duration of such winding-up be subjoined to the name used by the
corporation.
[Sub-s. (3) substituted by s. 6 (b) of Act No. 26 of 1997.]
(4) . . . . . .
[Sub-s. (4) added by s. 6 (c) of Act No. 26 of 1997 and repealed by
s. 224 (2) of Act No. 71 of 2008.]
22A. Improper references to incorporation in terms of
Act.—Any person carrying on business under a name or title—
(a) to which an abbreviation contemplated in section 22 (1) is
subjoined; or
(b) of which the words “close corporation” or its equivalent in
any other official language or any abbreviation thereof
form part in a way which indicates incorporation as a close
corporation in terms of this Act,
shall, unless duly incorporated as a close corporation in terms of this
Act, be guilty of an offence.
[S. 22A inserted by s. 4 of Act No. 81 of 1992 and
substituted by s. 7 of Act No. 26 of 1997.]
23. Use and publication of names.—Section 32 of the Compa-
nies Act, read with the changes required by the context, applies to a
corporation, but a reference in that section to a company must be
regarded as a reference to a corporation for the purposes of this Act.
[S. 23 amended by s. 8 (a) of Act No. 26 of 1997, by s. 5 of Act No. 81
of 1992, by s. 9 of Act No. 22 of 2001 and substituted by s. 224 (2) of
Act No. 71 of 2008.]
24. Contributions by members.—(1) Every person who is to
become a member of a corporation upon its registration, shall make
to the corporation an initial contribution of money, of property
(whether corporeal or incorporeal), or of services rendered in
connection with and for the purposes of the formation and incorpo-
ration of the corporation, and particulars of such contribution shall
be stated in the founding statement of the corporation referred to in
section 12, as required by paragraph (f) of that section.
(2) The amount or value of the members’ contributions, or of the
contribution of any one or more members, may from time to time by
agreement among all the members—
(a) be increased by additional contributions of money or
property (whether corporeal or incorporeal) to the corpora-
tion by existing members or, in terms of section 33 (1) (b),
by a person becoming a member of a registered corpora-
tion; or
(b) be reduced, provided that a reduction by way of a repay-
ment to any member shall comply with the provisions of sec-
tion 51 (1).
(3) Particulars of any increase or reduction of a member’s contri-
bution in terms of subsection (2) shall be furnished in an amended
founding statement referred to in section 15 (1).
(4) Money or property referred to in subsection (1) or (2) (a)
shall, in order to vest ownership thereof in the corporation, be paid,
delivered or transferred, as the case may be, to the corporation
within a period of 90 days—
(a) after the date of registration of the corporation, in the case
of an initial contribution referred to in subsection (1); or
(b) after the date of the registration of an amended founding
statement in connection with any additional contribution
referred to in subsection (2) (a).
(5) An undertaking by a member to make an initial or an addi-
tional contribution to a corporation shall be enforceable by the
corporation in legal proceedings.
25. Postal address and registered office.—(1) Every corpora-
tion shall have in the Republic a postal address and an office to
which, subject to subsection (2), all communications and notices to
the corporation may be addressed.
(2) Any—
(a) notice, order, communication or other document which is
in terms of this Act required or permitted to be served up-
on any corporation or member thereof, shall be deemed to
have been served if it has been delivered at the registered
ss 22–29
office, or has been sent by certified or registered post to the
registered office or postal address, of the corporation; and
(b) process which is required to be served upon any corpora-
tion or member thereof shall, subject to applicable provi-
sions in respect of such service in any law, be served by so
delivering or sending it.
26. Deregistration.—Sections 81 (1) (f), 81 (3), 82 (3) to (4),
and 83 of the Companies Act, each read with the changes required
by the context, apply with respect to the deregistration of a corpora-
tion, but a reference in any of those provisions to a company must be
regarded as a reference to a corporation for the purposes of this Act.
[S. 26 amended by s. 6 (1) of Act No. 38 of 1986, by s. 9 of Act No. 39
of 2002, by s. 1 of Act No. 25 of 2005, by s. 62 of Act No. 24 of 2006
and substituted by s. 224 (2) of Act No. 71 of 2008.]
27. . . . . . .
[S. 27 amended by s. 7 of Act No. 38 of 1986, by s. 2 (1) of Act No. 64
of 1988, by s. 6 of Act No. 81 of 1992, by s. 10 of Act No. 22 of 2001,
by s. 63 of Act No. 24 of 2006 and repealed by s. 224 (2) of Act No. 71
of 2008 with effect from 1 May 2011.]
PART IV
MEMBERSHIP
28. Number of members.—A corporation may at its incorpora-
tion have one or more members, but at no time shall the number of
members exceed ten.
29. Requirements for membership.—(1) Subject to subsection
(1A) or (2) (b) and (c), only natural persons may be members of a
corporation and no juristic person or trustee of a trust inter vivos in
that capacity shall directly or indirectly (whether through the
instrumentality of a nominee or otherwise) hold a member’s interest
in a corporation.
[Sub-s. (1) substituted by s. 3 (1) of Act No. 64 of 1988 and by s. 2 of
Act No. 25 of 2005.]
(1A) A natural or juristic person in the capacity of a trustee of a
trust inter vivos may be a member of a corporation: Provided that—
(a) no juristic person shall directly or indirectly be a benefi-
ciary of that trust;
(b) the member concerned shall, as between himself or herself
and the corporation, personally have all the obligations and
rights of a member;
(c) the corporation shall not be obliged to observe or have any
obligation in respect of any provision of or affecting the
trust or any agreement between the trust and the member
concerned of the corporation; and
(d) if at any time the number of natural persons at that time
entitled to receive any benefit from the trust shall, when
added to the number of members of the corporation at that
time, exceed 10, the provisions of, and exemption under,
this subsection shall cease to apply and shall not again be-
come applicable notwithstanding any diminution in the
number of members or beneficiaries.
[Sub-s. (1A) inserted by s. 1 of Act No. 17 of 1990 and substituted by s.
2 of Act No. 25 of 2005.]
(2) The following persons shall qualify for membership of a
corporation—
(a) any natural person entitled to a member’s interest;
(b) a natural or juristic person, nomine officii, who is a trustee
of a testamentary trust entitled to a member’s interest, pro-
vided that—
(i) no juristic person is a beneficiary of such trust; and
(ii) if the trustee is a juristic person, such juristic person
is not directly or indirectly controlled by any benefi-
ciary of the trust; and
(c) a natural or juristic person, nomine officii, who, in the case
of a member who is insolvent, deceased, mentally disor-
dered or otherwise incapable or incompetent to manage his
or her affairs, is a trustee of his or her insolvent estate or an
ss 29–35 Auditing: Legislation and Standards
administrator, executor or curator in respect of such member
or is otherwise a person who is his or her duly appointed or
authorized legal representative.
(3) (a) The membership of any person qualified therefor in terms
of subsection (2) shall commence on the date of the registration of a
founding statement of the corporation containing the particulars
required by section 12 in regard to such person and his or her
member’s interest.
(b) Where any person is to become a member of a registered
corporation the existing member or members of the corporation
shall ensure that the requirements of section 15 (1) regarding the
lodging of an amended founding statement with the Registrar are
complied with.
(c) A trustee of an insolvent estate, administrator, executor or
curator, or other legal representative, referred to in subsection (2)
(c), in respect of any member of a corporation, who is not obliged or
who does not intend to transfer the interest of the member in the
corporation in accordance with the provisions of this Act within 28
days of his or her assuming office to any other person, shall within
that period, or any extended period allowed by the Registrar on
application by him or her, request the existing member or members
of the corporation to lodge with the Registrar in accordance with
section 15 (1) an amended founding statement designating him or
her, nomine officii, as representative of the member of the corpora-
tion in question.
(d) Where the corporation has no other member, any such repre-
sentative his or her shall, in the circumstances contemplated in
paragraph (c), act on behalf of the corporation in accordance with
the provisions of section 15 (1), read with the said paragraph (c).
(e) The provisions of paragraphs (c) and (d) shall not affect the
power of such representative, as from the date of his or her assum-
ing office, and whether or not any such amended founding statement
has been lodged, to represent the member concerned in all matters in
which he or she himself or herself as a member could have acted,
until the interest of that member in the corporation has in accord-
ance with the provisions of this Act been transferred to any other
qualified person.
(4) A corporation is not concerned with the execution of any trust
in respect of any member’s interest in the corporation.
30. Nature of member’s interest.—(1) The interest of any
member in a corporation shall be a single interest expressed as a
percentage and shall be moveable property which shall be transfera-
ble in the manner provided by this Act.
[Sub-s. (1) substituted by s. 9 of Act No. 26 of 1997.]
(2) Two or more persons shall not be joint holders of the same
member’s interest in a corporation.
31. Certificate of member’s interest.—Each member of a
corporation shall be issued with a certificate, signed by or on behalf
of every member of that corporation, and stating the current per-
centage of such member’s interest in the corporation.
32. Representation of members.—(1) A minor who is a mem-
ber of a corporation, other than a minor whose guardian has lodged
a written consent referred to in section 47 (1) (a) (ii), shall be
represented in the corporation by his or her guardian.
(2) . . . . . .
[Sub-s. (2) deleted by s. 11 of Act No. 22 of 2001.]
(3) A member subject to any other legal disability shall be repre-
sented in the corporation by his or her duly appointed or authorized
legal representative referred to in paragraph (c) of subsection (2) of
section 29.
33. Acquisition of member’s interest by new member.—
(1) A person becoming a member of a registered corporation shall
acquire his or her member’s interest required for membership—
(a) from one or more of the existing members or his or her or
their deceased or insolvent estates; or
(b) pursuant to a contribution made by such person to the
corporation, in which case the percentage of his or her
A-306
member’s interest is determined by agreement between
him or her and the existing members, and the percentages
of the interests of the existing members in the corporation
shall be reduced in accordance with the provisions of sec-
tion 38 (b).
(2) The contribution referred to in subsection (1) (b) may consist
of an amount of money, or of any property (whether corporeal or
incorporeal) of a value agreed upon by the person concerned and the
existing members.
34. Disposal of interest of insolvent member.—(1) Notwith-
standing any provision to the contrary in any association agreement
or other agreement between members, a trustee of the insolvent
estate of a member of a corporation may, in the discharge of his or
her duties, sell that member’s interest—
(a) to the corporation, if there are one or more members other
than the insolvent member;
(b) to the members of the corporation other than the insolvent
member, in proportion to their member’s interests or as
they may otherwise agree upon; or
(c) subject to the provisions of subsection (2), to any other
person who qualifies for membership of a corporation in
terms of section 29.
(2) If the corporation concerned has one or more members other
than the insolvent, the following provisions shall apply to a sale in
terms of subsection (1) (c) of the insolvent member’s interest—
(a) the trustee shall deliver to the corporation a written
statement giving particulars of the name and address of the
proposed purchaser, the purchase price and the time and
manner of payment thereof;
(b) for a period of 28 days after the receipt by the corporation
of the written statement the corporation or the members, in
such proportions as they may agree upon, shall have the
right, exercisable by written notice to the trustee, to be
substituted as purchasers of the whole, and not a part only,
of the insolvent member’s interest at the price and on the
terms set out in the trustee’s written statement; and
(c) if the insolvent member’s interest is not purchased in terms
of paragraph (b), the sale referred to in the trustee’s written
statement shall become effective and be implemented.
34A. Attachment and sale in execution of member’s inter-
est.—The provisions of section 34 shall apply mutatis mutandis to
any attachment and sale in execution of a member’s interest in a
corporation.
[S. 34A inserted by s. 10 of Act No. 26 of 1997.]
35. Disposal of interest of deceased member.—Subject to any
other arrangement in an association agreement, an executor of the
estate of a member of a corporation who is deceased shall, in the
performance of his or her duties—
(a) cause the deceased member’s interest in the corporation to
be transferred to a person who qualifies for membership of
a corporation in terms of section 29 and is entitled thereto
as legatee or heir or under a redistribution agreement, if the
remaining member or members of the corporation (if any)
consent to the transfer of the member’s interest to such
person; or
(b) if any consent referred to in paragraph (a) is not given
within 28 days after it was requested by the executor, sell
the deceased member’s interest—
(i) to the corporation, if there is any other member or
members than the deceased member;
(ii) to any other remaining member or members of the
corporation in proportion to the interests of those
members in the corporation or as they may other-
wise agree upon; or
(iii) to any other person who qualifies for membership of
a corporation in terms of section 29, in which case
the provisions of subsection (2) of section 34 shall
mutatis mutandis apply in respect of any such sale.
A-307 Close Corporations Act No. 69 of 1984
36. Cessation of membership by order of Court.—(1) On
application by any member of a corporation a Court may on any of
the following grounds order that any member shall cease to be a
member of the corporation—
(a) subject to the provisions of the association agreement (if
any), that the member is permanently incapable, because of
unsound mind or any other reason, of performing his or her
part in the carrying on of the business of the corporation;
(b) that the member has been guilty of such conduct as taking
into account the nature of the corporation’s business, is likely
to have a prejudicial effect on the carrying on of the business;
(c) that the member so conducts his or her in matters relating
to the corporation’s business that it is not reasonably prac-
ticable for the other member or members to carry on the
business of the corporation with him or her; or
(d) that circumstances have arisen which render it just and
equitable that such member should cease to be a member
of the corporation:
Provided that such application to a Court on any ground mentioned
in paragraph (a) or (d) may also be made by a member in respect of
whom the order shall apply.
(2) A Court granting an order in terms of subsection (1) may
make such further orders as it deems fit in regard to—
(a) the acquisition of the member’s interest concerned by the
corporation or by members other than the member con-
cerned; or
(b) the amounts (if any) to be paid in respect of the member’s
interest concerned or the claims against the corporation of
that member, the manner and times of such payments and
the persons to whom they shall be made; or
(c) any other matter regarding the cessation of membership
which the Court deems fit.
37. Other dispositions of members’ interests.—Every disposi-
tion by a member of a corporation of his or her interest, or a portion
thereof, in the corporation, other than a disposition provided for in
section 34, 35 or 36, whether to the corporation, any other member
or any other person qualifying for membership in terms of section
29, shall be done—
(a) in accordance with the association agreement (if any); or
(b) with the consent of every other member of the corporation:
Provided that no member’s interest shall be acquired by the corpora-
tion unless it has one or more other members.
38. Maintenance of aggregate of members’ interests.—The
aggregate of the members’ interests in a corporation expressed as a
percentage shall at all times be one hundred per cent, and for that
purpose—
(a) any transfer of the whole, or a portion, of a member’s
interest shall be effected by the cancellation or the reduction,
as the case may be, of the interest of the member con-
cerned and the allocation in the name of the transferee, if
not already a member, of a member’s interest of the per-
centage concerned, or the addition to the interest of an ex-
isting member of the percentage concerned;
(b) when a person becomes a member of a registered corpora-
tion pursuant to a contribution made by him or her to the
corporation, the percentage of his or her member’s interest
shall be agreed upon by him or her and the existing mem-
bers, and the percentages of the interests of the existing
members shall be reduced proportionally or as they may
otherwise agree; and
(c) any member’s interest acquired by the corporation shall be
added to the respective interests of the other members in
proportion to their existing interests or as they may other-
wise agree.
39. Payment by corporation for members’ interests ac-
quired.—(1) Payment by a corporation in respect of its acquisition
of a member’s interest in the corporation shall be made only—
(a) with the previously obtained written consent of every
member of the corporation, other than the member whose
interest is acquired, for the specific payment;
ss 36–42
(b) if, after such payment is made, the corporation’s assets,
fairly valued, exceed all its liabilities;
(c) if the corporation is able to pay its debts as they become
due in the ordinary course of its business; and
(d) if such payment will in the particular circumstances not in
fact render the corporation unable to pay its debts as they
become due in the ordinary course of its business.
(2) For the purposes of subsection (1) “payment” shall include
the delivery or transfer of any property.
40. Financial assistance by corporation in respect of acquisi-
tion of members’ interests.—A corporation may give financial
assistance (whether directly or indirectly and whether by means of a
loan, guarantee, the provision of security or otherwise) for the
purpose of, or in connection with, any acquisition of a member’s
interest in that corporation by any person, only—
(a) with the previously obtained written consent of every
member of the corporation for the specific assistance;
(b) if, after such assistance is given, the corporation’s assets,
fairly valued, exceed all its liabilities;
(c) if the corporation is able to pay its debts as they become
due in the ordinary course of its business; and
(d) if such assistance will in the particular circumstances not
in fact render the corporation unable to pay its debts as
they become due in the ordinary course of its business.
41. . . . . . .
[S. 41 amended by s. 12 of Act No. 22 of 2001 and repealed by
s. 224 (2) of Act No. 71 of 2008.]
PART V
INTERNAL RELATIONS
42. Fiduciary position of members.—(1) Each member of a
corporation shall stand in a fiduciary relationship to the corporation.
(2) Without prejudice to the generality of the expression “fiduci-
ary relationship”, the provisions of subsection (1) imply that a
member—
(a) shall in relation to the corporation act honestly and in good
faith, and in particular—
(i) shall exercise such powers as he or she may have to
manage or represent the corporation in the interest
and for the benefit of the corporation; and
(ii) shall not act without or exceed the powers aforesaid;
and
(b) shall avoid any material conflict between his or her own
interests and those of the corporation, and in particular—
(i) shall not derive any personal economic benefit to
which he or she is not entitled by reason of his or her
membership of or service to the corporation, from
the corporation or from any other person in circum-
stances where that benefit is obtained in conflict
with the interests of the corporation;
(ii) shall notify every other member, at the earliest
opportunity practicable in the circumstances, of the
nature and extent of any direct or indirect material
interest which he or she may have in any contract of
the corporation; and
(iii) shall not compete in any way with the corporation in
its business activities.
(3) (a) A member of a corporation whose act or omission has
breached any duty arising from his or her fiduciary relationship shall
be liable to the corporation for—
(i) any loss suffered as a result thereof by the corporation; or
(ii) any economic benefit derived by the member by reason
thereof.
(b) Where a member fails to comply with the provisions of sub-
paragraph (ii) of paragraph (b) of subsection (2) and it becomes
known to the corporation that the member has an interest referred to
in that subparagraph in any contract of the corporation, the contract
ss 42–47 Auditing: Legislation and Standards
in question shall, at the option of the corporation, be voidable:
Provided that where the corporation chooses not to be bound a Court
may on application by any interested person, if the Court is of the
opinion that in the circumstances it is fair to order that such contract
shall nevertheless be binding on the parties, give an order to that
effect, and may make any further order in respect thereof which it
may deem fit.
(4) Except as regards his or her duty referred to in subsection (2)
(a) (i), any particular conduct of a member shall not constitute a
breach of a duty arising from his or her fiduciary relationship to the
corporation, if such conduct was preceded or followed by the
written approval of all the members where such members were or
are cognisant of all the material facts.
43. Liability of members for negligence.—(1) A member of a
corporation shall be liable to the corporation for loss caused by his
or her failure in the carrying on of the business of the corporation to
act with the degree of care and skill that may reasonably be expected
from a person of his or her knowledge and experience.
(2) Liability referred to in subsection (1) shall not be incurred if
the relevant conduct was preceded or followed by the written
approval of all the members where such members were or are
cognisant of all the material facts.
44. Association agreements.—(1) The members of a corpora-
tion having two or more members may at any time enter into a
written association agreement signed by or on behalf of each
member, which regulates—
(a) any matter which in terms of this Act may be set out or
agreed upon in an association agreement; and
(b) any other matter relating to the internal relationship
between the members, or the members and the corporation,
in a manner not inconsistent with the provisions of this
Act.
(2) A corporation shall keep any association agreement at the
registered office of the corporation where any member may inspect
it and may make extracts therefrom or copies thereof.
(3) Whether or not an association agreement exists, any other
agreement, express or implied, between all the members of a
corporation on any matter that may be regulated by an association
agreement shall be valid, provided that such express or implied
agreement—
(a) is not inconsistent with any provision of an association
agreement;
(b) does not affect any person other than the corporation or a
member who is a party to it; and
(c) ceases to have any effect when any party to it ceases to be
a member of the corporation.
(4) Subject to the provisions of this Act, an association agree-
ment or an agreement referred to in subsection (3) shall bind the
corporation to every member in his or her capacity as a member of
that corporation and, in such capacity, every member to the corpora-
tion and to every other member.
(5) A new member of a corporation shall be bound by an existing
association agreement between the other members as if he or she has
signed it as a party thereto.
(6) Any amendment to, or the dissolution of, an association
agreement shall be in writing and signed by or on behalf of each
member, including a new member referred to in subsection (5).
45. No access to or constructive notice of association agree-
ments.—No person who is not a member of a corporation shall,
except by virtue of a provision of this Act, be entitled to inspect any
association agreement in respect of that corporation, and no person
dealing with the corporation shall be deemed to have knowledge of
any particular thereof merely because it is stated or referred to
therein, whether or not the agreement is in accordance with section
44 (2) kept at the registered office of the corporation.
46. Variable rules regarding internal relations.—The follow-
ing rules in respect of internal relations in a corporation shall apply
A-308
in so far as this Act or an association agreement in respect of the
corporation does not provide otherwise—
(a) every member shall be entitled to participate in the carry-
ing on of the business of the corporation;
(b) subject to the provision of section 47, members shall have
equal rights in regard to the management of the business of
the corporation and in regard to the power to represent the
corporation in the carrying on of its business: Provided that
the consent in writing of a member holding a member’s in-
terest of at least 75 per cent, or of members holding to-
gether at least that percentage of the members’ interests, in
the corporation, shall be required for—
(i) a change in the principal business carried on by the
corporation;
(ii) a disposal of the whole, or substantially the whole,
undertaking of the corporation;
(iii) a disposal of all, or the greater portion of, the assets
of the corporation; and
(iv) any acquisition or disposal of immovable property
by the corporation;
[Para. (b) amended by s. 8 of Act No. 38 of 1986.]
(c) differences between members as to matters connected with
a corporation’s business shall be decided by majority vote
at a meeting of members of the corporation;
(d) at any meeting of members of a corporation each member
shall have the number of votes that corresponds with the
percentage of his or her interest in the corporation;
(e) a corporation shall indemnify every member in respect of
expenditure incurred or to be incurred by him or her—
(i) in the ordinary and proper conduct of the business of
the corporation; and
(ii) in regard to anything done or to be done for the
preservation of the business or property of the cor-
poration; and
(f) payments by a corporation to its members by reason only
of their membership in terms of section 51 (1) shall be of
such amounts and be effected at such times as the members
may from time to time agree upon, and such payments
shall be made to members in proportion to their respective
interests in the corporation.
47. Disqualified persons regarding management of corpora-
tion.—(1) Notwithstanding any other provision of this Act or in any
association agreement or any other agreement to the contrary, the
following persons shall be disqualified from taking part in the
management of a corporation—
(a) any person under legal disability, except—
(i) . . . . . .
[Sub-para. (i) deleted by s. 13 of Act No. 22 of 2001.]
(ii) a minor who has attained at least the age of 18 years
and whose guardian has lodged with the corporation
a written consent to the minor’s participation in the
management of the business of the corporation;
(b) save under authority of a Court—
(i) an unrehabilitated insolvent;
(ii) . . . . . .
[Sub-para. (ii) repealed by s. 224 (2) of Act No. 71 of 2008.]
(iii) . . . . . .
[Sub-para. (iii) substituted by s. 36 (1) of Act No. 12 of 2004 and re-
pealed by s. 224 (2) of Act No. 71 of 2008.]
(c) any person who is disqualified from being a director of a
company in terms of section 69 (8) to (11) of the Compa-
nies Act, subject to subsection (1B).
[Sub-s. (1) amended by s. 11 (b) of Act No. 26 of 1997. Para. (c) substi-
tuted by s. 224 (2) of Act No. 71 of 2008.]
(1A) A person who has been placed under probation by a court in
terms of section 162 of the Companies Act or subsection (1C), must
not participate in the management of the business of a corporation,
except to the extent permitted in the order of probation.
[Sub-s. (1A) inserted by s. 224 (2) of Act No. 71 of 2008.]
A-309 Close Corporations Act No. 69 of 1984
(1B) Despite being disqualified in terms of section 69 (8) (b) of
the Companies Act, read with subsection (1) (c), a person may
participate in the management of a corporation if 100% of the
members’ interest in the corporation is held by—
(a) that person; or
(b) that person and other persons, all of whom are related to
that disqualified person, and each such person has consent-
ed in writing to that disqualified person participating in the
management of the corporation.
[Sub-s. (1B) inserted by s. 224 (2) of Act No. 71 of 2008.]
(1C) Section 162 of the Companies Act, read with the changes
required by the context, applies to a corporation, but a reference in
that section to—
(a) a company must be regarded as referring to a company or a
corporation; or
(b) a director, must be regarded as referring to a director of a
company, or a member participating in the management of
a corporation.
[Sub-s. (1C) inserted by s. 224 (2) of Act No. 71 of 2008.]
(2) . . . . . .
[S. 47 amended by s. 11 (a) of Act No. 26 of 1997. Sub-s. (2) substituted
by s. 11 (c) of Act No. 26 of 1997 and repealed by s. 224 (2) of Act
No. 71 of 2008.]
48. Meetings of members.—(1) Any member of a corporation
may by notice to every other member and every other person
entitled to attend a meeting of members, call a meeting of members
for any purpose disclosed in the notice.
(2) Unless an association agreement provides otherwise—
(a) a notice referred to in subsection (1) shall, as regards the
date, time and venue of the meeting, fix a reasonable date
and time, and a venue which is reasonably suitable for all
persons entitled to attend the particular meeting;
(b) three-fourths of the members present in person at the
meeting, shall constitute a quorum; and
(c) only members present in person at the meeting may vote at
that meeting.
[Para. (c) added by s. 9 (c) of Act No. 38 of 1986.]
(2A) Unless an association agreement provides otherwise, a
meeting at which a quorum is not present within half an hour after
the time appointed for the meeting, shall be adjourned to a day not
earlier than seven days and not later than 21 days after the date of
that meeting, and if at such adjourned meeting a quorum is not
present within half an hour after the time appointed for the meeting,
the members present in person shall constitute a quorum.
[Sub-s. (2A) inserted by s. 12 of Act No. 26 of 1997.]
(2B) Where a meeting has been adjourned as contemplated in
subsection (2A), the member who adjourned the meeting shall, upon
a date not more than three days after the adjournment, send a written
notice to each member of the corporation stating—
(a) the date, time and place to which the meeting has been
adjourned;
(b) the matters before the meeting when it was adjourned; and
(c) the grounds for the adjournment.
[Sub-s. (2B) inserted by s. 12 of Act No. 26 of 1997.]
(3) (a) A corporation shall record a report of the proceedings at a
meeting of its members within 14 days after the date on which the
meeting was held in a minute book which shall be kept at the
registered office of the corporation.
(b) A resolution in writing, signed by all the members and en-
tered into the minute book, shall be as valid and effective as if it
were passed at a meeting of the members duly convened and held.
49. Unfairly prejudicial conduct.—(1) Any member of a cor-
poration who alleges that any particular act or omission of the
corporation or of one or more other members is unfairly prejudicial,
unjust or inequitable to him or her, or to some members including
him or her, or that the affairs of the corporation are being conducted
in a manner unfairly prejudicial, unjust or inequitable to him or her,
or to some members including him or her, may make an application
to a Court for an order under this section.
ss 47–51
(2) If on any such application it appears to the Court that the
particular act or omission is unfairly prejudicial, unjust or inequita-
ble as contemplated in subsection (1), or that the corporation’s
affairs are being conducted as so contemplated, and if the Court
considers it just and equitable, the Court may with a view to settling
the dispute make such order as it thinks fit, whether for regulating
the future conduct of the affairs of the corporation or for the pur-
chase of the interest of any member of the corporation by other
members thereof or by the corporation.
(3) When an order under this section makes any alteration or
addition to the relevant founding statement or association agree-
ment, or replaces any association agreement, the alteration or
addition or replacement shall have effect as if it were duly made by
agreement of the members concerned.
(4) A copy of an order made under this section which—
(a) alters or adds to a founding statement shall within 28 days
of the making thereof be lodged by the corporation with
the Registrar for registration; or
(b) alters or adds to or replaces any association agreement,
shall be kept by the corporation at its registered office
where any member of the corporation may inspect it.
(5) . . . . . .
[Sub-s. (5) repealed by s. 224 (2) of Act No. 71 of 2008.]
50. Proceedings against fellow-members on behalf of corpo-
ration.—(1) Where a member or a former member of a corporation
is liable to the corporation—
(a) to make an initial contribution or any additional contribu-
tion contemplated in subsection (1) and (2) (a), respective-
ly, of section 24; or
(b) on account of—
(i) the breach of a duty arising from his or her fiduciary
relationship to the corporation in terms of section
42; or
(ii) negligence in terms of section 43,
any other member of the corporation may institute proceedings in
respect of any such liability on behalf of the corporation against
such member or former member after notifying all other members of
the corporation of his or her intention to do so.
(2) After the institution of such proceedings by a member the
leave of the Court concerned shall be required for a withdrawal of
the proceedings or for any settlement of the claim, and the Court
may in connection with such withdrawal or settlement make such
orders as it may deem fit.
(3) If a Court in any particular case finds that the proceedings, if
unsuccessful, have been instituted without prima facie grounds, it
may order the member who has instituted them on behalf of the
corporation, him or her to pay the costs of the corporation and of the
defendant in question in such manner as the Court may determine.
51. Payments by corporation to members.—(1) Any payment
by a corporation to any member by reason only of his or her mem-
bership, may be made only—
(a) if, after such payment is made, the corporation’s assets,
fairly valued, exceed all its liabilities;
(b) if the corporation is able to pay its debts as they become
due in the ordinary course of its business; and
(c) if such payment will in the particular circumstances not in
fact render the corporation unable to pay its debts as they
become due in the ordinary course of its business.
(2) A member shall be liable to a corporation for any payment
received contrary to any provision of subsection (1).
(3) For the purposes of this section—
(a) without prejudice to the generality of the expression
“payment by a corporation to any member by reason only
of his or her membership”, that expression—
(i) shall include a distribution, or a repayment of any
contribution, or part thereof, to a member;
ss 51–56 Auditing: Legislation and Standards
(ii) shall exclude any payment to a member in his or her
capacity as a creditor of the relevant corporation
and, in particular, a payment as remuneration for
services rendered as an employee or officer of the
corporation, a repayment of a loan or of interest
thereon or a payment of rental; and
(b) “payment” shall include the delivery or transfer of any
property.
52. Prohibition of loans and furnishing of security to mem-
bers and others by corporation.—(1) A corporation shall not,
directly or indirectly, make a loan—
(a) to any of its members;
(b) to any other corporation in which one or more of its
members together hold more than a 50 per cent interest; or
(c) to any company or other juristic person (except a corpora-
tion) controlled by one or more members of the corpora-
tion,
and shall not provide any security to any person in connection with
any obligation of any such member, or other corporation, company
or other juristic person.
(2) The provisions of subsection (1) shall not apply in respect of
the making of any particular loan or the provision of any particular
security with the express previously obtained consent in writing of
all the members of a corporation.
(3) Any member of a corporation who authorizes or permits or is
a party to the making of any loan or the provision of any security
contrary to any provision of this section—
(a) shall be liable to indemnify the corporation and any other
person who had no actual knowledge of the contravention
against any loss directly resulting from the invalidity of
such loan or security; and
(b) shall be guilty of an offence.
(4) For the purposes of this section—
(a) “loan” includes—
(i) a loan of any property; and
(ii) any credit extended by a corporation where the debt
concerned is not payable or is not being paid in ac-
cordance with normal business practice in respect of
the payment of debts of the same kind;
(b) one or more members of a corporation shall only be
deemed to control a company or other juristic person as
contemplated in subsection (1) (c), if the circumstances
envisaged in section 226 (1A) (b) of the Companies Act in
relation to a director or manager or his or her nominee, or
directors or managers or their nominees, referred to in that
section, and a company or body corporate, are present in
respect of any such member or his or her nominee, or such
members or their nominees, and any such company or oth-
er juristic person; and
(c) “security” includes a guarantee.
PART VI
EXTERNAL RELATIONS
53. Pre-incorporation contracts.—(1) Any contract in writing
entered into by a person professing to act as an agent or a trustee for
a corporation not yet formed, may after its incorporation be ratified
or adopted by such corporation as if the corporation had been duly
incorporated at the time when the contract was entered into.
(2) The ratification or adoption by a corporation referred to in
subsection (1) shall be in the form of a consent in writing of all the
members of the corporation, given within a time specified in the
contract or, if no time is specified, within a reasonable time after
incorporation.
54. Power of members to bind corporation.—(1) Subject to
the provisions of this section, any member of a corporation shall in
relation to a person who is not a member and is dealing with the
corporation, be an agent of the corporation.
A-310
(2) Any act of a member shall bind a corporation, whether or not
such act is performed for the carrying on of business of the corpora-
tion unless the member so acting has in fact no power to act for the
corporation in the particular matter and the person with whom the
member deals has, or ought reasonably to have, knowledge of the
fact that the member has no such power.
[S. 54 amended by s. 10 of Act No. 38 of 1986 and substituted
by s. 13 of Act No. 26 of 1997.]
55. . . . . . .
[S. 55 amended by s. 2 (b) of Act No. 17 of 1990 and repealed
by s. 224 (2) of Act No. 71 of 2008.]
PART VII
ACCOUNTING AND DISCLOSURE
56. Accounting records.—(1) A corporation shall keep in one
of the official languages of the Republic such accounting records as
are necessary fairly to present the state of affairs and business of the
corporation, and to explain the transactions and financial position of
the business of the corporation, including—
(a) records showing its assets and liabilities, members’
contributions, undrawn profits, revaluations of fixed assets
and amounts of loans to and from members;
(b) a register of fixed assets showing in respect thereof the
respective dates of any acquisition and the cost thereof, de-
preciation (if any), and where any assets have been reval-
ued, the date of the revaluation and the revalued amount
thereof, the respective dates of any disposals and the con-
sideration received in respect thereof: Provided that in the
case of a corporation which has been converted from a
company in terms of section 27, the existing fixed asset
register of the company shall be deemed to be such a regis-
ter in respect of the corporation, and such particulars there-
in shall be deemed to apply in respect of it;
[Para. (b) amended by s. 7 of Act No. 81 of 1992.]
(c) records containing entries from day to day of all cash
received and paid out, in sufficient detail to enable the na-
ture of the transactions and, except in the case of cash
sales, the names of the parties to the transactions to be
identified;
(d) records of all goods purchased and sold on credit, and
services received and rendered on credit, in sufficient de-
tail to enable the nature of those goods or services and the
parties to the transactions to be identified;
(e) statements of the annual stocktaking, and records to enable
the value of stock at the end of the financial year to be de-
termined; and
(f) vouchers supporting entries in the accounting records.
(2) The accounting records relating to—
(a) contributions by members;
(b) loans to and from members; and
(c) payments to members,
shall contain sufficient detail of individual transactions to enable the
nature and purpose thereof to be clearly identified.
(3) The accounting records referred to in subsection (1) shall be
kept in such a manner as to provide adequate precautions against
falsification and to facilitate the discovery of any falsification.
(4) The accounting records shall be kept at the place or places of
business or at the registered office of the corporation and shall,
wherever kept, be open at all reasonable times for inspection by any
member.
(5) (a) Any corporation which fails to comply with any provi-
sion of any of the preceding subsections of this section, and every
member thereof who is a party to such failure or who fails to take all
reasonable steps to secure compliance by the corporation with any
such provision, shall be guilty of an offence.
(b) In any proceedings against any member of a corporation in
respect of an offence consisting of a failure to take reasonable steps
to secure compliance by a corporation with any provision referred to
in paragraph (a), it shall be a defence if it is proved that the accused
A-311 Close Corporations Act No. 69 of 1984
had reasonable grounds for believing and did believe that a com-
petent and reliable person was charged with the duty of seeing that
any such provision was complied with, and that such person was in
a position to discharge that duty, and that the accused had no reason
to believe that such person had in any way failed to discharge that
duty.
57. Financial year of corporation.—(1) (a) A corporation
shall fix a date on which, in each year, its financial year will end.
(b) The financial year of a corporation shall be its annual ac-
counting period.
(2) The date referred to in subsection (1) (a) may, subject to the
provisions of section 15 (2), be changed by the corporation to any
other date: Provided that the corporation may not change the date
referred to in subsection (1) (a) more than once in any financial
year.
[Sub-s. (2) amended by s. 3 (a) of Act No. 17 of 1990.]
(3) Subject to any increase or reduction of the duration of a fi-
nancial year by reason of the provisions of subsection (4), the
duration of each financial year of a corporation shall be 12 months
ending on the date or other date referred to in subsection (1) (a) or
(2).
(4) Notwithstanding the provisions of subsection (3)—
(a) the first financial year of a corporation shall commence on
the date of its registration and shall end on the date re-
ferred to in subsection (1) (a) occurring not less than 3 nor
more than 15 months after the date of registration: Provid-
ed that the first financial year of a corporation converted
from a company in terms of section 27, shall end on the
date on which the financial year of the company would
have ended had it not been so converted; and
[Para. (a) amended by s. 11 of Act No. 38 of 1986.]
(b) in the case of a corporation which has in terms of subsec-
tion (2) changed the date referred to in subsection (1) (a),
the financial year shall commence at the end of the previ-
ous financial year and shall end on the date as changed oc-
curring not less than 3 nor more than 18 months after the
end of that previous financial year.
[Para. (b) substituted by s. 3 (b) of Act No. 17 of 1990.]
58. Annual financial statements.—(1) The members of a cor-
poration shall within six months after the end of every financial year
of the corporation cause annual financial statements in respect of
that financial year to be made out in one of the official languages of
the Republic.
[Sub-s. (1) amended by s. 4 (a) of Act No. 64 of 1988 and substituted by
s. 224 (2) of Act No. 71 of 2008.]
(2) The annual financial statements of a corporation—
(a) shall consist of—
(i) a balance sheet and any notes thereon; and
(ii) an income statement or any similar financial state-
ment where such form is appropriate, and any notes
thereon;
(b) shall in conformity with generally accepted accounting
practice, appropriate to the business of the corporation,
fairly present the state of affairs of the corporation as at the
end of the financial year concerned, and the results of its
operations for that year;
(c) shall disclose separately the aggregate amounts, as at the
end of the financial year, of contributions by members, un-
drawn profits, revaluations of fixed assets and amounts of
loans to or from members, and the movements in these
amounts during the year;
(d) shall be in agreement with the accounting records, which
shall be summarised in such a form that—
(i) compliance with the provisions of this subsection is
made possible; and
(ii) an accounting officer is enabled to report to the
corporation in terms of section 62 (1) (c) without it
being necessary to refer to any subsidiary accounting
ss 56–60
records and vouchers supporting the entries in the
accounting records:
Provided that nothing contained in this paragraph shall be
construed as preventing an accounting officer, if he or she
deems it necessary, from inspecting such subsidiary ac-
counting records and vouchers; and
[Para. (d) added by s. 12 (1) (b) of Act No. 38 of 1986.]
(e) shall contain the report of the accounting officer referred to
in section 62 (1) (c).
[Sub-s. (2) amended by s. 4 (a) of Act No. 64 of 1988 (English only).
Para. (e) added by s. 12 (1) (b) of Act No. 38 of 1986.]
(2A) Section 30 (2) (b), and (3) to (6) of the Companies Act, read
with the changes required by the context, apply to a corporation that
is required by the regulations made in terms of section 30 (7) of the
Companies Act, to have its annual financial statements audited.
[Sub-s. (2A) inserted by s. 224 (2) of Act No. 71 of 2008.]
(3) The annual financial statements shall be approved and signed
by or on behalf of a member holding a member’s interest of at least
51 per cent, or members together holding members’ interests of at
least 51 per cent, in the corporation.
[Sub-s. (3) substituted by s. 4 (b) of Act No. 64 of 1988.]
(4) . . . . . .
[Sub-s. (4) amended by s. 12 (1) (c) of Act No. 38 of 1986 and repealed
by s. 224 (2) of Act No. 71 of 2008.]
59. Appointment of accounting officers.—(1) Every corpora-
tion shall appoint an accounting officer in accordance with the
provisions of this Act.
(2) The appointment of the first accounting officer of a corpora-
tion referred to in section 12 (g) (i) shall take effect on the date of
the registration of the corporation.
(3) If a vacancy occurs in the office of an accounting officer,
whether as a result of a removal, resignation or otherwise, the
corporation shall within 28 days appoint another accounting officer
and comply with the provisions of subsection (2) of section 15:
Provided that the provisions of subsection (3) of the said section 15
shall apply where the said subsection (2) of that section has not so
been complied with, whether or not an appointment of such other
accounting officer has been made.
[Sub-s. (3) amended by s. 14 (a) of Act No. 26 of 1997.]
(4) A corporation shall inform its accounting officer in writing of
his or her removal from office.
(5) (a) An accounting officer shall on resignation or removal
from office forthwith inform every member of the corporation
thereof in writing, and shall send a copy of the letter to the last
known address of the registered office of the corporation and shall
in addition forthwith by registered post inform the Registrar—
(i) that he or she has resigned or been removed from office;
(ii) of the date of his or her resignation or removal from office;
(iii) of the date up to which he or she performed his or her
duties; and
(iv) whether, at the time of the resignation or removal from
office of the accounting officer, that officer was aware of
any matters in the financial affairs of the corporation
which are in contravention of the provisions of this Act:
Provided that an accounting officer who was aware of any
such matter shall submit the full particulars thereof in writ-
ing to the Registrar.
[Para. (a) substituted by s. 8 of Act No. 81 of 1992. Sub-para. (iv) sub-
stituted by s. 14 (b) of Act No. 26 of 1997.]
(b) If an accounting officer who has been removed from office is
of the opinion that he or she was removed for improper reasons, he
or she shall forthwith by registered post inform the Registrar
thereof, and shall send a copy of the letter to every member.
60. Qualifications of accounting officers.—(1) No person
shall be appointed as or hold the office of an accounting officer of a
ss 60–63 Auditing: Legislation and Standards
corporation, unless he or she is a member of a recognized profession
which—
(a) as a condition for membership, requires its members to
have passed examinations in accounting and related fields
of study which in the opinion of the Minister would qualify
such members to perform the duties of an accounting
officer under this Act;
(b) has the power to exclude from membership those persons
found guilty of negligence in the performance of their du-
ties or of conduct which is discreditable to their profession;
and
(c) has been named in a notice referred to in subsection (2).
[Sub-s. (1) amended by s. 9 (a) of Act No. 81 of 1992.]
(2) The Minister may from time to time publish by notice in the
Gazette the names of those professions whose members are quali-
fied to perform the duties of an accounting officer in terms of this
Act.
(3) A member or employee of a corporation, and a firm whose
partner or employee is a member or employee of a corporation, shall
not qualify for appointment as an accounting officer of such corpo-
ration unless all the members consent in writing to such appoint-
ment.
(4) (a) A corporation may appoint as its accounting officer—
(i) any person who is a member of a recognised profession
listed in a notice referred to in subsection (2);
(ii) a firm as defined in section 1 of the Public Accountants’
and Auditors’ Act, 1991 (Act No. 80 of 1991);
(Editorial Note: The “Public Accountants and Auditors Act, 1991
(Act No. 80 of 1991)” has been repealed. It is suggested that the
reference should be to the “Auditing Professions Act, 2005 (Act No.
26 of 2005)”.)
(iii) any other firm, if each partner in the firm is qualified to be
so appointed; or
(iv) any other corporation, if each member of such corporation
is qualified to be so appointed.
(b) The liability of a partner in respect of debts and liabilities
incurred by a firm contemplated in paragraph (a) (iii) during the
partner’s period as a partner and the liability of a member in respect
of debts and liabilities incurred by a corporation contemplated in
paragraph (a) (iv) during the member’s period as a member may not
be excluded by operation of law or in any other way.
(c) For the purposes of paragraph (b), “debts and liabilities in-
curred” means debts and liabilities incurred by the firm or corpora-
tion, as the case may be, in connection with the performance by the
firm or corporation, as the case may be, of its duties in terms of
section 62.
[Sub-s. (4) substituted by s. 9 (b) of Act No. 81 of 1992 and by s. 3 of
Act No. 25 of 2005.]
61. Right of access and remuneration of accounting offic-
ers.—(1) An accounting officer of a corporation shall at all times
have a right of access to the accounting records and all the books
and documents of the corporation, and to require from members
such information and explanations as he or she considers necessary
for the performance of his or her duties as an accounting officer.
(2) The remuneration of an accounting officer shall be deter-
mined by agreement with the corporation.
62. Duties of accounting officers.—(1) The accounting officer
of a corporation shall, not later than three months after completion
of the annual financial statements—
(a) subject to the provisions of section 58 (2) (d), determine
whether the annual financial statements are in agreement
with the accounting records of the corporation;
[Para. (a) substituted by s. 13 (1) (a) of Act No. 38 of 1986.]
(b) review the appropriateness of the accounting policies
represented to the accounting officer as having been applied
in the preparation of the annual financial statements; and
[Para. (b) substituted by s. 13 (1) (a) of Act No. 38 of 1986 and by
s. 4 (a) of Act No. 17 of 1990.]
A-312
(c) report in respect of paragraphs (a) and (b) to the corpora-
tion.
(2) (a) If during the performance of his or her duties an account-
ing officer becomes aware of any contravention of a provision of
this Act, he or she shall describe the nature of such contravention in
his or her report.
(b) Where an accounting officer is a member or employee of a
corporation, or is a firm of which a partner or employee is a member
or employee of the corporation, his or her report shall state that fact.
(3) If an accounting officer of a corporation—
(a) at any time knows, or has reason to believe, that the
corporation is not carrying on business or is not in opera-
tion and has no intention of resuming operations in the
foreseeable future; or
(b) during the performance of his or her duties finds—
(i) that any change, during a relevant financial year, in
respect of any particulars mentioned in the relevant
founding statement has not been registered;
(ii) that the annual financial statements indicate that as
at the end of the financial year concerned the corpo-
ration’s liabilities exceed its assets; or
(iii) that the annual financial statements incorrectly
indicate that as at the end of the financial year con-
cerned the assets of the corporation exceed its lia-
bilities, or has reason to believe that such an
incorrect indication is given,
[Sub-para. (iii) added by s. 13 (1) (d) of Act No. 38 of 1986.]
he or she shall forthwith by registered post report accordingly to the
Registrar.
(4) If an accounting officer of a corporation has in accordance
with subparagraph (ii) or (iii) of paragraph (b) of subsection (3)
reported to the Registrar that the annual financial statements of the
corporation concerned indicate that as at the end of the financial
year concerned the corporation’s liabilities exceed its assets or that
the annual financial statements incorrectly indicate that as at the end
of the financial year concerned the assets of the corporation exceed
its liabilities, or that he or she has reason to believe that such an
incorrect indication is given, and he or she finds that any subsequent
financial statements of the corporation concerned indicate that the
situation has changed or has been rectified and that the assets
concerned then exceed the liabilities or that they no longer incorrect-
ly indicate that the assets exceed the liabilities or that he or she no
longer has reason to believe that such an incorrect indication is
given, as the case may be, he or she may report to the Registrar
accordingly.
[Sub-s. (4) added by s. 4 (b) of Act No. 17 of 1990.]
62A. Application of accountability provisions of Companies
Act.—(1) Section 34 (2) of the Companies Act, read with the
changes required by the context, apply to a corporation.
(2) Chapter 3 of the Companies Act, read with the changes re-
quired by the context—
(a) applies to a corporation that has voluntarily determined to
take any action contemplated in section 34 (2) of the Com-
panies Act; and
(b) prevails over any conflicting provision of this Act, with
respect to a corporation contemplated in paragraph (a).
[S. 62A inserted by s. 224 (2) of Act No. 71 of 2008.]
PART VIII
LIABILITY OF MEMBERS AND OTHERS FOR DEBTS OF
CLOSE CORPORATION
63. Joint liability for debts of corporation.—Notwithstanding
anything to the contrary contained in any provision of this Act, the
following persons shall in the following circumstances together with
a corporation be jointly and severally liable for the specified debts
of the corporation—
(a) where the name of the corporation is in any way used
without the abbreviation as required by section 22 (1), any
member of the corporation who is responsible for, or who
A-313 Close Corporations Act No. 69 of 1984
authorized or knowingly permits the omission of such
abbreviation, shall be so liable to any person who enters
into any transaction with the corporation from which a
debt accrues for the corporation while that person, in con-
sequence of such omission, is not aware that the person is
dealing with a corporation;
[Para. (a) substituted by s. 15 (a) of Act No. 26 of 1997.]
(b) where any member fails to pay money or to deliver or
transfer property to the corporation as required by section
24 (4), that member shall be so liable for every debt of the
corporation incurred from the date of registration of the
founding statement in which particulars of the contribution
concerned are stated to the date of the actual payment, de-
livery or transfer of such money or property;
[Para. (b) substituted by s. 15 (b) of Act No. 26 of 1997.]
(c) ......
[Para. (c) deleted by s. 15 (c) of Act No. 26 of 1997.]
(d) where a juristic person or a trustee of a trust inter vivos in
that capacity purports to hold, whether directly or indirect-
ly, a member’s interest in the corporation in contravention
of any provision of section 29, such juristic person or trus-
tee of a trust inter vivos and any nominee referred to in that
section shall, notwithstanding the invalidity of the holding
of such interest, be so liable for every debt of the corpora-
tion incurred during the time the contravention continues;
[Para. (d) substituted by s. 5 (1) of Act No. 64 of 1988.]
(e) where the corporation makes a payment in respect of the
acquisition of a member’s interest in contravention of any
provision of section 39, every person who is a member at
the time of such payment and who is aware of the making
of such payment, including a member or a former member
who receives or who received such payment, shall be so li-
able for every debt of the corporation incurred prior to the
making of such payment unless, in the case of a member
who is so aware, he or she proves that he or she took all
reasonable steps to prevent the payment;
(f) where the corporation gives financial assistance for the
purpose of or in connection with any acquisition of a
member’s interest in contravention of any provision of sec-
tion 40, every person who is a member at the time of the
giving of such assistance and who is aware of the giving of
such assistance, and the person who receives such assis-
tance, shall be so liable for every debt of the corporation
incurred prior to the giving of such assistance unless, in the
case of a member who is so aware, he or she proves that he
or she took all reasonable steps to prevent the payment;
(g) where a person takes part in the management of the
business of the corporation while disqualified from doing
so in terms of section 47 (1) (b) or (c), that person shall be
so liable for every debt of the corporation which it incurs
as a result of his or her participation in the management of
the corporation; and
(h) where the office of accounting officer of the corporation is
vacant for a period of six months, any person who at any
time during that period was a member and aware of the va-
cancy, and who at the expiration of that period is still a
member, shall be so liable for every debt of the corporation
incurred during such existence of the vacancy and for eve-
ry such debt thereafter incurred while the vacancy contin-
ues and he or she still is a member.
64. Liability for reckless or fraudulent carrying-on of busi-
ness of corporation.—(1) If it at any time appears that any busi-
ness of a corporation was or is being carried on recklessly, with
gross negligence or with intent to defraud any person or for any
fraudulent purpose, a Court may on the application of the Master, or
any creditor, member or liquidator of the corporation, declare that
any person who was knowingly a party to the carrying on of the
business in any such manner, shall be personally liable for all or any
of such debts or other liabilities of the corporation as the Court may
direct, and the Court may give such further orders as it considers
ss 63–66
proper for the purpose of giving effect to the declaration and
enforcing that liability.
(2) If any business of a corporation is carried on in any manner
contemplated in subsection (1), every person who is knowingly a
party to the carrying on of the business in any such manner, shall be
guilty of an offence.
[Sub-s. (2) substituted by s. 224 (2) of Act No. 71 of 2008.]
65. Powers of Court in case of abuse of separate juristic per-
sonality of corporation.—Whenever a Court on application by an
interested person, or in any proceedings in which a corporation is
involved, finds that the incorporation of, or any act by or on behalf
of, or any use of, that corporation, constitutes a gross abuse of the
juristic personality of the corporation as a separate entity, the Court
may declare that the corporation is to be deemed not to be a juristic
person in respect of such rights, obligations or liabilities of the
corporation, or of such member or members thereof, or of such other
person or persons, as are specified in the declaration, and the Court
may give such further order or orders as it may deem fit in order to
give effect to such declaration.
PART IX
WINDING-UP
66. Application of Companies Act, 1973.—(1) The laws men-
tioned or contemplated in item 9 of Schedule 5 of the Companies
Act, read with the changes required by the context, apply to the
liquidation of a corporation in respect of any matter not specifically
provided for in this Part or in any other provision of this Act.
[Sub-s. (1) substituted by s. 16 of Act No. 26 of 1997 and by s. 224 (2)
of Act No. 71 of 2008.]
(1A) The provisions of Chapter 6 of the Companies Act, read
with the changes required by the context, apply to a corporation, but
any reference in that Chapter to—
(a) a company must be regarded as a reference to a corpora-
tion; or
(b) a shareholder of a company, or the holder of securities
issued by a company, must be read as a reference to a
member of a corporation.
[Sub-s. (1A) inserted by s. 224 (2) of Act No. 71 of 2008.]
(2) For the purposes of subsection (1)—
(a) any reference in a relevant provision of the Companies
Act, and in any provision of the Insolvency Act, 1936 (Act
No. 24 of 1936), made applicable by any such provision—
(i) to a company, shall be construed as a reference to a
corporation;
(ii) to a share in a company, shall be construed as a
reference to a member’s interest in a corporation;
(iii) to a member, director, shareholder or contributory of
a company, shall be construed as a reference to a
member of a corporation;
(iv) to an auditor of a company, shall be construed as a
reference to an accounting officer of a corporation;
(v) to an officer or a secretary of a company, shall be
construed as a reference to a manager or a secretary
who is an officer of a corporation;
(vi) to a registered office of a company, shall be con-
strued as a reference to a registered office of a cor-
poration;
(vii) to a memorandum or articles of association of a
company, shall be construed as a reference to a
founding statement and an association agreement of
a corporation, respectively;
(viii) to the Registrar of Companies, shall be construed as
a reference to the Registrar;
(ix) to the Companies Act or the regulations made
thereunder, or to any provision thereof, shall be con-
strued as including a reference to this Act or the reg-
ulations made thereunder, or to any corresponding
provision thereof, as the case may be;
ss 66–72 Auditing: Legislation and Standards
(x) to an insolvent estate, shall be construed as a
reference to a corporation;
(xi) to a provisional liquidator of a company, or to a
liquidator of a company or a trustee of an insolvent
estate, shall be construed as a reference to a provi-
sional liquidator and to a liquidator of a corporation,
respectively;
(xii) to a sheriff of a province, shall be construed as
including a reference to a messenger of a magis-
trate’s court;
(xiii) to a Registrar of a Court, shall be construed as
including a reference to a clerk of a magistrate’s
court;
(xiv) to a Court, shall be construed as a reference to a
Court having jurisdiction under this Act; and
(xv) to a Master, shall be construed as a reference to a
Master having jurisdiction under this Act;
(b) a reference to a special resolution—
(i) referred to in sections 340 (2), 350 (1), 351 (1), 352,
356 (2), 357 (3) and (4), 359 (1), 362 (1) and 363 (1)
of the Companies Act, shall be construed as a refer-
ence to a written resolution for the voluntary wind-
ing-up of a corporation in terms of section 67 of this
Act; and
(ii) referred to in section 422 (1) (b) of the Companies
Act, shall be construed as a reference to a written
resolution signed by or on behalf of all the members
of a corporation; and
(c) it shall be deemed that the following paragraph has been
substituted for paragraph (b) of section 358 of the Compa-
nies Act:
“(b) where any other action or proceeding is being or
about to be instituted against the company in any
court in the Republic, apply to such court for an or-
der restraining further proceedings in the action or
proceeding,”.
67. Dissolution of corporations.—(1) Part G of Chapter 2 of
the Companies Act, read with the changes required by the context,
applies to a solvent corporation.
(2) This Part of this Act must be administered in accordance with
the laws mentioned or contemplated in item 9 of Schedule 5 of the
Companies Act.
(3) . . . . . .
(4) . . . . . .
[S. 67 substituted by s. 224 (2) of Act No. 71 of 2008.]
68. . . . . . .
[S. 68 repealed by s. 224 (2) of Act No. 71 of 2008.]
69. Circumstances under which corporation deemed unable
to pay debts.—(1) For the purposes of section 68 (c) a corporation
shall be deemed to be unable to pay its debts, if—
(a) a creditor, by cession or otherwise, to whom the corpora-
tion is indebted in a sum of not less than two hundred rand
then due has served on the corporation, by delivering it at
its registered office, a demand requiring the corporation to
pay the sum so due, and the corporation has for 21 days
thereafter neglected to pay the sum or to secure or com-
pound for it to the reasonable satisfaction of the creditor;
or
(b) any process issued on a judgment, decree or order of any
court in favour of a creditor of the corporation is returned
by a sheriff, or a messenger of a magistrate’s court, with an
endorsement that he or she has not found sufficient dispos-
able property to satisfy the judgment, decree or order, or
that any disposable property found did not upon sale satis-
fy such process; or
(c) it is proved to the satisfaction of the Court that the corpora-
tion is unable to pay its debts.
A-314
(2) In determining for the purposes of subsection (1) whether a
corporation is unable to pay its debts, the Court shall also take into
account the contingent and prospective liabilities of the corporation.
70. Repayments by members.—(1) Subject to the provisions
of this section, no member of a corporation shall in the winding-up
of the corporation be liable for the repayment of any payment made
by the corporation to him or her by reason only of his or her mem-
bership, if such payment complies with the requirements of section
51 (1).
(2) In the winding-up of a corporation unable to pay its debts,
any such payment made to a member by reason only of his or her
membership within a period of two years before the commencement
of the winding-up of the corporation, shall be repaid to the corpora-
tion by the member, unless such member can prove that—
(a) after such payment was made, the corporation’s assets,
fairly valued, exceeded all its liabilities; and
(b) such payment was made while the corporation was able to
pay its debts as they became due in the ordinary course of
its business; and
(c) such payment, in the particular circumstances, did not in
fact render the corporation unable to pay its debts as they
became due in the ordinary course of its business.
(3) A person who has ceased to be a member of the corporation
concerned within the said period of two years, shall also be liable
for any repayment provided for in subsection (2) if, and to the extent
that, repayments by present members, together with all other available
assets, are insufficient for paying all the debts of the corporation.
(4) A certificate given by the Master as to the amount payable by
any member or former member in terms of subsection (2) or (3) to
the corporation, may be forwarded by the liquidator to the clerk of
the magistrate’s court in whose area of jurisdiction the registered
office of the corporation is situated, who shall record it, and there-
upon such notice shall have the effect of a civil judgment of that
magistrate’s court against the member or former member concerned.
(5) The court in question may, on application by a member or
former member referred to in subsection (3), make any order that it
deems fit in regard to any certificate referred to in subsection (4).
71. Repayment of salary or remuneration by members.—
(1) If a corporation being wound up is unable to pay its debts,
and—
(a) any direct or indirect payment of a salary or other remu-
neration was made by the corporation within a period of
two years before the commencement of its winding-up to a
member in his or her capacity as an officer or employee of
the corporation; and
(b) such payment was, in the opinion of the Master, not bona
fide or reasonable in the circumstances,
the Master shall direct that such payment, or such part thereof as he
or she may determine, be repaid by such member to the corporation.
(2) A person who has within a period of two years referred to in
subsection (1) (a) ceased to be a member of a corporation referred to
in that subsection may, under the circumstances referred to therein,
be directed by the Master to make a repayment provided for in
subsection (1), if, and to the extent that, any such repayments by
present members are, together with all other available assets,
insufficient for paying all the debts of the corporation.
(3) The provisions of subsections (4) and (5) of section 70 shall
mutatis mutandis apply in respect of any repayment to a corporation
in terms of subsection (1) or (2).
72. Composition.—(1) Any person, in this section referred to
as “the offeror”, may at any time after the commencement of the
liquidation of a corporation which is unable to pay its debts, submit
to the liquidator a written offer of composition.
(2) If the liquidator is of the opinion that the creditors will proba-
bly accept the offer of composition, the liquidator shall send by
registered post or deliver to every known creditor as well as the
Master, a copy of the offer referred to in subsection (1) with the
A-315 Close Corporations Act No. 69 of 1984
liquidator’s report thereon, and an explanation of the effect of the
composition.
(3) If the liquidator is of the opinion that there is no likelihood
that the creditors will accept the composition or that he or she has
insufficient information at his or her disposal to make a recommen-
dation, the liquidator shall inform the offeror in writing that the offer
is unacceptable and that he or she does not propose to send a copy
thereof to the creditors and the Master.
(4) The offeror may, within 30 days from the date on which the
liquidator advised that offeror of the rejection of the offer, submit
representations in writing to the Master who, after having allowed
the liquidator 14 days to comment in writing, shall consider the
representations and comment and may thereafter direct the liquida-
tor to send by registered post or deliver a copy of the offer to every
known creditor of the corporation together with the liquidator’s
report thereon, and an explanation of the effect of the composition.
(5) Whenever the liquidator posts or delivers to the creditors and
the Master an offer of composition in terms of the provisions of this
section, he or she shall simultaneously give notice to the creditors of
the meeting at which the offer and any other matter mentioned in the
notice, are to be considered.
(6) An offer of composition may be considered at a general meet-
ing of creditors of the corporation in terms of this Act, provided that
notice was given to creditors and the Master not less than 10 days
and not more than 28 days before the date of such a meeting.
(7) An offer of composition which has been accepted by creditors
whose votes amount to not less than two-thirds in value and two-
thirds in number, calculated in accordance with the provisions of
section 52 of the Insolvency Act, 1936 (Act No. 24 of 1936), of the
votes of all the creditors who proved claims against the corporation,
shall be binding upon every person who had notice of and was
entitled to vote at that meeting, whether or not that person was
present or represented at the meeting, as if that person were a party
to the composition: Provided that—
(a) no offer may be so accepted if it contains any condition
whereby any creditor would obtain any benefit to which
that creditor would not have been entitled upon the distri-
bution of the estate in the ordinary way;
(b) payment under the composition has been made or security
for such payment has been given as specified in the offer
of composition; and
(c) the right of any secured or preferent creditor shall not be
prejudiced thereby, except insofar as that creditor has ex-
pressly and in writing waived the preference.
(8) A composition shall not affect the liability of a surety of the
corporation.
(9) Any money to be paid and anything to be done for the benefit
of creditors in pursuance of a composition shall be paid and done
through the liquidator: Provided that any creditor who has failed to
prove a claim before the liquidator has made a final distribution
amongst those creditors who have proved their claims, shall be
entitled to prove a claim and share in such final distribution up to
the amount to which that creditor may have been entitled to under
the composition: Provided further, that no claim shall be proved
against the corporation after the expiration of six months as from the
date of the meeting at which the composition was accepted, except
with leave of the Court or Master and on payment of such sum to
cover the costs or any part thereof, occasioned by the late proof of
the claim, as the Court or Master may direct.
(10) When a composition has been entered into between a corpo-
ration and its creditors, the liquidator shall, in terms of this Act,
frame an account and plan of distribution of all the assets which are
or will become available for creditors under the composition.
(11) If an accepted offer of composition so provides, the offeror
may apply to the Court for the setting aside of the winding-up of the
corporation and the Court may make such an order provided that the
offeror has, not less than three weeks before making the application,
given notice by advertisement in the Gazette, of the intention to
ss 72–75
make the application and has served a copy of the application on the
Master, the Registrar and the liquidator.
(12) The application for the setting aside of the liquidation of the
corporation may be opposed by any creditor or other interested
person on the following grounds—
(a) that the composition approved under this section unfairly
prejudices the interests of a creditor of the corporation;
(b) that there has been some material irregularity at or in the
relation to the meetings held for the consideration of the
composition;
(c) that insufficient or materially inaccurate information on the
composition was disclosed; or
(d) any other grounds that the Court may deem sufficient.
[S. 72 substituted by s. 17 of Act No. 26 of 1997.]
73. Repayments, payments of damages and restoration of
property by members and others.—(1) Where in the course of the
winding-up of a corporation it appears that any person who has
taken part in the formation of the corporation, or any former or
present member, officer or accounting officer of the corporation has
misapplied or retained or become liable or accountable for any
money or property of the corporation, or has been guilty of any
breach of trust in relation to the corporation, a Court may, on the
application of the Master or of the liquidator or of any creditor or
member of the corporation, inquire into the conduct of such person,
member, officer or accounting officer and may order him or her to
repay or restore the money or property, or any part thereof, with
interest at such rate as the Court considers just, or to contribute such
sum to the assets of the corporation by way of compensation or
damages in respect of the misapplication, retention or breach of
trust, as the Court considers just.
(2) The provisions of subsection (1) shall apply in respect of any
person, member, officer or accounting officer referred to therein,
notwithstanding the fact that such person may also be criminally
responsible in respect of any conduct contemplated therein.
74. Appointment of liquidator.—(1) For the purposes of con-
ducting the proceedings in a winding-up of a corporation, the Master
shall, in accordance with policy determined by the Minister, appoint
a suitable natural person as liquidator.
[Sub-s. (1) substituted by s. 21 of Act No. 16 of 2003.]
(2) The Master shall make an appointment as soon as is practica-
ble after a provisional winding-up order has been made, or a copy of
a resolution for a voluntary winding-up has been registered in terms
of section 67 (2).
(3) When the Master in the case of a voluntary winding-up by
members makes an appointment, he or she shall take into considera-
tion any further resolution at a meeting of members nominating a
person as liquidator.
(4) In the case of a creditors’ voluntary winding-up and a wind-
ing-up by the Court, the Master shall, subject to the provisions of
section 76, if a person is nominated as co-liquidator at the first
meeting of creditors, appoint such person as co-liquidator as soon as
he or she has given security to the satisfaction of the Master for the
proper performance of his or her duties.
75. Vacancies in office of liquidators.—(1) When a vacancy
occurs in the office of a liquidator of a corporation, the Master
may—
(a) where the vacancy occurs in the office of a liquidator
nominated by members or creditors, direct any remaining
liquidator to convene a meeting of creditors or members,
as the case may be, to nominate a liquidator to fill the
vacancy;
(b) in a case other than a case contemplated in paragraph (a),
if he or she is of opinion that any remaining liquidator will
be able to complete the winding-up, dispense with the ap-
pointment of a liquidator to fill the vacancy, and direct the
remaining liquidator to complete the winding-up; or
(c) in any other case, appoint a liquidator to fill the vacancy.
ss 75–79 Auditing: Legislation and Standards
(2) The provisions of the Companies Act relating to the nomina-
tion or appointment of a liquidator, as applied by section 66 of this
Act, and of this Act, shall apply to the nomination or appointment of
a liquidator to fill a vacancy in the office of liquidator.
76. Refusal by Master to appoint nominated person as liqui-
dator.—(1) If a person who has been nominated as liquidator by
any meeting of creditors or of members of a corporation was not
properly nominated, or is disqualified from being nominated or
appointed as liquidator pursuant to section 372 or 373 of the Com-
panies Act, as applied by section 66 of this Act, or has failed to give
within a period of 21 days as from the date upon which he or she
was notified that the Master had accepted his or her nomination or
within such further period as the Master may allow, the security
mentioned in section 375 (1) of the Companies Act, as so applied,
or, if in the opinion of the Master the person nominated as liquidator
should not be appointed as liquidator of the corporation concerned,
the Master shall give notice in writing to the person so nominated
that he or she declines to accept his or her nomination or to appoint
him or her as liquidator, and shall in such notice state his or her
reasons for declining to accept his or her nomination or to appoint
him or her: Provided that if the Master declines to accept the
nomination for appointment as liquidator because he or she is of the
opinion that the person nominated should not be appointed as
liquidator, it shall be sufficient if the Master states in that notice, as
such reason, that he or she is of the opinion that the person nominat-
ed should not be appointed as liquidator of the corporation con-
cerned.
[Sub-s. (1) amended by s. 14 of Act No. 38 of 1986.]
(2) (a) When the Master has so declined to accept the nomina-
tion of any person or to appoint him or her as liquidator, or when the
Minister has under section 371 (3) of the Companies Act, as applied
by section 66 of this Act, set aside the appointment of a liquidator,
the Master shall convene a meeting of creditors or members, as the
case may be, of the corporation concerned for the purpose of
nominating another person for appointment as liquidator.
(b) In the notice convening any said meeting the Master shall
state that he or she has declined to accept the nomination for
appointment as liquidator of the person previously nominated, or to
appoint the person so nominated and, subject to the proviso to
subsection (1), the reasons therefor, or that the appointment of the
person previously appointed as liquidator has so been set aside by
the Minister, as the case may be, and that the meetings are convened
for the purpose of nominating another person for appointment as
liquidator.
(c) The Master shall post a copy of such notice to every creditor
whose claim against the company was previously proved and
admitted.
(d) Any meeting referred to in paragraph (a) shall be deemed to
be a continuation of the relevant first meeting of creditors or of
members, or of any such meeting referred to in section 75, as the
case may be.
(3) If the Master again so declines for any reason mentioned in
subsection (1) to accept the nomination for appointment as liquida-
tor by any meeting referred to in subsection (2), or to appoint a
person so nominated—
(a) he or she shall act in accordance with the provisions of
subsection (1); and
(b) if the person so nominated as sole liquidator has not or if
all the persons so nominated have not been appointed by
him or her, he or she shall, in accordance with policy de-
termined by the Minister, appoint as liquidator or liquida-
tors of the corporation concerned any other person or
persons not disqualified from being liquidator of that cor-
poration.
[Para. (b) substituted by s. 22 of Act No. 16 of 2003.]
77. Resignation and absence of liquidator.—(1) At the re-
quest of a liquidator the Master may relieve him or her of his or her
office upon such conditions as the Master may think fit.
A-316
(2) A liquidator shall not be absent from the Republic for a peri-
od exceeding 60 days, unless—
(a) the Master has before his or her departure from the Repub-
lic granted him or her permission in writing to be absent;
and
(b) he or she complies with such conditions as the Master may
think fit to impose.
(3) Every liquidator who is relieved of his or her office by the
Master, or who is permitted to absent himself or herself for a period
exceeding 60 days from the Republic, shall give notice thereof in the
Gazette.
78. First meeting of creditors and members.—(1) A liquida-
tor shall as soon as may be and, except with the consent of the
Master, not later than one month after a final winding-up order has
been made by a Court or a resolution of a creditors’ voluntary
winding-up has been registered—
(a) summon a meeting of the creditors of the corporation for
the purpose of—
(i) considering the statement as to the affairs of the
corporation lodged with the Master;
(ii) the proving of claims against the corporation;
(iii) deciding whether a co-liquidator should be appoint-
ed and, if so, nominating a person for appointment;
and
(iv) receiving or obtaining, in a winding-up by the Court
or a creditors’ voluntary winding-up, directions or
authorization in respect of any matter regarding the
liquidation; and
(b) summon a meeting of members of the corporation for the
purpose of—
(i) considering the said statement as to the affairs of the
corporation, unless the meeting of members when
passing a resolution for the voluntary winding-up of
the corporation has already considered the said
statement; and
(ii) receiving or obtaining directions or authorization in
respect of any matter regarding the liquidation.
(2) (a) The provisions of the law relating to insolvency in re-
spect of voting, the manner of voting and voting by an agent at
meetings of creditors, shall apply mutatis mutandis in respect of any
meeting referred to in this section: Provided that in a winding-up by
the Court a member or former member of a corporation shall have
no voting right in respect of the nomination of a liquidator based on
his or her loan account with the corporation or claims for arrear
salary, travelling expenses or allowances due by the corporation, or
claims paid by such member or former member on behalf of the
corporation.
(b) The provisions of paragraph (a) shall mutatis mutandis apply
in respect of a person to whom a right contemplated in that para-
graph has been ceded.
79. Report to creditors and members.—Except in the case of a
members’ voluntary winding-up, a liquidator shall, as soon as
practicable and, except with the consent of the Master, not later than
three months after the date of his or her appointment, submit to a
general meeting of creditors and members of the corporation
concerned a report as to the following matters—
(a) the estimated amounts of the corporation’s assets and
liabilities;
(b) if the corporation has failed, the causes of the failure;
(c) whether or not he or she has submitted or intends to submit
to the Master a report under section 400 (2) of the Compa-
nies Act, as applied by section 66 of this Act;
(d) whether or not any member or former member appears to
be liable—
(i) to the corporation on the ground of breach of trust or
negligence;
(ii) to make repayments to the corporation in terms of
section 70 (2) or (3) or section 71 (1) or (2);
A-317 Close Corporations Act No. 69 of 1984
(iii) to either a creditor of the corporation or the corpora-
tion itself, as the case may be, by virtue of any pro-
vision of Part VIII of this Act;
(e) any legal proceedings by or against the corporation which
may have been pending at the date of the commencement
of the winding-up, or which may have been or may be in-
stituted;
(f) whether or not further enquiry is in his or her opinion
desirable in regard to any matter relating to the formation
or failure of the corporation or the conduct of its business;
(g) whether or not the corporation has kept the accounting
records required by section 56 and, if not, in what respects
the requirements of that section have not been complied
with;
(h) the progress and prospects in respect of the winding-up;
and
(i) any other matter which he or she may consider fit, or in
connection with which he or she may require the directions
of the creditors.
80. Repayments by members or former members.—The
liquidator of a corporation unable to pay its debts—
(a) shall ascertain whether members or former members of the
corporation are liable in terms of section 70 (2) or (3) to
make repayments;
(b) shall ascertain whether circumstances justify an approach
to the Master for a direction that members or former mem-
bers of the corporation make repayments in terms of sec-
tion 71 (1) or (2);
(c) may, if necessary, enforce such repayments; and
(d) may, in the event of the death of such member or former
member liable for or directed to make a repayment, or of
the insolvency of his or her estate, claim the amount due
from the estate concerned.
ss 79–83
81. Duties of liquidator regarding liability of members to
creditors or corporation.—(1) The liquidator of a corporation
unable to pay its debts shall ascertain whether, on the facts reasona-
bly available to him or her, there is reason to believe that any
member or former member of the corporation, or any other person,
has by virtue of any provision of Part VIII of this Act incurred any
liability to a creditor of the corporation or to the corporation itself,
as the case may be.
(2) If the liquidator finds that there is such reason in respect of
any creditor who has proved a claim, he or she shall in writing
inform such creditor accordingly, and if the creditor recovers the
amount of his or her claim or part thereof from
such member or former member, or from such other person, the
liquidator shall take such recovery into account in determining the
dividend payable to that creditor.
(3) In particular the liquidator shall determine whether an appli-
cation to the Court in terms of section 64 (1) is justified and advisa-
ble.
PART X
PENALTIES AND GENERAL
82. Application of Companies Act to enforcement of Act.—
Parts D, E, and F of Chapter 7, and Part A of Chapter 9 of the
Companies Act, read with the changes required by the context,
apply with respect to any alleged contravention of this Act or
contravention of any provision of the Companies Act to the extent
the provision applies to a corporation or its members.
[S. 82 amended by s. 10 of Act No. 81 of 1992, by s. 18 of Act No. 26 of
1997 and substituted by s. 224 (2) of Act No. 71 of 2008.]
83. Short title and commencement.—This Act shall be called
the Close Corporations Act, 1984, and shall come into operation on
a date fixed by the State President by proclamation in the Gazette.
A-319 Close Corporations Act No. 69 of 1984
References are to sections of the Act.
A Registrar, s. 4(3)
Account
definition “accounting records”, s. 1(1)
liquidator shall frame an, and plan of distribution, s. 72(10)
loan, with the corporation, s. 78(2)(a)
Accounting officer, see also Officer
appointment as the first, s. 59(2)
appointment of, s. 59
duties of, s. 62
member or employee shall not qualify for appointment as,
s. 60(3)
money or property of corporation, liable or accountable for, s 73
name and postal address of, s. 12(g)(i); 15(2)(b)
office of, vacant for a period of six months, s. 63(h)
professions whose members are qualified to perform the duties of
an, s. 60(2)
qualifications of, s. 60
removal from office, shall inform in writing, s. 59(4)
right of access and remuneration of, s. 61
vacancy occurs in the office of an, s. 59(3)
Accounting records, s. 56
accounting officer shall at all times have access to the, s. 61(1)
annual financial statements shall be in agreement with the,
s. 58(2)(d)
contain sufficient detail of individual transactions, s. 56(2)
contributions by members, relating to, s. 56(2)(a)
definition, s. 1(1)
fairly represent the state of affairs and business of the corporation,
s. 56(1)
inspection of subsidiary, and vouchers, s. 58(2)(d)
kept at the place of business or registered office, s. 56(4)
kept in such a manner as to provide adequate precautions against
falsification, s. 56(3)
loans to and from members, relating to, s. 56(2)(b)
payments to members, relating to, s. 56(2)(c)
vouchers supporting entries in the, s. 56(1)(f)
Act
Companies Act, 2008 (Act No. 71 of 2008), s. 1
Electronic and Transactions, 2002 (Act No. 25 of 2002), definition
“signature”, s. 1(1)
Administrator
definition “member”, s. 1(1)
Agreement
accordance with the association, in, s. 37(a)
amendment to, or the dissolution of an, shall be in writing, s. 44(6)
association or other, between members, s. 34(1)
bind the corporation to every member, s. 44(4)
express or implied, shall be valid, s. 44(3)
redistribution, s. 35(a)
remuneration of an accounting officer shall be determined by,
s. 61(2)
subject to the association, s. 36(1)(a)
Annual financial statements, s. 58
approved and signed by a member, s. 58(3)
audited, required to have, s. 58(2A)
members shall cause, to be made out in one of the official lan-
guages, s. 58(1)
Association agreement, s. 44
alteration or addition or replacement of, s. 49(3)
amendment to or dissolution of an, s. 44(6)
corporation shall keep any, at the registered office, s. 44(2)
definition, s. 1(1)
dispositions of members’ interest in accordance with, s. 37(a)
members may at any time enter into a written, s. 44(1)
new member shall be bound by an existing, s. 44(5)
no access to or constructive notice of, s. 45
set out or agreed upon in an, s. 44(1)(a)
C full name of the, s. 12(a)
Certificate of incorporation, s. 14
Commission
Companies and Intellectual Property, definition “commission”,
s. 1(1)
definition, s. 1(1)
Index
Commission (continued)
delegate any of the powers and entrust any of the duties of the
exercise the powers and perform the duties assigned to the Regis-
trar, s. 4(1)(a)
office of the, definition “Registration Office”, s. 1(1)
Registrar, s. 4
responsible for the administration of the Registration Office,
s. 4(1)(b)
Companies Act
definition, s. 1(1)
Company
action or proceeding is being or about to be instituted against the,
s. 66(2)(c)
auditor of a, s. 66(2)(a)(iv)
creditor whose claim against the, was previously proved and ad-
mitted, s. 76(2)(c)
definition, s. 1(1)
definition “director”, s. 1(1)
definition “holding company”, s. 1(1)
definition “subsidiary”, s. 1(1)
disqualified from being a director of a, s. 47(1)(c)
financial year of a corporation converted from a, s. 57(4)(a)
fixed asset register of a, s. 56(1)(b)
juristic person that has been converted to a, s. 2(2)(b)
member, director, shareholder or contributory of a, s. 66(2)(a)(iii)
memorandum or articles of association of a, s. 66(2)(a)(vii)
prescribed officer, definition “officer”, s. 1(1)
provisional liquidator of a, s. 66(2)(a)(xi)
registered office of a, s. 66(2)(a)(vi)
share in a, s. 66(2)(a)(ii)
shareholder or holder of securities issued by a, s. 66(1A)(b)
Composition, s. 72
considered at a general meeting of creditors, s. 72(6)
liability of surety of a corporation, shall not affect, s. 72(8)
offeror may submit to the liquidator a written offer of, s. 72(1)
unfairly prejudices the interests of a creditor, s. 72(12)(a)
Contribution
additional, of money and property, s. 24(2)(a)
amount or value of members’, s. 24(2)
founding statement contain particulars of, s. 12(f)
initial of money, property or services, s. 24(1)
undertaking by member to make, shall be enforceable, s. 24(5)
Corporation
accounting officer, shall appoint an, s. 59(1)
accounting records, shall keep in one of the official languages,
s. 56(1)
amended founding statement, fails to lodge an, s. 15(3)(a)
annual financial statements of, s. 58
annual return, copy of, shall be kept at the registered office of the,
s. 15A(2)
assets, fairly valued, exceed all its liabilities, s. 39(1)(b)
cancellation of the registration of the, founding statement, defini-
tion “deregistration”, s. 1(1)
capacity and powers of a natural person, s. 2(4)
CC shall be subjoined to the name used by a, s. 22(1)
close corporation, definition “corporation”, s. 1(1)
contribution of each member to the, s. 12(f)
court makes any order in relation to any, s. 9
courts having jurisdiction in respect of, s. 7
date of the end of the financial year of the, s. 12(g)(ii)
debts, able to pay as they become due, s. 1(c)
deceased member’s interest in the, s. 35(a)
definition, s. 1(1)
deregistration of a, s. 26
disqualified persons regarding management of, s. 47(1)
dissolution of, s. 67
financial assistance by, in respect of acquisition of members’
interest, s. 40
financial year end of, s. 57
formation and juristic personality of close, s. 2
initial or an additional contribution to a, by a member, s. 24(5)
inspector to investigate the affairs of the, s. 10(1)(m)
internal relations in a, rules in respect of, s. 46
joint liability for debts of, s. 63
keeping of copies of founding statements by, s. 16
Index Auditing: Legislation and Standards A-320

Corporation (continued) Curator

liability for reckless or fraudulent carrying-on of business of, s. 64 definition “member”, s. 1(1)
liquidation of a, s. 66(1) natural or juristic person, – of, s. 29(2)(c)
liquidator of a, unable to pay its debts, s. 81(1)
loan includes credit extended by a, s. 52(4)(a)(ii) D
member shall stand in a fiduciary relationship to the, s. 42(1) Deceased
member’s interest shall be acquired by the, no, s. 37 definition “member”, s. 1(1)
number of members of a, s. 28 disposal of interest of, member, s. 35
payment by, for members’ interests acquired, s. 39 executor in respect of such member, s. 29(2)(c)
payment by, to members, s. 51 Deeds, definition “accounting records”, s. 1(1)
person who intend to form a, shall draw up a founding statement, Deregistration, s. 26
s. 12 cancellation of the registration, definition “deregistration”, s. 1(1)
plaintiff or applicant in legal proceedings, s. 8 definition, s. 1(1)
postal address and registered office of, s. 25 Director
power of members to bind, s. 54 definition, s. 1(1)
powers of Court in case of abuse of separate juristic personality of, disqualified from being a, of a company, s. 47(1)(c)
s. 65 Document
preservation of the business or property of the, s. 46(e)(2) accounting officer shall have at all times right of access to all,
principal business to be carried out by the, s. 12(b) s. 61(1)
proceedings against fellow-members on behalf of, s. 50 constructive notice of particulars, no, s. 17
prohibition of loans and furnishing of security to members and inspection and copies of, in Registration Office, s. 5
others by, s. 52 open to inspection by any person, s. 16(2)
record a report of the proceedings at a meeting of its members, prescribing the form and contents of any, s. 10(1)(h)
shall, s. 48(3)(a) prescribing when copies of, shall required to be lodged, s. 10(1)(i)
registers of names and registration numbers, shall be kept in the Registrar inspect any, s. 4(1A)(a)
Registration Office, s. 3(2) Registrar obtain a copy of or extract from any such converted,
Registrar shall assign a registration number to the, s. 14(1) s. 4(1A)(b)
reproduction of any records relating to, s. 10(1)(c)
Republic, shall have a postal address and an office in the, s. 25(1) E
requirements for membership of a, s. 29 Electronic
security for costs in legal proceedings by, s. 8 conversion into, format, s. 10(1)(c)
size, expressed as a percentage, of each member’s interest in the, definition, s. 1(1)
s. 12(e) digital or other intangible form of, means, definition “electronic”,
votes of all the creditors who proved claims against the, s. 72(7) s. 1(1)
winding up of, practice and procedure to be followed, s. 10(1)(b) document converted into, format, s. 5(1A)(a)
Court(s) medium approved by the Registrar, s. 5(1A)
act or omission is unfairly prejudicial, unjust or inequitable, signature and advanced signature, definition “signature”, s. 1(1)
s. 49(2) Executor
cessation of membership by order of the, s. 36 deceased member’s interest to be transferred, shall cause, s. 35(a)
civil judgment of that magistrate’s, 15(3)(d) definition “member”, s. 1(1)
corporation being wound up by a, definition “Master”, s. 1(1) qualify for membership, s. 29(2)(c)
corporation chooses not to be bound, s. 42(3)(b)
debts due to the State recoverable by the Minister in any compe- F
tent, s. 6(4) Founding statement, s. 12
definition, s. 1(1) altered or something added thereto by an order of court, s. 15(2A)
founding statement is altered or something is added thereto by an amended, s. 29(3)(e)
order of the, s. 15(2A) certified copy of a, reflecting a change of name, s. 21(2)
jurisdiction in respect of corporations, having, s. 7 constructive notice of particulars in, no, s. 17
leave of the, required for a withdrawal of proceedings, s. 50(2) corporation fails to lodge an amended, s. 15(3)(a)
Master of the Supreme, definition “Master”, s. 1(1) date of registration of the, s. 63(b)
order as it may deem fit, may give such, s. 65 definition, s. 1(1)
person who has been placed under probation by a, s. 47(1A) increase or reduction of a member’s contribution, in an amended,
powers of, in case of abuse of separate juristic personality of cor- s. 24(3)
poration, s. 65 inspection of the, s. 15A(2)
proceeding instituted without prima facie grounds, s. 50(3) keeping of copies of, by corporations, s. 16
reduce or rescind the penalty, may, s. 15(3)(e) member’s contribution shall be stated in the, s. 24(1)
Registrar forward a certified copy of notice to the clerk of the member’s interest as a percentage in the, definition “member’s
magistrate’s, s. 15(3)(d) interest”, s. 1(1)
save under authority of a, s. 47(b) order which alters or adds to a, copy of shall be lodged to Regis-
transmission of copies of, orders to Registrar and Master, s. 9 trar for registration, s. 49(3)
Creditors proof of registration, s. 15A(2)
assets available for, s. 72(10) registration of, s. 13
claim against the company was previously proved and admitted, registration of amended, s. 15
whose, s. 76(2)(c) requirements regarding the lodging of an amended, s. 29(3)(b)
dividend payable to that, s. 81(2)
duties of liquidator regarding liability of members to, s. 81 H
payment to a member in his capacity as a, excludes, Holding company
s. 51(3)(a)(ii) definition, s. 1(1)
meeting of, first, s. 78
meeting of, general, s. 79 I
offer of composition considered, s. 72(6) Insolvent
report to, s. 79 definition “member”, s. 1(1)
right of any secured or preferent, s. 72(7)(c) disposal of interest of, member, s. 34
voluntary winding-up, s. 78(1)(a)(iv) trustee of his or her, estate, s. 29(2)(c)
voting by an agent at meetings of, s. 78(2)(a) unrehabilitated, s. 47(1)(b)(i)
A-321 Close Corporations Act No. 69 of 1984 Index

J Member (continued)
Jurisdiction insolvent, deceased, mentally disordered or otherwise incapable or
court where application is made, area of, definition “Master”, incompetent, s. 29(2)(c)
s. 1(1) interest of at least 51 per cent, holding, s. 58(3)
courts having, in respect of corporations, s. 7 liability of, for negligence, s. 43
magistrate’s court, within whose area of, the registered office or loans to or from, s. 58(2)(c)
main place of business is situated, s. 7 meeting of, s. 48
Master having, definition “Master”, s. 1(1) number of, s. 28
Master having, under this Act, s. 66(2)(xv) payment by corporation to, s. 51
power of, to bind corporation, s. 54
L present in person at the meeting may vote at that meeting, only,
Liquidator s. 48(2)(c)
application justified and advisable, s. 81(3) proceeding against any, in respect of an offence, s. 56(5)(b)
appointment of, s. 74 proceedings against fellow-, on behalf of corporation, s. 50
claim the amount due from the estate, s. 80(d) prohibition of loans and furnishing of security to, by corporation,
duties of, regarding liability of members, s. 81 s. 52
enforce such repayments, may, s. 80(c) repayment of salary or remuneration by, s. 71
fees payable to a, s. 10(1)(k) repayments by, s. 70; s. 80
frame an account and plan of distribution, s. 72(10) repayments, payments of damages and restoration of property by,
s. 73
Master declines nomination of appointments as, s. 76(3)
report to creditors and, s. 79
Minister may determine policy for appointment of, s. 10(1A)(a)
representation of, s. 32
refusal by Master to appoint nominated person as, s. 76
three-fourths of the, present at meeting, shall constitute a quorum,
relieved of his office by the Master, s. 77(3)
s. 48(2)(b)
resignation and absence of, s. 77
undertaking by, to make initial or additional contributions, s. 24(5)
summon a meeting of the creditors, shall, s. 78(1)(a)
votes that corresponds with his interest, shall have the number of,
vacancies in office of, s. 75
s. 46(d)
written resolution signed by or on behalf of all the, s. 67
M Member’s interest
Master acquisition of, by new member, s. 33
appoint a suitable natural person as liquidator, shall, s. 74(1) acquisition of, by the corporation, s. 36(2)(a)
certificate given by the, as to the amount payable, s. 70(4) aggregate of the, shall at all times be one hundred percent, s. 38
convene a meeting of creditors or members, s. 76(2)(a) attachment and sale in execution of, s. 34A
definition, s. 1(1) certificate of, s. 31
keeping and preservation of records in the office of the, s. 10(1)(e) definition, s. 1(1)
matter to be dealt with in the office of a, definition “Minister”, dispositions of, other, s. 37
s. 1(1) executor shall, in the performance of his duties, sell the deceased,
offeror may submit representations in writing to the, s. 72(4) s. 35(b)
policy for the appointment of a liquidator by the, s. 10(1A)(a) financial assistance by corporation in respect of acquisition of,
post a copy of notice to every creditor whose claim against the s. 40
company was previously proved and admitted, s. 76(2)(c) maintenance of aggregate of, s. 38
practice and procedure to be observed in the office of the, natural person entitled to a, s. 29(2)(a)
s. 10(1)(b) nature of, s. 30
refusal by, to appoint liquidator, s. 76 payment by corporation for, acquired, s. 39
relieve liquidator of his office, s. 77(1) share in a company, shall be construed as a, s. 66(2)(a)(ii)
reproduction of records to be observed in the office of the, size, expressed as a percentage, of each, s. 12(e)
s. 10(1)(c) trustee of the insolvent estate of a member, may sell that, s. 34(1)
Supreme Court, of the, definition “Master”, s. 1(1) two or more persons shall not be joint holders of the same, s. 30(2)
table of fees, subject to taxation by the, s. 10(1)(k) Minister
transmission of copies of Court orders to, s. 9 appointment of liquidator has so been set aside by the, s. 76(2)(b)
Member debts due to the State recoverable by the, in any competent court,
accounting officer, shall not qualify for, s. 60(3) s. 6(4)
accounting officer shall on resignation inform every, in writing, definition, s. 1(1)
s. 59(5)(a) determine policy for the appointment of a liquidator, s. 10(1A)
accounting records relating to contributions by, s. 56(2)(a) electronic format, or any other process deemed suitable by the,
accounting records relating to loans to and from, s. 56(2)(b) s. 10(1)(c)
accounting records relating to payments to, s. 56(2)(c) Justice, of, definition “Minister”, s. 1(1)
acquisition of member’s interest by new, s. 33 policy determined by the, s. 76(3)(b)
agreement between the trust and the, concerned, s. 29(1A)(c) prescribing the matter in respect of which fees shall be payable,
association agreement regulates internal relationship between, s. 10(1)(j)
s. 44(1)(b) regulations, may make, s. 10(1)
ceased to be a, of the corporation, s. 70(3) Trade and Industry, of, definition “Minister”, s. 1(1)
contribution by, s. 24
corporation shall indemnify every, in respect of expenditure in- N
curred, s. 46(e) Name(s)
definition, s. 1(1) application to reserve a, s. 20
differences between, shall be decided by majority vote, s. 46(c) CC, in capital letters, shall be subjoined to the, used by a corpora-
disposal of interest of deceased, s. 35 tion, s. 22(1)
disposal of interest of insolvent, s. 34 certified copy of a founding statement reflecting a change of,
duties of liquidator regarding liability of, to creditors or corpora- s. 21(2)
tion, s. 81 corporation which intends to change its, s. 19(2)
economic benefit derived by the, s. 3(a)(ii) definition, s. 1(1)
equal rights in regard to the management of the business, s. 46(b) duly appointed accounting officer, of, s. 15(2)(b)
fails to pay money or to deliver or transfer property, s. 63(b) effect of change of, s. 21
fiduciary position of, s. 42 formal requirements as to, s. 22
first meeting of creditors and, s. 78 full, of each member, s. 12(d)
full name of each, his or her identity number, s. 12(d) full registered, of the corporation, definition “name”, s. 1(1)
Index Auditing: Legislation and Standards A-322

Name(s) (continued) Registrar, (continued)

literal translation of that, into any one of the official languages of report to the, 62(3); s. 62(4)
the Republic, s. 12(a) transmission of copies of Court orders to the, s. 9
objection to, s. 20 Registration
registered literal translation of that, definition “name”, s. 1(1) amended founding statement, s. 15
registered shortened form of that, definition “name”, s. 1(1) Commission is responsible for the, Office, s. 4(1)(b)
registers of, and registration numbers, shall be kept in the Regis- date of, after, s. 24(4)(a)
tration Office, s. 3(2) definition, s. 1(1)
reservation of, s. 19 first financial year of a corporation shall commence on the date of
undesirable, s. 19 its, s. 57(4)(a)
use and publication of, s. 23 founding statement, of the, s. 13
person who is to become a member of the corporation upon its,
O s. 12
Officer; see also Accounting officer Registrar shall assign a, number to the corporation, s. 14(1)
Commission may delegate any of the powers and entrust any of Registrar shall give notice of the, in the prescribed manner, s. 13
the duties of the registrar to any, s. 4(3) requirements as to names and, numbers, s. 22
definition, s. 1(1) Registration Office
maintenance of a register, charged with the, s. 21(2) conduct and administration of the, s. 10(1)(a)
manager or a secretary who is an, of a corporation, s. 66(2)(a)(v) definition, s. 1(1)
member or employee of a corporation, s. 62(2)(b) inspection and copies of documents in, s. 5
money or property of corporation, liable or accountable for, s 73 keeping and preservation of any records in the, s. 10(1)(e)
prescribed, definition “officer”, s. 1(1) register, and, s. 3
removed from office, who has been, s. 59(5)(b) registers of names and registration numbers, shall be kept in the,
remuneration for services as an, of the corporation, s. 3(2)
s. 51(3)(a)(ii) Registrar is responsible for the administration of the, s. 4(1)(b)
review the appropriateness of the accounting policies, s. 62(1) reproduction of any records in the, s. 10(1)(c)
sign such statement on behalf of members, may, s. 15(2)(a) Regulation
Companies Act or the, made thereunder, s. 66(2)(a)(ix)
definition, s. 1(1)
P
Minister, made by, s. 10(3)
Payment of fees, s. 6
policy, and, s. 10
Prescribe
prescribe by, definition “prescribe”, s. 1(1)
additional fee, s. 15A(3)
prescribe penalties for contravention of, and failure to comply
definition, s. 1(1)
with, s. 10(2)
form, s. 1(2)(d)
higher tariff that the tariff so, s. 10(1)(l)
manner, s. 1(2)(e) S
notify in the, form, s. 1(2)(g) Signature
payment of, fee, s. 1(2)(h) advanced electronic, definition “signature”, s. 1(1)
regulations may, penalties for any contravention thereof or failure definition, s. 1(1)
to comply therewith, s. 10(2) includes an electronic, definition “signature”, s. 1(1)
Subsidiary
accounting records and vouchers supporting the entries,
R
s. 58(2)(d)(ii)
Registrar, s. 4
definition, s. 1(1)
apply to the, for the reservation of a name, s. 19(2)
inspecting such, accounting records and vouchers, s. 58(2)(d)
assign a registration number to the corporation, s. 14(1)
certificate of incorporation given by the, s. 14(2)
change or amend such registration number in order to rectify T
duplications, s. 14(1) Trustee
Commissioner, means the, definition “registrar”, s. 1(1) corporation not yet formed, for a, s. 53(1)
Companies, of, s. 66(2)(a)(viii) definition “member”, s. 1(1)
decision of the, s. 6(3) deliver to the corporation a written statement, s. 34(2)(a)
definition, s. 1(1) insolvent estate, of his or her, s. 29(3)(e)
extended period allowed by the, s. 29(3)(c) sell that member’s interest, s. 34(1)
fee, may waive payment of the, s. 15A(3) testamentary trust entitled to a member’s interest, of a, s. 29(2)(b)
fee, payment to, of the prescribed additional, s. 15A(3) trust inter vivos, of a, s. 63(d)
fees and other moneys payable to the, s. 6(4)
form which may be in electronic format as the, may allow, s. 15(2) W
issue a certificate that the amended founding statement has been Writings, definition “accounting records”, s. 1(1)
registered, s. 15(2B)
lodged by the corporation with the, alterations or additions to
founding statement, s. 49(4)(a)
providing for the appointment by the, s. 10(1)(m)
Auditing Profession Act
No. 26 of 2005
A-325 Auditing Profession Act No. 26 of 2005 Arrangement of sections

AUDITING PROFESSION ACT Part 6

Funding and financial management of
NO. 26 OF 2005 Regulatory Board
[ASSENTED TO 12 JANUARY 2006] 25. Funding
[DATE OF COMMENCEMENT: 1 APRIL 2006] 26. Annual budget and strategic plan
(English text signed by the President) 27. Financial management, financial statements and annual
report
Part 7
amended by
National government oversight and
Auditing Profession Amendment Act, executive authority
No. 2 of 2015 28. Executive authority
29. Ministerial representatives
30. Investigations
ACT 31. Information
To provide for the establishment of the Independent Regulato-
ry Board for Auditors; to provide for the education, training
and professional development of registered auditors and CHAPTER III
registered candidate auditors; to provide for the accreditation ACCREDITATION AND REGISTRATION
of professional bodies; to provide for the registration of audi- Part 1
tors and candidate auditors; to regulate the conduct of regis- Accreditation of professional bodies
tered auditors and registered candidate auditors; to repeal an 32. Application for accreditation
Act; and to provide for matters connected therewith. 33. Requirements for accreditation
[Long Title substituted by s. 13 of Act No. 2 of 2015.] 34. Retaining accreditation
BE IT ENACTED by the Parliament of the Republic of South 35. Termination of accreditation
Africa, as follows:— 36. Effect of termination of accreditation on registered auditors
ARRANGEMENT OF SECTIONS Part 2
Registration of individual auditors and firms
CHAPTER I 37. Registration of individuals as registered auditors and
INTERPRETATION AND OBJECTS OF ACT registered candidate auditors
1. Definitions
38. Registration of firms as registered auditors
2. Objects of Act
39. Termination of registration of registered auditors and
CHAPTER II registered candidate auditors
INDEPENDENT REGULATORY BOARD FOR AUDITORS 40. Renewal of registration and re-registration
Part 1 CHAPTER IV
Establishment and legal status of
CONDUCT BY AND LIABILITY OF
Regulatory Board
REGISTERED AUDITORS
3. Establishment and legal status
41. Practice
Part 2 42. Compliance with rules
Functions of Regulatory Board 43. Information to be furnished
4. General functions 44. Duties in relation to audit
5. Functions with regard to accreditation of professional 45. Duty to report on irregularities
bodies
46. Limitation of liability
6. Functions with regard to registration of auditors and
candidate auditors CHAPTER V
7. Functions with regard to education, training and profes- ACCOUNTABILITY OF REGISTERED
sional development AUDITORS
8. Functions with regard to fees and charges 47. Inspections
Part 3 48. Investigation of charge of improper conduct
Powers of Regulatory Board 49. Charge of improper conduct
9. General powers 50. Disciplinary hearing
10. Powers to make rules 51. Proceedings after hearing
Part 4 51A. Application of certain provisions to
Governance of Regulatory Board registered candidate auditors
11. Appointment of members of Regulatory Board
12. Term of office of members of Regulatory Board CHAPTER VI
13. Disqualification from membership and vacation of office OFFENCES
14. Chairperson and deputy chairperson 52. Reportable irregularities and false
15. Meetings statements in connection with audits
16. Decisions 53. Offences relating to disciplinary hearings
17. Duties of members 54. Offences relating to public practice
18. Chief executive officer
19. Delegations CHAPTER VII
GENERAL MATTERS
Part 5
55. Powers of Minister
Committees of Regulatory Board
20. Establishment of committees 56. Indemnity
21. Committee for auditor ethics 57. Administrative matters
22. Committee for auditing standards 58. Repeal and amendment of laws
23. Matters relating to appointment of members to committees 59. Transitional provisions
for auditor ethics and for auditing standards 60. Short title and commencement
24. Investigating and Disciplinary committees Schedule Laws repealed
ss 1–2 Auditing: Legislation and Standards
CHAPTER I
INTERPRETATION AND OBJECTS OF ACT
1. Definitions.—In this Act, unless the context indicates other-
wise—
“accreditation” means the status afforded to a professional
body in accordance with Part 1 of Chapter III, which status may be
granted in full or in part;
“appropriate regulator”, in relation to any entity, means any
national government department, registrar, regulator, agency,
authority, centre, board or similar institution established, appointed,
required or tasked in terms of any law to regulate, oversee or
ensure compliance with any legislation, regulation or licence, rule,
directive, notice or similar instrument issued in terms of or in com-
pliance with any legislation or regulation, as appears to the Regula-
tory Board to be appropriate in relation to the entity;
“audit” means the examination of, in accordance with prescribed
or applicable auditing standards—
(a) financial statements with the objective of expressing an
opinion as to their fairness or compliance with an identi-
fied financial reporting framework and any applicable
statutory requirements; or
(b) financial and other information, prepared in accordance
with suitable criteria, with the objective of expressing an
opinion on the financial and other information;
“auditing pronouncements” means those standards, practice
statements, guidelines and circulars developed, adopted, issued or
prescribed by the Regulatory Board which a registered auditor must
comply with in the performance of an audit; “Auditor-General” has
the meaning assigned in section 1 of the Public Audit Act, 2004 (Act
No. 25 of 2004);
“client” means the person for whom a registered auditor is per-
forming or has performed an audit;
“company” has the meaning assigned to it in the Companies
Act, 2008 (Act No. 71 of 2008);
[Definition of “company” substituted by s. 1 (a) of Act No. 2 of 2015.]
“delegation”, in relation to a duty, includes an instruction or
request to perform or to assist in performing the duty;
“ensure” means to take all reasonably necessary and expedient
steps in order to achieve the purpose, objective or intention of this
Act or a provision of this Act;
“firm” means a partnership, company or sole proprietor referred
to in section 40;
“improper conduct” means any non-compliance with this Act
or any rules prescribed in terms of this Act or any conduct pre-
scribed as constituting improper conduct;
“management board”, in relation to an entity which is a com-
pany, means the board of directors of the company and, in relation
to any other entity, means the body or individual responsible for
the management of the business of the entity;
“Minister” means the Minister of Finance;
“organ of state” has the meaning assigned to it in section 239 of
the Constitution of the Republic of South Africa, 1996;
“prescribe” means prescribe by notice in the Gazette, and “pre-
scribed” and “prescribing” have corresponding meanings;
“professional body” means a body of, or representing—
(a) registered auditors and registered candidate auditors; or
(b) accountants, registered auditors and registered candidate
auditors;
[Definition of “professional body” substituted by s. 1 (b) of Act No. 2
of 2015.]
“public accountant” means any person who is engaged in
public practice;
A-326
“public practice” means the practice of a registered auditor who
places professional services at the disposal of the public for reward,
and “practice” has a similar meaning;
“Public Accountants’ and Auditors’ Board” means the board
established under the Public Accountants’ and Auditors’ Act, 1951
(Act 51 of 1951) and which continues to exist under section 2 of
the Public Accountants’ and Auditors’ Act, 1991 (Act No. 80 of
1991);
“Public Finance Management Act” means the Public Finance
Management Act, 1999 (Act No. 1 of 1999);
“publish” means to publish in the Gazette or in any official
publication or official website of the Regulatory Board dealing
with the auditing profession and distributed or circulated on a
national basis to members of that profession, and “publishing” and
“published” have corresponding meanings;
“registered auditor” means an individual or firm registered as
an auditor with the Regulatory Board;
“registered candidate auditor” means an individual who has
obtained a professional accountant designation from an accredited
professional body, who is registered as a candidate auditor with the
Regulatory Board and who is serving under the supervision of a
registered auditor;
[Definition of “registered candidate auditor”
inserted by s. 1 (c) of Act No. 2 of 2015.]
“Regulatory Board” means the Independent Regulatory Board
for Auditors established by section 3;
“reportable irregularity” means any unlawful act or omission
committed by any person responsible for the management of an
entity, which—
(a) has caused or is likely to cause material financial loss to
the entity or to any partner, member, shareholder, creditor
or investor of the entity in respect of his, her or its deal-
ings with that entity; or
(b) is fraudulent or amounts to theft; or
(c) represents a material breach of any fiduciary duty owed by
such person to the entity or any partner, member, share-
holder, creditor or investor of the entity under any law
applying to the entity or the conduct or management
thereof;
“rule” means a rule prescribed by the Regulatory Board under
section 10;
“third party” means any person other than a client; and
“this Act” includes an regulations promulgated under section
55;
“training contract” means a written training contract entered
into in the prescribed form and registered with the Regulatory
Board whereby a prospective registered auditor is duly bound to
serve a registered auditor for a specified period and is entitled to
receive training in the practice and profession of a registered
auditor.
2. Objects of Act.—The objects of this Act are—
(a) to protect the public in the Republic by regulating audits
performed by registered auditors;
(b) to provide for the establishment of an Independent
Regulatory Board for Auditors;
(c) to improve the development and maintenance of interna-
tionally comparable ethical standards and auditing stand-
ards for auditors that promote investment and as a
consequence employment in the Republic;
(d) to set out measures to advance the implementation of
appropriate standards of competence and good ethics in
the auditing profession; and
(e) to provide for procedures for disciplinary action in
respect of improper conduct.
A-327 Auditing Profession Act No. 26 of 2005
CHAPTER II
INDEPENDENT REGULATORY BOARD FOR AUDITORS
Part 1
Establishment and legal status of Regulatory Board
3. Establishment and legal status.—(1) The Independent
Regulatory Board for Auditors is hereby established, and—
(a) is a juristic person; and
(b) must exercise its functions in accordance with this Act
and any other relevant law.
(2) The Regulatory Board is subject to the Constitution and the
law, specifically, the Public Finance Management Act.
Part 2
Functions of Regulatory Board
4. General functions.—(1) The Regulatory Board must, in
addition to its other functions provided for in this Act—
(a) take steps to promote the integrity of the auditing profes-
sion, including—
(i) investigating alleged improper conduct;
(ii) conducting disciplinary hearings;
(iii) imposing sanctions for improper conduct; and
(iv) conducting practice reviews or inspections;
(b) take steps it considers necessary to protect the public in
their dealings with registered auditors;
(c) prescribe standards of professional competence, ethics
and conduct of registered auditors;
(d) encourage education in connection with, and research into,
any matter affecting the auditing profession; and
(e) prescribe auditing standards.
(2) The Regulatory Board may—
(a) participate in the activities of international bodies whose
main purpose is to develop and set auditing standards and
to promote the auditing profession;
(b) publish a journal or any other publication, and issue news-
letters and circulars containing information and guide-
lines relating to the auditing profession;
(c) cooperate with international regulators in respect of
matters relating to audits and auditors; and
(d) take any measures it considers necessary for the proper
performance and exercise of its functions or duties or to
achieve the objects of this Act.
5. Functions with regard to accreditation of professional
bodies.—The Regulatory Board must, subject to this Act—
(a) prescribe minimum requirements for accreditation of
professional bodies in addition to those provided for in
this Act;
(b) consider and decide on any application for accreditation
and grant such accreditation in full or in part;
(c) prescribe the period of validity of the accreditation;
(d) keep a register of accredited professional bodies and
decide on—
(i) the register to be kept;
(ii) the maintenance of the register; and
(iii) the reviewing of the register and the manner in
which alterations thereto may be effected; and
(e) terminate the accreditation of professional bodies in
accordance with this Act.
6. Functions with regard to registration of auditors and
candidate auditors.—The Regulatory Board must, subject to this
Act—
(a) prescribe minimum qualifications, competency standards
and requirements for registration of auditors and candi-
date auditors in addition to those provided for in this Act;
(b) consider and decide on any applications for registration of
auditors and candidate auditors;
ss 3–7
(c) prescribe the period of validity of the registration of a
registered auditor and a registered candidate auditor;
(d) keep registers of registered auditors and registered
candidate auditors and decide on—
(i) the registers to be kept;
(ii) the maintenance of the registers; and
(iii) the reviewing of the registers and the manner in
which alterations thereto may be effected;
(e) ensure that the registers of registered auditors and regis-
tered candidate auditors are at all reasonable times open
to inspection by any member of the public;
(f) terminate the registration of registered auditors and
registered candidate auditors in accordance with this Act;
and
(g) prescribe minimum requirements for the renewal of
registration and reregistration of registered auditors and
registered candidate auditors.
[S. 6 substituted by s. 2 of Act No. 2 of 2015.]
7. Functions with regard to education, training and profes-
sional development.—(1) The Regulatory Board must—
(a) either in full or in part, recognise or withdraw the recogni-
tion of the educational qualifications or programmes or
continued education, training and professional develop-
ment programmes in the auditing profession of educa-
tional institutions and accredited professional bodies;
(b) recognise or withdraw the recognition of any accredited
professional body to conduct any qualifying examination
contemplated in section 37 or conduct any such examina-
tion for the purposes of section 37;
(c) prescribe requirements for and conditions relating to and
the nature and extent of continued education, training and
professional development;
(d) prescribe training requirements, including, but not limited
to, the period of training and the form for training con-
tracts;
(e) approve and register training contracts entered into by
prospective registered auditors;
(f) prescribe competency requirements; and
(g) either conditionally or unconditionally, recognise or
withdraw the recognition of registered auditors as training
officers.
(2) The Regulatory Board may—
(a) establish mechanisms for registered auditors to gain
recognition of their qualifications and professional status
in other countries;
(b) enter into an agreement with any person or body of
persons, within or outside the Republic, with regard to the
recognition of any examination or qualification for the
purposes of this Act;
(c) establish and administer an education fund for the
purpose of education, training, professional development
and continued education, training and professional devel-
opment of registered auditors and students in the auditing
profession; and
(d) give advice to, render assistance to, consult with or inter-
act with any organ of state, statutory body, educational
institution, professional body or examining body with re-
gard to educational facilities for and the education, train-
ing and professional development of registered auditors
and prospective registered auditors.
(3) (a) The Regulatory Board must, prior to withdrawing of
recognition referred to in subsection (1) (a) or (b), give notice in
writing to the educational institution or accredited professional
body concerned of its intention to withdraw and the reasons on
which it is based, and must afford the educational institution or
accredited professional body a period of not less than 21 days and
not more than 30 days in which to submit grounds for not proceed-
ing with withdrawal.
ss 7–12 Auditing: Legislation and Standards
(b) If the Regulatory Board considers that withdrawal of recog-
nition would not be in the best interests of the public, the auditing
profession or the members of an accredited professional body, it
may extend the recognition of the educational institution or
accredited professional body concerned on such conditions as it
considers appropriate.
(c) The Regulatory Board must publish the withdrawal of
recognition in terms of this subsection.
8. Functions with regard to fees and charges.— (1) The Regu-
latory Board must prescribe—
(a) accreditation, registration, registration renewal and re-
registration fees;
(b) annual fees, or a portion thereof in respect of a part of a
year;
(c) the date on which any fee is payable; and
(d) the fees payable in respect of any examination referred to
in section 37, conducted by an accredited professional
body or the Regulatory Board.
(2) The Regulatory Board may prescribe—
(a) any fees payable for the purposes of the education fund
referred to in section 7 (2);
(b) fees payable for an inspection or review undertaken by
the Regulatory Board in terms of section 47; and
(c) fees payable for any other service rendered by the
Regulatory Board.
(3) The Regulatory Board may grant exemption from payment
of any fees referred to in subsection (1) or (2).
Part 3
Powers of Regulatory Board
9. General powers.—The Regulatory Board may—
(a) determine its own staff establishment and may appoint a
chief executive officer and employees in posts on the staff
establishment on such conditions, including the payment
of remuneration and allowances, as it may determine;
(b) in consultation with the Minister, determine the remuner-
ation and allowances payable to its members or the mem-
bers of any committee of the Regulatory Board;
(c) collect fees and invest funds;
(d) borrow or raise money in accordance with the Public
Finance Management Act;
(e) with a view to the promotion of any matter relating to the
auditing profession, grant bursaries or loans to prospec-
tive registered auditors;
(f) finance any publications;
(g) acquire, hire, maintain, let, sell or otherwise dispose of
movable or immovable property for the effective perfor-
mance and exercise of its functions, duties or powers;
(h) decide upon the manner in which agreements must be
entered into;
(i) obtain the services of any person, including any organ of
state or institution, to perform any specific act or func-
tion;
(j) determine where its head office must be situated;
(k) confer with any organ of state;
(l) open and operate its own bank accounts;
(m) ensure that adequate risk management and internal
control practices are in place;
(n) perform legal acts, or institute or defend any legal action
in its own name; and
(o) do anything that is incidental to the exercise of any of its
functions or powers.
10. Powers to make rules.—(1) The Regulatory Board may,
by notice in the Gazette, prescribe rules with regard to—
(a) any matter that is required or permitted to be prescribed
in terms of this Act; and
A-328
(b) any other matter for the better execution of this Act or a
function or power provided for in this Act.
(2) (a) Before the Regulatory Board prescribes any rule under
this section, it must publish a draft of the proposed rule in the
Gazette together with a notice calling on the public to comment in
writing within a period stated in the notice, which period may not
be less than 30 days from the date of publication of the notice.
(b) If the Regulatory Board alters a draft rule because of any
comment, it need not publish the alteration before prescribing the
rule.
(3) The Regulatory Board may, if circumstances necessitate the
immediate publication of a rule, publish that rule without the
consultation contemplated in subsection (2).
Part 4
Governance of Regulatory Board
11. Appointment of members of Regulatory Board.—
(1) The Regulatory Board consists of not less than six but not
more than 10 non-executive members appointed by the Minister.
(2) The Minister must appoint competent persons, who must
include registered auditors, to effectively manage and guide the
activities of the Regulatory Board, based on their knowledge and
experience.
(3) When making the appointments, the Minister must take into
consideration, amongst other factors—
(a) the need for transparency and representivity within the
broader demographics of the South African population;
(b) any nominations received in terms of subsection (5); and
(c) the availability of persons to serve as members of the
Regulatory Board.
(4) Disregarding any vacancy in its membership, not more than
40% of the members of the Regulatory Board may be registered
auditors.
(5) Before the Minister makes the appointments, the Regulatory
Board must, by notice in the Gazette and in any national news-
paper, invite nominations from members of the public.
(6) The Minister may appoint an alternate member for every
member of the Regulatory Board, and an alternate member may
attend and take part in the proceedings at any meeting of the
Regulatory Board whenever the member for whom he or she has
been appointed as an alternate is absent from that meeting.
(7) The Regulatory Board, as soon as practicable after the ap-
pointment of its members, must publish by notice in the Gazette—
(a) the name of every person appointed;
(b) the date from which the appointment takes effect; and
(c) the period for which the appointment is made.
12. Term of office of members of Regulatory Board.—(1) A
member of the Regulatory Board appointed in terms of section 11
holds office for such period, but not exceeding two years, as the
Minister may determine at the time of his or her appointment.
(2) A member of the Regulatory Board may be reappointed, but,
subject to subsection (3), may not serve more than two consecutive
terms of office.
(3) Despite subsections (1) and (2), the Minister may, by notice
in the Gazette and after consultation with the Regulatory Board,
extend the period of office of all the members of the Regulatory
Board for a maximum period of 12 months.
(4) Despite subsection (1), the Minister may, by notice in the
Gazette, after consultation with the Regulatory Board, terminate
the period of office of a member of the Regulatory Board—
(a) if the performance of the member is unsatisfactory;
(b) if the member, either through illness or for any other
reason, is unable to perform the functions of office effec-
tively; or
(c) if the member, whilst holding office, has failed to comply
with or breached any legislation regulating the conduct of
members, including any applicable code of conduct.
A-329 Auditing Profession Act No. 26 of 2005
(5) Despite subsection (1), the Minister may, if the performance
of the Regulatory Board is unsatisfactory, terminate the period of
office of all the members of the Regulatory Board.
(6) (a) In the event of the dismissal of all the members of the
Regulatory Board, the Minister may appoint persons to act as
caretakers until competent persons are appointed in terms of
section 11.
(b) The Minister must appoint new members in terms of sec-
tion 11 within three months of the dismissal referred to in para-
graph (a).
13. Disqualification from membership and vacation of of-
fice.—(1) A person may not be appointed as a member of the
Regulatory Board if that person—
(a) is not a South African citizen;
(b) is not resident in the Republic;
(c) is an unrehabilitated insolvent;
(d) has been convicted of an offence in the Republic, other
than an offence committed prior to 27 April 1994 associ-
ated with political objectives, and was sentenced to im-
prisonment without an option of a fine or, in the case of
fraud, to a fine or imprisonment or both;
(e) subject to subsection (2), has been convicted of an
offence in a foreign country and was sentenced to impris-
onment without an option of a fine or, in the case of fraud,
to a fine or imprisonment or both;
(f) has, as a result of improper conduct, been removed from
an office of trust; or
(g) has in terms of this Act been found guilty of improper
conduct.
(2) For the purposes of subsection (1) (d), the Minister must, as
far as reasonably possible, take cognisance of the prevailing cir-
cumstances in a foreign country relating to a conviction.
(3) The membership of a member of the Regulatory Board ceas-
es if he or she—
(a) becomes disqualified in terms of subsection (1) from
being appointed as a member of the Regulatory Board;
(b) resigns by written notice addressed to the Regulatory
Board;
(c) is declared by the High Court to be of unsound mind or
mentally disordered or is detained under the Mental
Health Act, 1973 (Act No. 18 of 1973);
(d) has, without the leave of the Regulatory Board, been
absent from more than two consecutive meetings of the
Regulatory Board; or
(e) ceases to be permanently resident in the Republic.
(4) If a member of the Regulatory Board becomes disqualified
on a ground mentioned in subsection (1) or (3), such member
ceases to be a member of the Regulatory Board from the date of
becoming disqualified.
(5) (a) If a member of the Regulatory Board dies or vacates his
or her office before the expiration of his or her term of office, the
Minister must consider appointing a person to fill the vacancy for
the unexpired portion of the period for which that member was
appointed.
(b) If the Minister appoints a person to fill the vacant seat, the
appointment must be made within 60 days from the date on which
the vacancy occurred.
14. Chairperson and deputy chairperson.—(1) (a) The
Regulatory Board must elect a chairperson and a deputy chairper-
son from among its members.
(b) The chairperson and deputy chairperson each hold office for
a period of two years from the date of their appointment.
(2) If the chairperson is absent or for any reason unable to per-
form his or her functions as chairperson, the deputy chairperson
must act as chairperson, and while he or she so acts he or she has
all the powers and must perform all the duties of the chairperson.
ss 12–19
(3) If both the chairperson and deputy chairperson are absent or
for any reason unable to preside at a Regulatory Board meeting, the
members present must elect another member to act as chairperson
at that meeting and while he or she so acts has all the powers and
must perform all the duties of the chairperson.
15. Meetings.—(1) The Regulatory Board meets as often as
circumstances require, but at least four times every year, at such
time and place as the Regulatory Board may determine.
(2) The chairperson may at any time convene a special meeting
of the Regulatory Board at a time and place determined by the
chairperson.
(3) Upon a written request signed by not less than three mem-
bers of the Regulatory Board, the chairperson must convene a
special meeting of the Regulatory Board to be held within three
weeks after the receipt of the request, and the meeting must take
place at a time and place determined by the chairperson.
(4) A majority of the members of the Regulatory Board consti-
tutes a quorum at a meeting.
(5) (a) Every member of the Regulatory Board, including the
chairperson, has one vote.
(b) In the event of an equality of votes, the chairperson of the
meeting has a casting vote in addition to his or her deliberative
vote.
16. Decisions.—(1) A decision of the majority of members
present at a duly constituted meeting is a decision of the Regula-
tory Board.
(2) No decision taken by or act performed under the authority of
the Regulatory Board is invalid only by reason of—
(a) a casual vacancy on the Regulatory Board; or
(b) the fact that any person who was not entitled to sit as a
member of the Regulatory Board participated in the meet-
ing at the time the decision was taken or the act was au-
thorised, if the members who were present and acted at
the time followed the required procedure for decisions.
17. Duties of members.—The members of the Regulatory
Board form the accounting authority of the Regulatory Board
within the meaning of the Public Finance Management Act and
must, in addition to the duties and responsibilities provided for in
the Public Finance Management Act—
(a) provide effective, transparent, accountable and coherent
corporate governance and conduct effective oversight of
the affairs of the Regulatory Board;
(b) comply with all applicable legislation and agreements;
(c) communicate openly and promptly with the Minister, any
ministerial representatives, professional bodies and regis-
tered auditors;
(d) deal with the Minister, any ministerial representatives,
professional bodies, registered auditors and all other per-
sons in good faith; and
(e) at all times act in accordance with the code of conduct for
members of the Regulatory Board as may be prescribed
by the Minister.
18. Chief executive officer.—(1) The chief executive officer
is responsible for the day-to-day management of the Regulatory
Board and is accountable to the Regulatory Board.
(2) The chief executive officer must enter into a performance
agreement with the Regulatory Board on acceptance of his or her
appointment.
19. Delegations.—(1) The Regulatory Board must develop a
system of delegation that will maximise administrative and opera-
tional efficiency and provide for adequate checks and balances,
and, in accordance with that system—
(a) may—
(i) in writing delegate appropriate powers, excluding
the power to prescribe rules to a committee, the
chief executive officer, an employee or any mem-
ber of the Regulatory Board; and
ss 19–22 Auditing: Legislation and Standards
(ii) assign any committee, the chief executive officer,
any employee or member of the Regulatory Board
to perform any of its duties; and
(b) in respect of sections 48, 49, 50 and 51, with due regard
to the varying nature and seriousness of matters arising
from these sections, in writing delegate or assign appro-
priate powers or duties, and oblige the investigating and
disciplinary committees to delegate or assign appropriate
powers or duties to the chief executive officer, any em-
ployee or any member of the Regulatory Board.
(2) A delegation or assignment in terms of subsection (1)—
(a) is subject to such limitations and conditions as the
Regulatory Board may impose;
(b) may authorise subdelegation; and
(c) does not divest the Regulatory Board of the delegated
power or the performance of the assigned duty.
(3) The powers and duties of the investigating and disciplinary
committees referred to in sections 48, 49 and 50 are deemed
delegated and assigned by the Regulatory Board to the committees
and are subject to this section.
(4) The Regulatory Board may confirm, vary or revoke any
decision taken by a committee, the chief executive officer, a
member of the Regulatory Board or an employee as a result of a
delegation or assignment in terms of subsection (1).
Part 5
Committees of Regulatory Board
20. Establishment of committees.—(1) The Regulatory Board,
subject to subsection (2), may establish committees to assist it in
the performance of its functions and it may at any time dissolve or
reconstitute any such committee.
(2) The Regulatory Board must, at least, establish the following
permanent committees—
(a) a committee for auditor ethics in accordance with section
21;
(b) a committee for auditing standards in accordance with
section 22;
(c) an education, training and professional development
committee;
(d) an inspection committee;
(e) an investigating committee; and
(f) a disciplinary committee.
(3) (a) A committee consists of as many members as the Regula-
tory Board considers necessary.
(b) The Regulatory Board, subject to sections 21, 22 and 24 and
taking into account, amongst other factors, the need for transparen-
cy and representivity within the broader demographics of the South
African population, may appoint any person as a member of a
committee, on such terms and conditions as the Regulatory Board
may determine.
(c) The Regulatory Board may terminate the membership of a
member of a committee if—
(i) the performance by the member of the powers and
functions of that committee is unsatisfactory;
(ii) the member, either through illness or for any other reason,
is unable to perform the functions of the committee effec-
tively; or
(iii) the member has failed to comply with or breached any
legislation regulating the conduct of members, including
any applicable code of conduct.
(d) If the Regulatory Board does not designate a chairperson for
a committee, other than a disciplinary committee, the committee
may elect a chairperson from among its members.
(4) The Regulatory Board must provide funding to its commit-
tees in such a way that the committees are able to perform their
functions effectively.
A-330
(5) Sections 15 and 16 relating to meetings and decisions of the
Regulatory Board, respectively, with the necessary changes apply
in respect of any committee, except that the committees must meet
at least four times a year.
21. Committee for auditor ethics.—(1) The committee for
auditor ethics must consist of at least the following members
appointed by the Regulatory Board—
(a) three registered auditors;
(b) three persons representing users of audits;
(c) one person representing an exchange which is the holder
of a stock exchange licence issued under the Securities
Services Act, 2004 (Act No. 36 of 2004); and
(d) one advocate or attorney with at least 10 years’ experi-
ence in the practice of law.
(2) The committee for auditor ethics must assist the Regulatory
Board—
(a) to determine what constitutes improper conduct by
registered auditors and registered candidate auditors by
developing rules and guidelines for professional ethics,
including a code of professional conduct;
[Para. (a) amended by s. 3 of Act No. 2 of 2015.]
(b) to interact on any matter relating to its functions and
powers with professional bodies and any other body or
organ of state with an interest in the auditing profession;
and
(c) to provide advice to registered auditors on matters of
professional ethics and conduct.
22. Committee for auditing standards.—(1) The committee
for auditing standards must consist of at least the following mem-
bers appointed by the Regulatory Board—
(a) five registered auditors;
(b) one person with experience of business;
(c) an incumbent of the office of the Auditor-General, or a
person nominated by that incumbent;
(d) an incumbent of the office of the Executive Officer of the
Financial Services Board, or a person nominated by that
incumbent;
(e) one person with experience in the teaching of auditing at
a university recognised or established under the Higher
Education Act, 1997 (Act No. 101 of 1997);
(f) one person nominated by any stock exchange licensed
under the Securities Services Act, 2004 (Act No. 36 of
2004);
(g) the Commissioner of the South African Revenue Services
established in terms of the South African Revenue Ser-
vices Act, 1997 (Act No. 34 of 1997), or a person nomi-
nated by the Commissioner; and
(h) an incumbent of the office of the Registrar of Banks, or a
person nominated by that incumbent.
(2) The committee for auditing standards must assist the Regu-
latory Board—
(a) to develop, maintain, adopt, issue or prescribe auditing
pronouncements;
(b) to consider relevant international changes by monitoring
developments by other auditing standard-setting bodies
and sharing information where requested; and
(c) to promote and ensure the relevance of auditing pro-
nouncements by—
(i) considering the needs of users of audit reports;
(ii) liaising with the other committees of the Regulato-
ry Board on standards to be maintained by regis-
tered auditors and by receiving feedback from such
committees on areas where auditing pronouncements
are needed;
(iii) ensuring the greatest possible consistency between
auditing pronouncements and accepted inter-
national pronouncements; and
A-331 Auditing Profession Act No. 26 of 2005
(iv) consulting with professional bodies on the direction
and appropriateness of auditing pronouncements.
(3) The committee for auditing standards may assist the Regula-
tory Board to influence the nature of international auditing pro-
nouncements by—
(a) preparing comment on exposure drafts or discussion
papers and replies to questionnaires prepared by the In-
ternational Auditing and Assurance Standards Board or a
successor body; and
(b) nominating representatives to committees of the Interna-
tional Auditing and Assurance Standards Board or a suc-
cessor body when requested to do so by the Regulatory
Board.
23. Matters relating to appointment of members to commit-
tees for auditor ethics and for auditing standards.—(1) When
the need for an appointment to the committees for auditor ethics or
for auditing standards arises and the appointment depends on a
nomination referred to in section 22, the committees for auditor
ethics or for auditing standards must provide the Regulatory Board
with the name of the nominated person, the name of any nominated
alternate and any further relevant information, whereupon the
Regulatory Board must in writing appoint the nominated persons
within three months of receipt of the nominations.
(2) Where any person’s appointment to the committees for audi-
tor ethics or for auditing standards is dependent on a nomination
referred to in section 22, the Regulatory Board may make the
duration of the appointment terminable on notice given by the
nominating office-holder to the Regulatory Board that the nomi-
nated person has left its employment.
(3) A member of the committees for auditor ethics or for audit-
ing standards whose term has expired continues to serve until a
successor has been appointed.
24. Investigating and Disciplinary committees.—(1) The
investigating committee must include individuals with significant
legal experience.
(2) The disciplinary committee—
(a) must be chaired by a retired judge or senior advocate;
(b) must consist of a majority of persons not registered as
auditors in terms of this Act, but must include registered
auditors; and
(c) may include other suitably qualified persons.
Part 6
Funding and financial management of Regulatory Board
25. Funding.—The Regulatory Board is funded from—
(a) the collection of prescribed fees;
(b) all other monies which may accrue to the Regulatory
Board from any other legal source, including sanctions
imposed by the Regulatory Board; and
(c) moneys appropriated for that purpose by Parliament.
26. Annual budget and strategic plan.—The annual budget
and strategic plan of the Regulatory Board must be submitted to the
Minister in terms of the Public Finance Management Act.
27. Financial management, financial statements and annual
report.—The financial management and the preparation and
submission of financial statements and annual reports must be in
accordance with the Public Finance Management Act.
Part 7
National government oversight and executive authority
28. Executive authority.—(1) The Minister is the executive
authority for the Regulatory Board in terms of the Public Finance
Management Act and the Regulatory Board is accountable to the
Minister.
(2) The Minister must—
(a) ensure that the Regulatory Board complies with this Act,
the Public Finance Management Act and any other applica-
ble legislation;
ss 22–33
(b) ensure that the Regulatory Board is managed responsibly
and transparently and meets its contractual and other obli-
gations;
(c) establish and maintain clear channels of communication
between him or her and the Regulatory Board; and
(d) monitor and annually review the performance of the
Regulatory Board.
29. Ministerial representatives.—(1) The Minister may desig-
nate officials of the National Treasury as his or her representatives
to the Regulatory Board.
(2) Ministerial representatives designated in terms of subsection
(1) represent the Minister as participating observers at meetings of
the Regulatory Board.
(3) The Minister or his or her designated representative or rep-
resentatives may at any time call or convene a meeting of the
Regulatory Board in order for the Regulatory Board to give
account for actions taken by it.
(4) (a) A ministerial representative must represent the Minister
faithfully at meetings of and with the Regulatory Board, without
consideration of personal interest or gain, and must keep the
Minister informed of what transpired at meetings of the Regulatory
Board.
(b) A ministerial representative must act in accordance with the
instructions of the Minister and may be reimbursed by the Minister
for expenses in connection with his or her duties as a ministerial
representative, but may not receive any additional compensation or
salary for such duties.
30. Investigations.—(1) The Minister may at any time request
the Regulatory Board to investigate any matter at its own cost or
against full or partial payment.
(2) The Minister, at any time, may investigate the affairs or
financial position of the Regulatory Board and may recover from
the Regulatory Board reasonable costs incurred as a result of an
investigation.
31. Information.—The Regulatory Board must provide the
Minister or his or her ministerial representative with access to any
information as may be reasonably requested.
CHAPTER III
ACCREDITATION AND REGISTRATION
Part 1
Accreditation of professional bodies
32. Application for accreditation.—(1) A professional body
must apply, on the prescribed application form, to the Regulatory
Board for accreditation in terms of Section 33 or 34.
(2) If the Regulatory Board is satisfied that the professional
body complies with its requirements for accreditation, it must grant
the application on payment of the prescribed fee.
33. Requirements for accreditation.—In order to qualify for
accreditation, a professional body must demonstrate, to the satisfac-
tion of the Regulatory Board that—
(a) it complies with the prescribed requirements for profes-
sional development and achievement of professional
competence;
(b) it has appropriate mechanisms for ensuring that its mem-
bers participate in continuing professional development as
recognised or prescribed by the Regulatory Board;
(c) it has mechanisms to ensure that its members are disci-
plined where appropriate;
(d) it is, and is likely to continue to be, financially and opera-
tionally viable for the foreseeable future;
(e) it keeps a register of its members in the form prescribed
by the Regulatory Board;
(f) it has in place appropriate programmes and structures to
ensure that it is actively endeavouring to achieve the ob-
jective of being representative of all sectors of the South
African population; and
ss 33–37 Auditing: Legislation and Standards
(g) it meets any other requirement prescribed by the Regula-
tory Board from time to time.
34. Retaining accreditation.—In order to retain its accredita-
tion, an accredited professional body must at least once a year at a
time prescribed by the Regulatory Board, satisfy the Regulatory
Board in the prescribed manner that it continues to comply with the
requirements for accreditation listed in section 33.
35. Termination of accreditation.—(1) The accreditation of a
professional body lapses automatically if—
(a) it ceases to exist; or
(b) it fails to pay any prescribed fee or portion thereof within
such period as may be prescribed by the Regulatory
Board.
(2) (a) The Regulatory Board, subject to subsection (3), must
cancel the accreditation by it of a professional body if that body
ceases to comply with any requirement for accreditation.
(b) The Regulatory Board must, prior to cancelling of accredita-
tion, give notice in writing to the professional body concerned of
its intention to cancel and the reasons on which it is based, and
must afford the professional body a period of not less than 21 days
and not more than 30 days in which to submit grounds for not
proceeding with cancellation.
(c) The Regulatory Board, pending the outcome of the process
referred to in paragraph (b), may suspend the accreditation of a
professional body if it considers it in the best interests of the public
or the auditing profession and may make such alternative arrange-
ments to accommodate the needs of the members of such body
during the period of suspension as it may consider necessary.
(d) If the Regulatory Board considers that cancellation of ac-
creditation would not be in the best interests of the public, the
auditing profession or the members of a professional body referred
to in subsection (3), it may extend the accreditation of the profes-
sional body concerned on such conditions as it considers appropriate.
(3) A professional body may by written notice to the Regulatory
Board renounce its accreditation.
(4) (a) On the termination of the accreditation of a professional
body, the professional body must inform all the registered auditors
who were its members at the time of the termination—
(i) of the termination of its accreditation; and
(ii) of their duty to provide the Regulatory Board with the
written proof referred to in section 36 (2).
(b) On the termination of the accreditation of a professional
body, the Regulatory Board must publish a notice informing all the
registered auditors who were members of the professional body at
the time of the termination—
(i) of the termination of its accreditation; and
(ii) of their duty to provide the Regulatory Board with the
written proof referred to in section 36.
(5) A professional body which is no longer accredited is not
relieved of any outstanding financial obligation towards the Regula-
tory Board.
36. Effect of termination of accreditation on registered
auditors and registered candidate auditors.—(1) The fact that
the accreditation of a professional body has ended in terms of
section 35 does not affect the registration under this Act of any
registered auditor or registered candidate auditor who was a
member of the professional body at the time of the termination.
(2) Registered auditors or registered candidate auditors referred
to in subsection (1) who were members of the professional body
referred to in subsection (1) must, within six months of the termi-
nation of the accreditation of the professional body or within such
other period as may be prescribed by the Regulatory Board,
provide written proof to the satisfaction of the Regulatory Board
that they—
(a) have become members of another accredited professional
body; or
A-332
(b) have made arrangements for their continuing professional
development as recognised or prescribed by the Regulato-
ry Board.
(3) Where a registered auditor or registered candidate auditor
referred to in subsection (1) fails to comply with the requirements
of subsection (2), the Regulatory Board, subject to subsection (4),
may cancel the registration of the registered auditor or registered
candidate auditor under this Act.
(4) The Regulatory Board must, prior to the cancelling of the
registration of a registered auditor or registered candidate auditor,
give notice in writing to the registered auditor or registered candi-
date auditor concerned of its intention to cancel and the reasons on
which it is based, and must afford the registered auditor or regis-
tered candidate auditor a period of not less than 21 days and not
more than 30 days in which to submit grounds for not proceeding
to cancellation.
[S. 36 substituted by s. 4 of Act No. 2 of 2015.]
Part 2
Registration of individual auditors and firms
37. Registration of individuals as registered auditors and
registered candidate auditors.—(1) An individual must apply on
the prescribed application form to the Regulatory Board for
registration as an auditor or a candidate auditor.
(2) If, after considering an application, the Regulatory Board is
satisfied that the applicant—
(a) has complied with the prescribed education, training and
competency requirements for a registered auditor or regis-
tered candidate auditor;
(b) has arranged for his or her continuing professional
development if the applicant is not a member of an ac-
credited professional body;
(c) is resident within the Republic;
(d) is a fit and proper person to practise the profession;
(e) has met any additional requirements for registration as
prescribed under section 6,
the Regulatory Board must, subject to subsections (3) and (5),
register the applicant, enter the applicant’s name in the applicable
register and issue to the applicant a certificate of registration on
payment of the prescribed fee.
(3) The Regulatory Board may not register an individual as a
registered auditor or registered candidate auditor if that individu-
al—
(a) has at any time been removed from an office of trust
because of misconduct related to a discharge of that office;
(b) has been convicted, whether in the Republic or elsewhere,
of theft, fraud, forgery, uttering a forged document, per-
jury, an offence under the Prevention and Combating of
Corrupt Activities Act, 2004 (Act No. 12 of 2004), or any
offence involving dishonesty, other than theft, fraud or
forgery, committed prior to 27 April 1994 associated with
political objectives, and has been sentenced to imprison-
ment without the option of a fine or to a fine exceeding
such an amount as may be prescribed by the Minister;
(c) is for the time being declared by a competent court to be
of unsound mind or unable to manage his or her own af-
fairs; or
(d) is disqualified from registration under a sanction imposed
under this Act.
(4) For the purposes of subsection (3) (b), the Regulatory Board
must take cognisance of the prevailing circumstances in a foreign
country relating to a conviction.
(5) The Regulatory Board may decline to register as a registered
auditor or registered candidate auditor an individual who is an
unrehabilitated insolvent, has entered into a compromise with
creditors, has applied for debt review or has been provisionally
sequestrated.
[S. 37 substituted by s. 5 of Act No. 2 of 2015.]
A-333 Auditing Profession Act No. 26 of 2005
38. Registration of firms as registered auditors.—(1) The
only firms that may become registered auditors are—
(a) partnerships of which all the partners are individuals who
are themselves registered auditors;
(b) sole proprietors where the proprietor is a registered
auditor; and
(c) companies which comply with subsection (3).
(2) On application by a firm which is a partnership fulfilling the
conditions in subsection (1) (a) or a sole proprietor, on the pre-
scribed application form, the Regulatory Board must register the
firm as a registered auditor on payment of the prescribed fee.
(3) The Regulatory Board must register a company as a regis-
tered auditor on the payment of the prescribed fee if—
(a) the company has a share capital and its memorandum of
incorporation provides that its directors and past directors
shall be liable jointly and severally, together with the
company, for its debts and liabilities contracted during
their periods of office;
[Para. (a) substituted by s. 6 (a) of Act No. 2 of 2015.]
(b) only individuals who are registered auditors are share-
holders of the company;
(c) every shareholder of the company is a director thereof,
and every director is a shareholder, except that—
(i) where a shareholder of the company dies, the estate
of the shareholder may continue to hold the rele-
vant shares for a period of six months as from the
date of the death or for such longer period as the
Regulatory Board may approve; or
(ii) where a shareholder of the company ceases to
conform to any requirement of paragraph (b), the
shareholder may continue to hold the relevant
shares for a period of six months as from the date
on which the shareholder ceases so to conform or
for such longer period as the Regulatory Board may
approve,
and provided that—
(aa) no voting rights attach to any share contemplated in
paragraph (c) (i) and (ii); and
(bb) a shareholder mentioned in that paragraph does not
act as a director of the company or receive, directly
or indirectly, any director’s fees or remuneration or
participate in the income of or profits earned by the
company in its business; and
(d) the memorandum of incorporation of the company
provides that—
(i) the company may, without confirmation by a court,
purchase on such terms as it may consider expedi-
ent any shares held in it and the shares purchased
are available for allotment in accordance with the
company’s memorandum of incorporation; and
(ii) despite any provision to the contrary in any other
law, a member of the company may not appoint a
person who is not a member of the company to at-
tend, speak or vote on behalf of the member at any
meeting of the company.
[Para. (d) substituted by s. 6 (b) of Act No. 2 of 2015.]
(4) In its application to a company which is a registered auditor,
section 8 (2) (c) of the Companies Act, 2008 (Act No. 71 of 2008),
has effect.
[Sub-s. (4) substituted by s. 6 (c) of Act No. 2 of 2015.]
39. Termination of registration of registered auditors and
registered candidate auditors.—(1) Subject to subsection (3), the
Regulatory Board must cancel the registration of any registered
auditor that is an individual or any registered candidate auditor,
and—
(a) who subsequent to registration becomes subject to any of
the disqualifications mentioned in section 37 (3);
ss 38–41
(b) whose registration was made in error or on information
subsequently proved to be false; or
(c) who prior to registration has been guilty of improper
conduct because of which the registered auditor or regis-
tered candidate auditor is, in the opinion of the Regulato-
ry Board not a fit and proper person to be registered.
(2) Subject to subsection (3), the Regulatory Board may cancel
the registration of any registered auditor that is an individual or any
registered candidate auditor, and—
(a) whose estate is sequestrated or provisionally sequestrated
or who enters into a compromise with creditors or who
has applied for debt review; or
(b) who ceases to be a member of an accredited professional
body and does not within six months of such cessation
provide written proof to the satisfaction of the Regulatory
Board that such registered auditor or registered candidate
auditor has made arrangements for his or her continuing
professional development.
(3) Prior to cancelling a registration, the Regulatory Board must
give notice in writing to the registered auditor or registered candi-
date auditor concerned of its intention to cancel and the reasons on
which it is based, and afford the registered auditor or registered
candidate auditor a period of not less than 21 days and not more
than 30 days in which to submit grounds for not proceeding with
cancellation.
(4) The registration of a registered auditor that is a partnership,
sole proprietor or company automatically lapses if it no longer
complies with section 38 (1).
(5) The registration of a registered auditor or registered candi-
date auditor automatically lapses if such registered auditor or
registered candidate auditor fails to pay a prescribed fee or portion
thereof within the period prescribed by the Regulatory Board.
(6) At the written request of a registered auditor or registered
candidate auditor, the Regulatory Board must remove the name of
the registered auditor or registered candidate auditor from the
applicable register, but the removal does not affect any liability
incurred by the registered auditor or registered candidate auditor
prior to the date of the removal.
(7) The fact that the registration of a registered auditor or regis-
tered candidate auditor has been cancelled or removed does not
prevent the Regulatory Board from instituting disciplinary proceed-
ings for conduct committed prior to the cancellation or removal.
(8) As soon as practicable after the registration of a registered
auditor or registered candidate auditor has been cancelled or
removed the Regulatory Board must publish a notice of the cancel-
lation or removal, specifying the name of the registered auditor or
registered candidate auditor.
[S. 39 substituted by s. 7 of Act No. 2 of 2015.]
40. Renewal of registration and re-registration.—(1) A
registered auditor or registered candidate auditor must apply in the
prescribed manner to the Regulatory Board for the renewal of his
or her registration.
[Sub-s. (1) amended by s. 8 of Act No. 2 of 2015.]
(2) A registered auditor or registered candidate auditor whose
registration was terminated in terms of section 39 or cancelled in
terms of section 51 (3) (a) (iv) may apply for re-registration in the
prescribed manner to the Regulatory Board.
[Sub-s. (2) amended by s. 8 of Act No. 2 of 2015.]
CHAPTER IV
CONDUCT BY AND LIABILITY OF
REGISTERED AUDITORS
41. Practice.—(1) Only a registered auditor may engage in
public practice or hold out as an registered auditor in public
practice or use the registered auditor description “public account-
ant”, “certified public accountant”, “registered accountant and
auditor”, “accountant and auditor in public practice” or any other
designation or description likely to create the impression of being a
registered auditor in public practice.
ss 41–44 Auditing: Legislation and Standards
(2) (a) A person who is not registered in terms of this Act may
not—
(i) perform any audit;
(ii) pretend to be, or in any manner hold or allow himself or
herself to be held out as, a person registered in terms of
this Act;
(iii) use the name of any registered auditor or any name or
title referred to in subsection (1); or
(iv) perform any act indicating or calculated to lead persons to
believe that he or she is registered in terms of this Act.
(b) Paragraph (a) (i) may not be construed as prohibiting any
individual from performing an audit if such audit are performed in
the service of or by order of and under the direction, control,
supervision of or in association with a registered auditor entitled to
perform the audit identified and who must assume responsibility
for any audit so performed.
(3) Nothing in this section prohibits—
(a) any person from using description “internal auditor” or
“accountant”;
(b) any member of a not-for-profit club, institution or
association from acting as auditor for that club, institution
or association if he or she receives no fee or other consid-
eration for such audit; or
(c) the Auditor-General from appointing any person who is
not a registered auditor to carry out on his on her behalf
any audit which he or she is in terms of the Public Audit
Act, 2004 (Act No. 25 of 2004), required to undertake.
(4) Except with the consent of the Regulatory Board, a regis-
tered auditor may not knowingly employ—
(a) any person who is for the time being suspended from
public practice under any provision of this Act; or
(b) any person who is no longer registered as a registered
auditor as a result of the termination of his or her registra-
tion in terms of section 39 (1) (c) or the cancellation of
his or her registration in terms of section 51 (3) (a) (iv);
or
(c) any person who applied for registration under section 37
(3), but whose application the Regulatory Board declined.
(5) A registered auditor who is not in public practice as an indi-
vidual practitioner may practise as a member of a firm only if, by
virtue of section 40, the firm is itself a registered auditor.
(6) A registered auditor may not—
(a) practise under a firm name or title unless on every
letterhead bearing the firm name or title there appears—
(i) the registered auditor’s present first names, or
initials, and surname; or
(ii) in the case of a partnership, at least the present first
names, or initials, and surnames of the managing
partners or, if there are no managing partners, of
the active partners or, where such a letterhead is
used only by a branch office of the partnership, at
least the present first names, or initials, and sur-
names of the managing partners at that branch of-
fice or, if there are no such resident partners, of the
partners assigned to that branch office; or
(iii) in the case of a company, the present first names, or
initials, and surnames of the directors;
[Sub-para. (iii) substituted by s. 9 (a) of Act No. 2 of 2015.]
(b) sign any account, statement, report or other document
which purports to represent an audit performed by that
registered auditor, unless the audit were performed by
that registered auditor, under the personal supervision or
direction of that registered auditor or by or under the per-
sonal supervision or directions of that registered auditor
and one or more of the partners, co-directors or co-
members of the registered auditor, as the case may be, in
accordance with prescribed auditing standards;
(c) perform audits unless adequate risk management practic-
es and procedures are in place;
A-334
(d) engage in public practice during any period in respect of
which the registered auditor has been suspended from
public practice; or
(e) share any profit derived from performing an audit with a
person that is not a registered auditor.
(7) The provisions of subsection (6) (b) do not apply in respect
of an audit performed by another registered auditor in a partially
completed assignment which the previous registered auditor was
unable to complete as a result of death, disability or other unfore-
seen cause not under the control of the previous registered auditor,
and which assignment the successor registered auditor is engaged
to complete.
(8) Nothing in subsection (6) (b) prevents any registered auditor
from signing the firm name or title under which the registered
auditor practises.
(9) . . . . . .
[Sub-s. (9) deleted by s. 9 (b) of Act No. 2 of 2015.]
(10) In order to engage in public practice, a registered auditor
must have paid all applicable prescribed fees.
42. Compliance with rules.—All registered auditors or regis-
tered candidate auditors must comply with rules prescribed by the
Regulatory Board.
[S. 42 amended by s. 10 of Act No. 2 of 2015.]
43. Information to be furnished.—(1) Every firm that is a
registered auditor must notify the Regulatory Board of any change
in its name, composition or address not later than 30 days after the
date on which the change takes place.
(2) Within 14 days of the receipt of a written request from any
client for whom a registered auditor acts as auditor or person who
proposes to appoint the registered auditor as its auditor, the regis-
tered auditor must furnish the following information—
(a) every firm’s name or title under which the registered
auditor practises;
(b) the place or places of business of all firms in which the
registered auditor is in public practice as a partner, direc-
tor or member;
(c) the full names of all (if any) of the registered auditor’s
partners, co-directors or co-members; and
(d) the registered auditor’s first names or initials, surname,
ordinary business address and ordinary residential ad-
dress.
(3) In subsection (2) and where, under that subsection, a regis-
tered auditor is required to supply information relating to a firm,
the supply of the information in the name of the firm must be a
sufficient compliance with the obligation of the individual regis-
tered auditor.
44. Duties in relation to audit.—(1) (a) Where a registered
auditor that is a firm is appointed by an entity to perform an audit,
that firm must immediately after the appointment is made, take a
decision as to the individual registered auditor or registered
auditors within the firm that is responsible and accountable for that
audit.
(b) The first name and surname of the individual registered
auditor referred to in paragraph (a) must be made available to the
entity on taking of the decision and to the Regulatory Board on
request.
(2) The registered auditor may not, without such qualifications
as may be appropriate in the circumstances, express an opinion to
the effect that any financial statement or any supplementary
information attached thereto which relates to the entity—
(a) fairly presents in all material respects the financial
position of the entity and the results of its operations and
cash flow; and
A-335 Auditing Profession Act No. 26 of 2005
(b) are properly prepared in all material aspects in accordance
with the basis of the accounting and financial reporting
framework as disclosed in the relevant financial state-
ments,
unless a registered auditor who is conducting the audit of an entity
is satisfied about the criteria specified in subsection (3).
(3) The criteria referred to in subsection (2) are—
(a) that the registered auditor has carried out the audit free
from any restrictions whatsoever and in compliance, so
far as applicable, with auditing pronouncements relating
to the conduct of the audit;
(b) that the registered auditor has by means of such methods
as are reasonably appropriate having regard to the nature
of the entity satisfied himself or herself of the existence
of all assets and liabilities shown on the financial state-
ments;
(c) that proper accounting records in at least one of the
official languages of the Republic have been kept in con-
nection with the entity in question so as to reflect and ex-
plain all its transactions and record all its assets and
liabilities correctly and adequately;
(d) that the registered auditor has obtained all information,
vouchers and other documents which in the registered au-
ditor’s opinion were necessary for the proper performance
of the registered auditor’s duties;
(e) that the registered auditor has not had occasion, in the
course of the audit or otherwise during the period to
which the auditing services relate, to send a report to the
Regulatory Board under section 45 relating to a reporta-
ble irregularity or that, if such a report was so sent, the
registered auditor has been able, prior to expressing the
opinion referred to in subsection (1), to send to the Regu-
latory Board a notification under section 45 that the regis-
tered auditor has become satisfied that no reportable
irregularity has taken place or is taking place;
(f) that the registered auditor has complied with all laws
relating to the audit of that entity; and
(g) that the registered auditor is satisfied, as far as is reasona-
bly practicable having regard to the nature of the entity
and of the audit carried out as to the fairness or the cor-
rectness, as the case may be, of the financial statements.
(4) If a registered auditor or, where the registered auditor is a
member of a firm, any other member of that firm was responsible
for keeping the books, records or accounts of an entity, the regis-
tered auditor must, in reporting on anything in connection with the
business or financial affairs of the entity, indicate that the regis-
tered auditor or that other member of the firm was responsible for
keeping those accounting records.
(5) For the purpose of subsection (4), a person must not be re-
garded as responsible for keeping the books, records or accounts of
an entity by reason only of that person making closing entries,
assisting with any adjusting entries or framing any financial
statements or other document from existing records.
(6) A registered auditor may not conduct the audit of any finan-
cial statements of an entity, whether as an individual registered
auditor or as a member of a firm, if, the registered auditor has or
had a conflict of interest in respect of that entity, as prescribed by
the Regulatory Board.
45. Duty to report on irregularities.—(1) (a) An individual
registered auditor referred to in section 44 (1) (a) of an entity that
is satisfied or has reason to believe that a reportable irregularity has
taken place or is taking place in respect of that entity must, without
delay, send a written report to the Regulatory Board.
(b) The report must give particulars of the reportable irregulari-
ty referred to in subsection (1) (a) and must include such other
information and particulars as the registered auditor considers
appropriate.
(2) (a) The registered auditor must within three days of sending
the report to the Regulatory Board notify the members of the
management board of the entity in writing of the sending of the
ss 44–46
report referred to in subsection (1) and the provisions of this
section.
(b) A copy of the report to the Regulatory Board must accom-
pany the notice.
(3) The registered auditor must as soon as reasonably possible
but no later than 30 days from the date on which the report referred
to in subsection (1) was sent to the Regulatory Board—
(a) take all reasonable measures to discuss the report referred
to in subsection (1) with the members of the management
board of the entity;
(b) afford the members of the management board of the
entity an opportunity to make representations in respect
of the report; and
(c) send another report to the Regulatory Board, which report
must include—
(i) a statement that the registered auditor is of the
opinion that—
(aa) no reportable irregularity has taken place or
is taking place; or
(bb) the suspected reportable irregularity is no
longer taking place and that adequate steps
have been taken for the prevention or recov-
ery of any loss as a result thereof, if relevant;
or
(cc) the reportable irregularity is continuing; and
(ii) detailed particulars and information supporting the
statement referred to in subparagraph (i).
(4) The Regulatory Board must as soon as possible after receipt
of a report containing a statement referred to in paragraph (b) (i)
(cc) of subsection (3), notify any appropriate regulator in writing of
the details of the reportable irregularity to which the report relates
and provide it with a copy of the report.
(5) For the purpose of the reports referred to in subsections (1)
and (3), a registered auditor may carry out such investigations as
the registered auditor may consider necessary and, in performing
any duty referred to in the preceding provisions of this section, the
registered auditor must have regard to all the information which
comes to the knowledge of the registered auditor from any source.
(6) Where any entity is sequestrated or liquidated, whether
provisionally or finally, and a registered auditor referred to in
section 44 (1) (a) at the time of the sequestration or liquidation—
(a) has sent or is about to send a report referred to in subsec-
tion (1) or (3), the report must also be submitted to a pro-
visional trustee or trustee, or a provisional liquidator or
liquidator, as the case may be, at the same time as the re-
port is sent to the Regulatory Board or as soon as reason-
ably possible after his or her appointment; or
(b) has not sent a report referred to in subsection (1) or (3),
and is requested by a provisional trustee or trustee, or a
provisional liquidator or liquidator, as the case may be, to
send a report, the registered auditor must as soon as rea-
sonably possible—
(i) send the report together with a motivation as to
why a report was not sent; or
(ii) submit a notice that in the registered auditor’s
opinion no report needed to be submitted, together
with a justification of the opinion.
46. Limitation of liability.—(1) (a) The application of this
section is limited to an audit performed within the meaning of
paragraph (a) of the definition of “audit” in section (1).
(b) Despite section 44 (1) (a), for purposes of this section regis-
tered auditor means both the individual registered auditor and the
firm referred to in that section.
(2) In respect of any opinion expressed or report or statement
made by a registered auditor in the ordinary course of duties the
registered auditor does not incur any liability to a client or any
third party, unless it is proved that the opinion was expressed, or
the report or statement made, maliciously, fraudulently or pursuant
to a negligent performance of the registered auditor’s duties.
ss 46–48 Auditing: Legislation and Standards
(3) Despite subsection (2), a registered auditor incurs liability to
third parties who have relied on an opinion, report or statement of
that registered auditor for financial loss suffered as a result of
having relied thereon, only if it is proved that the opinion was
expressed, or the report or statement was made, pursuant to a negli-
gent performance of the registered auditor’s duties and the regis-
tered auditor—
(a) knew, or could in the particular circumstances reasonably
have been expected to know, at the time when the negli-
gence occurred in the performance of the duties pursuant
to which the opinion was expressed or the report or
statement was made—
(i) that the opinion, report or statement would be used
by a client to induce the third party to act or refrain
from acting in some way or to enter into the specif-
ic transaction into which the third party entered, or
any other transaction of a similar nature, with the
client or any other person; or
(ii) that the third party would rely on the opinion,
report or statement for the purpose of acting or re-
fraining from acting in some way or of entering in-
to the specific transaction into which the third party
entered, or any other transaction of a similar nature,
with the client or any other person; or
(b) in any way represented, at any time after the opinion was
expressed or the report or statement was made, to the
third party that the opinion, report or statement was cor-
rect, while at that time the registered auditor knew or
could in the particular circumstances reasonably have
been expected to know that the third party would rely on
that representation for the purpose of acting or refraining
from acting in some way or of entering into the specific
transaction into which the third party entered, or any oth-
er transaction of a similar nature, with the client or any
other person.
(4) Nothing in subsections (2) or (3) confers upon any person a
right of action against a registered auditor which, but for the
provisions of those subsections, the person would not have had.
(5) For the purposes of subsection (3) the fact that a registered
auditor performed the functions of a registered auditor is not in
itself proof that the registered auditor could reasonably have been
expected to know that—
(a) the client would act as contemplated in paragraph (a) (i)
of that subsection; or
(b) the third party would act as contemplated in paragraph
(a) (ii) or paragraph (b) of that subsection.
(6) Subsections (2) or (3) do not affect any additional or other
liability of a registered auditor arising from—
(a) a contract between a third party and the registered
auditor; or
(b) any other statutory provision or the common law.
(7) A registered auditor may incur liability to any partner, mem-
ber, shareholder, creditor or investor of an entity if the registered
auditor fails to report a reportable irregularity in accordance with
section 45.
(8) A registered auditor may not through an agreement or in any
other way limit or reduce the liability that such auditor may incur
in terms of this section.
CHAPTER V
ACCOUNTABILITY OF REGISTERED
AUDITORS
47. Inspections.—(1) (a) The Regulatory Board, or any per-
son authorised by it, may at any time inspect or review the practice
of a registered auditor and the effective implementation of any
training contracts and may for these purposes inspect and make
copies of any information, including but not limited to any working
papers, statements, correspondence, books or other documents, in
the possession or under the control of a registered auditor.
A-336
(b) Despite the generality of paragraph (a), the Regulatory
Board, or any person authorised by it, must at least every three
years inspect or review the practice of a registered auditor that
audits a public company as defined in section 1 of the Companies
Act, 2008 (Act No. 71 of 2008).
[Para. (b) substituted by s. 11 of Act No. 2 of 2015.]
(2) The Regulatory Board may recover the costs of an inspec-
tion under this section from the registered auditor concerned.
(3) A registered auditor must, at the request of the Regulatory
Board or the person authorised by it, produce any information,
including but not limited to any working papers, statements, cor-
respondence, books or other documents, and, subject to the provi-
sions of the Promotion of Access to Information Act, 2000 (Act
No. 2 of 2000) or any other law, may not refuse to produce such
information even though the registered auditor is of the opinion
that the information contains confidential information about a
client.
(4) A registered auditor who acts in good faith during an inspec-
tion of the public practice of the registered auditor and who
produces information under subsection (3) may not be held liable
criminally or under civil law because of the production of the
information.
(5) Subject to the Constitution and any other law, no person
who is or was concerned with the performance of any function
under this section may disclose any information obtained in the
performance of that function except—
(a) for the purpose of an investigation or a hearing under this
Chapter;
(b) if the person of necessity supplies it in the performance of
functions under this Act;
(c) when required to do so by order of a court of law;
(d) at the written request of. and to, any appropriate regulator
which requires it for the institution, or an investigation
with a view to the institution, of any disciplinary action or
criminal prosecution; or
(e) at the written request of, and to, any appropriate interna-
tional regulator of audits and auditors, that requires such
for the purpose of inspection with the consent of the reg-
istered auditor.
(6) A registered auditor must annually submit to the Regulatory
Board such information or returns as may be requested by the
Regulatory Board.
48. Investigation of charge of improper conduct.—(1) The
Regulatory Board must refer a matter brought against a registered
to the investigating committee appointed under section 20 if the
Regulatory Board—
(a) on reasonable grounds suspects that a registered auditor
has committed an act which may render him or her guilty
of improper conduct; or
(b) is of the opinion that a complaint or allegation of improp-
er conduct, whether prescribed or not, which has been
made against a registered auditor by any person appears
to be justified.
(2) (a) If, in the course of any proceedings before any court of
law, it appears to the court that there is prima facie proof of
improper conduct on the part of a registered auditor the court must
direct a copy of the record of the proceedings, or such part thereof
as relates to that conduct, to be sent to the Regulatory Board.
(b) Despite the provisions of any other law, whenever it appears
to an appropriate regulator that there is prima facie proof of
improper conduct on the part of a registered auditor, the official
must forthwith send a report of that conduct to the Regulatory
Board.
(c) The Regulatory Board must refer to an investigating com-
mittee any record or report received by it under this subsection.
(3) At the request of the Regulatory Board, the investigating
committee must—
(a) investigate the matter; and
A-337 Auditing Profession Act No. 26 of 2005
(b) obtain evidence to determine whether or not in its opinion
the registered auditor concerned should be charged and if
so, recommend to the Regulatory Board the charge or
charges that may be preferred against that registered audi-
tor.
(4) The investigating committee may not question the regis-
tered auditor concerned unless the investigating committee informs
the registered auditor that he or she—
(a) has the right to be assisted or represented by another
person; and
(b) is not obliged to make any statement and that any state-
ment made may be used in evidence against the registered
auditor.
(5) (a) In investigating a charge of improper conduct the inves-
tigating committee may—
(i) require the registered auditor to whom the charge relates or
any other person to produce to the committee any infor-
mation, including but not limited to any working papers,
statements, correspondence, books or other documents,
which is in the possession or under the control of that regis-
tered auditor or other person and which relates to the sub-
ject matter of the charge, including specifically, but without
limitation, any working papers of the registered auditor;
(ii) inspect and, if the investigating committee considers it ap-
propriate, retain any such information for the purposes of
its investigations; and
(iii) make copies of and take extracts from such information.
(b) The provisions of this subsection apply regardless of whether
the registered auditor is of the opinion that such information con-
tains confidential information about a client.
(6) Nothing in this section limits or affects the right of any pro-
fessional body to take disciplinary or other action against any of its
members in accordance with its constitution and rules.
(7) The investigating committee must, after the conclusion of
the investigation, submit a report stating its recommendations to
the Regulatory Board regarding any matter referred to it in terms of
this section.
(8) The Regulatory Board and investigating committee must in
exercising their powers or performing their duties in terms of this
section consider the delegation or assignment of such powers and
duties in accordance with section 19.
49. Charge of improper conduct.—(1) The Regulatory Board
must charge a registered auditor with improper conduct if the
investigating committee recommends that sufficient grounds exist
for a charge to be preferred against such a registered auditor.
(2) The Regulatory Board must furnish a charge sheet to the
registered auditor concerned by hand or registered mail.
(3) A charge sheet must inform the registered auditor charged—
(a) of the details and nature of the charge;
(b) that the registered auditor, in writing, admit or deny the
charge;
(c) that the registered auditor, together with the admission or
denial, submit a written explanation regarding the im-
proper conduct with which charged; and
(d) of the period, which must be reasonable but may not
exceed 60 days, within which the plea in terms of para-
graph (b) must be submitted to the Regulatory Board.
(4) If a registered auditor charged admits guilt to the charge, the
registered auditor is considered to have been found guilty as
charged.
(5) The Regulatory Board must on the expiry of the period re-
ferred to in subsection (3) (d) refer the charge sheet and any plea
received to the disciplinary committee to be dealt with in accord-
ance with section 50, or, where the registered auditor admitted is
guilty to the charge, to be dealt with in accordance with section 51.
ss 48–50
(6) The acquittal or the conviction of a registered auditor by a
court of law on a criminal charge is not a bar to proceedings
against the registered auditor under this Act on a charge of improp-
er conduct, even if the facts stated in the charge of improper
conduct would, if proved, constitute the offence stated in the
criminal charge on which the registered auditor was acquitted or
convicted or any other offence of which the registered auditor
might have been acquitted or convicted at the trial on the criminal
charge.
50. Disciplinary hearing.—(1) A disciplinary hearing must be
conducted by the disciplinary committee constituted in accordance
with section 24.
(2) (a) The disciplinary committee, for the purposes of this
section, must appoint a person to present the charge to the discipli-
nary committee, which person may be a member of the investigat-
ing committee.
(b) The disciplinary committee may at any time prior to or dur-
ing the disciplinary hearing terminate and replace a person referred
to in paragraph (a), if the committee is of the opinion that that
person is not fulfilling the obligations.
(3) The disciplinary committee may at any time prior to the
conclusion of a disciplinary hearing amend the charge sheet or a
charge on the grounds that an error exists in its formulation or that
a charge is not properly articulated in the original charge sheet.
(4) A hearing before the disciplinary committee is open to the
public except where, in the opinion of the chairperson of the
disciplinary committee, any part of the hearing should be held in
camera.
(5) (a) The disciplinary committee may, for the purposes of a
hearing, subpoena any person—
(i) who may be able to give material information concerning
the subject of the hearing; or
(ii) who it suspects or believes has in his or her possession or
custody or under such person’s control any information,
including but not limited to any working papers, state-
ments, correspondence, books or other documents, which
has any bearing on the subject of the hearing, to appear
before the disciplinary committee at the time and place
specified in the subpoena, to be questioned or to produce
any information, including but not limited to any working
papers, statements, correspondence, books or other doc-
uments.
(b) A subpoena issued in terms of paragraph (a) must—
(i) be in the prescribed form;
(ii) be signed by the chairperson of the disciplinary commit-
tee or, in that person’s absence, by any member of the
disciplinary committee; and
(iii) be served on the registered auditor concerned personally
or by sending it by registered mail.
(6) The disciplinary committee may retain any information,
including but not limited to any working papers, statements,
correspondence, books or other documents produced in terms of
subsection (5), for the duration of the hearing.
(7) The chairperson of the disciplinary committee may call upon
and administer an oath to, or take an affirmation from, any witness
at the hearing who was subpoenaed in terms of subsection (5).
(8) At a hearing the registered auditor charged—
(a) (i) may be assisted or represented by another person in
conducting the proceedings;
(ii) has the right to be heard;
(iii) may call witnesses;
(iv) may cross-examine any person called as a witness in
support of the charge; and
(v) may have access to documents produced in evi-
dence; and
ss 50–52 Auditing: Legislation and Standards
(b) (i) may admit at any time before the conclusion of the
disciplinary hearing that he or she is guilty of the
charge despite the fact that he or she denied the
charge or failed to react in terms of section
49 (3) (b) or (c); or
(ii) may, in the case where the person makes an ad-
mission in terms of subparagraph (i), be regarded as
guilty of improper conduct as charged.
(9) The person referred to in subsection (2) may during a hear-
ing—
(a) lead evidence and advance arguments in support of the
charge and cross-examine witnesses;
(b) question any person who was subpoenaed in terms of sub-
section (5); or
(c) call anyone to give evidence or to produce any infor-
mation, including but not limited to any working papers,
statements, correspondence, books or other documents in
his or her possession or custody or under his or her con-
trol, which such person suspects or believes to have a
bearing on the subject of the hearing.
(10) (a) A witness who has been subpoenaed may not—
(i) without sufficient cause, fail to attend the hearing at the
time and place specified in the subpoena;
(ii) refuse to be sworn in or to be affirmed as a witness;
(iii) without sufficient cause, fail to answer fully and satisfacto-
rily to the best of his or her knowledge to all questions
lawfully put to him or her; or
(iv) fail to produce any information, including but not limited to
any working papers, statements, correspondence, books
or other documents in his or her possession or custody or
under his or her control, which he or she has been re-
quired to produce.
(b) A witness who has been subpoenaed must remain in attend-
ance until excused by the chairperson of the disciplinary committee
from further attendance.
(c) A witness who has been subpoenaed may request that the
names of the members of the disciplinary committee be made
available to him or her.
(d) The law relating to privilege, as applicable to a witness
subpoenaed to give evidence or to produce a book, document or
object in a civil trial before a court of law may, with the necessary
changes, apply in relation to the examination of any information,
including but not limited to any working papers, statements, corre-
spondence, books or other documents, or to the production of such
information to the disciplinary committee by any person called in
terms of this section as a witness.
(e) A witness may not, after having been sworn in or having
been affirmed as a witness, give a false statement on any matter,
knowing that answer or statement to be false.
(f) A person may not prevent another person from complying
with a subpoena or from giving evidence or producing any infor-
mation, including but not limited to any working papers, state-
ments, correspondence, books or other documents, which he or she
is in terms of this section required to give or produce.
(11) The record of evidence which has a bearing on the charge
before the disciplinary committee, and which was presented before
any committee which investigated an event or conduct, is admissi-
ble without further evidence being led if—
(a) the record is accompanied by a certificate from the chair-
person; and
(b) the certificate certifies that the investigation was lawful,
reasonable and procedurally fair.
(12) If the improper conduct with which the registered auditor is
charged amounts to an offence of which he or she has been con-
victed by a court of law, a certified copy of the record of his or her
trial and conviction by that court is, on the identification of the
registered auditor as the person referred to in the record, sufficient
A-338
proof of the commission by him or her of that offence, unless the
conviction has been set aside by a superior court.
(13) In exercising its powers or performing its duties in terms of
this section, the disciplinary committee must consider the delega-
tion or assignment of such powers and duties in accordance with
section 19.
51. Proceedings after hearing.—(1) After the conclusion of
the hearing the disciplinary committee must, within 30 days—
(a) decide whether or not the registered auditor is guilty as
charged of improper conduct;
(b) if the disciplinary committee finds that the registered
auditor charged is guilty of improper conduct, take cogni-
sance of any aggravating or mitigating circumstances; and
(c) inform the registered auditor charged and the Regulatory
Board of the finding.
(2) A registered auditor found guilty of improper conduct in
terms of this section may—
(a) address the disciplinary committee in mitigation of sen-
tence; and
(b) call witnesses to give evidence on his or her behalf in
mitigation of the sentence.
(3) (a) If the registered auditor charged is found guilty of im-
proper conduct, or if the registered auditor admits to the charge, the
disciplinary committee must either—
(i) caution or reprimand the registered auditor;
(ii) impose on the registered auditor a fine not exceeding the
amount calculated according to the ratio for five year’s
imprisonment prescribed in terms of the Adjustment of
Fines Act, 1991 (Act No. 101 of 1991);
(iii) suspend the right to practice as a registered auditor for a
specific period; or
(iv) cancel the registration of the registered auditor concerned
and remove his or her name from the register referred to
in section 6.
(b) The disciplinary committee may impose more than one of
the sanctions referred to in paragraph (a).
(4) A disciplinary committee may order any person—
(a) who admitted guilt in terms of section 49 (4); or
(b) whose conduct was the subject of a hearing under section
50,
to pay such reasonable costs as have been incurred by an investi-
gating committee and the disciplinary committee in connection with
the investigation and hearing in question, or such part thereof as
the disciplinary committee considers just.
(5) The Regulatory Board may, if it deems it appropriate, pub-
lish the finding and the sanction imposed in terms of subsection
(3).
(6) (a) The Regulatory Board must give effect to the decision
of the disciplinary committee.
(b) Where an order as to costs has been made under subsection
(4), the amount thereof shall be recoverable by the Regulatory
Board from the person concerned, and any amount so recovered
must be paid into the funds of the Regulatory Board.
51A. Application of certain provisions to registered candi-
date auditors.—Sections 48, 49, 50 and 51 apply to registered
candidate auditors with the necessary changes.
[S. 51A inserted by s. 12 of Act No. 2 of 2015.]
CHAPTER VI
OFFENCES
52. Reportable irregularities and false statements in con-
nection with audits.—(1) A registered auditor who—
(a) fails to report a reportable irregularity in accordance with
section 45; or
(b) for the purposes of, or in connection with, the audit of any
financial statement knowingly or recklessly expresses an
opinion or makes a report or other statement which is false
in a material respect,
A-339 Auditing Profession Act No. 26 of 2005
shall be guilty of an offence.
(2) Where the registered auditor failing to report a reportable
irregularity or conducting the audit is a firm, subsection (1) applies
to individual registered auditor referred to in section 44 (1) (a), but
nothing in this subsection prevents the taking of disciplinary action
under Chapter V in respect of the firm concerned, in addition to or
instead of the individual registered auditor referred to in section 44
(1) (a).
(3) A person convicted of an offence in a court of law under this
section is liable to a fine or to imprisonment for a term not exceed-
ing 10 years or to both a fine and such imprisonment.
53. Offences relating to disciplinary hearings.—(1) Subject
to section 50 (4), a person is guilty of an offence if—
(a) having been duly summoned under section 50, the person
fails, without sufficient cause, to attend at the time and
place specified in the summons, or to remain in attend-
ance until excused from further attendance by the chair-
person of the disciplinary committee;
(b) having been called under section 50, the person refuses to
be sworn or to affirm as a witness or fails without suffi-
cient cause to answer fully and satisfactorily to the best of
the person’s knowledge and belief all questions lawfully
put concerning the subject of the hearing; or
(c) having been called under section 50 and having posses-
sion, custody or control of any information, including but
not limited to any working papers, statements, corre-
spondence, books or other documents, refuses to produce
it when required to do so.
(2) A witness before a disciplinary committee who, having been
duly sworn or having made an affirmation, gives a false answer to
any question lawfully put to the witness or makes a false statement
on any matter, knowing the answer or statement to be false, is
guilty of an offence.
(3) Any person who wilfully hinders any person acting in the
capacity of a member of a disciplinary committee in the exercise of
any power conferred upon that person by or under section 51 is
guilty of an offence.
(4) A person convicted of an offence in a court of law under this
section is liable to a fine or to imprisonment for a period of five
years or to both a fine and such imprisonment.
54. Offences relating to public practice.—(1) A person who
contravenes sections 41, 43 or 44 is guilty of an offence and is
liable to a fine or in default of payment to imprisonment not ex-
ceeding five years or to both fine and such imprisonment.
(2) Any person who—
(a) contravenes any provision of section 47; or
(b) obstructs or hinders any person in the performance of
functions under that section,
is guilty of an offence and liable on conviction to a fine or to impris-
onment for a period not exceeding one year.
CHAPTER VII
GENERAL MATTERS
55. Powers of Minister.—(1) The Minister may, by notice in
the Gazette, make regulations regarding—
(a) any matter relating to the functioning of the Regulatory
Board that is necessary to ensure the Regulatory Board’s
efficiency or to promote good order; and
(b) any ancillary or incidental administrative or procedural
matter that it is necessary to prescribe for the proper im-
plementation or administration of this Act.
(2) The Minister may delegate any of his or her powers in terms
of this Act, excluding the power to make such regulations and the
power to appoint the members of the Regulatory Board, to the
Director-General or any other official of the National Treasury.
56. Indemnity.—Neither the Regulatory Board or any member
or employee or chief executive thereof, nor a committee of the
ss 52–59
Regulatory Board or any member thereof, nor the Public Account-
ants’ and Auditors’ Board or any member thereof, incurs any
liability in respect of any act or omission performed in good faith
under or by virtue of a provision in this Act, unless that perfor-
mance was grossly negligent.
57. Administrative matters.—Subject to the provisions of this
Act, where the Regulatory Board takes a decision or any other step
of an administrative nature under this Act that affects the rights and
duties of another person, the Regulatory Board must—
(a) publish or otherwise make known the nature and effect
thereof in a written, printed or electronic manner to any
affected persons and bodies in a manner designed to en-
sure that they acquire full knowledge thereof; and
(b) comply with any applicable requirement of just adminis-
trative action, including the furnishing of reasons for dis-
cretionary decisions imposed by, under or by virtue of
any law.
58. Repeal and amendment of laws.—(1) Subject to section
60, the laws mentioned in the Schedule are hereby repealed to the
extent set out in the third column of that Schedule.
(2) With effect from the date on which this Act comes into force,
and in respect of damages suffered by any person as a result of an
act or omission of a registered auditor committed on or after that
date, the reference in section 1 of the Apportionment of Damages
Act, 1956 (Act No. 34 of 1956), to “damage” must be construed as
a reference also to damage caused by a breach, by the registered
auditor, of a term of a contract concluded with the registered
auditor.
59. Transitional provisions.—(1) (a) From the date of com-
mencement of this Act, the Regulatory Board must be regarded as
the successor to the Public Accountants’ and Auditors’ Board.
(b) In order to give effect to that succession—
(i) any board members of the Public Accountants’ and
Auditors’ Board who immediately prior to the com-
mencement of this Act were members of that Board, must
be deemed to have been appointed members of the Regu-
latory Board for the remainder of the period for which
each member was appointed as a board member under the
Public Accountants’ and Auditors’ Act, 1991;
(ii) all property which immediately before the date this Act
comes into force was property of the Public Accountants’
and Auditors’ Board shall, by virtue of this Act, without
any assignment or other form of transfer or the need for
any consent become on that date property of the Regula-
tory Board;
(iii) all rights or obligations of the Public Accountants’ and
Auditors’ Board, whether contractual or otherwise, which
were in existence immediately before the date this Act
comes into force and do not fall within subparagraph (ii)
shall become, on that date, rights or obligations of the
Regulatory Board and, in their application or construc-
tion, be treated for all purposes as if the Public Account-
ants’ and Auditors’ Board and the Regulatory Board were
the same person in law;
(iv) regarding anything done or falling to be done, or any
other event occurring, on or after the date this Act comes
into force, any reference in an existing document to the
Public Accountants’ and Auditors’ Board must be con-
strued as or, as the case may require, as including a ref-
erence to the Regulatory Board; and
(v) for the purposes only of section 197 of the Labour
Relations Act, 1995 (Act No. 6 of 1995), the provisions
of this subsection must be regarded as the transfer of a
business from the Public Accountants’ and Auditors’
Board to the Regulatory Board.
(c) The Registrar of Deeds concerned must, at the request of the
Regulatory Board and on submission of the relevant title deeds and
other documents, make the necessary entries and endorsements in
s 59–Schedule Auditing: Legislation and Standards
respect of his or her registers and other documents in order to give
effect to a transfer in terms of subsection (1).
(d) No transfer duty, stamp duty or other fees shall be payable
in respect of such transfer, entry or endorsement.
(2) Subject to subsection (3), any unfinished business of the
Public Accountants’ and Auditors’ Board on the date this Act
comes into force, which is dealt with by that Board under a provi-
sion of the Public Accountants’ and Auditors’ Act, 1991, and for
which no corresponding provision appears in this Act, must be
completed by that Board as if this Act had not been passed.
(3) (a) Any proceedings in connection with an application for
registration as accountant and auditor still pending on the com-
mencement date must, with effect from that date, be deemed to be
proceedings for registration as an auditor contemplated in this Act
and must further be administered, considered and completed by the
Regulatory Board.
(b) In the case of any such proceedings, and in the case of any
new applications for registration as an auditor received by the
Regulatory Board, the requirements for registration set out in
section 15 (2) and (4) of the Public Accountants’ and Auditors’
Act, 1991, must despite the repeal of that Act and any inconsisten-
cy with a provision of this Act be deemed to be still applicable
until a date determined by the Minister by notice in the Gazette.
(4) The Education and Training Committee of the Public Ac-
countants’ and Auditors’ Board, as it existed immediately prior to
the commencement date, is deemed to be a committee established
by the Regulatory Board under section 20 to determine the re-
quirements for the professional development and achievement of
professional competence.
(5) Any committee performing, immediately prior to the com-
mencement date, an investigating or disciplinary function under the
Public Accountants’ and Auditors’ Act, 1991, remains validly
constituted and must complete its functions after that date as if this
Act had not been passed.
(6) Any person who immediately prior to the commencement
date was registered as an accountant and auditor under the Public
Accountants’ and Auditors’ Act, 1991, is deemed to be registered
as an auditor under this Act.
Schedule
LAWS REPEALED
No. and year of Act Short title
Act No. 80 of 1991 Public Accountants’ and Auditors’ Act, 1991
Act No. 88 of 1996 Abolition of Restrictions on the Jurisdiction of Courts Act, 1996
COMMENCEMENT OF THIS ACT
Date of The whole Act/ Proclamation/
commencement Sections Notice No.
1 April 2006 The whole act GN 316
A-340
(7) Any training contract registered, any recognition of educa-
tional institutions or recognition of training officers under the
Public Accountants’ and Auditors’ Act, 1991, is deemed to be a
registration or recognition under this Act.
(8) (a) The Examination Regulations as contained in the Manu-
al of Information: Guidelines for Registered Accountants and
Auditors, issued by the Public Accountants’ and Auditors’ Board
as at the commencement date, must be deemed to have been
prescribed by the Regulatory Board in respect of registered audi-
tors.
(b) The Disciplinary Regulations as contained in the said Manu-
al (excluding paragraphs 2.1 to 2.1.21, inclusive, thereof) must be
deemed to have been prescribed by the Regulatory Board, to the
extent that the Disciplinary Regulations are consistent with this
Act.
(c) The Code of Professional Conduct as contained in the said
Manual (including paragraphs 1 to 2.1.21, inclusive, of the Disci-
plinary Regulations) must be deemed to have been prescribed by
the Regulatory Board.
(d) The Circulars as contained in the said Manual must be
deemed to have been issued by the Regulatory Board.
(e) The Recognition Model as contained in the said Manual
must be deemed to have been prescribed by the Regulatory Board.
(f) The auditing pronouncements issued by the Public Account-
ants’ and Auditors’ Board are, with effect from the commencement
date, deemed to have been issued by the Regulatory Board.
(9) Subject to the provisions of this Act, on and after the com-
mencement date, anything which was done under a provision of a
law repealed by section 58 and which could be done under a
corresponding provision of this Act is deemed to have been done
under that corresponding provision.
(10) A reference in any of the preceding subsections to the
commencement date is a reference to the date that subsection
comes into force.
60. Short title and commencement.—This Act is called the
Auditing Profession Act, 2005, and comes into operation on a date
determined by the Minister by notice in the Gazette.
Extent of repeal
The repeal of the whole.
The repeal of section 107.
Government Gazette Date of Government Gazette
28698 31 March 2006
A-341 Auditing Profession Act No. 26 of 2005
References are to sections of the Act.
A disciplinary, s. 20(2)(f); s. 24
Accreditation
application for, s. 5(b); s. 32
cancelling of, give notice in writing, s. 35(2)(b)
definition, s. 1
effect of termination of, on registered auditors and registered
candidate auditors, s. 36
extend, Regulatory Board may, s. 35(2)(d)
fees, s. 8(1)(a)
minimum requirements, s. 5(a)
period of validity of the, s. 5(c)
professional body apply to Regulatory Board for, s. 32(1)
requirements for, s. 33
retaining, s. 34
terminate the, s. 5(e)
termination of, s. 35
Act
Adjustment of Fines, 1991 (Act No. 101 of 1991), s. 51(3)(a)(ii)
Apportionment of Damages, 1956 (Act No. 34 of 1956), s. 58(2)
Companies, 2008 (Act No. 71 of 2008), s. 38(4)
Higher Education, 1997 (Act No. 101 of 1997), s. 22(1)(e)
Labour Relations, 1995 (Act No. 6 of 1995), s. 59(1)(b)(v)
Prevention and Combating of Corrupt Activities, 2004 (Act No. 12
of 2004), s. 37(3)(b)
Promotion of Access to Information, 2000 (Act No. 2 of 2000),
s. 47(3)
Public Accountants’ and Auditors’, 1951 (Act No. 51 of 1951),
definition, s. 1
Public Accountants’ and Auditors’, 1991 (Act No. 80 of 1991),
definition, s. 1
Public Audit, 2004 (Act No. 25 of 2004), s. 41(3)(c)
Public Finance Management, 1999 (Act No. 1 of 1999), definition,
s. 1
Securities Services, 2004 (Act No. 36 of 2004), s. 22(1)(f)
South African Revenue Services, 1997 (Act No. 34 of 1997),
s. 22(1)(g)
Audit
committee for, standards, s. 22
definition, s. 1
direction and appropriateness of, s. 22(2)(c)(iv)
duties in relation to, s. 44
examination of financial statements, definition “audit”, s. 1
experience in the teaching of, s. 22(1)(e)
international regulator of, s. 47(5)(e)
irregularities and false statements in connection with, s. 52
laws relating to the, s. 44(3)(f)
matter relating to, s. 4(2)(c)
person not registered may not perform any, s. 41(2)(a)(i)
registered auditor must assume responsibility for any, s. 41(2)(b)
three persons representing users of, s. 21(1)(b)
users of, reports, s. 22(2)(c)(i)
Auditing pronouncements
consistency between, and accepted international pronouncements,
s. 22(2)(c)(iii)
definition, s. 1
issued by the Public Accountants’ and Auditors’ Board, s. 59(8)(f)
Regulatory Board prescribes, s. 22(2)(a)
Regulatory Board promotes and ensures relevance of, s. 22(2)(c)
Auditor-General, s. 22(1)(c); 41(3)(c)
C
Chief executive officer, s. 18
accountable to the Regulatory Board, s. 18(1)
enter into a performance agreement with the Regulatory Board,
s. 18(2)
responsible for day-to-day management of the Regulatory Board,
s. 18(1)
Client
confidential information about a, s. 47(3)
definition, s. 1
opinion, report or statement would be used by the, s. 46(3)(a)(i)
Commissioner of the South African Revenue Services, s. 22(1)(g)
Committee
appointment of members to, s. 23
auditing standards, for, s. 20(2)(b); s. 22
Index
Committee (continued)
auditor ethics, for, s. 20(2)(a); s. 21
disciplinary, chaired by retired judge or senior advocate,
s. 24(2)(a)
disciplinary hearing, s. 50
Education and Training, s. 59(4)
education, training and professional development, s. 20(2)(c)
elect a chairperson from among its members, s. 22(3)(d)
establishment of, s. 20
inspect and retain information, s. 48(5)(a)(ii)
inspection, s. 20(2)(d)
investigating, s. 20(2)(e); s. 24
meet at least four times a year, must, s. 20(5)
Company
branch office of any, s. 41(9)
definition, s. 1
every shareholder is a director, s. 38(3)(c)
memorandum of incorporation, s. 38(3)(a), (d)
public, s. 47(1)(b)
public interest, s. 47(1)(b)
register as a registered auditor, s. 38(3)
registered auditors are shareholders, s. 38(3)(b)
registration automatically lapses, s. 39(4)
shareholder dies, s. 38(3)(c)(i)
Constitution of the Republic of South Africa, definition “organ of
state”, s. 1
D
Delegation, s. 19
definition, s. 1
instruction or request to perform or assist, definition “delegation”,
s. 1
limitations and conditions, subject to, s. 19(2)(a)
Regulatory Board must develop a system of, s. 19(1)
subdelegation, may authorise, s. 19(2)(b)
Disciplinary committee, s. 24
amend the charge sheet or a charge, s. 50(3)
caution or reprimand the registered auditor, s. 51(3)(a)(i)
chaired by a retired judge or senior advocate, s. 24(2)(a)
consist of a majority of persons not registered as auditors,
s. 24(2)(b)
disciplinary hearing must be conducted by the, s. 50(1)
hearing is open to the public, s. 50(4)
powers and duties delegated and assigned by the Regulatory
Board, s. 19(3)
subpoena signed by the chairperson of the, s. 50(5)(b)(ii)
E
Ensure
adequate risk management and internal control practices in place,
s. 9(m)
definition, s. 1
members are disciplined, s. 33(c)
reasonably necessary and expedient steps, definition “ensure”, s. 1
registers open to inspection, s. 6(1)(e)
Regulatory Board complies with the Act, s. 28(2)(a)
Regulatory Board is managed responsibly and transparently,
s. 28(2)(b)
relevance of auditing pronouncements, s. 22(2)(c)
Executive Officer of the Financial Services Board, s. 22(1)(d)
F
Firm
appointed by an entity to perform an audit, s. 44(1)(a)
definition, s. 1
disciplinary action in respect of a, s. 52(2)
failing to report a reportable irregularity, s. 52(2)
letterhead bearing the, name or title, s. 41(6)(a)
name or title, s. 43(2)(a)
partnership, company or sole proprietor, definition “firm”, s. 1
place or places of business of, s. 43(2)(b)
registered as an auditor, definition “registered auditor”, s. 1
registration as registered auditors, s. 38
Regulatory Board must register the, s. 38(2)
Index Auditing: Legislation and Standards
I Prescribe (continued)
Improper conduct
charge of, s. 49
complaint or allegation of, s. 48(1)(b)
definition, s. 1
determine what constitutes, s. 21(2)(a)
guilty of, s. 13(1)(g); s. 39(1)(c);
s. 50(8)(b)(ii)
imposing sanctions for, s. 4(1)(a)(ii)
investigating alleged, s. 4(1)(a)(i)
investigation of charge of, s. 48
non-compliance with this Act, definition “improper conduct”, s. 1
prima facie proof of, s. 48(2)(a)
procedures for disciplinary action, s. 2(e)
written explanation regarding the, s. 49(3)(c)
Indemnity, s. 56
International Auditing and Assurance Standards Board, s. 22(3)(a)
M qualify for accreditation, s. 33
Management board
body or individual responsible for the management of the busi-
ness, definition “management board”, s. 1
definition, s. 1
directors of the company, definition “management board”, s. 1
discuss the report with the members of the, s. 45(3)(a)
opportunity to make representation, s. 45(3)(b)
Minister
amount as may be prescribed by, s. 37(3)(b)
annual budget and strategic plan submitted to the, s. 26
appoint an alternate member, s. 11(6)
appoint competent persons, s. 11(2)
appoint persons as caretakers, may, s. 12(6)
call or convene a meeting of the Regulatory Board, s. 29(3)
definition, s. 1
delegate any of his powers, s. 55(2)
designate officials of the National Treasury, s. 29(1)
ensure Regulatory Board complies with the Act, s. 28(2)(a)
ensure Regulatory Board managed responsibly and transparently,
s. 28(2)(b)
establish and maintain clear channels of communication,
s. 28(2)(c)
executive authority for the Regulatory Board, s. 28(1)
extend the period of office, may, s. 12(3)
Finance, of, definition “Minister”, s. 1
monitor and annually review performance of the Regulatory
Board, s. 28(2)(d)
powers of, s. 55
prescribe code of conduct for members, s. 17(e)
Regulatory Board appointed by the, s. 11(1)
Regulatory Board is accountable to the, s. 28(1)
terminate the period of office, may, s. 12(4)
O Gazette or official publication or website of the Regulatory Board,
Objects of Act, s. 2
internationally comparable ethical standards, improve the devel-
opment and maintenance of, s. 2(c)
protect the public by regulating audits, s. 2(a)
provide for procedures for disciplinary action, s. 2(e)
provide for the establishment of a Regulatory Board, s. 2(b)
Organ of state
definition, s. 1
Regulatory Board may confer with any, s. 9(k)
Regulatory Board may obtain the services of any, s. 9(i)
P
Prescribe
annual fees, s. 8(1)(b)
auditing pronouncements, s. 22(2)(a)
auditing standards, s. 4(1)(e)
competency requirements, s. 7(1)(f)
definition, s. 1
fees, s. 8(1)
implementation or administration of this Act, s. 55(1)(b)
A-342
minimum requirements
accreditation, s. 5(a)
qualifications, competency standards and, for registration,
s. 6(a)
period of validity of
accreditation, s. 5(c)
registration, s. 6(a)
renewal of registration and re-registration,
s. 6(g)
training requirements, s. 7(1)(d)
Professional body
accreditation lapses, if, s. 35(1); s. 36
apply to the Regulatory Board for accreditation, s. 32(1)
body of, or representing, s. 1
definition, s. 1
education, training and professional development, s. 7(2)(d)
examination conducted by an accredited, s. 8(1)(d)
members of an accredited, s. 7(3)(b)
Regulatory Board may extend the accreditation of, s. 35(2)(d)
Regulatory Board may suspend the accreditation of, s. 35(2)(c)
renounce its accreditation, may, s. 35(3)
requirements for accreditation, continues to comply with, s. 34
Public accountant
definition, s. 1
public practice, person who is engaged in, definition “public
accountant”, s. 1
registered auditor may use the description, s. 41(1)
Public Accountants’ and Auditors’ Board
auditing pronouncements issued by, s. 59(8)(f)
board members of the, s. 59(1)(b)(i)
definition, s. 1
Education and Training Committee of the, s. 59(4)
indemnity, s. 56
Manual of Information: Guidelines for Registered Accountants
and Auditors, issued by the, s. 59(8)
property of the, s. 59(1)(b)(ii)
Regulatory Board, successor to the, s. 59(1)
rights or obligations of the, s. 59(1)(b)(iii)
unfinished business of the, s. 59(2)
Public practice
definition, s. 1
inspection of the, s. 47(4)
offences relating to, s. 54
person who is suspended from, s. 4(a)
registered auditor must have paid all applicable fees, to engage in,
s. 41(10)
registered auditor only, may engage in, s. 41(1)
registered auditor who places professional services at disposal of
the public for reward, definition “public practice”, s. 1
Publish
date from which appointment takes effect, s. 11(7)(b)
definition, s. 1
draft of the proposed rule in the Gazette, s. 10(2)
definition “publish”, s. 1
journal or any other publication, s. 4(2)(b)
name of every person appointed, s. 11(7)(a)
notice of the cancellation of registration, s. 39(8)
period for which appointment is made, s. 11(7)(c)
withdrawal of recognition, s. 7(3)(c)
R
Registered auditor
acquittal or conviction by a court of law, s. 49(6)
admit or deny the charge in writing, s. 49(3)(b)
admits guilt to the charge, if, s. 49(4)
annually submit information or returns, s. 47(6)
bursaries or loans to prospective, s. 9(e)
carried out the audit free from any restrictions, s. 44(3)(a)
carry out investigations, s. 45(5)
charge of improper conduct, s. 49
committee for auditing standards, at least five members are,
s. 22(1)(a)
committee for auditor ethics, at least three members are, s. 21(1)
compliance with rules, s. 42
A-343 Auditing Profession Act No. 26 of 2005 Index

Registered auditor (continued) Regulatory Board (continued)

complied with all laws relating to the audit, s. 44(3)(f)
conflict of interest in respect of the entity, s. 44(6)
contract between a third party and the, s. 46(6)(a)
damage caused by a breach, s. 58(2)
definition, s. 1
duties in relation to audit, s. 44
duty to report on irregularities, s. 45
education, training and competency requirements, s. 37(2)(a)
effect of termination of accreditation on, s. 36
engage in public practice, may, s. 41(1)
entitled to perform the audit identified, s. 41(2)(b)
fails to report a reportable irregularity, s. 46(7)
full names of all partners, co-directors or co-members, s. 43(2)(c)
improper conduct by, s. 21(2)(a)
improper conduct, guilty of, s. 48(1)(a)
improper conduct, prima facie proof of, s. 48(2)
individual or firm registered as an auditor, definition “registered
auditor”, s. 1
inform of the details and nature of the charge, s. 49(3)(a)
Investigating and Disciplinary committees must include, s. 24
limitation of liability, s. 46
name or title under which, practices, s. 43(2)(a)
negligent performance of duties, s. 46(3)(a)(i)
obtained all information, vouchers and other documents, s.
44(3)(d)
paid all applicable prescribed fees, s. 41(10)
personal supervision or direction of that, s. 41(6)(b)
place or places of business, s. 43(2)(b)
proceedings after hearing, s. 51
produce any information, papers, statements, s. 47(3)
registers of, open to inspection, s. 6(1)(e)
registration of, s. 6
registration of firms as, s. 38
registration of individuals as, s. 37
Regulatory Board may cancel the registration of the, s. 36(3); s. 39
renewal of registration and re-registration, s. 40
right of action against, s. 46(4)
satisfied himself of the existence of all assets and liabilities shown,
s. 44(3)(b)
subpoena issued must be served on the, personally, s. 50(5)(b)(iii)
supervision of registered candidate auditor, definition “registered
candidate auditor”, s. 1
Registered candidate auditor see also Registered auditor
application of certain provisions, s. 51A
compliance with rules, s. 42
definition, s. 1
education, training and competency requirements, s. 37(2)(a)
effect of termination of accreditation on, s. 36
improper conduct by, s. 21(2)(a)
registers of, open to inspection, s. 6(1)(e)
registration of individuals as, s. 37
Regulatory Board may cancel the registration of the, s. 36(3); s. 39
renewal of registration and re-registration, s. 40
Registrar of Banks, s. 22(1)(h)
Registrar of deeds, s. 59(1)(c)
Regulatory Board
annual budget and strategic plan, s. 26
appointment of members of the, s. 11
approve and register training contracts, s. 7(1)(e)
borrow or raise money, may, s. 9(d)
chairperson and deputy chairperson, s. 14
charge of improper conduct, s. 49
collect fees and invest funds, may, s. 9(c)
conduct disciplinary hearings, s. 4(3)(a)(ii)
conduct practice reviews or inspections, s. 4(1)(a)(iv)
confer with any organ of state, may, s. 9(k)
consider and decide on any application, s. 6(1)(b)
decisions, s. 16
definition, s. 1
delegate appropriate powers in writing, may, s. 19(1)(a)(i)
determine its own staff establishment, s. 9(a)
develop a system of delegation, must, s. 19(1)
disqualification from membership and vacation of office, s. 13
duties of members, s. 17
education fund, establish and administer an, s. 7(2)(c)
encourage education and research, s. 4(1)(d)
establishment and legal status, s. 3
establishment of committees, s. 20
finance any publications, may, s. 9(f)
functions with regard to,
accreditation of professional bodies, s. 5
education, training and professional development, s. 7
fees and charges, s. 8
registration of auditors and candidate auditors, s. 6
funding, s. 25
general functions, s. 4
general powers, s. 9
grant bursaries or loans, may, s. 9(e)
grant exemption from payment of any fees, may, s. 8(3)
indemnity, s. 56
Independent Regulatory Board for Auditors, definition
“Regulatory Board”, s. 1
inspections, s. 47
investigate alleged improper conduct, s. 4(1)(a)(i); s. 48
investigations, s. 30
invite nominations from members of the public, s. 11(5)
keep registers, s. 6(1)(d)
majority of the members constitutes a quorum, s. 15(4)
meetings, s. 15
meets at least four times every year, s. 15(1)
member may be reappointed, s. 12(2)
members appointed by the Minister, s. 11(1)
participate in the activities of international bodies, s. 4(2)(a)
perform legal acts, may, s. 9(n)
powers to make rules, s. 10
prescribe,
accreditation and registration fees, s. 8(1)(a)
annual fees, s. 8(1)(b)
date on which any fee is payable, s. 8(1)(c)
qualifications, competency standards and requirements for regis-
tration, s. 6(1)(a)
renewal of registration and re-registration,
s. 6(1)(g)
period of validity of registration, s. 6(1)(c)
standards of professional competence, s. 4(1)(c)
training requirements, must, s. 7(1)(d)
provide funding to its committees, must, s. 20(4)
publish a draft of the rule in the Gazette, must, s. 10(2)(a)
register of accredited bodies, keep, s. 5(d)
registration of
individuals, s. 37
firms, s. 38
renewal of registration and re-registration,
s. 40
rules prescribed by, s. 42
subject to the Constitution and the law, s. 3(2)
take steps to protect the public, s. 4(1)(b)
term of office of members of, s. 12
terminate the registration of registered auditors and registered
candidate auditors, s. 6(1)(f), s. 39
Reportable irregularity, s. 52
definition, s. 1
registered auditor fails to report a, s. 46(7)
report must give particulars of the, s. 45(1)(b)
unlawful act or omission, definition “reportable irregularity”, s. 1
Rule
compliance with, s. 42
definition, s. 1
power to make, s. 10
prescribed by the Regulatory Board, definition “rule”, s. 1
publish a draft of the proposed, in the Gazette, s. 10(2)(a)
T
Third party
contract between, and the registered auditor, s. 46(6)(a)
definition, s. 1
liability to any, by registered auditor, s. 46(2)
rely on the opinion, report or statement, s. 46(3)(a)(ii)
Training contract
definition, s. 1
effective implementation of any, s. 47(1)(a)
Regulatory Board must approve and register, s. 7(1)(e)
Regulatory Board must prescribe the form for, s. 7(1)(d)
Public Finance Management Act
No. 1 of 1999
A-347 Public Finance Management Act No. 1 of 1999 Arrangement of sections

PUBLIC FINANCE MANAGEMENT ACT 3. Institutions to which this Act applies

4. Amendments to this Act
NO. 1 OF 1999
[ASSENTED TO 2 MARCH 1999] CHAPTER 2
[DATE OF COMMENCEMENT: 1 APRIL 2000] NATIONAL TREASURY AND NATIONAL REVENUE FUND
(Unless otherwise indicated) Part 1: National Treasury
(English text signed by the President) 5. Establishment
6. Functions and powers
7. Banking, cash management and
investment framework
as amended by
8. Annual consolidated financial statements
Public Finance Management Amendment Act, 9. Financial statistics and aggregations
No. 29 of 1999 10. Delegations by National Treasury
Local Government: Municipal Systems Act,
No. 32 of 2000 Part 2: National Revenue Fund
Judicial Officers (Amendment of Conditions of Service) Act, No. 11. Control of National Revenue Fund
28 of 2003 12. Deposits and withdrawals by South
[with effect from 1 November 2003] African Revenue Services in Revenue Funds
Public Audit Act, No. 25 of 2004 13. Deposits into National Revenue Fund
South African Airways Act, No. 5 of 2007 14. Withdrawal of exclusions
[with effect from 13 July 2009]
15. Withdrawals and investments from
National Revenue Fund
Public Service Amendment Act, No. 30 of 2007 16. Use of funds in emergency situations
[with effect from 1 April 2008]
Broadband Infraco Act, No. 33 of 2007 CHAPTER 3
South African Express Act, No. 34 of 2007 PROVINCIAL TREASURIES AND
Financial Management of Parliament Act, PROVINCIAL REVENUE FUNDS
No. 10 of 2009
National Health Amendment Act, No. 12 of 2013 Part 1: Provincial Treasuries
[with effect from 2 September 2013, unless
17. Establishment
otherwise indicated] 18. Functions and powers
19. Annual consolidated financial statements
20. Delegations by provincial treasuries

GENERAL NOTE Part 2: Provincial Revenue Funds

21. Control of Provincial Revenue Fund
Please note that the Preferential Procurement Policy Framework Act,
No. 5 of 2000 and its Regulations shall apply to all public entities listed in
22. Deposits by provincial departments into Provincial
Schedules 2 and 3 of this Act, under GNR.501 published in Government Revenue Fund
Gazette No. 34350 dated 8 June 2011, with effect from 7 December 2011. 23. Withdrawal of exclusions from Provincial Revenue
Funds
24. Withdrawals from Provincial Revenue Funds
25. Use of funds in emergency situations
EDITORIAL NOTE CHAPTER 4
1. Please note that the wording and section numbering in this Act NATIONAL AND PROVINCIAL BUDGETS
correctly reflects the Act and the amending Act as published in 26. Annual appropriations
Government Gazette Nos. 19814 of 2 March 1999, and 19978 of 30
27. National annual budgets
April 1999 respectively. In addition, we draw your attention to
the fact that there are inconsistencies between the English and 28. Multi-year budget projections
Afrikaans versions of the Act despite the amendments. 29. Expenditure before annual budget is passed
2. Please note that details of Notices published in the Government 30. National adjustments budgets
Gazettes that amend the Schedules to the Act are annotated at the 31. Provincial adjustments budgets
beginning of the Schedules. 32. Publishing of reports on state of budget
33. Withholding of appropriated funds
34. Unauthorised expenditure
35. Unfunded mandates
ACT
To regulate financial management in the national government
and provincial governments; to ensure that all revenue, expendi- CHAPTER 5
ture, assets and liabilities of those governments are managed DEPARTMENTS AND CONSTITUTIONAL INSTITUTIONS
efficiently and effectively; to provide for the responsibilities of
persons entrusted with financial management in those govern- Part 1: Appointment of Accounting Officers
ments; and to provide for matters connected therewith. 36. Accounting officers
[Long title substituted by s. 47 of Act No. 29 of 1999.]
37. Acting accounting officers
Part 2: Responsibilities of Accounting Officers
ARRANGEMENT OF SECTIONS 38. General responsibilities of accounting officers
[Arrangement of sections amended by s. 48 of Act No. 29 of 1999.] 39. Accounting officers’ responsibilities relating to
budgetary control
CHAPTER 1 40. Accounting officers’ reporting responsibilities
INTERPRETATION, OBJECT, APPLICATION AND 41. Information to be submitted by accounting officers
AMENDMENT OF THIS ACT 42. Accounting officers’ responsibilities when assets and
1. Definitions liabilities are transferred
2. Object of this Act 43. Virement between main divisions within votes
Arrangement of sections–s 1 Auditing: Legislation and Standards A-348

Part 3: Other Officials of Departments and Constitutional CHAPTER 10

Institutions FINANCIAL MISCONDUCT
44. Assignment of powers and duties by accounting
officers Part 1: Disciplinary Proceedings
45. Responsibilities of other officials 81. Financial misconduct by officials in departments and
constitutional institutions
CHAPTER 6 82. Financial misconduct by treasury officials
PUBLIC ENTITIES 83. Financial misconduct by accounting authorities and
officials of public entities
Part 1: Application of this Chapter
84. Applicable legal regime for disciplinary proceedings
46. Application
47. Unlisted public entities 85. Regulations on financial misconduct procedures
48. Classification of public entities Part 2: Criminal Proceedings
Part 2: Accounting Authorities for Public Entities 86. Offences and penalties
49. Accounting authorities
CHAPTER 11
50. Fiduciary duties of accounting authorities
ACCOUNTING STANDARDS BOARD
51. General responsibilities of accounting authorities
52. Annual budget and corporate plan by Schedule 2 87. Establishment
public entities and government business enterprises 88. Composition
53. Annual budgets by non-business Schedule 3 public 89. Functions of Board
entities 90. Powers of Board
54. Information to be submitted by accounting authorities 91. Regulations on accounting standards of Board
55. Annual report and financial statements
CHAPTER 12
Part 3: Other Officials of Public Entities MISCELLANEOUS
56. Assignment of powers and duties by accounting 92. Exemptions
authorities
93. Transitional provisions
57. Responsibilities of other officials
94. Repeal of legislation
Part 4: External Auditors 95. Short title and commencement
58. ...... Schedule 1. Constitutional institutions
59. ...... Schedule 2. Major public entities
60. ......
Schedule 3. Other public entities
61. ......
62. ...... Schedule 4. Exclusions from revenue funds
Schedule 5. Direct charges against national revenue fund
CHAPTER 7 Schedule 6. Repeal of legislation
EXECUTIVE AUTHORITIES
63. Financial responsibilities of executive CHAPTER 1
authorities INTERPRETATION, OBJECT, APPLICATION AND
64. Executive directives having financial implications AMENDMENT OF THIS ACT
65. Tabling in legislatures
1. Definitions.—In this Act, unless the context otherwise indi-
cates—
CHAPTER 8
LOANS, GUARANTEES AND OTHER “accounting officer” means a person mentioned in section 36;
COMMITMENTS
“accounting authority” means a body or person mentioned in
Part 1: General Principles section 49;
66. Restrictions on borrowing, guarantees and other “Accounting Standards Board” means the board established in
commitments terms of section 87;
67. No provincial foreign commitments
68. Consequences of unauthorised transactions “annual Division of Revenue Act” means the Act of Parlia-
69. Regulations on borrowing by public entities ment which must annually be enacted in terms of section 214 (1) of
70. Guarantees, indemnities and securities by Cabinet the Constitution;
members “constitutional institution” means an institution listed in
Schedule 1;
Part 2: Loans by National Government
71. Purposes for which Minister may borrow money “department” means a national or provincial department or a
72. Signing of loan agreements national or provincial government component;
73. Interest and repayments of loans to be direct charges [Definition of “department” substituted by s. 1 (a) of Act No. 29 of
74. Repayment, conversion and consolidation of loans 1999 and by s. 43 of Act No. 30 of 2007.]
75. Obligations from lien over securities “executive authority”—
(a) in relation to a national department, means the Cabinet
CHAPTER 9 member who is accountable to Parliament for that de-
GENERAL TREASURY MATTERS partment;
76. Treasury regulations and instructions
77. Audit committees (b) in relation to a provincial department, means the member
78. Publishing of draft treasury regulations for public of the Executive Council of a province who is accounta-
comment ble to the provincial legislature for that department;
79. Departures from treasury regulations, instructions or (c) in relation to a national public entity, means the Cabinet
conditions member who is accountable to Parliament for that public
80. Determination of interest rates for debt owing to state entity or in whose portfolio it falls; and
A-349 Public Finance Management Act No. 1 of 1999
(d) in relation to a provincial public entity, means the
member of the provincial Executive Council who is ac-
countable to the provincial legislature for that public enti-
ty or in whose portfolio it falls;
[Definition of “executive authority” substituted by s. 1 (b) of
Act No. 29 of 1999.]
“financial year”—
(a) means a year ending 31 March; or
(b) in relation to a public entity that existed when this Act
took effect and that has a different financial year in terms
of other legislation, means that financial year, provided
the National Treasury has approved that other financial
year;
[Para. (b) amended by s. 1 (c) of Act No. 29 of 1999.]
“financial statements” means statements consisting of at
least—
(a) a balance sheet;
(b) an income statement;
(c) a cash-flow statement;
(d) any other statements that may be prescribed; and
(e) any notes to these statements;
“fruitless and wasteful expenditure” means expenditure which
was made in vain and would have been avoided had reasonable
care been exercised;
“generally recognised accounting practice” means an account-
ing practice complying in material respects with standards issued by
the Accounting Standards Board;
“irregular expenditure” means expenditure, other than unau-
thorised expenditure, incurred in contravention of or that is not in
accordance with a requirement of any applicable legislation,
including—
(a) this Act; or
(b) the State Tender Board Act, 1968 (Act No. 86 of 1968),
or any regulations made in terms of that Act; or
(c) any provincial legislation providing for procurement
procedures in that provincial government;
[Definition of “irregular expenditure” amended by s. 1 (d) of
Act No. 29 of 1999.]
“main division within a vote” means one of the main segments
into which a vote is divided and which—
(a) specifies the total amount which is appropriated for the
items under that segment; and
(b) is approved by Parliament or a provincial legislature, as
may be appropriate, as part of the vote;
[Definition of “main division within a vote” amended by s. 1 (e) of
Act No. 29 of 1999.]
“MEC for finance” means the member of an Executive Council
of a province responsible for finance in the province;
[Definition of “MEC for finance” inserted by s. 1 (f) of Act No. 29 of
1999.]
“Minister” means the Minister of Finance;
“national department” means a department listed in Schedule
1 to the Public Service Act, 1994 (Proclamation No. 103 of 1994),
but excluding the Office of a Premier;
[Definition of “national department” substituted by s. 43 of Act No. 30
of 2007.]
“national government business enterprise” means an entity
which—
(a) is a juristic person under the ownership control of the
national executive;
(b) has been assigned financial and operational authority to
carry on a business activity;
(c) as its principal business, provides goods or services in
accordance with ordinary business principles; and
s1
(d) is financed fully or substantially from sources other
than—
(i) the National Revenue Fund; or
(ii) by way of a tax, levy or other statutory money;
“national government component” means a national govern-
ment component listed in Part A of Schedule 3 to the Public
Service Act, 1994;
[Definition of “national government component” added by s. 43 of Act
No. 30 of 2007.]
“national public entity” means—
(a) a national government business enterprise; or
(b) a board, commission, company, corporation, fund or other
entity (other than a national government business enter-
prise) which is—
(i) established in terms of national legislation;
(ii) fully or substantially funded either from the
National Revenue Fund, or by way of a tax, levy or
other money imposed in terms of national legisla-
tion; and
(iii) accountable to Parliament;
“National Treasury” means the National Treasury established
by section 5;
“overspending”—
(a) in relation to a vote, means when expenditure under the
vote exceeds the amount appropriated for that vote; or
(b) in relation to a main division within a vote, means when
expenditure under the main division exceeds the amount
appropriated for that main division, subject to section 43;
“ownership control”, in relation to an entity, means the ability
to exercise any of the following powers to govern the financial and
operating policies of the entity in order to obtain benefits from its
activities:
(a) To appoint or remove all, or the majority of, the members
of that entity’s board of directors or equivalent governing
body;
(b) to appoint or remove that entity’s chief executive officer;
(c) to cast all, or the majority of, the votes at meetings of that
board of directors or equivalent governing body; or
(d) to control all, or the majority of, the voting rights at a
general meeting of that entity;
“prescribe” means prescribe by regulation or instruction in
terms of section 76;
“provincial department” means—
(a) the Office of a Premier listed in Schedule 1 to the Public
Service Act, 1994;
(b) a provincial department listed in Schedule 2 to the Public
Service Act, 1994;
[Definition of “provincial department” inserted by s. 1 (g) of
Act No. 29 of 1999 and substituted by s. 43 of Act No. 30 of 2007.]
“provincial government business enterprise” means an entity
which—
(a) is a juristic person under the ownership control of a
provincial executive;
(b) has been assigned financial and operational authority to
carry on a business activity;
(c) as its principal business, provides goods or services in
accordance with ordinary business principles; and
(d) is financed fully or substantially from sources other
than—
(i) a Provincial Revenue Fund; or
(ii) by way of a tax, levy or other statutory money;
[Definition of “provincial government business enterprise” inserted by
s. 1 (g) of Act No. 29 of 1999.]
ss 1–6 Auditing: Legislation and Standards
“provincial government component” means a provincial gov-
ernment component listed in Part B of Schedule 3 to the Public
Service Act, 1994;
[Definition of “provincial government component” added by s. 43 of
Act No. 30 of 2007.]
“provincial public entity” means—
(a) a provincial government business enterprise; or
(b) a board, commission, company, corporation, fund or other
entity (other than a provincial government business enter-
prise) which is—
(i) established in terms of legislation or a provincial
constitution;
(ii) fully or substantially funded either from a Provin-
cial Revenue Fund or by way of a tax, levy or other
money imposed in terms of legislation; and
(iii) accountable to a provincial legislature;
[Definition of “provincial public entity” inserted by s. 1 (g) of Act No.
29 of 1999.]
“provincial treasury” means a treasury established in terms of
section 17;
[Definition of “provincial treasury” inserted by s. 1 (g) of Act No. 29
of 1999.]
“public entity” means a national or provincial public entity;
[Definition of “public entity” substituted by s. 1 (h) of Act No. 29 of
1999.]
“Revenue Fund” means—
(a) the National Revenue Fund mentioned in section 213 of
the Constitution; or
(b) a Provincial Revenue Fund mentioned in section 226 of
the Constitution;
[Definition of “Revenue Fund” amended by s. 1 (i) of Act No. 29 of
1999.]
“this Act” includes any regulations and instructions in terms of
section 69, 76, 85 or 91;
“trading entity” means an entity operating within the admin-
istration of a department for the provision or sale of goods or
services, and established—
(a) in the case of a national department, with the approval of
the National Treasury; or
(b) in the case of a provincial department, with the approval
of the relevant provincial treasury acting within a pre-
scribed framework;
[Definition of “trading entity” amended by s. 1 (j) of Act No. 29 of
1999.]
“treasury” means the National Treasury or a provincial treas-
ury, as may be appropriate in the circumstances;
[Definition of “treasury” substituted by s. 1 (k) of Act No. 29 of 1999.]
“unauthorised expenditure” means—
(a) overspending of a vote or a main division within a vote;
(b) expenditure not in accordance with the purpose of a vote
or, in the case of a main division, not in accordance with
the purpose of the main division;
“vote” means one of the main segments into which an appropri-
ation Act is divided and which—
(a) specifies the total amount which is usually appropriated
per department in an appropriation Act; and
(b) is separately approved by Parliament or a provincial
legislature, as may be appropriate, before it approves the
relevant draft appropriation Act as such.
[Definition of “vote” amended by s. 1 (l) of Act No. 29 of 1999.]
2. Object of this Act.—The object of this Act is to secure
transparency, accountability, and sound management of the
revenue, expenditure, assets and liabilities of the institutions to
which this Act applies.
A-350
3. Institutions to which this Act applies.—(1) This Act, to
the extent indicated in the Act, applies to—
(a) departments;
(b) public entities listed in Schedule 2 or 3;
(c) constitutional institutions; and
(d) the provincial legislatures, subject to subsection (2).
[Para. (d) substituted by s. 2 (a) of Act No. 29 of 1999 and amended by
s. 72 (b) (i) of Act No. 10 of 2009.]
(2) To the extent that a provision of this Act applies to—
(a) . . . . . .
[Para. (a) repealed by s. 72 (b) (ii) of Act No. 10 of 2009.]
(b) a provincial legislature, any controlling and supervisory
functions of the National Treasury and a provincial treas-
ury in terms of that provision are performed by the
Speaker of the provincial legislature.
[Para. (b) added by s. 2 (b) of Act No. 29 of 1999.]
(3) In the event of any inconsistency between this Act and any
other legislation, this Act prevails.
4. Amendments to this Act.—Draft legislation directly or
indirectly amending this Act, or providing for the enactment of
subordinate legislation that may conflict with this Act, may be
introduced in Parliament—
(a) by the Minister only; or
(b) only after the Minister has been consulted on the contents
of the draft legislation.
CHAPTER 2
NATIONAL TREASURY AND NATIONAL REVENUE FUND
Part 1: National Treasury
5. Establishment.—(1) A National Treasury is hereby estab-
lished, consisting of—
(a) the Minister, who is the head of the Treasury; and
(b) the national department or departments responsible for
financial and fiscal matters.
(2) The Minister, as the head of the National Treasury, takes the
policy and other decisions of the Treasury, except those decisions
taken as a result of a delegation or instruction in terms of section
10.
6. Functions and powers.—(1) The National Treasury must—
(a) promote the national government’s fiscal policy frame-
work and the co-ordination of macro-economic policy;
(b) co-ordinate inter-governmental financial and fiscal
relations;
(c) manage the budget preparation process;
(d) exercise control over the implementation of the annual
national budget, including any adjustments budgets;
(e) facilitate the implementation of the annual Division of
Revenue Act;
(f) monitor the implementation of provincial budgets;
(g) promote and enforce transparency and effective manage-
ment in respect of revenue, expenditure, assets and liabili-
ties of departments, public entities and constitutional
institutions; and
(h) perform the other functions assigned to the National
Treasury in terms of this Act.
(2) To the extent necessary to perform the functions mentioned
in subsection (1), the National Treasury—
(a) must prescribe uniform treasury norms and standards;
(b) must enforce this Act and any prescribed norms and
standards, including any prescribed standards of generally
recognised accounting practice and uniform classification
systems, in national departments;
A-351 Public Finance Management Act No. 1 of 1999
(c) must monitor and assess the implementation of this Act,
including any prescribed norms and standards, in provin-
cial departments, in public entities and in constitutional
institutions;
[Para. (c) substituted by s. 3 of Act No. 29 of 1999.]
(d) may assist departments and constitutional institutions in
building their capacity for efficient, effective and trans-
parent financial management;
(e) may investigate any system of financial management and
internal control in any department, public entity or consti-
tutional institution;
(f) must intervene by taking appropriate steps, which may
include steps in terms of section 100 of the Constitution
or the withholding of funds in terms of section 216 (2) of
the Constitution, to address a serious or persistent materi-
al breach of this Act by a department, public entity or
constitutional institution; and
(g) may do anything further that is necessary to fulfil its
responsibilities effectively.
(3) Subsections (1) (g) and (2) apply to public entities listed in
Schedule 2 only to the extent provided for in this Act.
7. Banking, cash management and investment frame-
work.—(1) The National Treasury must prescribe a framework
within which departments, public entities listed in Schedule 3 and
constitutional institutions must conduct their cash management.
(2) A department authorised to open a bank account in terms of
the prescribed framework, a public entity or a constitutional
institution may open a bank account only—
(a) with a bank registered in South Africa and approved in
writing by the National Treasury; and
(b) after any prescribed tendering procedures have been
complied with.
(3) A department, public entity listed in Schedule 3 or constitu-
tional institution may not open a bank account abroad or with a
foreign bank except with the written approval of the National
Treasury.
(4) The National Treasury may prescribe an investment policy
for public entities, constitutional institutions and those departments
authorised to open a bank or other account in terms of the pre-
scribed framework.
(5) A bank which has opened a bank account for a department, a
public entity listed in Schedule 3 or a constitutional institution, or
any other institution that holds money for a department, a public
entity listed in Schedule 3 or a constitutional institution, must
promptly disclose information regarding the account when so
requested by the National Treasury or the Auditor-General, or, in
the case of a provincial department or provincial public entity, by
the National Treasury, the Auditor-General or the relevant provin-
cial treasury.
[Sub-s. (5) substituted by s. 4 of Act No. 29 of 1999.]
8. Annual consolidated financial statements.—(1) The Na-
tional Treasury must—
(a) prepare consolidated financial statements in accordance
with generally recognised accounting practice for each fi-
nancial year in respect of—
(i) national departments;
(ii) public entities under the ownership control of the
national executive;
(iii) constitutional institutions;
(iv) the South African Reserve Bank;
(v) the Auditor-General; and
(vi) Parliament; and
(b) submit those statements for audit to the Auditor-General
within three months after the end of that financial year.
ss 6–10
(2) The Auditor-General must audit the consolidated financial
statements and submit an audit report on the statements to the
National Treasury within three months of receipt of the statements.
(3) The Minister must submit the consolidated financial state-
ments and the audit report on those statements within one month of
receiving the report from the Auditor-General, to Parliament for
tabling in both Houses.
(4) The consolidated financial statements must be made public
when submitted to Parliament.
(5) If the Minister fails to submit the consolidated financial
statements and the Auditor-General’s audit report on those state-
ments to Parliament within seven months after the end of the
financial year to which those statements relate—
(a) the Minister must submit to Parliament a written explana-
tion setting out the reasons why they were not submitted;
and
(b) the Auditor-General may issue a special report on the
delay.
(Date of commencement of s. 8: 1 April 2003.)
9. Financial statistics and aggregations.—The National
Treasury may annually compile in accordance with international
standards, and publish in the national Government Gazette, finan-
cial statistics and aggregations concerning all spheres of govern-
ment.
10. Delegations by National Treasury.—(1) The Minister
may—
(a) in writing delegate any of the powers entrusted to the
National Treasury in terms of this Act, to the head of a
department forming part of the National Treasury, or in-
struct that head of department to perform any of the du-
ties assigned to the National Treasury in terms of this
Act; and
(b) in relation to a provincial department or provincial public
entity, in writing delegate any of the powers entrusted to
the National Treasury in terms of this Act to a provincial
treasury, or request that treasury to perform any of the du-
ties assigned to the National Treasury in terms of this Act,
as the Minister and the relevant MEC for finance may
agree.
[Para. (b) added by s. 5 (a) of Act No. 29 of 1999.]
(2) A delegation, instruction or request in terms of subsection
(1) to the head of a department forming part of the National
Treasury, or to a provincial treasury—
(a) is subject to any limitations or conditions that the Minis-
ter may impose;
(b) may authorise that head, in the case of subsection
(1) (a)—
(i) to sub-delegate, in writing, the delegated power to
another National Treasury official, or to the holder
of a specific post in the National Treasury, or to the
accounting officer of a constitutional institution or
a department, or to the accounting authority for a
public entity; or
(ii) to instruct another National Treasury official, or the
holder of a specific post in the National Treasury,
or the accounting officer for a constitutional institu-
tion or a department, or the accounting authority
for a public entity, to perform the assigned duty;
(c) may authorise a provincial treasury, in the case of
subsection (1) (b)—
(i) to sub-delegate, in writing, the delegated power to
an official in that provincial treasury, or to the
holder of a specific post in that provincial treasury,
or to the accounting officer for a provincial de-
partment, or to the accounting authority for a pro-
vincial public entity; or
(ii) to instruct an official in that provincial treasury, or
the holder of a specific post in that provincial
ss 10–15 Auditing: Legislation and Standards
treasury, or the accounting officer for a provincial
department, or the accounting authority for a pro-
vincial public entity, to perform the assigned duty;
and
[Para. (c) inserted by s. 5 (d) of Act No. 29 of 1999.]
(d) does not divest the Minister of the responsibility concern-
ing the exercise of the delegated power or the perfor-
mance of the assigned duty.
[Sub-s. (2) amended by s. 5 (b) of Act No. 29 of 1999.]
(3) The Minister may confirm, vary or revoke any decision
taken by the head of a department forming part of the National
Treasury, or by a provincial treasury, as a result of a delegation,
instruction or request in terms of subsection (1) (a) or (b), or by a
treasury official or accounting officer or accounting authority as a
result of an authorisation in terms of subsection (2) (b) or (c),
subject to any rights that may have become vested as a conse-
quence of the decision.
[Sub-s. (3) substituted by s. 5 (e) of Act No. 29 of 1999.]
Part 2: National Revenue Fund
11. Control of National Revenue Fund.—(1) The National
Treasury is in charge of the National Revenue Fund and must
enforce compliance with the provisions of section 213 of the
Constitution, namely that—
(a) all money received by the national government must be
paid into the Fund, except money reasonably excluded by
this Act or another Act of Parliament; and
(b) no money may be withdrawn from the Fund except—
(i) in terms of an appropriation by an Act of Parlia-
ment; or
(ii) as a direct charge against the Fund, subject to
section 15 (1) (a) (ii).
(2) Draft legislation that provides for a withdrawal from the
National Revenue Fund as a direct charge against the Fund, may be
introduced in Parliament only after the Minister has been consulted
and has consented to the direct charge.
(3) Money that must be paid into the National Revenue Fund is
paid into the Fund by depositing it into a bank account of the Fund
in accordance with any requirements that may be prescribed.
(4) The National Treasury must establish appropriate and effec-
tive cash management and banking arrangements for the National
Revenue Fund.
(5) The National Treasury must ensure that there is at all times
sufficient money in the National Revenue Fund.
12. Deposits and withdrawals by South African Revenue
Services in Revenue Funds.—(1) The South African Revenue
Services must promptly deposit into a Revenue Fund all taxes,
levies, duties, fees and other moneys collected by it for that
Revenue Fund, in accordance with a framework determined by the
National Treasury.
(2) The South African Revenue Services may, despite section
15 (1), withdraw money from the National Revenue Fund—
(a) to refund any tax, levy or duty credits or any other
charges in connection with taxes, levies or duties;
(b) to make other refunds approved by the National Treasury;
or
(c) to transfer to a member of the South African Customs
Union any money collected on its behalf.
(3) The National Treasury must promptly transfer all taxes, levies,
duties, fees and other moneys collected by the South African Reve-
nue Services for a province and deposited into the National Revenue
Fund, to that province’s Provincial Revenue Fund.
(4) Withdrawals in terms of subsection (2) or (3) are direct
charges against the National Revenue Fund.
13. Deposits into National Revenue Fund.—(1) All money
received by the national government must be paid into the National
Revenue Fund, except money received by—
(a) . . . . . .
[Para. (a) repealed by s. 72 (b) (iii) of Act No. 10 of 2009.]
A-352
(b) a national public entity;
(c) the South African Reserve Bank;
(d) the Auditor-General;
(e) the national government from donor agencies which in
terms of legislation or the agreement with the donor, must
be paid to the Reconstruction and Development Pro-
gramme Fund;
(f) a national department—
(i) operating a trading entity, if the money is received
in the ordinary course of operating the trading enti-
ty;
(ii) in trust for a specific person or category of persons
or for a specific purpose;
(iii) from another department to render an agency
service for that department; or
(iv) if the money is of a kind described in Schedule 4; or
(g) a constitutional institution—
(i) in trust for a specific person or category of persons
or for a specific purpose; or
(ii) if the money is of a kind described in Schedule 4.
(2) The exclusion in subsection (1) (b) does not apply to a na-
tional public entity which is not listed in Schedule 2 or 3 but which
in terms of section 47 is required to be listed.
(Date of commencement of sub-s. (2): 1 April 2001.)
(3) Draft legislation that excludes money from payment into the
National Revenue Fund may be introduced in Parliament only after
the Minister has been consulted on the reasonableness of the
exclusion and has consented to the exclusion.
(4) Any legislation inconsistent with subsection (1) is of no
force and effect to the extent of the inconsistency.
(5) Money received by a national public entity listed in Schedule
2 or 3, the South African Reserve Bank or the Auditor-General must
be paid into a bank account opened by the institution concerned.
[Sub-s. (5) amended by s. 72 (b) (iv) of Act No. 10 of 2009.]
14. Withdrawal of exclusions.—(1) The National Treasury
may withdraw, from a date determined by it, any exclusion granted
to a national department, a constitutional institution or a national
public entity in terms of section 13 (1), either with regard to all
money or with regard to money of a specific kind received by that
department, constitutional institution or public entity, if—
(a) the exclusion is not reasonable within the context of
section 213 of the Constitution; or
(b) the National Treasury regards the withdrawal of the
exclusion to be necessary for transparency or more effec-
tive and accountable financial management.
(2) The exclusion in terms of section 13 (1) of the following
public entities may not be withdrawn:
(a) A national government business enterprise which is a
company and in which the state is not the sole sharehold-
er; and
(b) the national public entities listed in Schedule 2.
(3) From the date on which the withdrawal of an exclusion in
terms of subsection (1) takes effect until the end of the relevant
financial year, the National Treasury may transfer money from the
National Revenue Fund, as a direct charge against the Fund, to the
national department or public entity affected by the withdrawal,
provided that the amount of the transfer does not exceed the
amount that would otherwise have been excluded from payment
into the Fund.
(4) The Minister must promptly inform Parliament of any with-
drawal of an exclusion in terms of subsection (1).
15. Withdrawals and investments from National Revenue
Fund.—(1) Only the National Treasury may withdraw money
from the National Revenue Fund, and may do so only—
(a) to provide funds that have been authorised—
(i) in terms of an appropriation by an Act of Parlia-
ment; or
A-353 Public Finance Management Act No. 1 of 1999
(ii) as a direct charge against the National Revenue
Fund provided for in the Constitution or this Act, or
in any other Act of Parliament provided the direct
charge in such a case is listed in Schedule 5;
(Date of commencement of proviso: 31 August 2001.)
(b) to refund money invested by a province in the National
Revenue Fund; or
(c) to refund money incorrectly paid into, or which is not due
to, the National Revenue Fund.
(2) A payment in terms of subsection (1) (b) or (c) is a direct
charge against the National Revenue Fund.
(3) (a) The National Treasury may invest temporarily, in the
Republic or elsewhere, money in the National Revenue Fund that is
not immediately needed.
(b) When money in the National Revenue Fund is invested, the
investment, including interest earned, is regarded as part of the
National Revenue Fund.
16. Use of funds in emergency situations.—(1) The Minister
may authorise the use of funds from the National Revenue Fund to
defray expenditure of an exceptional nature which is currently not
provided for and which cannot, without serious prejudice to the
public interest, be postponed to a future parliamentary appropria-
tion of funds.
(2) The combined amount of any authorisations in terms of
subsection (1), may not exceed two per cent of the total amount
appropriated in the annual national budget for the current financial
year.
(3) An amount authorised in terms of subsection (1) is a direct
charge against the National Revenue Fund.
(4) An amount authorised in terms of subsection (1) must—
(a) be reported to Parliament and the Auditor-General within
14 days, or if the funds are authorised for the deployment
of the security services, within a period determined by the
President; and
(b) be attributed to a vote.
(5) A report to Parliament in terms of subsection (4) (a) must be
submitted to the National Assembly for tabling in the Assembly
and made public.
(6) Expenditure in terms of subsection (1) must be included
either in the next adjustments budget for the financial year in which
the expenditure is authorised or in other appropriation legislation
tabled in the National Assembly within 120 days of the Minister
authorising the expenditure, whichever is the sooner.
CHAPTER 3
PROVINCIAL TREASURIES AND PROVINCIAL REVENUE
FUNDS
[Chapter 3 inserted by s. 6 of Act No. 29 of 1999.]
Part 1: Provincial Treasuries
17. Establishment.—(1) There is a provincial treasury for
each province, consisting of—
(a) the MEC for finance in the province, who is the head of
the provincial treasury; and
(b) the provincial department responsible for financial
matters in the province.
(2) The MEC for finance as the head of a provincial treasury
takes the policy and other decisions of the treasury, except those
decisions taken as a result of a delegation or instruction in terms of
section 20.
[S. 17 inserted by s. 6 of Act No. 29 of 1999.]
18. Functions and powers.—(1) A provincial treasury must—
(a) prepare the provincial budget;
(b) exercise control over the implementation of the provincial
budget;
ss 15–19
(c) promote and enforce transparency and effective manage-
ment in respect of revenue, expenditure, assets and liabili-
ties of provincial departments and provincial public
entities; and
(d) ensure that its fiscal policies do not materially and
unreasonably prejudice national economic policies.
(2) A provincial treasury—
(a) must issue provincial treasury instructions not incon-
sistent with this Act;
(Date of commencement of para. (a): 31 August 2001.)
(b) must enforce this Act and any prescribed national and
provincial norms and standards, including any prescribed
standards of generally recognised accounting practice and
uniform classification systems, in provincial departments;
(c) must comply with the annual Division of Revenue Act,
and monitor and assess the implementation of that Act in
provincial public entities;
(d) must monitor and assess the implementation in provincial
public entities of national and provincial norms and
standards;
(e) may assist provincial departments and provincial public
entities in building their capacity for efficient, effective
and transparent financial management;
(f) may investigate any system of financial management and
internal control applied by a provincial department or a
provincial public entity;
(g) must intervene by taking appropriate steps, which may
include the withholding of funds, to address a serious or
persistent material breach of this Act by a provincial de-
partment or a provincial public entity;
(h) must promptly provide any information required by the
National Treasury in terms of this Act; and
(i) may do anything further that is necessary to fulfil its
responsibilities effectively.
[S. 18 inserted by s. 6 of Act No. 29 of 1999.]
19. Annual consolidated financial statements.—(1) A pro-
vincial treasury must—
(a) prepare consolidated financial statements, in accordance
with generally recognised accounting practice, for each
financial year in respect of—
(i) provincial departments in the province;
(ii) public entities under the ownership control of the
provincial executive of the province; and
(iii) the provincial legislature in the province; and
(b) submit those statements to the Auditor-General within
three months after the end of that financial year.
(2) The Auditor-General must audit the consolidated financial
statements and submit an audit report on the statements to the
provincial treasury of the province concerned within three months
of receipt of the statements.
(3) The MEC for finance in a province must submit the consoli-
dated financial statements and the audit report, within one month of
receiving the report from the Auditor-General, to the provincial
legislature for tabling in the legislature.
(4) The consolidated financial statements must be made public
when submitted to the provincial legislature.
(5) If the MEC for finance fails to submit the consolidated fi-
nancial statements and the Auditor-General’s audit report on those
statements to the provincial legislature within seven months after
the end of the financial year to which those statements relate—
(a) the MEC must submit to the legislature a written explana-
tion setting out the reasons why they were not submitted;
and
(b) the Auditor-General may issue a special report on the
delay.
[S. 19 inserted by s. 6 of Act No. 29 of 1999.]
(Date of commencement of s. 19: 1 April 2003.)
ss 20–24 Auditing: Legislation and Standards
20. Delegations by provincial treasuries.—(1) The MEC for
finance in a province may, in writing, delegate any of the powers
entrusted or delegated to the provincial treasury in terms of this Act
to the head of the department referred to in section 17 (1) (b), or
instruct that head of department to perform any of the duties
assigned to the provincial treasury in terms of this Act.
(2) A delegation or instruction in terms of subsection (1) to the
head of the department referred to in section 17 (1) (b)—
(a) is subject to any limitations or conditions that the MEC
for finance may impose;
(b) may authorise that head—
(i) to, in writing, sub-delegate the delegated power to
another treasury official or the holder of a specific
post in that treasury, or to the accounting officer for
a provincial department, or to the accounting au-
thority for a provincial public entity in the prov-
ince; or
(ii) to instruct another provincial treasury official or the
holder of a specific post in that treasury, or the ac-
counting officer for a provincial department, or the
accounting authority for a provincial public entity
in the province, to perform the assigned duty; and
(c) does not divest the MEC for finance of the responsibility
concerning the exercise of the delegated power or the per-
formance of the assigned duty.
(3) The MEC for finance may confirm, vary or revoke any deci-
sion taken by the head of the department referred to in section
17 (1) (b), as a result of a delegation or instruction in terms of
subsection (1), or by a treasury official or accounting officer or
accounting authority as a result of an authorisation in terms of
subsection (2) (b), subject to any rights that may have become
vested as a consequence of the decision.
[S. 20 inserted by s. 6 of Act No. 29 of 1999.]
Part 2: Provincial Revenue Funds
21. Control of Provincial Revenue Funds.—(1) The provin-
cial treasury of a province is in charge of that province’s Provincial
Revenue Fund and must enforce compliance with the provisions of
section 226 of the Constitution, namely that—
(a) all money received by the provincial government must
promptly be paid into the Fund, except money reasonably
excluded by this Act or another Act of Parliament; and
(b) no money may be withdrawn from the Fund except—
(i) in terms of an appropriation by a provincial Act; or
(ii) as a direct charge against the Fund when it is
provided for in the Constitution or a provincial Act.
(2) Money that must be paid into the Provincial Revenue Fund
is paid into the Fund by depositing it into a bank account of the
Fund in accordance with any requirements that may be prescribed.
(3) A provincial treasury must establish appropriate and effec-
tive cash management and banking arrangements for its Provincial
Revenue Fund in accordance with the framework that must be
prescribed in terms of section 7.
[S. 21 inserted by s. 6 of Act No. 29 of 1999.]
22. Deposits into Provincial Revenue Funds.—(1) All money
received by a provincial government, including the province’s
equitable share, and grants made to it, in terms of the annual
Division of Revenue Act, must be paid into the province’s Provin-
cial Revenue Fund, except money received by—
(a) the provincial legislature in the province;
(b) a provincial public entity in the province;
(c) the provincial government from donor agencies which in
terms of legislation or the agreement with the donor, must
be paid to the Reconstruction and Development Pro-
gramme Fund;
(d) a provincial department in the province—
(i) operating a trading entity, if the money is received in
the ordinary course of operating the trading entity;
A-354
(ii) in trust for a specific person or category of persons
or for a specific purpose;
(iii) from another department to render an agency
service on behalf of that department;
(iv) in terms of the annual Division of Revenue Act, if
the money is exempted by that Act from payment
into the Revenue Fund; or
(v) if the money is of a kind described in Schedule 4.
(2) The exclusion in subsection (1) (b) does not apply to a pro-
vincial public entity in the province which is not listed in Schedule
3 but which, in terms of section 47, is required to be listed.
(Date of commencement of sub-s. (2): 1 April 2001.)
(3) Draft legislation that excludes money from payment into a
Provincial Revenue Fund may be introduced in Parliament only
after the Minister has been consulted on the reasonableness of the
exclusion and has consented to the exclusion.
(4) Any legislation inconsistent with subsection (1) is of no
force and effect to the extent of the inconsistency.
(5) Money received by a provincial legislature or a provincial
public entity listed in Schedule 3 must be paid into a bank account
opened by the entity concerned.
[S. 22 inserted by s. 6 of Act No. 29 of 1999.]
23. Withdrawal of exclusions from Provincial Revenue
Funds.—(1) The National Treasury, after having consulted the
relevant provincial treasury, may withdraw, from a date determined
by it, any exclusion granted to a provincial department or provin-
cial public entity in terms of section 22 (1), either with regard to all
money or with regard to money of a specific kind received by that
department or public entity, if—
(a) the exclusion is not reasonable within the context of
section 226 of the Constitution; or
(b) the National Treasury regards the withdrawal of the
exclusion to be necessary for transparency or more effec-
tive and accountable financial management.
(2) The exclusion in terms of section 22 (1) of a provincial
government business enterprise which is a company and in which
the relevant province is not the sole shareholder, may not be
withdrawn, provided the National Treasury has given its prior
written approval to the province to participate in a company that is
not wholly owned by the province.
(3) From the date on which the withdrawal of an exclusion in
terms of subsection (1) takes effect until the end of the relevant
financial year, a provincial treasury may transfer money from the
Provincial Revenue Fund, as a direct charge against the Fund, to
the provincial department or provincial public entity affected by
the withdrawal of the exclusion—
(a) if a provincial Act provides for the transfer to be a direct
charge; and
(b) provided that the amount of the transfer does not exceed
the amount that would otherwise have been excluded
from payment into the Fund.
(4) The Minister must promptly inform Parliament of any with-
drawal of an exclusion in terms of subsection (1).
[S. 23 inserted by s. 6 of Act No. 29 of 1999.]
24. Withdrawals and investments from Provincial Revenue
Funds.—(1) Only a provincial treasury may withdraw money
from a Provincial Revenue Fund, and may do so only—
(a) to provide funds that have been authorised—
(i) in terms of an appropriation by a provincial Act; or
(ii) as a direct charge against the Provincial Revenue
Fund provided for in the Constitution or a provin-
cial Act;
(b) to refund money incorrectly paid into, or which is not due
to, the Provincial Revenue Fund; or
(c) to deposit into or invest money in the National Revenue
Fund.
A-355 Public Finance Management Act No. 1 of 1999
(2) A payment in terms of subsection (1) (b) or (c) is a direct
charge against a Provincial Revenue Fund if a provincial Act so
provides.
(3) (a) A provincial treasury, in accordance with a prescribed
framework, may invest temporarily in the Republic money in the
province’s Provincial Revenue Fund that is not immediately
needed.
(b) When money in a Provincial Revenue Fund is invested, the
investment, including interest earned, is regarded as part of that
Fund.
[S. 24 inserted by s. 6 of Act No. 29 of 1999.]
25. Use of funds in emergency situations.—(1) The MEC for
finance in a province may authorise the use of funds from that
province’s Provincial Revenue Fund to defray expenditure of an
exceptional nature which is currently not provided for and which
cannot, without serious prejudice to the public interest in the
province, be postponed to a future appropriation by the provincial
legislature.
(2) The combined amount of any authorisations in terms of
subsection (1) may not exceed two per cent of the total amount
appropriated in the annual provincial budget for the current
financial year.
(3) An amount authorised in terms of subsection (1) is a direct
charge against the Provincial Revenue Fund if a provincial Act so
provides.
(4) An amount authorised in terms of subsection (1) must—
(a) be reported to the provincial legislature and the Auditor-
General within 14 days; and
(b) be attributed to a vote.
(5) A report to a provincial legislature in terms of subsection
(4) (a) must be submitted to the provincial legislature for tabling in
the legislature and made public.
(6) Expenditure in terms of subsection (1) must be included
either in the next provincial adjustments budget for the financial
year in which the expenditure is authorised, or in other appropria-
tion legislation tabled in the provincial legislature within 120 days
of the MEC for finance in the province authorising the expenditure,
whichever is the sooner.
[S. 25 inserted by s. 6 of Act No. 29 of 1999.]
CHAPTER 4
NATIONAL AND PROVINCIAL BUDGETS
[Heading substituted by s. 8 of Act No. 29 of 1999.]
26. Annual appropriations.—Parliament and each provincial
legislature must appropriate money for each financial year for the
requirements of the state and the province, respectively.
[S. 26 substituted by s. 9 of Act No. 29 of 1999.]
27. National annual budgets.—(1) The Minister must table
the annual budget for a financial year in the National Assembly
before the start of that financial year or, in exceptional circum-
stances, on a date as soon as possible after the start of that financial
year, as the Minister may determine.
(2) The MEC for finance in a province must table the provincial
annual budget for a financial year in the provincial legislature not
later than two weeks after the tabling of the national annual budget,
but the Minister may approve an extension of time for the tabling
of a provincial budget.
[Sub-s. (2) inserted by s. 10 (a) of Act No. 29 of 1999.]
(3) An annual budget must be in accordance with a format as
may be prescribed, and must at least contain—
(a) estimates of all revenue expected to be raised during the
financial year to which the budget relates;
(b) estimates of current expenditure for that financial year per
vote and per main division within the vote;
(c) estimates of interest and debt servicing charges, and any
repayments on loans;
ss 24–29
(d) estimates of capital expenditure per vote and per main
division within a vote for that financial year and the pro-
jected financial implications of that expenditure for future
financial years;
(e) estimates of revenue excluded in terms of section 13 (1)
or 22 (1) from the relevant Revenue Fund for that finan-
cial year;
[Para. (e) substituted by s. 10 (b) of Act No. 29 of 1999.]
(Date of commencement of para. (e): 31 August 2001.)
(f) estimates of all direct charges against the relevant
Revenue Fund and standing appropriations for that finan-
cial year;
[Para. (f) substituted by s. 10 (c) of Act No. 29 of 1999.]
(g) proposals for financing any anticipated deficit for that
financial year;
(h) an indication of intentions regarding borrowing and other
forms of public liability that will increase public debt dur-
ing that financial year and future financial years;
(i) the projected—
(i) revenue for the previous financial year;
(ii) expenditure per vote, and per main division within
the vote, for the previous financial year; and
(iii) borrowing for the previous financial year; and
(j) any other information as may be prescribed, including
any multi-year budget information.
(4) When the annual budget is introduced in the National As-
sembly or a provincial legislature, the accounting officer for each
department must submit to Parliament or the provincial legislature,
as may be appropriate, measurable objectives for each main
division within the department’s vote. The relevant treasury may
co-ordinate these submissions and consolidate them in one docu-
ment.
[Sub-s. (4) substituted by s. 10 (d) of Act No. 29 of 1999.]
(Date of commencement of sub-s. (4): 1 August 2002.)
28. Multi-year budget projections.—(1) The Minister and
the MEC for finance in a province must annually table in the
National Assembly and in that province’s provincial legislature,
respectively, a multi-year budget projection of—
(a) the estimated revenue expected to be raised during each
year of the multi-year period; and
(b) the estimated expenditure expected to be incurred per
vote during each year of the multi-year period, differenti-
ating between capital and current expenditure.
[Sub-s. (1) amended by s. 11 of Act No. 29 of 1999.]
(2) A multi-year budget projection tabled by the Minister must
contain the Minister’s key macro-economic projections.
29. Expenditure before annual budget is passed.—(1) If an
annual budget is not passed before the start of the financial year to
which it relates, funds may be withdrawn in accordance with this
section from the relevant Revenue Fund for the services of the state
or the province concerned during that financial year as direct
charges against the Fund until the budget is passed.
[Sub-s. (1) substituted by s. 12 (a) of Act No. 29 of 1999.]
(2) Funds withdrawn from a Revenue Fund in terms of subsec-
tion (1)—
(a) may be utilised only for services for which funds were
appropriated in the previous annual budget or adjustments
budget; and
(b) may not—
(i) during the first four months of that financial year,
exceed 45 per cent of the total amount appropriated
in the previous annual budget;
(ii) during each of the following months, exceed 10 per
cent of the total amount appropriated in the previ-
ous annual budget; and
ss 29–36 Auditing: Legislation and Standards
(iii) in aggregate, exceed the total amount appropriated
in the previous annual budget.
(3) The funds provided for in subsection (1) are not additional
to funds appropriated for the relevant financial year, and any funds
withdrawn in terms of that subsection must be regarded as forming
part of the funds appropriated in the relevant annual budget for that
financial year.
[Sub-s. (3) substituted by s. 12 (b) of Act No. 29 of 1999.]
(4) This section does not apply in respect of a province unless a
provincial Act provides that the withdrawal of funds in terms of
this section is a direct charge against that province’s Revenue
Fund.
[Sub-s. (4) added by s. 12 (c) of Act No. 29 of 1999.]
30. National adjustments budgets.—(1) The Minister may
table an adjustments budget in the National Assembly as and when
necessary.
(2) A national adjustments budget may only provide for—
(a) adjustments required due to significant and unforeseeable
economic and financial events affecting the fiscal targets
set by the annual budget;
(b) unforeseeable and unavoidable expenditure recommended
by the national executive or any committee of Cabinet
members to whom this task has been assigned;
(c) any expenditure in terms of section 16;
(d) money to be appropriated for expenditure already an-
nounced by the Minister during the tabling of the annual
budget;
(e) the shifting of funds between and within votes or to
follow the transfer of functions in terms of section 42;
(f) the utilisation of savings under a main division of a vote
for the defrayment of excess expenditure under another
main division of the same vote in terms of section 43; and
(g) the roll-over of unspent funds from the preceding finan-
cial year.
31. Provincial adjustments budgets.—(1) The MEC for fi-
nance in a province may table an adjustments budget in the provin-
cial legislature, subject to subsection (3).
(2) An adjustments budget of a province may only provide
for—
(a) the appropriation of funds that have become available to
the province;
(b) unforeseeable and unavoidable expenditure recommended
by the provincial Executive Council of the province with-
in a framework determined by the Minister;
(c) any expenditure in terms of section 25;
(d) money to be appropriated for expenditure already an-
nounced by the MEC for finance during the tabling of the
annual budget;
(e) the shifting of funds between and within votes or to
follow the transfer of functions in terms of section 42;
(f) the utilisation of savings under a main division within a
vote for the defrayment of excess expenditure under an-
other main division within the same vote in terms of sec-
tion 43; and
(g) the roll-over of unspent funds from the preceding finan-
cial year.
(3) The Minister may determine the time when an adjustments
budget may be tabled in a provincial legislature, as well as the
format for such budgets.
[S. 31 inserted by s. 13 of Act No. 29 of 1999.]
32. Publishing of reports on state of budget.—(1) Within 30
days after the end of each month, the National Treasury must
publish in the national Government Gazette a statement of actual
revenue and expenditure with regard to the National Revenue
Fund.
A-356
(2) After the end of a prescribed period, but at least quarterly,
every provincial treasury must submit to the National Treasury a
statement of revenue and expenditure with regard to the Revenue
Fund for which that treasury is responsible, for publication in the
national Government Gazette within 30 days after the end of each
prescribed period.
[Sub-s. (2) inserted by s. 14 of Act No. 29 of 1999.]
(3) The statement must specify the following amounts and com-
pare those amounts in each instance with the corresponding
budgeted amounts for the relevant financial year:
(a) The actual revenue for the relevant period, and for the
financial year up to the end of that period;
(b) the actual expenditure per vote (distinguishing between
capital and current expenditure) for that period, and for
the financial year up to the end of that period; and
(c) actual borrowings for that period, and for the financial
year up to the end of that period.
(4) The National Treasury may determine—
(a) the format of the statement of revenue and expenditure;
and
(b) any other detail the statement must contain.
33. Withholding of appropriated funds.—The relevant treas-
ury—
(a) may withhold from a department any remaining funds
appropriated for a specific function if that function is
transferred to another department or any other institution;
and
(b) must allocate those remaining funds to that other depart-
ment or institution.
[S. 33 amended by s. 15 of Act No. 29 of 1999.]
34. Unauthorised expenditure.—(1) Unauthorised expendi-
ture does not become a charge against a Revenue Fund except
when—
(a) the expenditure is an overspending of a vote and Parliament
or a provincial legislature, as may be appropriate, ap-
proves, as a direct charge against the relevant Revenue
Fund, an additional amount for that vote which covers the
overspending; or
(b) the expenditure is unauthorised for another reason and
Parliament or a provincial legislature, as may be appro-
priate, authorises the expenditure as a direct charge
against the relevant Revenue Fund.
(2) If Parliament or a provincial legislature does not approve in
terms of subsection (1) (a) an additional amount for the amount of
any overspending, that amount becomes a charge against the funds
allocated for the next or future financial years under the relevant
vote.
[S. 34 substituted by s. 16 of Act No. 29 of 1999.]
35. Unfunded mandates.—Draft national legislation that as-
signs an additional function or power to, or imposes any other
obligation on, a provincial government, must, in a memorandum
that must be introduced in Parliament with that legislation, give a
projection of the financial implications of that function, power or
obligation to the province.
[S. 35 inserted by s. 17 of Act No. 29 of 1999.]
CHAPTER 5
DEPARTMENTS AND CONSTITUTIONAL INSTITUTIONS
Part 1: Appointment of Accounting Officers
36. Accounting officers.—(1) Every department and every
constitutional institution must have an accounting officer.
(2) Subject to subsection (3)—
(a) the head of a department must be the accounting officer
for the department; and
(b) the chief executive officer of a constitutional institution
must be the accounting officer for that institution.
A-357 Public Finance Management Act No. 1 of 1999
(3) The relevant treasury may, in exceptional circumstances,
approve or instruct in writing that a person other than the person
mentioned in subsection (2) be the accounting officer for—
(a) a department or a constitutional institution; or
(b) a trading entity within a department.
[Sub-s. (3) amended by s. 18 (a) of Act No. 29 of 1999.]
(4) The relevant treasury may at any time withdraw in writing
an approval or instruction in terms of subsection (3).
[Sub-s. (4) substituted by s. 18 (b) of Act No. 29 of 1999.]
(5) The employment contract of an accounting officer for a
department, trading entity or constitutional institution must be in
writing and, where possible, include performance standards. The
provisions of sections 38 to 42, as may be appropriate, are regarded
as forming part of each such contract.
37. Acting accounting officers.—When an accounting officer
is absent or otherwise unable to perform the functions of account-
ing officer, or during a vacancy, the functions of accounting officer
must be performed by the official acting in the place of that
accounting officer.
Part 2: Responsibilities of Accounting Officers
38. General responsibilities of accounting officers.—(1) The
accounting officer for a department, trading entity or constitutional
institution—
(a) must ensure that that department, trading entity or
constitutional institution has and maintains—
(i) effective, efficient and transparent systems of
financial and risk management and internal control;
(ii) a system of internal audit under the control and
direction of an audit committee complying with
and operating in accordance with regulations and
instructions prescribed in terms of sections 76 and
77;
(iii) an appropriate procurement and provisioning
system which is fair, equitable, transparent, com-
petitive and cost-effective;
(iv) a system for properly evaluating all major capital
projects prior to a final decision on the project;
(b) is responsible for the effective, efficient, economical and
transparent use of the resources of the department, trading
entity or constitutional institution;
(c) must take effective and appropriate steps to—
(i) collect all money due to the department, trading
entity or constitutional institution;
(ii) prevent unauthorised, irregular and fruitless and
wasteful expenditure and losses resulting from
criminal conduct; and
(iii) manage available working capital efficiently and
economically;
(d) is responsible for the management, including the safe-
guarding and the maintenance of the assets, and for the
management of the liabilities, of the department, trading
entity or constitutional institution;
(e) must comply with any tax, levy, duty, pension and audit
commitments as may be required by legislation;
(f) must settle all contractual obligations and pay all money
owing, including inter-governmental claims, within the
prescribed or agreed period;
(g) on discovery of any unauthorised, irregular or fruitless
and wasteful expenditure, must immediately report, in
writing, particulars of the expenditure to the relevant
treasury and in the case of irregular expenditure involving
the procurement of goods or services, also to the relevant
tender board;
[Para. (g) substituted by s. 19 of Act No. 29 of 1999.]
ss 36–39
(h) must take effective and appropriate disciplinary steps
against any official in the service of the department, trad-
ing entity or constitutional institution who—
(i) contravenes or fails to comply with a provision of
this Act;
(ii) commits an act which undermines the financial
management and internal control system of the de-
partment, trading entity or constitutional institution;
or
(iii) makes or permits an unauthorised expenditure,
irregular expenditure or fruitless and wasteful ex-
penditure;
(i) when transferring funds in terms of the annual Division of
Revenue Act, must ensure that the provisions of that Act
are complied with;
(j) before transferring any funds (other than grants in terms
of the annual Division of Revenue Act or to a constitu-
tional institution) to an entity within or outside govern-
ment, must obtain a written assurance from the entity that
that entity implements effective, efficient and transparent
financial management and internal control systems, or, if
such written assurance is not or cannot be given, render
the transfer of the funds subject to conditions and remedi-
al measures requiring the entity to establish and imple-
ment effective, efficient and transparent financial
management and internal control systems;
(k) must enforce compliance with any prescribed conditions if
the department, trading entity or constitutional institution
gives financial assistance to any entity or person;
(l) must take into account all relevant financial considera-
tions, including issues of propriety, regularity and value
for money, when policy proposals affecting the account-
ing officer’s responsibilities are considered, and when
necessary, bring those considerations to the attention of
the responsible executive authority;
(m) must promptly consult and seek the prior written consent
of the National Treasury on any new entity which the de-
partment or constitutional institution intends to establish
or in the establishment of which it took the initiative; and
(n) must comply, and ensure compliance by the department,
trading entity or constitutional institution, with the provi-
sions of this Act.
(2) An accounting officer may not commit a department, trading
entity or constitutional institution to any liability for which money
has not been appropriated.
(Date of commencement of sub-s. (2): 31 August 2001.)
39. Accounting officers’ responsibilities relating to budget-
ary control.—(1) The accounting officer for a department is
responsible for ensuring that—
(a) expenditure of that department is in accordance with the
vote of the department and the main divisions within the
vote; and
(b) effective and appropriate steps are taken to prevent
unauthorised expenditure.
(2) An accounting officer, for the purposes of subsection (1),
must—
(a) take effective and appropriate steps to prevent any
overspending of the vote of the department or a main di-
vision within the vote;
(b) report to the executive authority and the relevant treasury
any impending—
(i) under collection of revenue due;
(ii) shortfalls in budgeted revenue; and
(iii) overspending of the department’s vote or a main
division within the vote; and
[Para. (b) amended by s. 20 (a) of Act No. 29 of 1999.]
ss 39–43 Auditing: Legislation and Standards
(c) comply with any remedial measures imposed by the
relevant treasury in terms of this Act to prevent over-
spending of the vote or a main division within the vote.
[Para. (c) substituted by s. 20 (b) of Act No. 29 of 1999.]
40. Accounting officers’ reporting responsibilities.—(1) The
accounting officer for a department, trading entity or constitutional
institution—
(a) must keep full and proper records of the financial affairs
of the department, trading entity or constitutional institu-
tion in accordance with any prescribed norms and stand-
ards;
(b) must prepare financial statements for each financial year
in accordance with generally recognized accounting prac-
tice;
(c) must submit those financial statements within two months
after the end of the financial year to—
(i) the Auditor-General for auditing; and
(ii) the relevant treasury to enable that treasury to
prepare consolidated financial statements in terms
of section 8 or 19;
[Sub-para. (ii) substituted by s. 21 (a) of Act No. 29 of 1999.]
(d) must submit within five months of the end of a financial
year to the relevant treasury and, in the case of a depart-
ment or trading entity, also to the executive authority re-
sponsible for that department or trading entity—
(i) an annual report on the activities of that depart-
ment, trading entity or constitutional institution
during that financial year;
(ii) the financial statements for that financial year after
those statements have been audited; and
(iii) the Auditor-General’s report on those statements;
[Para. (d) amended by s. 21 (b) of Act No. 29 of 1999.]
(e) must, in the case of a constitutional institution, submit to
Parliament that institution’s annual report and financial
statements referred to in paragraph (d), and the Auditor-
General’s report on those statements, within one month
after the accounting officer received the Auditor-
General’s audit report; and
(f) is responsible for the submission by the department or
constitutional institution of all reports, returns, notices
and other information to Parliament, the relevant provin-
cial legislature, an executive authority, the relevant treas-
ury or the Auditor-General, as may be required by this
Act.
[Para. (f) substituted by s. 21 (c) of Act No. 29 of 1999.]
(2) The Auditor-General must audit the financial statements
referred to in subsection (1) (b) and submit an audit report on those
statements to the accounting officer within two months of receipt
of the statements.
(3) The annual report and audited financial statements referred
to in subsection (1) (d) must—
(a) fairly present the state of affairs of the department,
trading entity or constitutional institution, its business, its
financial results, its performance against predetermined
objectives and its financial position as at the end of the fi-
nancial year concerned; and
(b) include particulars of—
(i) any material losses through criminal conduct, and
any unauthorised expenditure, irregular expenditure
and fruitless and wasteful expenditure, that oc-
curred during the financial year;
(ii) any criminal or disciplinary steps taken as a result
of such losses, unauthorised expenditure, irregular
expenditure and fruitless and wasteful expenditure;
(iii) any material losses recovered or written off; and
(iv) any other matters that may be prescribed.
A-358
(4) The accounting officer of a department must—
(a) each year before the beginning of a financial year provide
the relevant treasury in the prescribed format with a
breakdown per month of the anticipated revenue and ex-
penditure of that department for that financial year;
[Para. (a) substituted by s. 21 (d) of Act No. 29 of 1999.]
(b) each month submit information in the prescribed format
on actual revenue and expenditure for the preceding
month and the amounts anticipated for that month in
terms of paragraph (a); and
(c) within 15 days of the end of each month submit to the
relevant treasury and the executive authority responsible
for that department—
(i) the information for that month;
(ii) a projection of expected expenditure and revenue
collection for the remainder of the current financial
year; and
(iii) when necessary, an explanation of any material
variances and a summary of the steps that are taken
to ensure that the projected expenditure and reve-
nue remain within budget.
[Para. (c) amended by s. 21 (e) of Act No. 29 of 1999.]
(5) If an accounting officer is unable to comply with any of the
responsibilities determined for accounting officers in this Part, the
accounting officer must promptly report the inability, together with
reasons, to the relevant executive authority and treasury.
41. Information to be submitted by accounting officers.—
An accounting officer for a department, trading entity or constitu-
tional institution must submit to the relevant treasury or the
Auditor-General, such information, returns, documents, explana-
tions and motivations as may be prescribed or as the relevant
treasury or the Auditor-General may require.
[S. 41 substituted by s. 22 of Act No. 29 of 1999.]
42. Accounting officers’ responsibilities when assets and
liabilities are transferred.—(1) When assets or liabilities of a
department are transferred to another department or other institu-
tion in terms of legislation or following a reorganisation of func-
tions, the accounting officer for the transferring department must—
(a) draw up an inventory of such assets and liabilities; and
(b) provide the accounting officer for the receiving depart-
ment or other institution with substantiating records, in-
cluding personnel records of staff to be transferred.
(2) Both the accounting officer for the transferring department
and the accounting officer for the receiving department or other
institution must sign the inventory when the transfer takes place.
(3) The accounting officer for the transferring department must
file a copy of the signed inventory with the relevant treasury and
the Auditor-General within 14 days of the transfer.
[Sub-s. (3) substituted by s. 23 of Act No. 29 of 1999.]
43. Virement between main divisions within votes.—(1) An
accounting officer for a department may utilise a saving in the
amount appropriated under a main division within a vote towards
the defrayment of excess expenditure under another main division
within the same vote, unless the relevant treasury directs otherwise.
[Sub-s. (1) substituted by s. 24 (a) of Act No. 29 of 1999.]
(2) The amount of a saving under a main division of a vote that
may be utilised in terms of subsection (1), may not exceed eight
per cent of the amount appropriated under that main division.
(3) An accounting officer must within seven days submit a
report containing the prescribed particulars concerning the utilisa-
tion of a saving in terms of subsection (1), to the executive authori-
ty responsible for the department and to the relevant treasury.
[Sub-s. (3) substituted by s. 24 (b) of Act No. 29 of 1999.]
(4) This section does not authorise the utilisation of a saving
in—
(a) an amount specifically and exclusively appropriated for a
purpose mentioned under a main division within a vote;
A-359 Public Finance Management Act No. 1 of 1999
(b) an amount appropriated for transfer to another institution;
and
(c) an amount appropriated for capital expenditure in order to
defray current expenditure.
(5) A utilisation of a saving in terms of subsection (1) is a direct
charge against the relevant Revenue Fund provided that, in the case
of a province, that province enacts such utilisation as a direct
charge.
[Sub-s. (5) substituted by s. 24 (c) of Act No. 29 of 1999.]
(6) The National Treasury may by regulation or instruction in
terms of section 76 regulate the application of this section.
Part 3: Other Officials of Departments and Constitutional
Institutions
44. Assignment of powers and duties by accounting offic-
ers.—(1) The accounting officer for a department, trading entity
or constitutional institution may—
(a) in writing delegate any of the powers entrusted or dele-
gated to the accounting officer in terms of this Act, to an
official in that department, trading entity or constitutional
institution; or
(b) instruct any official in that department, trading entity or
constitutional institution to perform any of the duties as-
signed to the accounting officer in terms of this Act.
(2) A delegation or instruction to an official in terms of subsec-
tion (1)—
(a) is subject to any limitations and conditions prescribed in
terms of this Act or as the relevant treasury may impose;
[Para. (a) substituted by s. 25 of Act No. 29 of 1999.]
(b) is subject to any limitations and conditions the accounting
officer may impose;
(c) may either be to a specific individual or to the holder of a
specific post in the relevant department, trading entity or
constitutional institution; and
(d) does not divest the accounting officer of the responsibility
concerning the exercise of the delegated power or the per-
formance of the assigned duty.
(3) The accounting officer may confirm, vary or revoke any
decision taken by an official as a result of a delegation or instruc-
tion in terms of subsection (1), subject to any rights that may have
become vested as a consequence of the decision.
45. Responsibilities of other officials.—An official in a de-
partment, trading entity or constitutional institution—
(a) must ensure that the system of financial management and
internal control established for that department, trading
entity or constitutional institution is carried out within the
area of responsibility of that official;
(b) is responsible for the effective, efficient, economical and
transparent use of financial and other resources within
that official’s area of responsibility;
(c) must take effective and appropriate steps to prevent,
within that official’s area of responsibility, any unauthor-
ised expenditure, irregular expenditure and fruitless and
wasteful expenditure and any under collection of revenue
due;
(d) must comply with the provisions of this Act to the extent
applicable to that official, including any delegations and
instructions in terms of section 44; and
(e) is responsible for the management, including the safe-
guarding, of the assets and the management of the liabili-
ties within that official’s area of responsibility.
CHAPTER 6
PUBLIC ENTITIES
Part 1: Application of this Chapter
46. Application.—The provisions of this Chapter apply, to the
extent indicated, to all public entities listed in Schedule 2 or 3.
ss 43–50
47. Unlisted public entities.—(1) The Minister, by notice in
the national Government Gazette—
(a) must amend Schedule 3 to include in the list all public
entities that are not listed; and
(b) may make technical changes to the list.
[General Note: Amended list of public entities has been published
under General Notice No. 3366 in Government Gazette 25778 of 5
December 2003.]
(2) The accounting authority for a public entity that is not listed
in either Schedule 2 or 3 must, without delay, notify the National
Treasury, in writing, that the public entity is not listed.
(3) Subsection (2) does not apply to an unlisted public entity
that is a subsidiary of a public entity, whether the latter entity is
listed or not.
(4) The Minister may not list the following institutions in
Schedule 3:
(a) A constitutional institution, the South African Reserve
Bank and the Auditor-General;
(b) any public institution which functions outside the sphere
of national or provincial government; and
[Para. (b) substituted by s. 26 of Act No. 29 of 1999.]
(c) any institution of higher education.
48. Classification of public entities.—(1) The Minister may
by notice in the national Government Gazette classify public
entities listed in Schedule 3 in accordance with the relevant
definitions set out in section 1, as—
(a) national government business enterprises;
(b) provincial government business enterprises;
(c) national public entities; and
(d) provincial public entities.
[Sub-s. (1) substituted by s. 27 of Act No. 29 of 1999.]
(2) A public entity is for the purposes of this Act regarded as
belonging to the class in which it is classified in terms of subsec-
tion (1).
[General Note: Re-classification of public entities has been pub-
lished under General Notice No. 504 in Government Gazette 22337
of 8 June 2001.]
Part 2: Accounting Authorities for Public Entities
49. Accounting authorities.—(1) Every public entity must
have an authority which must be accountable for the purposes of
this Act.
(2) If the public entity—
(a) has a board or other controlling body, that board or
controlling body is the accounting authority for that enti-
ty; or
(b) does not have a controlling body, the chief executive
officer or the other person in charge of the public entity is
the accounting authority for that public entity unless spe-
cific legislation applicable to that public entity designates
another person as the accounting authority.
(3) The relevant treasury, in exceptional circumstances, may
approve or instruct that another functionary of a public entity must
be the accounting authority for that public entity.
[Sub-s. (3) substituted by s. 28 (a) of Act No. 29 of 1999.]
(4) The relevant treasury may at any time withdraw an approval
or instruction in terms of subsection (3).
[Sub-s. (4) substituted by s. 28 (b) of Act No. 29 of 1999.]
(5) A public entity must inform the Auditor-General promptly
and in writing of any approval or instruction in terms of subsection
(3) and any withdrawal of an approval or instruction in terms of
subsection (4).
50. Fiduciary duties of accounting authorities.—(1) The
accounting authority for a public entity must—
(a) exercise the duty of utmost care to ensure reasonable
protection of the assets and records of the public entity;
ss 50–54 Auditing: Legislation and Standards
(b) act with fidelity, honesty, integrity and in the best inter-
ests of the public entity in managing the financial affairs
of the public entity;
(c) on request, disclose to the executive authority responsible
for that public entity or the legislature to which the public
entity is accountable, all material facts, including those
reasonably discoverable, which in any way may influence
the decisions or actions of the executive authority or that
legislature; and
(d) seek, within the sphere of influence of that accounting
authority, to prevent any prejudice to the financial inter-
ests of the state.
(2) A member of an accounting authority or, if the accounting
authority is not a board or other body, the individual who is the
accounting authority, may not—
(a) act in a way that is inconsistent with the responsibilities
assigned to an accounting authority in terms of this Act;
or
(b) use the position or privileges of, or confidential infor-
mation obtained as, accounting authority or a member of
an accounting authority, for personal gain or to improper-
ly benefit another person.
(3) A member of an accounting authority must—
(a) disclose to the accounting authority any direct or indirect
personal or private business interest that that member or
any spouse, partner or close family member may have in
any matter before the accounting authority; and
(b) withdraw from the proceedings of the accounting authori-
ty when that matter is considered, unless the accounting
authority decides that the member’s direct or indirect in-
terest in the matter is trivial or irrelevant.
51. General responsibilities of accounting authorities.—
(1) An accounting authority for a public entity—
(a) must ensure that that public entity has and maintains—
(i) effective, efficient and transparent systems of
financial and risk management and internal control;
(ii) a system of internal audit under the control and
direction of an audit committee complying with
and operating in accordance with regulations and
instructions prescribed in terms of sections 76 and
77; and
(iii) an appropriate procurement and provisioning
system which is fair, equitable, transparent, com-
petitive and cost-effective;
(iv) a system for properly evaluating all major capital
projects prior to a final decision on the project;
(b) must take effective and appropriate steps to—
(i) collect all revenue due to the public entity con-
cerned; and
(ii) prevent irregular expenditure, fruitless and wasteful
expenditure, losses resulting from criminal conduct,
and expenditure not complying with the operational
policies of the public entity; and
(iii) manage available working capital efficiently and
economically;
(c) is responsible for the management, including the safe-
guarding, of the assets and for the management of the
revenue, expenditure and liabilities of the public entity;
(d) must comply with any tax, levy, duty, pension and audit
commitments as required by legislation;
(e) must take effective and appropriate disciplinary steps
against any employee of the public entity who—
(i) contravenes or fails to comply with a provision of
this Act;
(ii) commits an act which undermines the financial
management and internal control system of the
public entity; or
A-360
(iii) makes or permits an irregular expenditure or a
fruitless and wasteful expenditure;
(f) is responsible for the submission by the public entity of
all reports, returns, notices and other information to Par-
liament or the relevant provincial legislature and to the
relevant executive authority or treasury, as may be re-
quired by this Act;
[Para. (f) substituted by s. 29 of Act No. 29 of 1999.]
(g) must promptly inform the National Treasury on any new
entity which that public entity intends to establish or in
the establishment of which it takes the initiative, and al-
low the National Treasury a reasonable time to submit its
decision prior to formal establishment; and
(h) must comply, and ensure compliance by the public entity,
with the provisions of this Act and any other legislation
applicable to the public entity.
(2) If an accounting authority is unable to comply with any of
the responsibilities determined for an accounting authority in this
Part, the accounting authority must promptly report the inability,
together with reasons, to the relevant executive authority and
treasury.
52. Annual budget and corporate plan by Schedule 2 public
entities and government business enterprises.—The accounting
authority for a public entity listed in Schedule 2 or a government
business enterprise listed in Schedule 3 must submit to the account-
ing officer for a department designated by the executive authority
responsible for that public entity or government business enter-
prise, and to the relevant treasury, at least one month, or another
period agreed with the National Treasury, before the start of its
financial year—
(a) a projection of revenue, expenditure and borrowings for
that financial year in the prescribed format; and
(b) a corporate plan in the prescribed format covering the
affairs of that public entity or business enterprise for the
following three financial years, and, if it has subsidiaries,
also the affairs of the subsidiaries.
[S. 52 amended by s. 30 of Act No. 29 of 1999.]
(Date of commencement of s. 52: 1 April 2001.)
53. Annual budgets by non-business Schedule 3 public enti-
ties.—(1) The accounting authority for a public entity listed in
Schedule 3 which is not a government business enterprise must
submit to the executive authority responsible for that public entity,
at least six months before the start of the financial year of the
department designated in terms of subsection (2) or another period
agreed to between the executive authority and the public entity, a
budget of estimated revenue and expenditure for that financial
year, for approval by the executive authority.
(2) The budget must be submitted to the executive authority
through the accounting officer for a department designated by the
executive authority, who may make recommendations to the
executive authority with regard to the approval or amendment of
the budget.
(3) A public entity which must submit a budget in terms of
subsection (1), may not budget for a deficit and may not accumu-
late surpluses unless the prior written approval of the National
Treasury has been obtained.
(4) The accounting authority for such a public entity is respon-
sible for ensuring that expenditure of that public entity is in
accordance with the approved budget.
(5) The National Treasury may regulate the application of this
section by regulation or instruction in terms of section 76.
54. Information to be submitted by accounting authori-
ties.—(1) The accounting authority for a public entity must submit
to the relevant treasury or the Auditor-General such information,
returns, documents, explanations and motivations as may be
prescribed or as the relevant treasury or the Auditor-General may
require.
[Sub-s. (1) substituted by s. 31 (a) of Act No. 29 of 1999.]
A-361 Public Finance Management Act No. 1 of 1999
(2) Before a public entity concludes any of the following trans-
actions, the accounting authority for the public entity must prompt-
ly and in writing inform the relevant treasury of the transaction and
submit relevant particulars of the transaction to its executive
authority for approval of the transaction:
(a) establishment or participation in the establishment of a
company;
(b) participation in a significant partnership, trust, unincorpo-
rated joint venture or similar arrangement;
(c) acquisition or disposal of a significant shareholding in a
company;
(d) acquisition or disposal of a significant asset;
(e) commencement or cessation of a significant business
activity; and
(f) a significant change in the nature or extent of its interest
in a significant partnership, trust, unincorporated joint
venture or similar arrangement.
[Sub-s. (2) amended by s. 31 (b) of Act No. 29 of 1999.]
(3) A public entity may assume that approval has been given if
it receives no response from the executive authority on a submis-
sion in terms of subsection (2) within 30 days or within a longer
period as may be agreed to between itself and the executive
authority.
(4) The executive authority may exempt a public entity listed in
Schedule 2 or 3 from subsection (2).
55. Annual report and financial statements.—(1) The ac-
counting authority for a public entity—
(a) must keep full and proper records of the financial affairs
of the public entity;
(b) prepare financial statements for each financial year in
accordance with generally accepted accounting practice,
unless the Accounting Standards Board approves the ap-
plication of generally recognised accounting practice for
that public entity;
(c) must submit those financial statements within two months
after the end of the financial year—
(i) to the auditors of the public entity for auditing; and
(ii) if it is a business enterprise or other public entity
under the ownership control of the national or a
provincial government, to the relevant treasury; and
[Sub-para. (ii) substituted by s. 32 (a) of Act No. 29 of 1999.]
(d) must submit within five months of the end of a financial
year to the relevant treasury, to the executive authority re-
sponsible for that public entity and, if the Auditor-
General did not perform the audit of the financial state-
ments, to the Auditor-General—
(i) an annual report on the activities of that public
entity during that financial year;
(ii) the financial statements for that financial year after
the statements have been audited; and
(iii) the report of the auditors on those statements.
[Para. (d) amended by s. 32 (b) of Act No. 29 of 1999.]
(2) The annual report and financial statements referred to in
subsection (1) (d) must—
(a) fairly present the state of affairs of the public entity, its
business, its financial results, its performance against pre-
determined objectives and its financial position as at the
end of the financial year concerned;
(b) include particulars of—
(i) any material losses through criminal conduct and
any irregular expenditure and fruitless and wasteful
expenditure that occurred during the financial year:
(ii) any criminal or disciplinary steps taken as a
consequence of such losses or irregular expenditure
or fruitless and wasteful expenditure;
(iii) any losses recovered or written off;
ss 54–61
(iv) any financial assistance received from the state and
commitments made by the state on its behalf; and
(v) any other matters that may be prescribed; and
(c) include the financial statements of any subsidiaries.
(3) An accounting authority must submit the report and state-
ments referred to in subsection (1) (d), for tabling in Parliament or
the provincial legislature, to the relevant executive authority
through the accounting officer of a department designated by the
executive authority.
[Sub-s. (3) substituted by s. 32 (c) of Act No. 29 of 1999.]
(4) The relevant treasury may direct that, instead of a separate
report, the audited financial statements of a Schedule 3 public
entity which is not a government business enterprise must be
incorporated in those of a department designated by that treasury.
[Sub-s. (4) substituted by s. 32 (d) of Act No. 29 of 1999.]
Part 3: Other Officials of Public Entities
56. Assignment of powers and duties by accounting authori-
ties.—(1) The accounting authority for a public entity may—
(a) in writing delegate any of the powers entrusted or dele-
gated to the accounting authority in terms of this Act, to
an official in that public entity; or
(b) instruct an official in that public entity to perform any of
the duties assigned to the accounting authority in terms of
this Act.
(2) A delegation or instruction to an official in terms of subsec-
tion (1)—
(a) is subject to any limitations and conditions the accounting
authority may impose;
(b) may either be to a specific individual or to the holder of a
specific post in the relevant public entity; and
(c) does not divest the accounting authority of the responsi-
bility concerning the exercise of the delegated power or
the performance of the assigned duty.
(3) The accounting authority may confirm, vary or revoke any
decision taken by an official as a result of a delegation or instruc-
tion in terms of subsection (1), subject to any rights that may have
become vested as a consequence of the decision.
57. Responsibilities of other officials.—An official in a public
entity—
(a) must ensure that the system of financial management and
internal control established for that public entity is carried
out within the area of responsibility of that official;
(b) is responsible for the effective, efficient, economical and
transparent use of financial and other resources within
that official’s area of responsibility;
(c) must take effective and appropriate steps to prevent,
within that official’s area of responsibility, any irregular
expenditure and fruitless and wasteful expenditure and
any under collection of revenue due;
(d) must comply with the provisions of this Act to the extent
applicable to that official, including any delegations and
instructions in terms of section 56; and
(e) is responsible for the management, including the safe-
guarding, of the assets and the management of the liabili-
ties within that official’s area of responsibility.
Part 4: External Auditors
58. . . . . . .
[S. 58 repealed by s. 53 of Act No. 25 of 2004.]
59. . . . . . .
[S. 59 repealed by s. 53 of Act No. 25 of 2004.]
60. . . . . . .
[S. 60 repealed by s. 53 of Act No. 25 of 2004.]
61. . . . . . .
[S. 61 repealed by s. 53 of Act No. 25 of 2004.]
ss 62–66 Auditing: Legislation and Standards
62. . . . . . .
[S. 62 amended by s. 33 of Act No. 29 of 1999 and repealed by s. 53 of
Act No. 25 of 2004.]
CHAPTER 7
EXECUTIVE AUTHORITIES
63. Financial responsibilities of executive authorities.—
(1) (a) Executive authorities of departments must perform their
statutory functions within the limits of the funds authorised for the
relevant vote.
(b) In performing their statutory functions executive authorities
must consider the monthly reports submitted to them in terms of
section 39 (2) (b) and 40 (4) (c).
(2) The executive authority responsible for a public entity under
the ownership control of the national or a provincial executive
must exercise that executive’s ownership control powers to ensure
that that public entity complies with this Act and the financial
policies of that executive.
[Sub-s. (2) substituted by s. 34 of Act No. 29 of 1999.]
64. Executive directives having financial implications.—
(1) Any directive by an executive authority of a department to the
accounting officer of the department having financial implications
for the department must be in writing.
(2) If implementation of the directive is likely to result in unau-
thorised expenditure, the accounting officer will be responsible for
any resulting unauthorised expenditure unless the accounting
officer has informed the executive authority in writing of the
likelihood of that unauthorised expenditure.
(3) Any decision of the executive authority to proceed with the
implementation of the directive, and the reasons for the decision,
must be in writing, and the accounting officer must promptly file a
copy of this document with the National Treasury and the Auditor-
General, and if a provincial department is involved, also with the
relevant provincial treasury.
[Sub-s. (3) substituted by s. 35 of Act No. 29 of 1999.]
65. Tabling in legislatures.—(1) The executive authority
responsible for a department or public entity must table in the
National Assembly or a provincial legislature, as may be appropri-
ate—
(a) the annual report and financial statements referred to in
section 40 (1) (d) or 55 (1) (d) and the audit report on
those statements, within one month after the accounting
officer for the department or the accounting authority for
the public entity received the audit report; and
(b) the findings of a disciplinary board, and any sanctions
imposed by such a board, which heard a case of financial
misconduct against an accounting officer or accounting
authority in terms of section 81 or 83.
[Sub-s. (1) amended by s. 36 of Act No. 29 of 1999.]
(2) If an executive authority fails to table, in accordance with
subsection (1) (a), the annual report and financial statements of the
department or the public entity, and the audit report on those
statements, in the relevant legislature within six months after the
end of the financial year to which those statements relate—
(a) the executive authority must table a written explanation in
the legislature setting out the reasons why they were not
tabled; and
(b) the Auditor-General may issue a special report on the
delay.
CHAPTER 8
LOANS, GUARANTEES AND OTHER COMMITMENTS
Part 1: General principles
66. Restrictions on borrowing, guarantees and other com-
mitments.—(1) An institution to which this Act applies may not
borrow money or issue a guarantee, indemnity or security, or enter
into any other transaction that binds or may bind that institution or
A-362
the Revenue Fund to any future financial commitment, unless such
borrowing, guarantee, indemnity, security or other transaction—
(a) is authorised by this Act; and
(b) in the case of public entities, is also authorised by other
legislation not in conflict with this Act; and
(c) in the case of loans by a province or a provincial govern-
ment business enterprise under the ownership control of a
provincial executive, is within the limits as set in terms of
the Borrowing Powers of Provincial Governments Act,
1996 (Act No. 48 of 1996).
[Para. (c) added by s. 37 (a) of Act No. 29 of 1999.]
(2) A government may only through the following persons
borrow money, or issue a guarantee, indemnity or security, or enter
into any other transaction that binds or may bind a Revenue Fund
to any future financial commitment:
(a) The National Revenue Fund: The Minister or, in the case
of the issue of a guarantee, indemnity or security, the re-
sponsible Cabinet member acting with the concurrence of
the Minister in terms of section 70.
(b) A Provincial Revenue Fund: The MEC for finance in the
province, acting in accordance with the Borrowing Pow-
ers of Provincial Governments Act, 1996.
[Sub-s. (2) substituted by s. 37 (b) of Act No. 29 of 1999.]
(3) Public entities may only through the following persons bor-
row money, or issue a guarantee, indemnity or security, or enter
into any other transaction that binds or may bind that public entity
to any future financial commitment:
(a) A public entity listed in Schedule 2: The accounting
authority for that Schedule 2 public entity.
(b) A national government business enterprise listed in
Schedule 3 and authorised by notice in the national Gov-
ernment Gazette by the Minister: The accounting authori-
ty for that government business enterprise, subject to any
conditions the Minister may impose.
[General Note: Approval published under General Notice No. 972
in Government Gazette 29033 of 21 July 2006 with effect from
21 July 2006 and subject to Rand Water not exceeding their debt
limit as provided in the Government Gazette
Notice 23450 of 31 May 2002.]
(c) Any other national public entity: The Minister or, in the
case of the issue of a guarantee, indemnity or security, the
Cabinet member who is the executive authority responsi-
ble for that public entity, acting with the concurrence of
the Minister in terms of section 70.
(d) A provincial government business enterprise listed in
Schedule 3 and authorised by notice in the national Gov-
ernment Gazette by the Minister: The MEC for finance in
the province, acting with the concurrence of the Minister,
subject to any conditions that the Minister may impose.
[Para. (d) added by s. 37 (c) of Act No. 29 of 1999.]
(Date of commencement of sub-s. (3): 1 April 2001.)
(4) Constitutional institutions and provincial public entities not
mentioned in subsection (3) (d) may not borrow money, nor issue a
guarantee, indemnity or security, nor enter into any other transac-
tion that binds or may bind the institution or entity to any future
financial commitment.
[Sub-s. (4) substituted by s. 37 (d) of Act No. 29 of 1999.]
(5) Despite subsection (4), the Minister may in writing permit a
public entity mentioned in subsection (3) (c) or (d) or a constitu-
tional institution to borrow money for bridging purposes up to a
prescribed limit, including a temporary bank overdraft, subject to
such conditions as the Minister may impose.
[Sub-s. (5) substituted by s. 37 (e) of Act No. 29 of 1999.]
(6) A person mentioned in subsection (2) or (3) may not dele-
gate a power conferred in terms of that subsection, except with the
prior written approval of the Minister.
A-363 Public Finance Management Act No. 1 of 1999
(7) A public entity authorised to borrow money—
(a) must annually submit to the Minister a borrowing Pro-
gramme for the year; and
(b) may not borrow money in a foreign currency above a
prescribed limit, except when that public entity is a com-
pany in which the state is not the only shareholder.
(Date of commencement of para. (b): 1 April 2001.)
67. No provincial foreign commitments.—A provincial gov-
ernment, including any provincial public entity, may not borrow
money or issue a guarantee, indemnity or security or enter into any
other transaction that binds itself to any future financial commit-
ment, denominated in a foreign currency or concluded on a foreign
financial market.
[S. 67 inserted by s. 38 of Act No. 29 of 1999.]
68. Consequences of unauthorised transactions.—If a per-
son, otherwise than in accordance with section 66, lends money to
an institution to which this Act applies or purports to issue on
behalf of such an institution a guarantee, indemnity or security, or
enters into any other transaction which purports to bind such an
institution to any future financial commitment, the state and that
institution is not bound by the lending contract or the guarantee,
indemnity, security or other transaction.
69. Regulations on borrowing by public entities.—The Min-
ister may regulate by regulation in terms of section 76 the borrow-
ing of money by or for or on behalf of public entities referred to in
section 66 (3) (b), (c) and (d).
[S. 69 substituted by s. 39 of Act No. 29 of 1999.]
70. Guarantees, indemnities and securities by Cabinet
members.—(1) A Cabinet member, with the written concurrence
of the Minister (given either specifically in each case or generally
with regard to a category of cases and subject to any conditions
approved by the Minister), may issue a guarantee, indemnity or
security which binds—
(a) the National Revenue Fund in respect of a financial
commitment incurred or to be incurred by the national
executive; or
(b) a national public entity referred to in section 66 (3) (c)
in respect of a financial commitment incurred or to be
incurred by that public entity.
(Date of commencement of para. (b): 1 April 2001.)
(2) Any payment under a guarantee, indemnity or security
issued in terms of—
(a) subsection (1) (a), is a direct charge against the National
Revenue Fund, and any such payment must in the first
instance be defrayed from the funds budgeted for the
department that is concerned with the issue of the guaran-
tee, indemnity or security in question; and
(b) subsection (1) (b), is a charge against the national public
entity concerned.
(3) A Cabinet member who seeks the Minister’s concurrence for
the issue of a guarantee, indemnity or security in terms of subsec-
tion (1) (a) or (b), must provide the Minister with all relevant
information as the Minister may require regarding the issue of such
guarantee, indemnity or security and the relevant financial com-
mitment.
(4) The responsible Cabinet member must at least annually
report the circumstances relating to any payments under a guaran-
tee, indemnity or security issued in terms of subsection (1) (a) or
(b), to the National Assembly for tabling in the National Assembly.
Part 2: Loans by National Government
71. Purposes for which Minister may borrow money.—The
Minister may borrow money in terms of section 66 (2) (a) for the
following purposes only:
(a) To finance national budget deficits;
(b) to refinance maturing debt or a loan paid before the
redemption date;
ss 66–76
(c) to obtain foreign currency;
(d) to maintain credit balances on a bank account of the
National Revenue Fund;
(e) to regulate internal monetary conditions should the
necessity arise; or
(f) any other purpose approved by the National Assembly by
special resolution.
72. Signing of loan agreements.—The Minister, on conditions
determined by the Minister, may authorise another person to sign a
loan agreement when the Minister borrows money in terms of
section 66 (2) (a).
73. Interest and repayments of loans to be direct charges.—
The following payments in connection with loans are direct
charges against the National Revenue Fund:
(a) the repayment of money borrowed by the Minister in
terms of section 66 (2) (a) or repaid in terms of section
74;
(b) the interest payable on money borrowed; and
(c) any costs associated with such borrowing and approved
by the National Treasury.
74. Repayment, conversion and consolidation of loans.—
The Minister may, on such terms and conditions as the Minister
may determine, and, when necessary, with the concurrence of the
lender—
(a) repay any loan prior to the redemption date of that loan;
(b) convert the loan into any other loan, or
(c) consolidate two or more loans into an existing or new
loan.
75. Obligations from lien over securities.—Neither the Min-
ister, nor the National Treasury is responsible for the fulfilment of
any obligation resulting from any lien, whether expressed, implied
or construed, held over any security issued in terms of this Act,
despite the fact that the Minister or the National Treasury was
notified of the lien.
CHAPTER 9
GENERAL TREASURY MATTERS
76. Treasury regulations and instructions.—(1) The Nation-
al Treasury must make regulations or issue instructions applicable
to departments, concerning—
(a) any matter that must be prescribed for departments in
terms of this Act;
(b) the recovery of losses and damages;
(c) the handling of, and control over, trust money and
property;
(d) the rendering of free services;
(e) the writing off of losses of state money or other state
assets or amounts owed to the state;
(f) liability for losses and damages and procedures for
recovery;
(g) the cancellation or variation of contracts to the detriment
of the state;
(h) the settlement of claims by or against the state;
(i) the waiver of claims by the state;
(j) the remission of money due to the Revenue Fund, refunds
of revenue and payments from the Revenue Fund, as an
act of grace;
(k) the alienation, letting or other disposal of state assets; and
(l) gifts or donations by or to the state.
(2) The National Treasury may make regulations or issue in-
structions applicable to departments, concerning—
(a) any matter that may be prescribed for departments in
terms of this Act;
(b) the charging of expenditure against particular votes;
ss 76–85 Auditing: Legislation and Standards
(c) the establishment of and control over trading entities;
(d) the improvement and maintenance of immovable state
assets;
(e) fruitless and wasteful, unauthorised and irregular ex-
penditure;
(f) the determination of any scales of fees, other charges or
rates relating to revenue accruing to, or expenditure from,
a Revenue Fund;
(g) the treatment of any specific expenditure;
(h) vouchers or other proofs of receipts or payments, which
are defective or have been lost or damaged;
(i) assets which accrue to the state by operation of any law;
or
(j) any other matter that may facilitate the application of this
Act.
(3) Regulations in terms of subsection (1) or (2) may prescribe
matters for which the prior approval of a treasury must be obtained.
(4) The National Treasury may make regulations or issue in-
structions applicable to all institutions to which this Act applies
concerning—
(a) any matter that may be prescribed for all institutions in
terms of this Act;
(b) financial management and internal control;
(c) the determination of a framework for an appropriate
procurement and provisioning system which is fair, equi-
table, transparent, competitive and cost-effective;
(d) audit committees, their appointment and their function-
ing;
(e) internal audit components and their functioning;
(f) the administration of this Act; and
(g) any other matter that may facilitate the application of this
Act.
(5) A treasury regulation or instruction in terms of this section
may—
(a) differentiate between different categories of—
(i) institutions to which this Act applies;
(ii) accounting officers; or
(iii) accounting authorities; or
(b) be limited in its application to a specific category of—
(i) institutions to which this Act applies;
(ii) accounting officers; or
(iii) accounting authorities.
77. Audit committees.—An audit committee—
(a) must consist of at least three persons of whom, in the case
of a department—
(i) one must be from outside the public service;
(ii) the majority may not be persons in the employ of
the department, except with the approval of the rel-
evant treasury; and
[Sub-para. (ii) substituted by s. 40 (a) of Act No. 29 of 1999.]
(iii) the chairperson may not be in the employ of the
department;
(b) must meet at least twice a year; and
(c) may be established for two or more departments or
institutions if the relevant treasury considers it to be more
economical.
[Para. (c) substituted by s. 40 (b) of Act No. 29 of 1999.]
78. Publishing of draft treasury regulations for public
comment.—Draft regulations in terms of section 76 must be
published for public comment in the national Government Gazette
before their enactment.
79. Departures from treasury regulations, instructions or
conditions.—The National Treasury may on good grounds ap-
prove a departure from a treasury regulation or instruction or any
A-364
condition imposed in terms of this Act and must promptly inform
the Auditor-General in writing when it does so.
80. Determination of interest rates for debt owing to
state.—(1) The Minister, by notice in the national Government
Gazette, must determine—
(a) a uniform interest rate applicable to loans granted out of a
Revenue Fund; and
(b) a uniform interest rate applicable to all other debts which
must be paid into a Revenue Fund.
[Sub-s. (1) substituted by s. 41 of Act No. 29 of 1999.]
(2) An interest rate determined in terms of subsection (1) (b)
may differentiate between different categories of debt.
CHAPTER 10
FINANCIAL MISCONDUCT
Part 1: Disciplinary proceedings
81. Financial misconduct by officials in departments and
constitutional institutions.—(1) An accounting officer for a
department or a constitutional institution commits an act of finan-
cial misconduct if that accounting officer wilfully or negligently—
(a) fails to comply with a requirement of section 38, 39, 40,
41 or 42; or
(b) makes or permits an unauthorised expenditure, an irregular
expenditure or a fruitless and wasteful expenditure.
(2) An official of a department, a trading entity or a constitu-
tional institution to whom a power or duty is assigned in terms of
section 44 commits an act of financial misconduct if that official
wilfully or negligently fails to exercise that power or perform that
duty.
82. Financial misconduct by treasury officials.—An official
of a treasury to whom a power or duty is assigned in terms of
section 10 or 20 commits an act of financial misconduct if that
official wilfully or negligently fails to exercise that power or
perform that duty.
[S. 82 substituted by s. 42 of Act No. 29 of 1999.]
83. Financial misconduct by accounting authorities and
officials of public entities.—(1) The accounting authority for a
public entity commits an act of financial misconduct if that ac-
counting authority wilfully or negligently—
(a) fails to comply with a requirement of section 50, 51, 52,
53, 54 or 55; or
(b) makes or permits an irregular expenditure or a fruitless
and wasteful expenditure.
(2) If the accounting authority is a board or other body consist-
ing of members, every member is individually and severally liable
for any financial misconduct of the accounting authority.
(3) An official of a public entity to whom a power or duty is
assigned in terms of section 56 commits an act of financial mis-
conduct if that official wilfully or negligently fails to exercise that
power or perform that duty.
(4) Financial misconduct is a ground for dismissal or suspension
of, or other sanction against, a member or person referred to in
subsection (2) or (3) despite any other legislation.
84. Applicable legal regime for disciplinary proceedings.—
A charge of financial misconduct against an accounting officer or
official referred to in section 81 or 83, or an accounting authority
or a member of an accounting authority or an official referred to in
section 82, must be investigated, heard and disposed of in terms of
the statutory or other conditions of appointment or employment
applicable to that accounting officer or authority, or member or
official, and any regulations prescribed by the Minister in terms of
section 85.
85. Regulations on financial misconduct procedures.—
(1) The Minister must make regulations prescribing—
(a) the manner, form and circumstances in which allegations
and disciplinary and criminal charges of financial
A-365 Public Finance Management Act No. 1 of 1999
misconduct must be reported to the National Treasury, the
relevant provincial treasury and the Auditor-General, in-
cluding—
(i) particulars of the alleged financial misconduct; and
(ii) the steps taken in connection with such financial
misconduct;
[Para. (a) amended by s. 43 (a) of Act No. 29 of 1999.]
(b) matters relating to the investigation of allegations of
financial misconduct;
(c) the circumstances in which the National Treasury or a
provincial treasury may direct that disciplinary steps be
taken or criminal charges be laid against a person for
financial misconduct;
[Para. (c) substituted by s. 43 (b) of Act No. 29 of 1999.]
(d) the circumstances in which a disciplinary board which
hears a charge of financial misconduct must include a
person whose name appears on a list of persons with ex-
pertise in state finances or public accounting compiled by
the National Treasury;
(e) the circumstances in which the findings of a disciplinary
board and any sanctions imposed by the board must be
reported to the National Treasury, the relevant provincial
treasury and the Auditor-General; and
[Para. (e) substituted by s. 43 (c) of Act No. 29 of 1999.]
(f) any other matters to the extent necessary to facilitate the
object of this Chapter.
(2) A regulation in terms of subsection (1) may—
(a) differentiate between different categories of—
(i) accounting officers;
(ii) accounting authorities;
(iii) officials; and
(iv) institutions to which this Act applies; and
(b) be limited in its application to a particular category of
accounting officers, accounting authorities, officials or
institutions only.
Part 2: Criminal proceedings
86. Offences and penalties.—(1) An accounting officer is
guilty of an offence and liable on conviction to a fine, or to impris-
onment for a period not exceeding five years, if that accounting
officer wilfully or in a grossly negligent way fails to comply with a
provision of section 38, 39 or 40.
(2) An accounting authority is guilty of an offence and liable on
conviction to a fine, or to imprisonment for a period not exceeding
five years, if that accounting authority wilfully or in a grossly
negligent way fails to comply with a provision of section 50, 51 or
55.
(3) Any person, other than a person mentioned in section 66 (2)
or (3), who purports to borrow money or to issue a guarantee,
indemnity or security for or on behalf of a department, public
entity or constitutional institution, or who enters into any other
contract which purports to bind a department, public entity or
constitutional institution to any future financial commitment, is
guilty of an offence and liable on conviction to a fine or to impris-
onment for a period not exceeding five years.
CHAPTER 11
ACCOUNTING STANDARDS BOARD
87. Establishment.—(1) The Minister by regulation in terms
of section 91 must establish a board to be known as the Accounting
Standards Board.
(2) The Accounting Standards Board is a juristic person.
(Date of commencement of s. 87: 2 March 1999.)
88. Composition.—(1) The Accounting Standards Board con-
sists of no more than 10 members as the Minister may determine.
ss 85–91
(2) The Minister, after consulting the Auditor-General, appoints
the members of the Board.
(3) The Board may establish its own operating procedures.
(Date of commencement of s. 88: 2 March 1999.)
89. Functions of Board.—(1) The Accounting Standards
Board must—
(a) set standards of generally recognised accounting practice
as required by section 216 (1) (a) of the Constitution, for
the annual financial statements of—
(i) departments;
(ii) public entities;
(iii) constitutional institutions;
(iv) municipalities and boards, commissions, compa-
nies, corporations, funds or other entities under the
ownership control of a municipality; and
(v) Parliament and the provincial legislatures;
[Sub-para. (v) substituted by s. 44 of Act No. 29 of 1999.]
(b) prepare and publish directives and guidelines concerning
the standards set in terms of paragraph (a);
(c) recommend to the Minister effective dates of implementa-
tion of these standards for the different categories of insti-
tutions to which these standards apply; and
(d) perform any other function incidental to advancing
financial reporting in the public sector.
(2) In setting standards the Board must take into account all
relevant factors, including—
(a) best accounting practices, both locally and international-
ly; and
(b) the capacity of the relevant institutions to comply with the
standards.
(3) The Board may set different standards for different catego-
ries of institutions to which these standards apply.
(4) The standards set by the Board must promote transparency
in and effective management of revenue, expenditure, assets and
liabilities of the institutions to which these standards apply.
(Date of commencement of s. 89: 2 March 1999.)
90. Powers of Board.—The Accounting Standards Board may
do all that is necessary or expedient to perform its functions
effectively, which includes the power to—
(a) determine its own staff establishment and appoint em-
ployees to posts on its staff establishment;
(b) obtain the services of any person or entity to perform any
specific act or function;
(c) confer with any person or entity;
(d) acquire or dispose of any right in or to property, but
ownership in immovable property may be acquired or
disposed of only with the consent of the Minister;
(e) insure itself against any loss, damage, risk or liability;
(f) perform legal acts, or institute or defend any legal action
in its own name;
(g) do research and publish reports; and
(h) do anything that is incidental to the exercise of any of its
powers.
(Date of commencement of s. 90: 2 March 1999.)
91. Regulations on accounting standards of Board.—
(1) The Minister, after consulting the Auditor-General, may make
regulations—
(a) concerning the qualifications, remuneration, term of
office and removal of members of the Accounting Stand-
ards Board, the filling of vacancies, the chairperson of the
Board, and the finances and administration of the Board;
(b) prescribing the standards set by the Board in terms of
section 89; and
s 91– Schedule 2 Auditing: Legislation and Standards
(c) concerning any other matter that may facilitate the proper
functioning of the Board or the implementation of those
standards.
(2) The Minister must consult the Board on the implementation
date of a regulation made in terms of subsection (1) (b).
(3) Different regulations may be made in terms of subsection
(1) (b) for different categories of institutions to which the standards
set in terms of section 89 apply.
(4) Draft regulations prescribing standards in terms of subsec-
tion (1) (b) must be published for public comment in the national
Government Gazette before their enactment.
(Date of commencement of s. 91: 2 March 1999.)
CHAPTER 12
MISCELLANEOUS
92. Exemptions.—The Minister, by notice in the national Gov-
ernment Gazette, may exempt any institution to which this Act
applies, or any category of those institutions, from any specific
provisions of this Act for a period determined in the notice.
[General Note: Exemption of public entities has been published
under General Notices No. 502 and No. 503 in Government
Gazette 22337 of 8 June 2001. Exemption of an institution has
been published under Government Notice No. 1097 in Government
Gazette 22801 of 9 November 2001, Government Notice No. 886
in Government Gazette 26602 of 30 July 2004, Government Notice
No. 822 in Government Gazette 40129 of 8 July 2016, Government
Notice No. 824 in Government Gazette 40132 of 11 July 2016 and
Government Notice No. 886 in Government Gazette 40183 of
2 August 2016.]
93. Transitional provisions.—(1) Anything done in terms of a
provision of the Exchequer Act, 1975 (Act No. 66 of 1975), which
can be done in terms of a provision of this Act, must be regarded as
having been done in terms of this Act.
(2) All treasury regulations and instructions made or issued in
terms of the Exchequer Act, 1975, remain in force until repealed in
terms of section 76 of this Act.
(3) Until the Accounting Standards Board is established, the
National Treasury may perform the functions of the Board.
(4) The provisions of the Revenue Funds Interim Arrangements
Act, 1997 (Act No. 95 of 1997), despite the fact that they have
lapsed, must be regarded as forming part of this Act until 1 April
2000.
(Date of commencement of sub-s. (4): 2 March 1999.)
94. Repeal of legislation.—The legislation mentioned in
Schedule 6 is repealed to the extent specified in the third column.
95. Short title and commencement.—This Act is called the
Public Finance Management Act, 1999, and takes effect on 1 April
2000 except—
(a) Chapter 11 and section 93 (4), which take effect on the
date of publication of this Act; and
(b) those provisions determined by the Minister by notice in
the national Government Gazette, which will take effect
on a date determined in the notice, but which may not be
a date later than 1 April 2003.
SCHEDULE 1
CONSTITUTIONAL INSTITUTIONS
[General Note: Amended public entities have been published under
General Notice No. 1863 in Government Gazette 22577 of
24 August 2001 with effect from 24 August 2001; under General
Notice No. 2302 in Government Gazette 22860 of 30 November
2001 with effect from 30 November 2001; and under Government
Notice No. 1396 in Government Gazette 24042 of 15 November
2002 with effect from 15 November 2002.]
The Commission for Gender Equality
A-366
The Commission for the Promotion and Protection of the
Rights of Cultural, Religious and Linguistic Communi-
ties
......
[“The Commission on the Remuneration of Persons Holding Public
Office” deleted by GN 1396 in GG 24042 of 15 November 2002.]
The Financial and Fiscal Commission
The Human Rights Commission
......
[“The Independent Broadcasting Authority” deleted by GN 2302 in
GG 22860 of 30 November 2001.]
Independent Communications Authority of South Africa
[“Independent Communications Authority of South Africa” previously
“Independent Communications Authority” amended by GN 1863 in
GG 22577 of 24 August 2001.]
The Independent Electoral Commission
The Municipal Demarcation Board
The Pan South African Language Board
The Public Protector
SCHEDULE 2
MAJOR PUBLIC ENTITIES
[General Note: Please note that the Preferential Procurement Policy
Framework Act, No. 5 of 2000 and its Regulations shall apply to
all public entities listed in Schedules 2 and 3 of this Act, under
GNR.501 published in Government Gazette 34350 dated 8 June
2011, with effect from 7 December 2011. Amended public entities
have been published under General Notice No. 1863 in Govern-
ment Gazette 22577 of 24 August 2001 with effect from 24 August
2001; under General Notice No. 2302 in Government Gazette
22860 of 30 November 2001 with effect from 30 November 2001;
under General Notice No. 683 in Government Gazette 23407 of
17 May 2002, with effect from 17 May 2002; under General Notice
No. 1283 in Government Gazette 23619 of 19 July 2002 with effect
from 19 July 2002; under General Notice No. 1261 in Government
Gazette 24731 of 17 April 2003 with effect from
17 April 2003, under General Notice No. 765 in Government
Gazette 27599 of 27 May 2005 with effect from 27 May 2005,
under Act No. 5 of 2007 with effect from the transfer date (the date
on which the transfer of shares and claims is finalised under an
agreement between Transnet and the State) and the conversion
date, (the date on which the conversion of South African Airways
(Pty.) Ltd. into a public company is registered in terms of section
4 (3), under Act No. 33 of 2007 with effect from the transfer date,
(the date on which the transfer of shares and claims is finalised
under an agreement between Eskom and the State), and the conver-
sion date (the date determined by the Minister in terms of section
8 (1)) and under Act No. 34 of 2007 with effect from the transfer
date, (the date on which the transfer of shares and claims is final-
ised under an agreement between Transnet and the State), and the
conversion date (the date on which the conversion of South African
Express (Propriety) Limited into a public company is registered in
terms of section 6 (1).]
Air Traffic and Navigation Services Company
Airports Company
Alexkor Limited
[“Alexander Bay Development Corporation
Limited” previously “Alexander Bay Development Corporation”
amended by GN 683 in Government Gazette 23407 of 17 May 2002.]
[“Alexkor Limited” previously “Alexander Bay Development Corpora-
tion Limited” amended by GN 1283 in Government Gazette 23619 of
19 July 2002.]
Armaments Corporation of South Africa
Broadband Infraco (Proprietary) Limited
[“Broadband Infraco (Proprietary) Limited” inserted by s. 11 (a) of Act
No. 33 of 2007 with effect from the transfer date, (the date on which
the transfer of shares and claims is finalised under an agreement
between Eskom and the State).]
Broadband Infraco Limited
[“Broadband Infraco Limited” previously “Broadband Infraco
(Proprietary) Limited” substituted by s. 11 (b) of Act No. 33 of 2007
with effect from the conversion date, (the date determined by the
Minister in terms of section 8 (1)).]
A-367 Public Finance Management Act No. 1 of 1999
CEF (Pty) Ltd
[“Central Energy Fund (Pty) Ltd” previously “Central Energy Fund”
amended by GN 1863 in GG 22577 of 24 August 2001 and by GN 765
in Government Gazette 27599 of 27 May 2005.]
DENEL
Development Bank of Southern Africa
ESKOM
Independent Development Trust
Industrial Development Corporation of South Africa Limited
Land and Agricultural Bank of South Africa
......
[“SA Abbattoir Corporation” deleted by GN 1863 in Government
Gazette 22577 of 24 August 2001.]
SA Broadcasting Corporation Limited
[“SA Broadcasting Corporation” previously “SA Broadcasting Com-
mission” amended by GN 1863 in GG 22577 of 24 August 2001.]
[“SA Broadcasting Corporation Limited” previously “SA Broadcasting
Corporation” amended by
GN 2302 in GG 22860 of 30 November 2001.]
South African Express (Proprietary) Limited
[“South African Express (Proprietary) Limited” inserted by s. 9 (a) of
Act No. 34 of 2007 with effect from the transfer date, (the date on
which the transfer of shares and claims is finalised under an
agreement between Transnet and the State) and substituted by s. 9 (b)
of Act No. 34 of 2007 with effect from the conversion date, (the date
on which the conversion of South African Express (Propriety) Limited
into a public company is registered in terms of section 6 (1)).]
SA Forestry Company Limited
SA Nuclear Energy Corporation
[“SA Nuclear Energy Corporation” previously “Atomic Energy Corpo-
ration of South Africa Limited” amended by GN 1261 in GG 24731
of 17 April 2003.]
SA Post Office Limited
South African Airways Limited
[“South African Airways Limited” previously known as “South Afri-
can Airways (Proprietary) Limited” inserted by s. 9 (a) of Act No. 5 of
2007 with effect from the transfer date, (the date on which the transfer
of shares and claims is finalised under an agreement between South
African Airways (Proprietary) Limited and the State) and substituted
by s. 9 (b) of Act No. 5 of 2007 with effect from the conversion date,
(the date on which the conversion of South African Airways (Proprie-
tary) Limited into a public company is registered in terms of
section 6 (1)).]
(Editorial Note: S. 9 of Act No. 5 of 2007 inserts number 16A for
“South African Airways (Proprietary) Limited” and “South African
Airways Limited”. Since numbering has not been effected in a
prior Gazette, we will abide by the original format with no
numbering.)
Telkom SA Limited
Trans-Caledon Tunnel Authority
Transnet Limited
Any subsidiary or entity under the ownership control of the
above public entities
SCHEDULE 3
OTHER PUBLIC ENTITIES
[General Note: Please note that the Preferential Procurement Policy
Framework Act, No. 5 of 2000 and its Regulations shall apply to
all public entities listed in Schedules 2 and 3 of this Act, under
GNR.501 published in Government Gazette 34350 dated 8 June
2011, with effect from 7 December 2011.]
Part A: National Public Entities
[General Note: Amended public entities have been published under
General Notice No. 402 in Government Gazette 22047 of 16
February 2001 with effect from 1 April 2001; under General
Notice No. 1397 in Government Gazette 22321 of 1 June 2001
with effect from 1 June 2001; under Government Notice No. 504 in
Government Gazette 22337 of 8 June 2001 with effect from 8 June
Schedule 2–Schedule 3
2001; under General Notice No. 1863 in Government Gazette
22577 of 24 August 2001 with effect from 24 August 2001; under
General Notice No. 2302 in Government Gazette 22860 of
30 November 2001 with effect from 30 November 2001; under
General Notice No. 683 in Government Gazette 23407 of 17 May
2002 with effect from 17 May 2002; under General Notice No.
1283 in Government Gazette 23619 of 19 July 2002 with effect
from 19 July 2002; under Government Notice No. 1396 in Gov-
ernment Gazette 24042 of 15 November 2002 with effect from
15 November 2002; under General Notice No. 1261 in Government
Gazette 24731 of 17 April 2003 with effect from 17 April 2003;
under General Notice No. 3366 in Government Gazette 25778 of
5 December 2003 with effect from 5 December 2003; under
General Notice No. 1139 in Government Gazette 26477 of 25 June
2004 with effect from 25 June 2004; under General Notice No. 765
in Government Gazette 27599 of 27 May 2005 with effect from
27 May 2005; under General Notice No. 1114 in Government
Gazette 27773 of 15 July 2005 with effect from 15 July 2005;
under General Notices Nos. 1263, 1264, 1265, 1268, 1269 and
1271 in Government Gazette 28237 of 25 November 2005 with effect
from 25 November 2005, under General Notice No. 230 in Gov-
ernment Gazette 28519 of 24 February 2006 with effect from 24
February 2006, under General Notice No. 396 in Government
Gazette No. 28605 of 17 March 2006 with effect from 17 March
2006, under General Notices Nos. 436 and 441 in Government
Gazette 28651 of 31 March 2006 with effect from 31 March 2006,
under General Notice No. 602 in Government Gazette 28798 of 12
May 2006 with effect from 12 May 2006, under General Notice
No. 667 in Government Gazette 28847 of 26 May 2006 with effect
from 26 May 2006, under General Notice No. 972 in Government
Gazette 29033 of 21 July 2006 with effect from 21 July 2006 and
subject to Rand Water not exceeding their debt limit, as provided
in the Government Gazette Notice 23450 of 31 May 2002, under
General Notice Nos. 1010 and 1011 in Government Gazette 29050
of 28 July 2006 with effect from 28 July 2006, under General
Notices Nos. 1476 and 1477 in Government Gazette 29293 of
20 October 2006 with effect from 20 October 2006, under Gov-
ernment Notice No. 187 in Government Gazette 29669 of 9 March
2007 with effect from 9 March 2007, under Government Notice
No. 1000 in Government Gazette 31417 of 19 September 2008
with effect from 19 September 2008, under Government Notice
No. 1003 in Government Gazette 31417 of 19 September 2008
with effect from 19 September 2008; under Government Notice
No. 311 in Government Gazette 32013 of 20 March 2009 with
effect from 20 March 2009, under Government Notice No. 240 in
Government Gazette 33059 of 1 April 2010 with effect retrospec-
tively from 1 July 2005, under Government Notices Nos. 241 and
242 in Government Gazette 33059 of 1 April 2010 with effect from
1 April 2010, under Government Notice No. 1250 in Government
Gazette 33900 of 31 December 2010, under Government Notices
Nos. 1253 and 1254 in Government Gazette 33900 of 31 December
2010 with effect retrospectively from 1 April 2010, under Gov-
ernment Notice No. 363 in Government Gazette 34233 of 29 April
2011, with effect retrospectively from 1 April 2011, under Gov-
ernment Notice Nos. 796, 797 (with effect retrospectively from
1 April 2011) and 800 in Government Gazette 34631 of 30 Sep-
tember 2011, under Government Notice No. 821 in Government
Gazette 35759 of 12 October 2012, with effect from 1 April 2012,
under Government Notice No. 824 in Government Gazette 35759
of 12 October 2012, with effect from 1 April 2011, under Govern-
ment Notice No. 187 in Government Gazette 36225 of 15 March
2013, with effect retrospectively from 16 February 2001, under
Government Notice No. 190 in Government Gazette 36225 of 15
March 2013 with effect from 15 March 2013, under Government
Notice No. 392 in Government Gazette 37653 of 23 May 2014,
under Government Notice No. 393 in Government Gazette 37653
of 23 May 2014 and s. 8 of Act No. 12 of 2013with effect from
1 April 2014, under Government Notice No. 353 in Government
Gazette 38735 of 30 April 2015 with effect from 30 April 2015,
under Government Notice No. 354 in Government Gazette 38735
of 30 April 2015 with effect from 1 April 2015 and under Govern-
ment Notice No. 358 in Government Gazette 38735 of 30 April
2015 w.e.f. 31 March 2015.]
Schedule 3 Auditing: Legislation and Standards
Accounting Standards Board
Africa Institute of South Africa, Pretoria
[“Africa Institute of South Africa, Pretoria” added by GN 402 in
GG 22047 of 16 February 2001.]
African Renaissance and International Cooperation Fund
[“African Renaissance and International Cooperation Fund” added by
GN 1139 in GG 26477 of 25 June 2004.]
Afrikaanse Taalmuseum, Paarl
[“Afrikaanse Taalmuseum, Paarl” added by
GN 402 in GG 22047 of 16 February 2001.]
......
[“Agricultural Credit Board” deleted by GN 1863 in GG 22577 of
24 August 2001.]
Agricultural Research Council
AGRISETA
[“AGRISETA” added by GN 1010 in GG 29050 of 28 July 2006.]
......
[“Air Services Licensing Council” deleted by
GN 1396 in GG 24042 of 15 November 2002.]
Artscape
[“Cape Performing Arts Board (CAPAB), Cape Town” added by
GN 402 in GG 22047 of 16 February 2001.]
[“Artscape” previously “Cape Performing Arts Board (CAPAB), Cape
Town” amended by GN 1283 in GG 23619 of 19 July 2002.]
Banking Sector Education and Training Authority
[“Banking Sector Education and Training Authority” added by GN 402
in GG 22047 of 16 February 2001.]
......
[“Board on Tariffs and Trade” deleted by GN 3366 in GG 25778 of
5 December 2003.]
Boxing South Africa
[“Boxing South Africa” added by GN 3366 in
GG 25778 of 5 December 2003.]
Brand SA
[“South African International Marketing Council Trust/Brand South
Africa” previously “International Marketing Council” added by
GN 1476 in GG 29293 of 20 October 2006 and amended by
GN 800 in GG 34631 of 30 September 2011.]
[“Brand SA” previously “South African International Marketing Coun-
cil Trust/Brand South Africa” amended by GN 190 in GG 36225 of
15 March 2013 with effect from 15 March 2013.]
Breede-Gouritz Catchment Management Agency
[“Breede-Gouritz Catchment Management Agency”, previously
“Breede River Catchment Management Agency”, added and classified
by GN 1000 in GG 31417 of 19 September 2008 and amended
by GN 353 in GG 38735 of 30 April 2015.]
......
[“Business and Arts South Africa (BASA)” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 441 in GG 28651
of 31 March 2006.]
Castle Control Board
[“Castle Control Board” previously “Castle Management Board” added
by GN 1397 in GG 22321 of 1 June 2001 and amended by GN 1863 in
GG 22577 of 24 August 2001 and by GN 2302
in GG 22860 of 30 November 2001.]
......
[“Certification Council for Technikon Education” deleted by GN 683
in GG 23407 of 17 May 2002.]
Chemical Industries Education and Training Authority
[“Chemical Industries Education and Training
Authority” added by GN 402 in GG 22047 of 16 February 2001.]
......
[“Clothing, Textiles, Footwear and Leather Sector Education and
Training Authority” added by GN 402 in GG 22047 of 16 February
2001 and deleted by GN 797 in GG 34631 of 30 September 2011.]
Commission for Conciliation, Mediation & Arbitration
Community Schemes Ombud Service
[“Community Schemes Ombud Service” added by GN 821 in
GG 35759 of 12 October 2012 with effect from 1 April 2012.]
Companies and Intellectual Property Commission
[“Companies and Intellectual Property Commission” added by
GN 1254 in GG 33900 of 31 December 2010 with
effect retrospectively from 1 April 2010.]
A-368
Companies Tribunal
[“Companies Tribunal” added by GN 363 in GG 34233 of 29 April
2011 with effect retrospectively from 1 April 2011.]
......
[“Compensation Board” deleted by GN 3366 in
GG 25778 of 5 December 2003.]
Compensation Fund, including Reserve Fund
[“Compensation Fund, including Reserve Fund” added by GN 402 in
GG 22047 of 16 February 2001.]
......
[“Competition Board” deleted by GN 3366 in
GG 25778 of 5 December 2003.]
Competition Commission
[“Competition Commission” added by GN 402 in GG 22047 of
16 February 2001.]
Competition Tribunal
[“Competition Tribunal” added by GN 402 in
GG 22047 of 16 February 2001.]
Construction Education and Training Authority
[“Construction Education and Training Authority” added by GN 402 in
GG 22047 of 16 February 2001.]
Construction Industry Development Board
[“Construction Industry Development Board” added by GN 2302 in
GG 22860 of 30 November 2001.]
Council for Built Environment (CBE)
[“Council for Built Environment (CBE)” added by GN 765 in
GG 27599 of 27 May 2005.]
Council for Geoscience
Council for Medical Schemes
[“Council for Medical Schemes” added by GN 402 in GG 22047 of
16 February 2001.]
......
[“Council for Mineral Technology (Mintek)” moved from Schedule 3A
to Schedule 3B by GN 504 in
GG 22337 of 8 June 2001.]
......
[“Council for Nuclear Safety” deleted by GN 3366 in GG 25778 of
5 December 2003.]
......
[“Council for Scientific and Industrial Research (CSIR)” moved from
Schedule 3A to Schedule 3B by GN 504 in GG 22337 of 8 June 2001.]
Council on Higher Education
[“Council on Higher Education” added by GN 402 in GG 22047 of
16 February 2001.]
Cross-Border Road Transport Agency
[“Cross-Border Road Transport Agency” added by GN 1397 in
GG 22321 of 1 June 2001.]
Culture, Arts, Tourism, Hospitality and Sports Education and
Training Authority (CATHSSETA)
[“Culture, Arts, Tourism, Hospitality and Sports Education and Train-
ing Authority (CATHSSETA)” added and classified by GN 796 in
GG 34631 of 30 September 2011.]
......
[“Diplomacy, Intelligence, Defence and Trade & Industry Sector Edu-
cation and Training Authority” added by GN 402 in GG 22047 of
16 February 2001 and deleted by GN 1000 in GG 31417 of
19 September 2008.]
......
[“Education and Labour Relations Council” added by GN 1396 in
GG 24042 of 15 November 2002 and deleted by GN 358 in GG 38735
of 30 April 2015 w.e.f. 31 March 2015 (Editorial Note: GN 358 in
GG 38735 made reference to “Education Labour Relations Council
(ELRC)”. We suggest “Education and Labour Relations Council” was
intended).]
Education, Training and Development Practices SETA (ETDP)
[“Education, Training and Development Practices SETA (ETDP)” pre-
viously “Education, Training and Development Practices Sector Educa-
tion and Training Authority” added by GN 402 in GG 22047 of
16 February 2001 and amended by GN 800 in GG 34631 of
30 September 2011.]
Electricity Distribution Industry Holdings (Pty) Ltd
[“Electricity Distribution Industry Holdings (Pty) Ltd” added by
GN 3366 in GG 25778 of 5 December 2003.]
A-369 Public Finance Management Act No. 1 of 1999
Electronic Communications Security (Pty) Ltd
[“Electronic Communications Security (Pty) Ltd” added and classified
by GN 311 in GG 32013 of 20 March 2009.]
......
[“Employment’s Condition Commission” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 765 in GG 27599
of 27 May 2005.]
Energy and Water Sector Education and Training Authority
(EWSETA)
[“Energy and Water Sector Education and Training Authority
(EWSETA)” previously “Energy Sector Education and Training Au-
thority” added by GN 402 in GG 22047 of 16 February 2001 and
amended by GN 800 in GG 34631 of 30 September 2011.]
......
[“Engelenburg House Art Collection, Pretoria” added by
GN 402 in GG 22047 of 16 February 2001 and deleted
by GN 1396 in GG 24042 of 15 November 2002.]
......
[“English Dictionary Unit of South Africa,
Grahamstown” added by GN 402 in GG 22047
of 16 February 2001 and deleted by GN 1283
in GG 23619 of 19 July 2002.]
Estate Agency Affairs Board
[“Estate Agency Affairs Board” added by
GN 1397 in GG 22321 of 1 June 2001.]
......
[“Export Credit Reinsurance Fund” added by
GN 1397 in GG 22321 of 1 June 2001 and deleted by GN 683 in
GG 23407 of 17 May 2002.]
Fibre Processing Manufacturing Sector Education and Training
Authority (FPMSETA)
[“Fibre Processing Manufacturing Sector Education and Training Au-
thority (FPMSETA)” added and classified by GN 796 in GG 34631 of
30 September 2011.]
Film and Publication Board
[“Film and Publication Board” added by GN 1397 in GG 22321 of 1
June 2001.]
......
[“Film & Publications Review Board” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1261 in
GG 24731 of 17 April 2003.]
Financial and Accounting Services SETA (FASSET)
[“Financial and Accounting Services SETA (FASSET)” previously
“Financial and Accounting Services Training Authority” added by
GN 402 in
GG 22047 of 16 February 2001 and amended by
GN 800 in GG 34631 of 30 September 2011.]
Financial Intelligence Centre
[“Financial Intelligence Centre” added by GN 3366 in GG 25778 of
5 December 2003.]
Financial Services Board
Food and Beverages Manufacturing Industry (FOODBEV)
[“Food and Beverages Manufacturing Industry (FOODBEV)” previ-
ously “Food and Beverages Manufacturing Industry Sector Education
and Training Authority” added by GN 402 in GG 22047 of
16 February 2001 and amended by GN 800 in
GG 34631 of 30 September 2011.]
......
[“Forest Industries Sector Education and Training Authority” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 797 in
GG 34631 of 30 September 2011.]
......
[“Foundation for Education, Science and Technology, Pretoria” added
by GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1139
in GG 26477 of 25 June 2004.]
......
[“Foundation for Research and Development” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 1283 in GG 23619
of 19 July 2002.]
Freedom Park Trust
[“Freedom Park Trust” added by GN 1261 in
GG 24731 of 17 April 2003.]
Schedule 3
......
[“Godisa Trust” added by GN 1139 in GG 26477 of 25 June 2004 and
deleted by GN 1000 in GG 31417 of 19 September 2008.]
Health and Welfare Sector Education and Training Authority
[“Health and Welfare Sector Education and Training Authority” added
by GN 402 in GG 22047 of
16 February 2001.]
Housing Development Agency
[“Housing Development Agency” added and classified by GN 311 in
GG 32013 of 20 March 2009.]
Human Sciences Research Council
......
[“Immigrants Selection Board” added by GN 402 in GG 22047 of
16 February 2001 and deleted by
GN 1396 in GG 24042 of 15 November 2002.]
......
[“Independent Communications Authority” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 1863 in
GG 22577 of 24 August 2001.]
Independent Regulatory Board for Auditors
[“Independent Regulatory Board for Auditors” added by GN 1011 in
GG 29050 of 28 July 2006.]
Information Systems, Electronics and Telecommunications
Technologies Training Authority
[“Information Systems, Electronics and Telecommunications
Technologies Training Authority” added by GN 402 in GG 22047 of
16 February 2001.]
Ingonyama Trust Board
[“Ingonyama Trust Board” added by GN 402 in
GG 22047 of 16 February 2001.]
Inkomati-Usuthu Catchment Management Agency
[“Inkomati-Usuthu Catchment Management Agency”, previously
“Inkomati Catchment Management Agency”, added by GN 396 in
GG 28605 of 17 March 2006 and amended by
GN 353 in GG 38735 of 30 April 2015.]
Insurance Sector Education and Training Authority
[“Insurance Sector Education and Training
Authority” added by GN 402 in GG 22047 of
16 February 2001.]
International Trade Administration Commission
[“International Trade Administration” added by
GN 1139 in GG 26477 of 25 June 2004 and amended by GN 765 in
GG 27599 of 27 May 2005.]
......
[“Investment South Africa” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by
GN 1863 in GG 22577 of 24 August 2001.]
iSimangaliso Wetland Park
[“iSimangaliso Wetland Park” previously “Greater St. Lucia Wetland
Park Authority” added by GN 1283 in GG 23619 of 19 July 2002 and
amended by GN 1003 in GG 31417 of 19 September 2008.]
Iziko Museums of South Africa
[“Iziko Museums of South Africa” previously “Iziko Museums of Cape
Town” previously “Southern Flagship Institution, Cape Town” added
by GN 402 in GG 22047 of 16 February 2001 and amended by
GN 1283 in GG 23619 of 19 July 2002 and by
GN 392 of GG 37653 of 23 May 2014.]
......
[“JLB Institute of Ichthyology” added by GN 402 in GG 22047 of
16 February 2001 and deleted by
GN 1283 in GG 23619 of 19 July 2002.]
......
[“Johannesburg World Summit” previously “Johannesburg Earth
Summit” added by GN 1397 in
GG 22321 of 1 June 2001 and amended by GN 683 in GG 23407 of
17 May 2002 and deleted by
GN 1139 in GG 26477 of 25 June 2004.]
......
[“Judicial Services Commission” deleted by GN 683 in GG 23407 of
17 May 2002.]
KwaZulu-Natal Museum
[“KwaZulu-Natal Museum” previously “Natal
Museum, Pietermaritzburg” added by GN 402 in
GG 22047 of 16 February 2001 and amended by GN 800 in GG 34631
of 30 September 2011.]
Schedule 3 Auditing: Legislation and Standards A-370

...... ......
[“KwaZulu Ingonyama Trust” added by GN 402 in GG 22047 of [“National Archives Commission” added by
16 February 2001 and deleted by GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1283 in
GN 1261 in GG 24731 of 17 April 2003.] GG 23619 of 19 July 2002.]
Legal Aid South Africa National Arts Council
[“Legal Aid South Africa” previously “Legal Aid Board” amended by [“National Arts Council” added by GN 402 in
GN 1250 in GG 33900 of 31 December 2010.] GG 22047 of 16 February 2001.]
Local Government Education and Training Authority ......
(LGSETA) [“National Botanical Institute” added by GN 402 in GG 22047 of
[“Local Government Education and Training Authority (LGSETA)” 16 February 2001 and deleted by
previously “Local Government, Water and Related Services Sector GN 765 in GG 27599 of 27 May 2005.]
Education and Training Authority” added by GN 402 in GG 22047 of National Consumer Commission
16 February 2001 and amended by GN 800 in GG 34631 of
30 September 2011.] [“National Consumer Commission” added and classified by GN 1000
in GG 31417 of 19 September 2008.]
Luthuli Museum
National Consumer Tribunal
[“Luthuli Museum” added by GN 1269 in
GG 28237 of 25 November 2005.] [“National Consumer Tribunal” added by GN 602 in GG 28798 of
12 May 2006.]
......
......
[“Manufacturing Advisory Council” added by
GN 1397 in GG 22321 of 1 June 2001 and deleted by GN 1000 in [“National Coordination Office of the Manufacturing Advisory Centre
GG 31417 of 19 September 2008.] Programme—NAMAC” added by GN 402 in GG 22047 of 16 Febru-
ary 2001 and deleted by GNs 1263, 1264 and 1265 in GG 28237 of
...... 25 November 2005.]
[“Manufacturing Development Board” added by National Credit Regulator
GN 1397 in GG 22321 of 1 June 2001 and deleted by GN 3366 in
GG 25778 of 5 December 2003.] [“National Credit Regulator” added by GN 602 in GG 28798 of
12 May 2006.]
Manufacturing, Engineering and Related Services Education
and Training Authority National Development Agency
[“Manufacturing, Engineering and Related Services Education and [“National Development Agency” added by GN 402 in GG 22047 of
Training Authority” added by 16 February 2001.]
GN 402 in GG 22047 of 16 February 2001.] National Economic, Development and Labour Council
Marine Living Resources Fund ......
[“Marine Living Resources Fund” added by GN 402 in GG 22047 of [“National Electricity Regulator” deleted by
16 February 2001.] GN 1271 in GG 28237 of 25 November 2005.]
Market Theatre Foundation National Electronic Media Institute of SA
[“Market Theatre Foundation” added by GN 1283 in GG 23619 of [“National Electronic Media Institute of SA” added by GN 1397 in
19 July 2002.] GG 22321 of 1 June 2001.]
...... National Empowerment Fund
[“Market Theatre, Johannesburg” added by GN 402 in GG 22047 of [“National Empowerment Fund” added by GN 402 in GG 22047 of
16 February 2001 and deleted by GN 1396 in GG 24042 of 15 Novem- 16 February 2001.]
ber 2002.]
National Energy Regulator of South Africa
...... [“National Energy Regulator of South Africa” added by GN 1271 in
[“Media, Advertising, Publishing, Printing and Packaging Training GG 28237 of 25 November 2005.]
Authority” added by GN 402 in GG 22047 of 16 February 2001 and National Film and Video Foundation
deleted by GN 797 in GG 34631 of 30 September 2011.]
[“National Film and Video Foundation” added by GN 402 in
Media Development and Diversity Agency GG 22047 of 16 February 2001.]
[“Media Development and Diversity Agency” added by GN 1261 in ......
GG 24731 of 17 April 2003.]
[“National Film Board” deleted by GN 3366 in
Media, Information and Communication Technologies Sector GG 25778 of 5 December 2003.]
Education and Training Authority (MICTS) National Gambling Board of SA
[“Media, Information and Communication Technologies Sector Educa- [“National Gambling Board of SA” added by
tion and Training Authority (MICTS)” added and classified by GN 796 GN 402 in GG 22047 of 16 February 2001.]
in
GG 34631 of 30 September 2011.] National Health Laboratory Service
[“National Health Laboratory Service” added by
Mine Health & Safety Council
GN 683 in GG 23407 of 17 May 2002.]
[“Mine Health & Safety Council” added by GN 402 in GG 22047 of
16 February 2001.] National Heritage Council (NHC)
[“National Heritage Council (NHC)” added by
...... GN 765 in GG 27599 of 27 May 2005.]
[“Mines and Works Compensation Fund” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 3366 in GG 25778
National Home Builders Registration Council—NHBRC
of 5 December 2003.] [“National Home Builders Registration Council—NHBRC” added by
GN 402 in GG 22047 of
Mining Qualifications Authority 16 February 2001.]
[“Mining Qualifications Authority” added by National Housing Finance Corporation
GN 402 in GG 22047 of 16 February 2001.]
National Library, Pretoria/Cape Town
Municipal Infrastructure Investment Unit
[“National Library, Pretoria/Cape Town” added by GN 402 in
[“Municipal Infrastructure Investment Unit” added by GN 1397 in
GG 22047 of 16 February 2001.]
GG 22321 of 1 June 2001.]
National Agricultural Marketing Council National Lotteries Commission
[“National Lotteries Commission”, previously
[“National Agricultural Marketing Council” previously “National “National Lotteries Board”, added by GN 402 in
Agriculture Marketing Council” amended by GN 1283 in GG 23619 GG 22047 of 16 February 2001 and amended by GN 353 in GG 38735
of 19 July 2002.] of 30 April 2015.]
A-371 Public Finance Management Act No. 1 of 1999
National Metrology Institute of South Africa
[“National Metrology Institute of South Africa” added and classified
by GN 1000 in GG 31417 of 19 September 2008.]
......
[“National Monuments Council” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
National Museum, Bloemfontein
[“National Museum, Bloemfontein” added by
GN 402 in GG 22047 of 16 February 2001.]
National Nuclear Regulator
[“National Nuclear Regulator” added by GN 402
in GG 22047 of 16 February 2001.]
National Regulator for Compulsory Specifications
[“National Regulator for Compulsory Specifications” added and classi-
fied by GN 1000 in GG 31417 of 19 September 2008.]
National Research Foundation
[“National Research Foundation” added by GN 402 in GG 22047 of
16 February 2001.]
......
[“National Small Business Council” deleted by
GN 3366 in GG 25778 of 5 December 2003.]
National Student Financial Aid Scheme
[“National Student Financial Aid Scheme” added by GN 402 in
GG 22047 of 16 February 2001.]
National Urban Reconstruction and Housing Agency-NURCHA
[“National Urban Reconstruction and Housing Agency-NURCHA”
added by GN 402 in GG 22047 of 16 February 2001.]
......
[“National Year 2000 Decision Support Centre” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 3366 in GG 25778
of 5 December 2003.]
......
[“National Youth Commission” deleted by GN 1253 in GG 33900 of
31 December 2010 with effect from 1 April 2010.]
National Youth Development Agency
[“National Youth Development Agency’ added and classified by
GN 311 in GG 32013 of 20 March 2009.]
......
[“National Zoological Gardens of SA” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1477 in
GG 29293 of 20 October 2006 (Editorial Note: GN 1477 in GG 29293
made reference to “National Zoological Gardens”.
We suggest “National Zoological Gardens of SA” was intended).]
Nelson Mandela Museum, Umtata
[“Nelson Mandela Museum, Umtata” added by
GN 402 in GG 22047 of 16 February 2001.]
Ditsong: Museums of South Africa
[“Ditsong: Museums of South Africa” previously “Northern Flagship
Institution, Pretoria” added by GN 402 in GG 22047 of 16 February
2001 and amended by GN 1250 in GG 33900 of
31 December 2010.]
Office of Health Standards Compliance
[“Office of Health Standards Compliance” added and classified by
GN 393 in GG 37653 of 23 May 2014 w.e.f. 1 April 2014 and by
s. 8 of Act No. 12 of 2013.]
(Editorial Note: Please note that both GN 393 in GG 37653 of 23
May 2014 and section 8 of the National Health Amendment Act,
No. 12 of 2013 add/insert the expression “Office of Health Stand-
ards Compliance” in Schedule 3, Part A with
effect from 1 April 2014.)
Office of the Ombudsman for Financial Services Providers
[“Office of the Ombudsman for Financial Services Providers” added
and classified by GN 1000 in GG 31417 of 19 September 2008.]
Office of the Pension Funds Adjudicator
[“Office of the Pension Funds Adjudicator” added and classified by
GN 1000 in GG 31417 of 19 September 2008.]
Schedule 3
Performing Arts Council of the Free State
[“Performing Arts Council Orange Free State (PACOFS), Bloemfon-
tein” added by GN 402 in GG 22047 of 16 February 2001.]
[“Performing Arts Council of the Free State” previously “Performing
Arts Council Orange Free State (PACOFS), Bloemfontein” amended
by GN 1283 in GG 23619 of 19 July 2002.]
Perishable Products Export Control Board
[“Perishable Products Export Control Board” added by GN 1283 in
GG 23619 of 19 July 2002.]
......
[“Police, Private Security, Legal and Correctional Services” added by
GN 402 in GG 22047 of 16 February 2001.]
[“Police, Private Security, Legal and Correctional Services Training
Authority” previously “Police, Private Security, Legal and Correctional
Services” amended by GN 1863 in GG 22577 of 24 August 2001 and
deleted by GN 1000 in GG 31417 of 19 September 2008.]
Ports Regulator of South Africa
[“Ports Regulator of South Africa” added and
classified by GN 1000 in GG 31417 of 19 September 2008.]
......
[“Primary Agricultural Education and Training Authority (PAETA)”
added by GN 402 in GG 22047 of 16 February 2001 and deleted by
GN 1010 in GG 29050 of 28 July 2006.]
Private Security Industry Regulatory Authority
[“Private Security Industry Regulatory Authority” added and classified
by GN 1000 in GG 31417 of 19 September 2008.]
Productivity SA
[“Productivity SA” previously “National Productivity Institute” added
by GN 402 in GG 22047 of 16 February 2001 and amended by
GN 1003 in GG 31417 of 19 September 2008.]
......
[“Public Investment Commissioners” added by
GN 1397 in GG 22321 of 1 June 2001 and deleted by GN 1114 in
GG 27773 of 15 July 2005.]
......
[“Public Protector” added by GN 402 in GG 22047 of 16 February
2001 and deleted by GN 1863 in GG 22577 of 24 August 2001.]
Public Service Sector Education and Training Authority
(PSETA)
[“Public Service Sector Education and Training Authority (PSETA)”
previously “Public Sector Education and Training Authority” added by
GN 667 in GG 28847 of 26 May 2006 and amended by
GN 800 in GG 34631 of 30 September 2011.]
......
[“Public Services Sector Education and Training Authority” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 2302 in
GG 22860 of 30 November 2001.]
Quality Council for Trades and Occupations (QCTO)
[“Quality Council for Trades and Occupations (QCTO)” added by
GN 1254 in GG 33900 of 31 December 2010 with effect retrospective-
ly
from 1 April 2010.]
Railway Safety Regulator
[“Railway Safety Regulator” added by GN 3366 in GG 25778 of
5 December 2003.]
......
[“Rent Control Board” added by GN 1283 in
GG 23619 of 19 July 2002 and deleted by GN 765 in GG 27599 of
27 May 2005.]
Road Accident Fund
Road Traffic Infringement Agency (RTIA)
[“Road Traffic Infringement Agency (RTIA)” added by GN 1254 in
GG 33900 of 31 December 2010 with effect retrospectively from
1 April 2010.]
Road Traffic Management Corporation
[“Road Traffic Management Corporation” added by GN 1396 in
GG 24042 of 15 November 2002.]
Robben Island Museum, Cape Town
[“Robben Island Museum, Cape Town” added by GN 402 in
GG 22047 of 16 February 2001.]
Schedule 3 Auditing: Legislation and Standards A-372

Rural Housing Loan Fund SA Maritime Safety Authority

[“Rural Housing Loan Fund” added by GN 3366 in GG 25778 of [“SA Maritime Safety Authority” added by
5 December 2003.] GN 402 in GG 22047 of 16 February 2001.]
Safety and Security Sector Education and Training Authority SA Medical Research Council
(SASSETA) SA National Accreditation System
[“Safety and Security Sector Education and Training Authority [“SA National Accreditation System” added by
(SASSETA)” previously “Safety and GN 402 in GG 22047 of 16 February 2001.]
Security Sector Education and Training” added by
GN 240 in GG 33059 of 1 April 2010 with effect retrospectively from South African National Biodiversity Institute (SANBI)
1 July 2005 and amended by GN 800 in GG 34631 of 30 September [“South African National Biodiversity Institute (SANBI)” added by
2011.] GN 765 in GG 27599 of 27 May 2005.]
...... South African National Energy Development Institute
[“South African Blind Workers Organization (SABWO)” added by (SANEDI)
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 441 in [“South African National Energy Development Institute (SANEDI)”
GG 28651 of 31 March 2006 (Editorial Note: added by GN 1254 in GG 33900 of 31 December 2010 with effect
GN 441 in GG 28651 made reference to “South African Blind Workers retrospectively from 1 April 2010.]
Association (SABWO)”. We suggest “South African Blind Workers
Organization (SABWO)” was intended).] South African National Parks
...... [“South African National Parks” previously
“National Parks Board” amended by GN 683
[“SA Bureau of Standards (SABS)” moved from Schedule 3A to in GG 23407 of 17 May 2002.]
Schedule 3B by GN 504 in
GG 22337 of 8 June 2001.] SA National Roads Agency
SA Civil Aviation Authority [“SA National Roads Agency” previously “National Road Fund”
amended by GN 1863 in GG 22577 of 24 August 2001.]
......
South African National Space Agency
[“SA Communications Regulatory Authority” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by GN 1863 in GG 22577 [“South African National Space Agency” added and classified by
of GN 311 in GG 32013 of 20 March 2009.]
24 August 2001.] ......
...... [“SA Nuclear Energy Corporation” added by
[“SA Council for Architects” added by GN 1397 in GG 22321 of GN 402 in GG 22047 of 16 February 2001 and deleted by GN 187 in
1 June 2001 and deleted by GN 1139 in GG 26477 of 25 June 2004.] GG36225 of 15 March 2013 with effect retrospectively from
16 February 2001.]
SA Council for Educators
SA Qualifications Authority
[“SA Council for Educators” added by GN 402 in GG 22047 of
16 February 2001.] ......
South African Diamond and Precious Metals Regulator [“SA Quality Institute” added by GN 402 in GG 22047 of 16 February
[“SA Diamond and Precious Metals Regulator” added by GN 187 in 2001 and deleted by GN 1000 in GG 31417 of 19 September 2008.]
GG 29669 of 9 March 2007.] SA Revenue Service
...... ......
[“SA Diamond Board” added by GN 402 in
GG 22047 of 16 February 2001 and deleted by [“SA Road Board” deleted by GN 1396 in
GN 187 in GG 29669 of 9 March 2007.] GG 24042 of 15 November 2002.]

...... ......
[“SA Excellence Foundation” added by GN 402 in GG 22047 of [“SA Road Safety Council” deleted by GN 1396 in GG 24042 of
16 February 2001 and deleted by 15 November 2002.]
GN 1268 in GG 28237 of 25 November 2005.]
South African Social Security Agency
...... [“South African Social Assistance Agency” inserted by GN 230 in
[“SA Geographical Names Commission” added by GN 402 in GG 28519 of 24 February 2006 and corrected to read “South African
GG 22047 of 16 February 2001 and deleted by GN 1283 in GG 23619 Social Security Agency” by GN 436 in GG 28651 of
of 19 July 2002.] 31 March 2006.]
SA Heritage Resources Agency ......
[“SA Heritage Resources Agency” previously “National Heritage
Council” added by GN 402 in GG 22047 of 16 February 2001 and [“SA Sport Commission” added by GN 1397 in
amended by GN 683 in GG 23407 of 17 May 2002.] GG 22321 of 1 June 2001 and deleted by GN 1000 in GG 31417 of
19 September 2008.]
......
......
[“SA Housing Development Board” previously “National Housing
Board” amended by GN 1863 in GG 22577 of 24 August 2001 and [“SA Telecommunications Regulatory Authority” deleted by GN 1863
deleted by GN 1283 in GG 23619 of 19 July 2002.] in GG 22577 of 24 August 2001.]
...... SA Tourism Board
[“SA Housing Fund” deleted by GN 3366 in South African Weather Service
GG 25778 of 5 December 2003.]
[“South African Weather Service” added by
...... GN 2302 in GG 22860 of 30 November 2001.]
[“SA Housing Trust Limited” deleted by GN 3366 in GG 25778 of
5 December 2003.] ......
SA Institute for Drug-free Sport [“Secondary Agricultural Sector Education and Training Authority
(SETSA)” added by GN 402 in GG 22047 of 16 February 2001 and
[“SA Institute for Drug-free Sport” added by deleted by GN 1010 in GG 29050 of 28 July 2006.]
GN 402 in GG 22047 of 16 February 2001.]
Servcon
SA Library for the Blind, Grahamstown
[“SA Library for the Blind, Grahamstown” added by GN 402 in [“Servcon” added by GN 402 in GG 22047 of
GG 22047 of 16 February 2001.] 16 February 2001.]

SA Local Government Association Services Sector Education and Training Authority

[“SA Local Government Association” added by [“Services Sector Education and Training Authority” added by GN 402
GN 1283 in GG 23619 of 19 July 2002.] in GG 22047 of 16 February 2001.]
A-373 Public Finance Management Act No. 1 of 1999
Small Enterprise Development Agency (SEDA)
[“Small Enterprise Development Agency (SEDA)” added by
GNs 1263, 1264 and 1265 in GG 28237 of 25 November 2005.]
Social Housing Foundation
[“Social Housing Foundation” added by GN 1397 in GG 22321 of
1 June 2001.]
Special Investigation Unit
[“Special Investigation Unit” added by GN 402 in GG 22047 of
16 February 2001.]
State Information Technology Agency
State Theatre, Pretoria
[“State Theatre, Pretoria” added by GN 402 in
GG 22047 of 16 February 2001.]
Technology Innovation Agency
[“Technology Innovation Agency’ added and classified by GN 311 in
GG 32013 of 20 March 2009.]
The Co-Operative Banks Development Agency
[“The Co-Operative Banks Development Agency” added and classified
by GN 1000 in GG 31417 of 19 September 2008.]
The National English Literary Museum, Grahamstown
[“The National English Literary Museum,
Grahamstown” added by GN 402 in GG 22047 of 16 February 2001.]
The National Radioactive Waste Disposal Institute (NRWDI)
[“The National Radioactive Waste Disposal Institute (NRWDI)” added
and classified by GN 796 in GG 34631 of 30 September 2011.]
The National Skills Fund (NSF)
[“The National Skills Fund (NSF)” added by GN 821 in GG 35759 of
12 October 2012 with effect from 1 April 2012.]
The Playhouse Company, Durban
[“The Playhouse Company, Durban” added by
GN 402 in GG 22047 of 16 February 2001.]
The Social Housing Regulatory Authority (SHRA)
[“The Social Housing Regulatory Authority (SHRA)” added by
GN 1254 in GG 33900 of 31 December 2010 with effect
retrospectively from 1 April 2010.]
Thubelisha Homes
[“Thubelisha Homes” added by GN 402 in GG 22047 of 16 February
2001.]
Tourism and Hospitality Education and Training Authority
[“Tourism and Hospitality Education and Training Authority” added
by GN 402 in GG 22047 of 16 February 2001.]
......
[“Tourism, Hospitality & Sport Education and Training Authority”
deleted by GN 824 in GG 35759 of 12 October 2012 with effect
retrospectively from 1 April 2011.]
......
[“Investment South Africa” added by GN 402 in
GG 22047 of 16 February 2001.]
[“Trade and Investment South Africa” previously “Investment South
Africa” amended by GN 1863 in GG 22577 of 24 August 2001.]
[“Trade and Investment South Africa” moved from Schedule 3B to
Schedule 3A by GN 2302 in
GG 22860 of 30 November 2001.]
[“Trade and Investment South Africa” deleted by GN 1000 in
GG 31417 of 19 September 2008.]
Transport Education and Training Authority
[“Transport Education and Training Authority” added by GN 402 in
GG 22047 of 16 February 2001.]
uMalusi Council for Quality Assurance in General and Further
Education and Training
[“Umalusi Council for Quality Assurance in General and Further Edu-
cation and Training” previously “SA Certification Council” amended
by GN 1396 in GG 24042 of 15 November 2002.]
uMsunduzi Museum
[“Voortrekker Museum, Pietermaritzburg” added by GN 402 in
GG 22047 of 16 February 2001.]
[“uMsunduzi Museum” previously “Voortrekker Museum, Pietermar-
itzburg” amended by GN 190 in GG 36225 of 15 March 2013 with
effect from 15 March 2013.]
Schedule 3
Unemployment Insurance Fund
Universal Service and Access Agency of South Africa
[“Universal Services Agency” added by GN 402 in GG 22047 of
16 February 2001.]
[“Universal Service Agency” previously “Universal Services Agency”
amended by GN 1863 in
GG 22577 of 24 August 2001.]
[“Universal Service and Access Agency of South Africa” previously
“Universal Service Agency” amended by GN 1003 in GG 31417 of
19 September 2008.]
Universal Service and Access Fund
[“Universal Services Fund” added by GN 402 in
GG 22047 of 16 February 2001.]
[“Universal Service Fund” previously “Universal Services Fund”
amended by GN 2302 in GG 22860 of 30 November 2001.]
[“Universal Service and Access Fund” previously “Universal Service
Fund” amended by GN 1003 in GG 31417 of 19 September 2008.]
Urban Transport Fund
[“Urban Transport Fund” added by GN 1397 in
GG 22321 of 1 June 2001.]
Vredefort Dome World Heritage Site
[“Vredefort Dome World Heritage Site” added and classified by
GN 354 in GG 38735 of 30 April 2015 w.e.f. 1 April 2015.]
......
[“Wage Board” deleted by GN 3366 in GG 25778 of 5 December
2003.]
War Museum of the Boer Republics, Bloemfontein
[“War Museum of the Boer Republics, Bloemfontein” added by
GN 402 in GG 22047 of 16 February 2001.]
Water Research Commission
Wholesale and Retail Sector Education and Training Authority
[“Wholesale and Retail Sector Education and Training Authority”
added by GN 402 in GG 22047 of 16 February 2001.]
William Humphreys Art Gallery
[“William Humphreys Art Gallery” added by
GN 402 in GG 22047 of 16 February 2001 and by GN 1283 in
GG 23619 of 19 July 2002.]
Windybrow Centre
[“Windybrow Centre” added by GN 683 in
GG 23407 of 17 May 2002.]
......
[“Woordeboek van die Afrikaanse Taal (WAT), Paarl” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1283
in GG 23619 of 19 July 2002.]
Any subsidiary or entity under the ownership control of the
above public entities
Part B: National Government Business Enterprises
[General Note: Amended public entities have been published under
General Notice No. 402 in Government Gazette 22047 of
16 February 2001 with effect from 1 April 2001; under Govern-
ment Notice No. 504 in Government Gazette 22337 of
8 June 2001 with effect from 8 June 2001; under General Notice
No. 1863 in Government Gazette 22577 of 24 August 2001 with
effect from 24 August 2001; under General Notice No. 2302 in
Government Gazette 22860 of 30 November 2001 with effect from
30 November 2001; under General Notice No. 1283 in Government
Gazette 23619 of 19 July 2002 with effect from 19 July 2002;
under General Notice No. 1261 in Government Gazette 24731 of
17 April 2003 with effect from 17 April 2003; under General
Notice No. 3366 in Government Gazette 25778 of
5 December 2003 with effect from 5 December 2003; under
General Notice No. 1114 in Government Gazette 27773 of 15 July
2005 with effect from 15 July 2005 and under General Notices
Nos. 1263, 1264 and 1265 in Government Gazette 28237 of
25 November 2005 with effect from 25 November 2005, under
General Notice No. 431 in Government Gazette 28630 of 24 March
2006, under Government Notice No. 647 in
Schedule 3 Auditing: Legislation and Standards A-374

Government Gazette 30074 of 20 July 2007 with effect from Khula Enterprises
20 July 2007, under Government Notice No. 242 in Government Lepelle Northern Water
Gazette 33059 of 1 April 2010 with effect from 1 April 2010,
[“Lepelle Northern Water” inserted by GN 1863 in GG 22577 of
under Government Notice No. 1251 in Government Gazette 33900
24 August 2001.]
of 31 December 2010, under Government Notice
No. 1252 in Government Gazette 33900 of Magalies Water
31 December 2010 with effect from 1 April 2010, under Govern- Mhlathuze Water
ment Notice No. 352 in Government Gazette 38735 of 30 April
Mintek
2015 with effect from 30 April 2015 and under Government Notice
No. 357 in Government Gazette 38735 of 30 April 2015 with effect [“Mintek”, previously “Council for Mineral Technology (Mintek)”
moved from Schedule 3A to Schedule 3B by GN 504 in GG 22337 of
from 31 March 2015.] 8 June 2001 and amended by GN 352 in GG 38735 of 30 April 2015.]
...... ......
[“Albany Coast Water Board” previously “Albaniekus Waterraad” [“Mjindi Farming (Pty) Ltd” deleted from Schedule 3B and moved to
amended by GN 1863 in GG 22577 of 24 August 2001 and deleted by Schedule 3D by GN 1863 in
by GN 1252 in GG 33900 of 31 December 2010 with effect from GG 22577 of 24 August 2001.]
1 April 2010.]
......
Amatola Water Board [“Mpendle-Ntambanana Agricultural Company (Pty) Ltd” deleted from
[“Amatola Water Board” previously “Amatola Water” added by Schedule 3B and moved to Schedule 3D by GN 1863 in GG 22577 of
GN 402 in GG 22047 of 16 February 2001 and amended by GN 1863 24 August 2001.]
in GG 22577 of 24 August 2001.]
......
Aventura [“Namakwa Water” deleted by GN 357 in GG 38735 of 30 April 2015
[“Aventura” added by GN 402 in GG 22047 of w.e.f. 31 March 2015 (Editorial Note: GN 357 in GG 38735 made ref-
16 February 2001.] erence to “Namakwa Water Board”. We suggest “Namakwa Water”
was intended).]
......
Ncera Farms (Pty) Ltd
[“Bala Farms (Pty) Ltd” previously “Bala-Bala Farms (Pty) Ltd”
amended by GN 1863 in GG 22577 of 24 August 2001 and deleted by ......
GN 431 in GG 28630 of 24 March 2006.] [“Noord Transvaal Water/Meetse” substituted by “Lepelle Northern
Bloem Water Water”.]

...... ......
[“Ntsika Enterprises” deleted by GNs 1263, 1264 and 1265 in
[“Bosveld Waterraad” substituted by “Lepelle Northern Water”]
GG 28237 of 25 November 2005.]
...... Onderstepoort Biological Products
[“Botshelo Water” previously “North West Water Supply Authority [“Onderstepoort Biological Products” added by
Board” added by GN 1863 in GN 402 in GG 22047 of 16 February 2001.]
GG 22577 of 24 August 2001, amended by GN 3366 in GG 25778 of
5 December 2003 and deleted by GN 357 in GG 38735 of 30 April Overberg Water
2015 w.e.f. 31 March 2015 (Editorial Note: GN 357 in GG 38735
made reference to “Botshelo Water Board”. Passenger Rail Agency of South Africa
We suggest “Botshelo Water” was intended).] [“Passenger Rail Agency of South Africa” previously “SA Rail Com-
...... muter Corporation Limited” amended by GN 242 in GG 33059 of
1 April 2010.]
[“Bushbuckridge Water Board” previously “Bushbuckridge Water”
added by GN 402 in GG 22047 of 16 February 2001, amended by ......
GN 1863 in GG 22577 of 24 August 2001 and deleted by GN 357 in [“Pelladrift Water Board” previously “Pelladrift Water” amended by
GG 38735 of 30 April 2015 w.e.f. 31 March 2015.] GN 1863 in GG 22577 of 24 August 2001 and deleted by GN 357 in
Council for Scientific and Industrial Research (CSIR) GG 38735 of 30 April 2015 w.e.f. 31 March 2015.]
[“Council for Scientific and Industrial Research (CSIR)” moved from ......
Schedule 3A to Schedule 3B by GN 504 in GG 22337 of 8 June 2001.] [“Phalaborwa Water” substituted by “Lepelle Northern Water”.]
Export Credit Insurance Corporation of South Africa Limited Public Investment Corporation Limited
[“Export Credit Insurance Corporation of South Africa Limited” added [“Public Investment Corporation Limited” added by GN 1114 in
by GN 2302 in GG 22860 of 30 November 2001 and ” amended by GG 27773 of 15 July 2005.]
GN 1283 in GG 23619 of 19 July 2002.]
Rand Water
......
[“Rand Water” previously “Rand Water Board” amended by GN 1863
[“Ikangala Water” added by GN 1863 in GG 22577 of 24 August 2001 in GG 22577 of 24 August 2001.]
and deleted by GN 1252 in GG 33900 of 31 December 2010 with
effect from 1 April 2010.] SA Bureau of Standards (SABS)
[“SA Bureau of Standards (SABS)” moved from Schedule 3A to
Inala Farms (Pty) Ltd Schedule 3B by GN 504 in GG 22337 of 8 June 2001.]
[“Inala Farms (Pty) Ltd” previously “Iniala Farms (Pty) Ltd” amended
by GN 1261 in GG 24731 of 17 April 2003.]
Sasria Limited
[“Sasria Limited” previously “Sasria” added by GN 402 in GG 22047
...... of 16 February 2001 and amended by GN 1251 in GG 33900 of
[“Kalahari East Water Board” previously “Kalahari-Oos Waterraad” 31 December 2010.]
amended by GN 1863 in GG 22577 of 24 August 2001 and deleted by Sedibeng Water
GN 3366 in GG 25778 of 5 December 2003.]
[“Sedibeng Water” previously “Goudveld Water” amended by
...... GN 1863 in GG 22577 of 24 August 2001.]
[“Kalahari West Water Board” previously “Kalahari-Wes Waterraad” Sentech
amended by GN 1863 in GG 22577 of 24 August 2001 and deleted by
[“Sentech” added by GN 402 in GG 22047 of
GN 3366 in GG 25778 of 5 December 2003.]
16 February 2001.]
...... State Diamond Trader
[“Karos-Geelkoppen Waterraad” deleted by [“State Diamond Trader” included by
GN 1863 in GG 22577 of 24 August 2001.] GN 647 in GG 30074 of 20 July 2007.]
A-375 Public Finance Management Act No. 1 of 1999
......
[“Trade and Investment South Africa” previously “Investment South
Africa” amended by GN 1863 in GG 22577 of 24 August 2001 and
moved from Schedule 3B to Schedule 3A by GN 2302 in
GG 22860 of 30 November 2001.]
Umgeni Water
[“Umgeni Water” previously “Umgeni Water Board” amended by
GN 1863 in GG 22577 of 24 August 2001.]
......
[“Umsobomvu Youth Fund” previously “Umsombomvu Fund” added
by GN 1261 in GG 24731 of 17 April 2003, amended by GN 3366 in
GG 25778 of 5 December 2003 and deleted by GN 1252 in GG 33900
of 31 December 2010 with effect from 1 April 2010.]
Any subsidiary or entity under the ownership control of the
above public entities
Part C: Provincial Public Entities
[Part C added by s. 45 of Act No. 29 of 1999.]
[General Note: Amended public entities have been published under
General Notice No. 402 in Government Gazette 22047 of
16 February 2001 with effect from 1 April 2001; under General
Notice No. 1397 in Government Gazette 22321 of 1 June 2001
with effect from 1 June 2001; under General Notice No. 1863 in
Government Gazette 22577 of 24 August 2001 with effect from
24 August 2001; under General Notice No. 2302 in Government
Gazette 22860 of 30 November 2001 with effect from 30 Novem-
ber 2001; under General Notice No. 683 in Government Gazette
23407 of 17 May 2002 with effect from 17 May 2002; under
General Notice No. 1283 in Government Gazette 23619 of 19 July
2002 with effect from 19 July 2002; under Government Notice
No.1396 in Government Gazette 24042 of 15 November 2002 with
effect from 15 November 2002; under General Notice No. 1261 in
Government Gazette 24731 of 17 April 2003 with effect from
17 April 2003; under General Notice No. 3366 in Government
Gazette 25778 of 5 December 2003 with effect from 5 December
2003; under General Notice No. 1139 in Government Gazette
26477 of 25 June 2004 with effect from 25 June 2004; under
General Notice No. 765 in Government Gazette 27599 of 27 May
2005 with effect from 27 May 2005, under General Notices Nos.
1266, 1267 and 1270 in Government Gazette 28237 of 25 Novem-
ber 2005 with effect from 25 November 2005, under General
Notices Nos. 462 and 476 in Government Gazette 28679 of 7 April
2006 with effect from 7 April 2006, under General Notice No. 797
in Government Gazette 28937 of 23 June 2006 with effect from 23
June 2006, under General Notice No. 1475 in Government Gazette
29293 of 20 October 2006 with effect from 20 October 2006, under
Government Notice No. 7 in Government Gazette 30637 of
4 January 2008 with effect from 4 January 2008, under Govern-
ment Notice No. 1001 in Government Gazette 31417 of 19 Sep-
tember 2008 with effect from 19 September 2008, under
Government Notice No. 1003 in Government Gazette 31417 of
19 September 2008 with effect from 19 September 2008, under
Government Notice Nos. 309 and 310 in Government Gazette
32013 of 20 March 2009 with effect from 20 March 2009, under
Government Notice No. 241 in Government Gazette 33059 of
1 April 2010 with effect from 1 April 2010, under Government
Notices Nos. 1247, 1248 and 1249 in Government Gazette 33900
of 31 December 2010, with effect from 1 April 2004, 1 July 2010
and 8 June 2010 respectively, under Government Notice No. 364 in
Government Gazette 34233 of 29 April 2011 with effect retrospec-
tively from 1 April 2010, under Government Notice No. 798 in
Government Gazette 34631 of 30 September 2011, under Govern-
ment Notice No. 822 in Government Gazette 35759 of 12 October
2012, with effect from 14 November 2007, under Government
Notice No. 188 in Government Gazette 36225 of 15 March 2013
with effect retrospectively from 1 December 2012, under Govern-
ment Notice Nos. 189 and 191 in Government Gazette 36225 of
15 March 2013 with effect from 15 March 2013, under Govern-
ment Notice No. 391 in Government Gazette 37653 of 23 May
2014, under Government Notice Nos. 394 and 395 in Government
Gazette 37653 of 23 May 2014 with effect from 1 April 2014,
under Government Notice No. 355 in Government Gazette 38735
of 30 April 2015 with effect from 1 April 2013, under Government
Notice No. 356 in Government Gazette 38735 of 30 April 2015
with effect from 31 March 2015 and under Government Notice
No. 523 in Government Gazette 39985 of 13 May 2016 with effect
from 13 May 2016.]
Schedule 3
Commissioner for the Environment
[“Commissioner for the Environment” added by
GN 765 in GG 27599 of 27 May 2005
(Editorial Note: No Province indicated).]
......
[“Destination Marketing Organisation” previously “Destinations Mar-
keting Organisation” added by GN 7 in GG 30637 of 4 January 2008,
amended by GN 1003 in GG 31417 of 19 September 2008 and deleted
by GN 395 in GG 37653 of 23 May 2014 w.e.f. 1 April 2014 (Editorial
Note: No Province indicated).]
Dube TradePort Corporation (DTPC)
[“Dube TradePort Corporation (DTPC)” added and classified by
GN 798 in GG 34631 of 30 September 2011 w.e.f. from 1 April 2011
(Editorial Note:
No Province indicated).]
Royal Household Trust
[“Royal Household Trust” added and classified by GN 822 in
GG 35759 of 12 October 2012 w.e.f.
14 November 2007 (Editorial Note: No Province indicated).]
XHASA ATC Agency
[“XHASA ATC Agency” added and classified by GN 1001 in
GG 31417 of 19 September 2008
(Editorial Note: No Province indicated).]
Eastern Cape:
......
[“Centre for Investment and Marketing in the Eastern Cape” deleted by
GN 1001 in GG 31417 of 19 September 2008.]
......
[“Eastern Cape Appropriate Technology Unit” deleted by GN 356 in
GG 38735 of 30 April 2015 w.e.f. 31 March 2015 (Editorial Note:
GN 356 in GG 38735 made reference to “Eastern Cape
Appropriate Technology Unit (ECATU)”. We
suggest “Eastern Cape Appropriate Technology Unit” was intended).]
Eastern Cape Arts Council
......
[“Eastern Cape Consumer Affairs Court” deleted by GN 1001 in
GG 31417 of 19 September 2008.]
......
[“Eastern Cape Development Corporation” moved from Schedule 3C
to Schedule 3D.]
......
[“Eastern Cape Development Tribunal” deleted by GN 1396 in
GG 24042 of 15 November 2002.]
Eastern Cape Gambling and Betting Board
Eastern Cape Liquor Board
......
[“Eastern Cape Local Road Transport Board”
deleted by GN 1001 in GG 31417 of 19 September 2008.]
......
[“Eastern Cape Museums” deleted by GN 1001 in GG 31417 of
19 September 2008.]
Eastern Cape Parks and Tourism Agency (ECPTA)
[“Eastern Cape Parks and Tourism Agency
(ECPTA)” added by GN 1248 in GG 33900 of
31 December 2010 with effect from 1 July 2010.]
......
[“Eastern Cape Parks Board” added by GN 1270 in GG 28237 of 25
November 2005 and deleted by GN 1249 in GG 33900 of 31 December
2010.]
......
[“Eastern Cape Provincial Housing Board” deleted by GN 1001 in
GG 31417 of 19 September 2008.]
Eastern Cape Provincially Aided Libraries
......
[“Eastern Cape Regional Authorities” deleted by GN 1001 in
GG 31417 of 19 September 2008.]
Eastern Cape Rural Development Agency
[“Eastern Cape Rural Finance Corporation Limited” previously
“Eastern Cape Agricultural Bank” amended by GN 1283 in GG 23619
of 19 July 2002.]
[“Eastern Cape Rural Development Agency” previously “Eastern Cape
Rural Finance Corporation Limited” amended by GN 191 in GG 36225
of 15 March 2013 with effect from 15 March 2013.]
Schedule 3 Auditing: Legislation and Standards
Eastern Cape Socio-Economic Consultative Council
......
[“Eastern Cape Tender Board” deleted by GN 1283 in GG 23619 of
19 July 2002.]
......
[“Eastern Cape Tourism Board” deleted by
GN 1249 in GG 33900 of 31 December 2010.]
......
[“Eastern Cape Township Board” deleted by
GN 1396 in GG 24042 of 15 November 2002.]
......
[“Eastern Cape Youth Commission” added by GN 1261 in GG 24731
of 17 April 2003 and deleted by GN 523 in GG 39985 of 13 May
2016.]
......
[“Eastern Region Entrepreneurial Support Centre” added by GN 1283
in GG 23619 of 19 July 2002 and deleted by GN 1001 in GG 31417 of
19 September 2008.]
......
[“East London Industrial Development Zone Corporation” added by
GN 3366 in GG 25778 of
5 December 2003 moved from Schedule 3C
to Schedule 3D by GN 1267 in GG 28237 of
25 November 2005.]
Free State:
......
[“Free State Consumer Affairs” added by GN 1396 in GG 24042 of 15
November 2002 and deleted by GN 462 in GG 28679 of 7 April 2006.]
......
[“Free State Council for Citizenship, Education and Conflict Resolu-
tion” added by GN 683 in GG 23407 of 17 May 2002 and deleted by
GN 1001 in GG 31417 of 19 September 2008.]
Free State Gambling and Liquor Authority (FSGLA)
[“Free State Gambling and Liquor Authority (FSGLA)” added by
GN 1248 in GG 33900 of
31 December 2010 with effect from 8 June 2010.]
......
[“Free State Gambling and Racing Board” previously “Free State
Gambling and Gaming Board” amended by GN 765 in GG 27599 of
27 May 2005 and deleted by GN 1249 in GG 33900 of
31 December 2010.]
......
[“Free State Investment Agency” added by GN 1396 in GG 24042 of
15 November 2002 and deleted by GN 462 in GG 28679 of 7 April
2006.]
......
[“Free State Investment Promotion Agency” added and classified by
GN 310 in GG 32013 of 20 March 2009 and deleted by GN 356 in
GG 38735 of 30 April 2015 w.e.f. 31 March 2015.]
.......
[“Free State Liquor Board” deleted by GN 462 in GG 28679
of 7 April 2006.]
......
[“Free State Mangaung Nursing College” added by GN 1396 in
GG 24042 of 15 November 2002 and deleted by GN 462 in GG 28679
of
7 April 2006.]
......
[“Free State Rural Foundation” deleted by GN 1396 in GG 24042 of
15 November 2002.]
......
[“Free State Rural Strategy Unit” deleted by
GN 1396 in GG 24042 of 15 November 2002.]
......
[“Free State Tender Board” deleted by GN 1283 in GG 23619 of
19 July 2002.]
Free State Tourism Authority
[“Free State Tourism Authority” added by GN 797 in GG 28937 of
23 June 2006.]
......
[“Free State Tourism Board” deleted by GN 1396 in GG 24042 of
15 November 2002.]
......
[“Free State Youth Commission” deleted by
GN 241 in GG 33059 of 1 April 2010.]
A-376
......
[“Phakisa Major Sport and Development Corporation” added by
GN 1396 in GG 24042 of
15 November 2002 and deleted by GN 356 in
GG 38735 of 30 April 2015 w.e.f. 31 March 2015.]
Gauteng:
......
[“Gauteng Agriculture and Farming Development Trust” added by
GN 1863 in GG 22577 of 24 August 2001 and deleted by GN 1475 in
GG 29293 of 20 October 2006 (Editorial Note: GN 1475 in GG 29293
made reference to “Gauteng Agriculture and Farming Trust”. We sug-
gest “Gauteng Agriculture and Farming Development Trust” was in-
tended).]
......
[“Gauteng Consumer Affairs Court” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
......
[“Gauteng Development Tribunal” deleted by
GN 1261 in GG 24731 of 17 April 2003.]
......
[“Gauteng Economic Development Agency” deleted by GN 395 in
GG 37653 of 23 May 2014 w.e.f. 1 April 2014.]
......
[“Gauteng Education and Training Board” deleted by GN 1283 in
GG 23619 of 19 July 2002.]
Gauteng Enterprise Propeller
[“Gauteng Enterprise Propeller” added and classified by GN 1001 in
GG 31417 of 19 September 2008.]
Gauteng Gambling Board
......
[“Gauteng Housing Fund” previously “Gauteng Provincial Housing
Board” amended by GN 2302 in GG 22860 of 30 November 2001 and
deleted by GN 1283 in GG 23619 of 19 July 2002.]
Gauteng Growth and Development Agency (GGDA)
[“Gauteng Growth and Development Agency (GGDA)” previously
“Blue IQ Investment Holdings (Pty) Ltd” added by GN 1139 in
GG 26477 of 25 June 2004 and amended by GN 391 in GG 37653 of
23 May 2014.]
......
[“Gauteng Municipal Demarcation Board” deleted by GN 1283 in
GG 23619 of 19 July 2002.]
Gauteng Partnership Fund (GPF)
[“Gauteng Partnership Fund (GPF)” added by
GN 1266 in GG 28237 of 25 November 2005.]
......
[“Gauteng Rental Housing Tribunal” added by
GN 1283 in GG 23619 of 19 July 2002 and deleted by GN 3366 in
GG 25778 of 5 December 2003.]
......
[“Gauteng Services Appeal Board” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
Gauteng Tourism Authority
......
[“Gauteng Townships Board” deleted by GN 1261 in GG 24731 of
17 April 2003.]
Gautrain Management Agency
[“Gautrain Management Agency” added by
GN 1001 in GG 31417 of 19 September 2008.]
KwaZulu-Natal:
Amafa Akwazulu Natali
[“Amafa Akwazulu Natali” previously “KwaZulu-Natal Monuments
Council” amended by GN 1261 in GG 24731 of 17 April 2003.]
Ezemvelo KwaZulu-Natal Wildlife
[“Ezemvelo KwaZulu-Natal Wildlife” previously “KwaZulu-Natal
Conservation Services” amended by GN 1261 in GG 24731 of 17 April
2003.]
Agri-Business Development Agency
[“Agri-Business Development Agency” previously “KwaZulu-Natal
Agricultural Development Trust” added by GN 1139 in GG 26477 of
25 June 2004 and amended by GN 1247 in GG 33900 of
31 December 2010.]
A-377 Public Finance Management Act No. 1 of 1999
......
[“KwaZulu-Natal Appeals Tribunal” deleted by
GN 1261 in GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Development Tribunal” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Economic Council” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
KwaZulu-Natal Film Commission
[“KwaZulu-Natal Film Commission” added and classified by GN 355
in GG 38735 of 30 April 2015 w.e.f. 1 April 2013.]
......
[“KwaZulu-Natal Gambling Board” deleted by GN 395 in GG 37653
of 23 May 2014 w.e.f. 1 April 2014.]
KwaZulu-Natal Gaming and Betting Board
[“KwaZulu-Natal Gaming and Betting Board” added and classified by
GN 798 in GG 34631 of 30 September 2011 w.e.f. 1 April 2011.]
KwaZulu-Natal House of Traditional Leaders
......
[“KwaZulu-Natal International Airport Development Initiative” deleted
by GN 1261 in GG 24731 of 17 April 2003.]
KwaZulu-Natal Liquor Authority
[“KwaZulu-Natal Liquor Authority” added and
classified by GN 189 in GG 36225 of 15 March 2013 w.e.f. 15 March
2013.]
......
[“KwaZulu-Natal Liquor Board” deleted by
GN 1261 in GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Local Roads Transportation Board” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
......
[“KwaZulu-Natal Marketing Initiative” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Private Townships Board” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Provincial Peace Committee” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
KwaZulu-Natal Provincial Planning and Development Commis-
sion
[“KwaZulu-Natal Provincial Planning and Development Commission”
previously “KwaZulu-Natal Town and Regional Planning Commission”
amended by GN 1261 in GG 24731 of 17 April 2003.]
......
[“Kwazulu-Natal Taxi Council” re-listed by
GN 1396 in GG 24042 of 15 November 2002 and deleted by GN 1001
in GG 31417 of 19 September 2008.]
......
[“KwaZulu-Natal Taxi Task Team” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
......
[“KwaZulu-Natal Tender Board” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
KwaZulu-Natal Tourism Authority
......
[“KwaZulu-Natal Townships Board” deleted by
GN 1261 in GG 24731 of 17 April 2003.]
......
[“KwaZulu-Natal Youth Commission” added by
GN 402 in GG 22047 of 16 February 2001 and deleted by GN 1261 in
GG 24731 of 17 April 2003.]
......
[“Natal Arts Trust” deleted by GN 3366 in
GG 25778 of 5 December 2003.]
Schedule 3
Natal Sharks Board
......
[“Natal Trust Fund” deleted by GN 3366 in
GG 25778 of 5 December 2003.]
......
[“S.A. Life Saving” deleted by GN 1261 in
GG 24731 of 17 April 2003.]
Trade and Investment KwaZulu-Natal
[“Trade and Investment KwaZulu-Natal” added and classified by
GN 798 in GG 34631 of 30 September 2011 w.e.f. 1 April 2011.]
uMsekeli Municipal Support Services
[“uMsekeli Municipal Support Services” previously “KwaZulu-Natal
Development & Services Board” amended by GN 2302 in GG 22860
of 30 November 2001.]
Mpumalanga:
......
(Editorial Note: “Mpumalanga Agricultural
Development Corporation” deleted by GN 395 in GG 37653 of 23 May
2014 w.e.f. 1 April 2014. Please note that this entity did not previously
exist in Schedule 3, Part C, instead it was added to Schedule 3, Part D
by GN 1283 in GG 23619 of 19 July 2002.)
Mpumalanga Economic Empowerment Corporation
[“Mpumalanga Economic Empowerment Corporation” added by
GN 683 in GG 23407 of 17 May 2002.]
......
[Mpumalanga Gaming Board previously “Mpumalanga Gambling
Board” added by GN 683 in GG 23407 of 17 May 2002, amended by
GN 1283 in GG 23619 of 19 July 2002.]
[“Mpumalanga Gambling Board” previously “Mpumalanga Gaming
Board” deleted by GN 1001 in GG 31417 of 19 September 2008 and
corrected by GN 309 in GG 32013 of 20 March 2009.]
(Editorial Note: Please note that GN 1001 in
GG 31417 of 19 September 2008 removes the entity “Mpumalanga
Gambling Board” from this list. However, the name of this entity
prior to removal is “Mpumalanga Gaming Board”. This entity is
later corrected, after removal from the list, to “Mpumalanga
Gambling Board” by GN 309 in GG 32013 of 20 March 2009.)
......
[“Mpumalanga Housing Board” deleted by
GN 1001 in GG 31417 of 19 September 2008.]
......
(Editorial Note: “Mpumalanga Housing Finance Company” deleted by
GN 395 in GG 37653 of 23 May 2014 w.e.f. 1 April 2014. Please note
that this entity did not previously exist in Schedule 3, Part C, instead it
was added to Schedule 3, Part D by
GN 1283 in GG 23619 of 19 July 2002.)
......
[“Mpumalanga Investment Initiative” added by
GN 1397 in GG 22321 of 1 June 2001 and by
GN 683 in GG 23407 of 17 May 2002 and deleted by GN 1001 in
GG 31417 of 19 September 2008.]
Mpumalanga Liquor Authority
[“Mpumalanga Liquor Authority” added and classified by GN 355 in
GG 38735 of 30 April 2015 w.e.f. 1 April 2012.]
......
[“Mpumalanga Parks Board” deleted by GN 1001 in GG 31417 of
19 September 2008.]
Mpumalanga Regional Training Trust
[“Mpumalanga Regional Training Trust” added by GN 1283 in
GG 23619 of 19 July 2002.]
......
[“Mpumalanga Tender Board” deleted by GN 1283 in GG 23619 of
19 July 2002.]
Mpumalanga Tourism and Parks Board
[“Mpumalanga Tourism and Parks Board” added and classified by
GN 1001 in GG 31417 of 19 September 2008.]
Schedule 3 Auditing: Legislation and Standards A-378

...... Limpopo Gambling Board

[“Mpumalanga Tourism Authority” added by [“Limpopo Gambling Board” inserted by GN 476 in GG 28679 of
GN 683 in GG 23407 of 17 May 2002 and deleted by GN 1001 in 7 April 2006.]
GG 31417 of 19 September 2008.]
Limpopo Housing Board
Northern Cape: [“Limpopo Housing Board” previously “Northern Province Housing
Kalahari Kid Corporation (KKC) Board” amended by GN 1003 in GG 31417 of 19 September 2008.]
[“Kalahari Kid Corporation (KKC)” added by Limpopo Liquor Board
GN 1248 in GG 33900 of 31 December 2010 with effect from
[“Limpopo Liquor Board” previously “Northern Province Liquor
1 April 2004.]
Board” amended by GN 1003 in GG 31417 of 19 September 2008.]
McGregor Museum (Kimberley) Limpopo Local Business Centres
[“McGregor Museum (Kimberley)” added and classified by GN 394 in
[“Limpopo Local Business Centres” previously “Northern Province
GG 37653 of 23 May 2014 w.e.f. 1 April 2014.]
Local Business Centres” amended by GN 1003 in GG 31417 of
Northern Cape Economic Development, Trade and Investment 19 September 2008.]
Promotion Agency (NCEDA) Limpopo Panel of Mediators
[“Northern Cape Economic Development, Trade and Investment Pro- [“Limpopo Panel of Mediators” previously “Northern Province Panel
motion Agency (NCEDA)” added by GN 364 in GG 34233 of 29 April of Mediators” amended by
2011 with effect retrospectively from 1 April 2010.] GN 1003 in GG 31417 of 19 September 2008.]
...... Limpopo Planning Commission
[“Northern Cape Economic Development Unit” deleted by GN 1261 in
[“Limpopo Planning Commission” previously “Northern Province
GG 24731 of 17 April 2003.]
Planning Commission” amended by GN 1003 in GG 31417 of
...... 19 September 2008.]
[“Northern Cape Gambling and Racing Board” previously “Northern Limpopo Roads Agency
Cape Gambling Board” amended by GN 683 in GG 23407 of 17 May
[“Limpopo Roads Agency” previously “Northern Province Roads
2002 and deleted by GN 1261 in GG 24731 of 17 April 2003.]
Agency” added by GN 402 in
Northern Cape Gambling Board GG 22047 of 16 February 2001 and amended by GN 1003 in
[“Northern Cape Gambling Board” added and GG 31417 of 19 September 2008.]
classified by GN 1001 in GG 31417 of 19 September 2008.] Limpopo Tourism and Parks Board
...... [“Limpopo Tourism and Parks Board” inserted by GN 476 in
[“Northern Cape Housing Board” deleted by GG 28679 of 7 April 2006.]
GN 1261 in GG 24731 of 17 April 2003.] ......
Northern Cape Liquor Board [“Northern Province Agricultural and Rural Development Corporation”
[“Northern Cape Liquor Board” deleted by GN 1261 in GG 24731 of deleted by GN 476 in GG 28679 of 7 April 2006.]
17 April 2003 and re-added and classified by GN 798 in GG 34631 of ......
30 September 2011 w.e.f. 1 April 2010.]
[“Northern Province Gaming Board” deleted by
...... GN 476 in GG 28679 of 7 April 2006.]
[“Northern Cape Local Transportation Board” deleted by GN 1261 in ......
GG 24731 of 17 April 2003.]
[“Northern Province Investment Initiative” deleted by GN 476 in
...... GG 28679 of 7 April 2006.]
[“Northern Cape Provincial Tender Board” deleted by GN 1283 in ......
GG 23619 of 19 July 2002.]
[“Northern Province Provincial Tender Board”
Northern Cape Tourism Authority deleted by GN 1283 in GG 23619 of 19 July 2002.]
...... ......
[“Northern Cape Youth Commission” deleted by GN 1139 in [“Northern Province Tourism Board” deleted by
GG 26477 of 25 June 2004.] GN 476 in GG 28679 of 7 April 2006.]
Northern Province: ......
...... [“Trade and Investment Limpopo” inserted by
[“Gateway International Airport” deleted by GN 476 in GG 28679 of GN 476 in GG 28679 of 7 April 2006 and deleted by GN 188 in
7 April 2006.] GG 36225 of 15 March 2013 with effect retrospectively from
1 December 2012.]
......
[“Limpopo Agribusiness Development Corporation” added and classi- North West:
fied by GN 798 in GG 34631 of 30 September 2011 w.e.f. 1 April 2009
and deleted by GN 188 in GG 36225 of 15 March 2013 with effect
Invest North West
retrospectively from 1 December 2012.] [“Invest North West” added by GN 1283 in
GG 23619 of 19 July 2002.]
Limpopo Appeal Tribunals
[“Limpopo Appeal Tribunals” previously “Northern Province Appeal Mmabana Arts, Culture and Sport Foundation
Tribunals” amended by GN 1003 in GG 31417 of 19 September 2008.] [“Mmabana Arts, Culture and Sport Foundation” previously “NW Arts
Council” and “NW Mmabana Cultural Foundation” amended by
Limpopo Development Enterprise GN 1283 in GG 23619 of 19 July 2002.]
[“Limpopo Development Enterprise” inserted by GN 476 in GG 28679
of 7 April 2006.] ......
Limpopo Development Tribunals [“NW Agricultural Services Corporation” deleted by GN 1001 in
GG 31417 of 19 September 2008.]
[“Limpopo Development Tribunals” previously “Northern Province
Development Tribunals” amended by GN 1003 in GG 31417 of ......
19 September 2008.] [“NW Arts Council” renamed by GN 1283 in
...... GG 23619 of 19 July 2002.]

(Editorial Note: We have been instructed by GN 191 in ......

GG 36225, to change the entity “Limpopo Economic De- [“NW Communication Service” deleted by
velopment Enterprise (LimDev)” to “Limpopo Economic GN 1001 in GG 31417 of 19 September 2008.]
Development Agency (Leda)”, however this entity does not NW Eastern Region Entrepreneurial Support Centre
exist in the Act.) NW Gambling Board
A-379 Public Finance Management Act No. 1 of 1999 Schedule 3

NW Housing Corporation been published under General Notice No. 318 in Government
...... Gazette 23204 of 7 March 2002. Amended public entities have
[“NW Mmabana Cultural Foundation” renamed by GN 1283 in
been published under General Notice No. 1283 in Government
GG 23619 of 19 July 2002.] Gazette 23619 of 19 July 2002 with effect from 19 July 2002;
under General Notice No. 1315 in Government Gazette 23661 of
......
2 August 2002 with effect from 2 August 2002; under Government
[“NW Ombudsman” deleted by GN 1283 in
GG 23619 of 19 July 2002.]
Notice No.1396 in Government Gazette 24042 of 15 November
2002 with effect from 15 November 2002; under General Notice
NW Parks and Tourism Board No. 1261 in Government Gazette 24731 of 17 April 2003 with
NW Provincial Aids Council effect from 17 April 2003; under General Notice No. 1139 in
[“NW Provincial Aids Council” added by GN 1283 in GG 23619 of Government Gazette 26477 of 25 June 2004 with effect from
19 July 2002.] 25 June 2004, under General Notice No. 1267 in Government
North West Provincial Heritage Resources Authority Gazette 28237 of 25 November 2005 with effect from 25 Novem-
[“North West Provincial Heritage Resources Authority” added and ber 2005, under General Notice No. 476 in Government Gazette
classified by GN 1001 in GG 31417 of 19 September 2008.] 28679 of 7 April 2006, under General Notice No. 1002 in Govern-
Provincial Arts and Culture Council ment Gazette 31417 of 19 September 2008 with effect from
[“Provincial Arts and Culture Council” added by GN 1283 in 19 September 2008, under General Notice No. 799 in Government
GG 23619 of 19 July 2002.] Gazette 34631 of 30 September 2011 with effect retrospectively
...... from 1 April 2000, under Government Notice No. 823 in Govern-
[“NW Tender Board” deleted by GN 1283 in ment Gazette 35759 of 12 October 2012, with effect from 1 April
GG 23619 of 19 July 2002.] 2012, under General Notice No. 395 in Government Gazette 37653
NW Youth Development Trust of 23 May 2014 with effect from 1 April 2014 and under Govern-
ment Notice No. 524 in Government Gazette 39985 of 13 May
[“NW Youth Development Trust” added by
GN 1283 in GG 23619 of 19 July 2002.] 2016 with effect from 13 May 2016.]

Western Cape:
Entity:
Western Cape Cultural Commission ......
[“Western Cape Cultural Commission” added by GN 1397 in [“Algoa Bus Company” deleted by GN 1283 in
GG 22321 of 1 June 2001.] GG 23619 of 19 July 2002.]

WC Gambling and Racing Board Casidra (Pty) Ltd

......
[“WC Housing Development Board” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
Western Cape Language Committee
[“Western Cape Language Committee” added by GN 1397 in
GG 22321 of 1 June 2001.]
Western Cape Nature Conservation Board
[“Western Cape Nature Conservation Board” added by GN 402 in
GG 22047 of 16 February 2001.]
Western Cape Liquor Authority
[“Western Cape Liquor Authority” previously “WC Liquor Board”
amended by GN 191 in GG 36225 of 15 March 2013 with effect from
15 March 2013.]
......
[“WC Provincial Development Council” deleted by GN 523 in
GG 39985 of 13 May 2016.]
......
[“WC Provincial Tender Board” deleted by
GN 1283 in GG 23619 of 19 July 2002.]
Western Cape Tourism, Trade and Investment Promotion
Agency
[“Western Cape Tourism, Trade and Investment Promotion Agency”,
previously “WC Investment and Trade Promotion Agency”, amended
by GN 391 in GG 37653 of 23 May 2014.]
......
[“WC Tourism Board” deleted by GN 7 in
GG 30637 of 4 January 2008.]
......
[“Western Cape Provincial Youth Commission” added by GN 765 in
GG 27599 of 27 May 2005 and deleted by GN 241 in GG 33059 of
1 April 2010.]
Any subsidiary or entity under the ownership control of the
above public entities
Part D: Provincial Government Business Enterprises
[Part D added by s. 45 of Act No. 29 of 1999.]
[General Note: Amended public entities have been published under
General Notice No. 402 in Government Gazette 22047 of 16
February 2001 with effect from 1 April 2001; under General
Notice No. 1863 in Government Gazette 22577 of 24 August 2001
with effect from 24 August 2001; under General Notice No. 2302
in Government Gazette 22860 of 30 November 2001 with effect
from 30 November 2001. Authorisation of public entities have
[“Casidra (Pty) Ltd” previously “Lanok (Pty) Ltd” amended by
GN 1261 in GG 24731 of 17 April 2003.]
Cowslip Investments (Pty) Ltd
[“Cowslip Investment (Pty) Ltd” previously “Cowslip (Pty) Ltd”
amended by GN 1315 in GG 23661 of 2 August 2002.]
[“Cowslip Investments (Pty) Ltd” previously “Cowslip Investment
(Pty) Ltd” amended by GN 1396 in GG 24042 of 15 November 2002.]
Eastern Cape Development Corporation
[“Eastern Cape Development Corporation” moved from Schedule 3C
to Schedule 3D.]
East London Industrial Development Zone
[“East London Industrial Development Zone ” previously “East Lon-
don Industrial Development Zone Corporation” added by GN 1267 in
GG 28237 of 25 November 2005 and amended by GN 524 in GG
39985 of 13 May 2016.]
......
[“Free State Agri-Eco (Pty) Ltd” deleted by
GN 1396 in GG 24042 of 15 November 2002.]
Free State Development Corporation
Gateway Airport Authority Limited
[“Gateway Airport Authority Limited” inserted by GN 476 in
GG 28679 of 7 April 2006.]
Ithala Development Finance Corporation
[“Ithala Finance Corporation” previously
“KwaZulu-Natal Finance & Investment Corporation” amended by
GN 1863 in GG 22577 of 24 August 2001.]
[“Ithala Development Finance Corporation” previously “Ithala Finance
Corporation” amended by
GN 2302 in GG 22860 of 30 November 2001.]
......
[“KwaZulu Transport Corporation Ltd” added by GN 402 in GG 22047
of 16 February 2001 and deleted by GN 1139 in GG 26477 of 25 June
2004.]
Mafikeng Industrial Development Zone (Pty) Ltd
[“Mafikeng Industrial Development Zone (Pty) Ltd” added and
classified by GN 1002 in GG 31417 of
19 September 2008.]
Mayibuye Transport Corporation
Mjindi Farming (Pty) Ltd
[“Mjindi Farming (Pty) Ltd” deleted from Schedule 3B and moved to
Schedule 3D by GN 1863 in GG 22577 of 24 August 2001.]
Schedule 3–Schedule 6 Auditing: Legislation and Standards A-380

Mpendle Ntambanana Agricultural Company (Pty) Ltd NW Development Corporation

[“Mpendle Ntambanana Agricultural Company (Pty) Ltd” deleted from
Schedule 3B and moved to Schedule 3D by GN 1863 in GG 22577 of
24 August 2001.]
......
[“Mpumalanga Agricultural Development Corporation” added by
GN 1283 in GG 23619 of 19 July 2002 and deleted by GN 395 in GG
37653 of 23 May 2014 w.e.f. 1 April 2014 (Editorial Note: Please note
that GN 395 of 23 May 2014 instructs that this entity be removed from
Schedule 3, Part C. It is suggested that Schedule 3, Part D was in fact
meant).]
......
[“Mpumalanga Development Corporation” deleted by GN 1863 in
GG 22577 of 24 August 2001.]
......
[“Mpumalanga Economic Empowerment Corporation” previously
“Mpumalanga Finance Corporation” and “Mpumalanga Development
Corporation” re-listed by GN 1863 in GG 22577 of 24 August 2001
and deleted by GN 1002 in GG 31417 of
19 September 2008.]
Mpumalanga Economic Growth Agency
[“Mpumalanga Economic Growth Agency” added and classified by
GN 1002 in GG 31417 of 19 September 2008.]
......
[“Mpumalanga Finance Corporation” deleted by
GN 1863 in GG 22577 of 24 August 2001.]
......
[“Mpumalanga Housing Finance Company” added by GN 1283 in
GG 23619 of 19 July 2002 and deleted by GN 395 in GG 37653 of
23 May 2014 w.e.f. 1 April 2014 (Editorial Note: Please note that
GN 395 of 23 May 2014 instructs that this entity be removed from
Schedule 3, Part C. It is suggested that Schedule 3, Part D was in fact
meant).]
......
[“Natal Trust Farms (Pty) Ltd” deleted by GN 1261 in GG 24731 of
17 April 2003.]
Northern Province Development Corporation
Northwest Transport Investments (Pty) Ltd
[“Northwest Transport Investments (Pty) Ltd” added and classified by
GN 799 in GG 34631 of 30 September 2011.]
Richards Bay Industrial Development Zone
[“Richards Bay Industrial Development Zone” added and classified by
GN 823 in GG 35759 of 12 October 2012 with effect from 1 April
2012.]
Any subsidiary or entity under the ownership control of the
above public entities
SCHEDULE 4
EXCLUSIONS FROM REVENUE FUNDS
(In terms of section 13 (1) or 22 (1))
[Heading substituted by s. 46 of Act No. 29 of 1999.]
1. SA Schools Act (covering school fees)
2. Fines and estreated bails paid in respect of offences and
alleged offences in terms of—
(a) by-laws enacted by municipalities; or
(b) national or provincial legislation, the administration
of which is assigned to municipalities.
[Item 2 added by s. 121 of Act No. 32 of 2000.]
SCHEDULE 5
DIRECT CHARGES AGAINST NATIONAL REVENUE FUND
Payments in terms of the following Acts:
1. Remuneration of Public Office Bearers Act, 1998 (Act No.
20 of 1998) (Covering the President’s salary and the salaries
of members of Parliament sections 2 (7) and 3 (7));
2. Remuneration and Allowances of Deputy Presidents,
Ministers and Deputy Ministers Act, 1994 (Act No. 53 of
1994) (Covering the salary of the Deputy President section
4 (a));
3. Judges’ Remuneration and Conditions of Employment Act,
1989 (Act No. 88 of 1989) (Covering salaries and allowanc-
es of Judges and Judges seconded to governments of other
countries in terms of section 2).
4. Magistrates Act, 1993 (Act No. 90 of 1993) (covering
remuneration of magistrates in terms of section 12).
[Item 4 added by s. 13 of Act No. 28 of 2003.]

SCHEDULE 6
REPEAL OF LEGISLATION
(Section 94)

No. and year of Act Short title Extent of repeal

(a) Act No. 66 of 1975 Exchequer Act, 1975 The whole, except sections 28, 29, 30
Act No. 106 of 1976 Financial Arrangements with the Transkei Act, 1976 The whole
Act No. 93 of 1977 Financial Arrangements with Bophuthatswana Act, 1977 The whole
Act No. 105 of 1979 Financial Arrangements with Venda Act, 1979 The whole
Proclamation No. R.85 of 1968 South West Africa Constitution Act, 1968 (Act No. 39 of 1968) Part 3
Act No. 67 of 1980 Railways and Harbours Acts Amendment Act, 1980 Section 19
Act No. 29 of 1981 Railways and Harbours Acts Amendment Act, 1981 Section 21
Act No. 118 of 1981 Financial Arrangements with Ciskei Act, 1981 The whole
Act No. 100 of 1984 Exchequer and Audit Amendment Act, 1984 The whole
Act No. 9 of 1989 Legal Succession of the South African Transport Services Schedule 2 Part 6 of the Act insofar as it
Act, 1989 relates to the Exchequer Act, 1975
Act No. 120 of 1991 Finance Act, 1991 Sections 14, 15 and 16
Act No. 96 of 1992 Part Appropriation Acts Abolition Act, 1992 The whole
Act No. 69 of 1993 Exchequer Amendment Act, 1993 The whole
Act No. 123 of 1993 Finance Act, 1993 The whole
Act No. 142 of 1993 Exchequer Second Amendment Act, 1993 The whole
Act No. 182 of 1993 Exchequer Third Amendment Act, 1993 The whole
A-381
No. and year of Act
Act No. 41 of 1994
(b) Act No. 93 of 1992
(c) Act No. 66 of 1975
Act No. 102 of 1976
(d) Act No. 29 of 1992 (Bophuthatswana)
Act No. 16 of 1993 (Bophuthatswana)
(e) Act No. 66 of 1975
Act No. 111 of 1977
Act No. 94 of 1978
Proclamation No. R.85 of 1979
Act No. 21 of 1983 (Venda)
Act No. 18 of 1987 (Venda)
Act No. 28 of 1989 (Venda)
Proclamation No. 25 of 1993 (Venda)
(f) Act No. 28 of 1985 (Ciskei)
Public Finance Management Act No. 1 of 1999 Schedule 6
Short title Extent of repeal
Finance Act, 1994 Sections 17 and 18
Reporting by Public Entities Act, 1992 The whole
Exchequer and Audit Act, 1975 The whole insofar as it is in force in the
area of the former Republic of Transkei
Finance Act, 1976 Sections 23, 24 and 25 insofar as it is in
force in the area of the former Republic of
Transkei
Exchequer Act, 1992 The whole
Exchequer Amendment Act, 1993 The whole
Exchequer and Audit Act, 1975 The whole insofar as it is in force in the
area of the former Republic of Venda
Finance Act, 1977 Sections 9, 10 and 11 insofar as it is in
force in the area of the former Republic of
Venda
Finance Act, 1978 Sections 12, 13 and 14 insofar as it is in
force in the area of the former Republic of
Venda
Exchequer and Audit Proclamation Sections 16 and 17 insofar as it is in force
in the area of the former Republic of
Venda
Exchequer and Audit Amendment Act, 1983 The whole
Exchequer and Audit Amendment Act, 1987 The whole
Exchequer and Audit Amendment Act, 1989 The whole
Exchequer and Audit Amendment Act, 1993 The whole
Exchequer and Audit Act, 1985 The whole
A-383 Public Finance Management Act No. 1 of 1999 Index

References are to sections and schedules of the Act. Act (continued)

Objects, to secure transparency, accountability and sound man-
A agement of revenue, expenditure, assets and liabilities, s. 2
Accounting authority see Public entities “accounting authority” Public Service, 1994 (Proclamation No. 103 of 1994), definition
definition, s. 1 “national department”, s. 1
Accounting officer Remuneration and Allowances of Deputy Presidents, Ministers and
absent or otherwise unable to perform the functions of, s. 37 Deputy Ministers, 1994 (Act No. 53 of 1994), sch. 5, para. 2
acting, s. 37 Remuneration of Public Office Bearers, 1998 (Act No. 20 of
annual report, must submit an, s. 40(1)(d)(i) 1998), sch. 5, para. 1
appointment of, s. 36 Revenue Funds Interim Arrangements, 1997 (Act No. 95 of 1997),
assignment of powers and duties by, s. 44 s. 93(4)
collect all money due to the department, entity or institution, State Tender Board, 1968 (Act No. 86 of 1968), definition “irregu-
s. 38(1)(c)(i) lar expenditure”,
comply with any tax, levy, duty, pension and audit commitments, s. 1
s. 38(1)(e) Audit Committees, s. 77
definition, s. 1 consist of at least three persons, must, s. 77(a)
delegate any power to an official, may, s. 44(1)(a) established for two or more departments, may be, s. 77(c)
employment contract of an, must be in writing, s. 36(5) meet at least twice a year, must, s. 77(b)
financial statements, must prepare, s. 40(1)(b) Auditor-General must,
financial statements to the Auditor-General, must submit, audit the consolidated financial statements, s. 19(2)
s. 40(1)(c)
submit an audit report to the Treasury, s. 19(2)
financial statements to the relevant treasury, must submit,
s. 40(1)(c)
head of the department must be the, s. 36(2)(a) B
information to be submitted by, s. 41 Banks
inventory of assets and liabilities to be transferred to another de- Disclosure of information, s. 7(5)
partment, must draw up an, s. 42(1)(a) opening of accounts, s. 7(5)
manage available working capital, s. 38(1)(c)(iii)
Parliament, constitutional institution’s annual report, must submit C
to, s. 40(1)(e) Cabinet members
prevent any overspending of the vote, s. 39(2)(a) guarantees and securities by, s. 70
provincial department, for a, s. 20(2)(b)(ii) annual reports, s. 70(4)
records of financial affairs, must keep full and proper, s. 40(1)(a)
concurrence of Minister required, s. 70(1)
responsibilities of the, s. 38
relating to budgetary control, s. 39 information supplied to Minister, s. 70(3)
reporting, s. 40 payment under, is a direct charge against the Revenue Fund,
of assets and liabilities transfer s. 42 s. 70(2)
virement between main divisions within votes, s. 43 unforeseeable and unavoidable expenditure, s. 30(2)(b)
Accounting Standards Board Constitutional institution
chairperson of the, s. 91(1)(a) accounting officer, must have an, s. 36(1)
composition, s. 88 application of this Act to, s. 3(1)(1)(c)
establish its own operating procedures, may, s. 88(3) bank accounts of, s. 7(2)
Minister appoints members, s. 88(2) chief executive officer of a, must be the accounting officer,
ten members or less, s. 88(1) s. 36(2)(b)
definition, s. 1 definition, s. 1
establishment, s. 87 list of, sch. 1
finance and administration of the, s. 91(1)(a) money, may not borrow, s. 66(4)
functions of the, s. 89
insure itself against any loss, damage, risk or liability, s. 90(e) D
Minister may regulate regarding members of the,
Department
filling of vacancies, s. 91(1)(a)
accounting officer, must have an, s. 36(1)
qualifications and remuneration, s. 91(1)(a)
removal of, s. 91(1)(a) definition, s. 1
term of office, s. 91(1)(a)
Minister must establish a, s. 87(1) E
perform any legal acts, may, s. 90(f) Executive authority
powers of the, s. 90 accounting officer report to, any,
publish reports, may, s. 90(g) overspending of departments vote,
regulations on accounting standards of the, s. 39(2)(b)(iii)
s. 91 shortfalls in budgeted revenue, s. 39(2)(b)(ii)
research may do, s. 90(g) under collection of revenue, s. 39(2)(b)(i)
standards of generally recognised accounting practice, must set, definition, s. 1
s. 89(a) executive directives having financial implications, s. 64
standards set by, must promote transparency and effective man- financial responsibilities of, s. 63
agement, s. 89(4) table to the National Assembly, must,
Act
annual report and financial statements, s. 65(1)(a)
applies to, this,
findings of a disciplinary board, s. 65(1)(b)
constitutional institutions, s. 3(1)(c)
departments, s. 3(1)(a) tabling in legislatures, s. 65
provincial legislatures, s. 3(1)(d) Executive Council
public entities, s. 3(1)(b) expenditure recommended by, unforeseeable and unavoidable,
Borrowing Powers of Provincial Governments, 1996 (Act No. 48 s. 31(2)(b)
of 1996), s. 66(1)(c) provincial, of the province, s. 31(2)(b)
Exchequer, 1975 (Act No. 66 of 1975), s. 93(1) Expenditure, fruitless and wasteful
Judges’ Remuneration and Conditions of Employment, 1989 (Act accounting officer must prevent, s. 38(1)(c)(ii)
No. 88 of 1989), sch. 5, para. 3 definition, s. 1
Magistrates, 1993 (Act No. 90 f 1993), sch. 5, para. 4 discovery of any unauthorised, irregular and, s. 38(1)(g)
Index Auditing: Legislation and Standards A-384

F Minister (continued)
Financial misconduct repayment, conversion and consolidation of loans, s. 74
accounting authorities and officials of public entities, s. 83 signing of loan agreements, s. 72
charges of, must be investigated, heard and disposed of, s. 84
ground for dismissal, is a, s. 83(4) N
Minister must make regulations regarding procedures, s. 85(1) National and Provincial Budgets
offences and penalties, s. 86 annual appropriations, s. 26
officials in departments and constitutional institutions, by, s. 81 annual budgets, s. 27
regulations on procedures, s. 85 expenditure before annual, is passed, s. 29
treasury official, by, s. 82
MEC for finance must table, in the provincial legislature, s. 27(2)
Financial statements
Minister may table adjustments when necessary, s. 30(1)
consolidated, must be made public, s. 19(4)
Minister must table, in the National Assembly, s. 27(1)
criminal or disciplinary steps taken, must include particulars of,
multi-year budget projections, s. 28
s. 40(3)(b)(ii)
definition, s. 1 national adjustment budgets, s. 30
particulars of losses recovered, must include, s. 40(3)(b)(iii) provincial adjustment budgets, s. 31
particulars of material losses through criminal conduct, must in- publishing of reports on state of, s. 32
clude, s. 40(3)(b)(i) unauthorised expenditure, s. 34
state of affairs of the department, must fairly present the, unfunded mandates, s. 35
s. 40(3)(a) National department
Financial year bank accounts of, s. 7(2)
definition, s. 1 definition, s. 1
National government business enterprise
definition, s. 1
G
Generally recognised accounting practice list of, sch. 3
accounting officer’s responsibility, s. 40(1)(b) National government component
definition, s. 1 definition, s. 1
enforcement of, s. 6(2)(b); s. 18(2)(b) National public entity
setting of standards, s. 89(1)(a) definition, s. 1
Treasury must prepare financial statements in accordance with, National Revenue Fund
s. 8(1)(a); s. 19(1)(a) control of, s. 11
deposits into, s. 13
direct charges against, sch. 5
I
emergency situations, use of funds in, s. 16
Irregular expenditure
definition, s. 1 interest and repayments of loans to be direct charges, s. 73
disclosure of, s. 40(3)(b); s. 55(2)(b); s. 57(c) investments and interest are part of the fund, s. 15(3)(b)
financial misconduct, s. 81(1)(b); s. 83(1)(b) money received by Government, must be paid into the, all,
prevention of, s. 45(c) s. 11(1)(a)
report on, s. 38(1)(g) National Treasury is in charge of the, s. 11(1)
SA Revenue Services may withdraw money from, to,
make other refunds approved by Treasury, s. 12(2)(b)
J
refund any tax, levy or duty credits,
Juristic person
s. 12(2)(a)
Accounting Standards Board is a, s. 87(2)
transfer to a member of the SA Customs Union, s. 12(2)(c)
National Treasury
L annual consolidated financial statements, s. 8
Loans, guarantees and other commitments banking, cash management and investment framework, s. 7
Cabinet member, guarantees, indemnities and securities by, s. 70 consists of,
consequences of unauthorised transactions, Minister, who is the head of the, s. 5(1)(a)
s. 68 national departments, s. 5(1)(b)
government may only borrow money through, definition, s. 1
MEC for finance in the province, s. 66(2)(b) delegations by, s. 10
Minister or Cabinet member, s. 66(2)(a)
departures from regulations, instructions or conditions, s. 79
provincial, no foreign commitments, s. 67
ensure there is sufficient money in Fund,
regulations on borrowing by public entity, s. 69
s. 11(5)
restrictions on, s. 66
establish appropriate and effective cash management, s. 11(4)
establishment of the, s. 5
M financial misconduct by officials of the, s. 82
Main division within a vote financial statistics and aggregations, s. 9
definition, s. 1 functions and powers, s. 6
virement between, s. 53 Minister takes policy and other decisions of the, s. 5(2)
MEC for finance publishing of draft regulations for public comment, s. 78
definition, s. 1 regulations and instructions, s. 76
Minister
withdrawal of exclusions, s. 14
definition, s. 1
withdrawals and investments from, s. 15
determination of interest rates for debt owing to the state, s. 80
withholding of appropriated funds, s. 33
Finance, of, definition “Minister”, s. 1
Parliament, promptly inform of withdrawal of any exclusion,
s. 14(4) O
purposes for which, may borrow money, s. 71 Offences and penalties, s. 86
finance national budget deficits, to, s. 71(a) Overspending
maintain credit balances on a bank account of the National accounting officer must prevent any, of the vote, s. 39(2)(a)
Revenue Fund, to, s. 71(d) definition, s. 1
obtain foreign currency, to, s. 71(c) prevention of, s. 39(2)(a)
purpose approved by the National Assembly, any other, s. 71(f) unauthorised expenditure, s. 34(1)(a)
refinance maturing debt, to, s. 71(b) Ownership control
regulate internal monetary conditions, to, s. 71(e) definition, s. 1
A-385 Public Finance Management Act No. 1 of 1999 Index

P Public entity (continued)

Prescribe Minister may not list the following as,
definition, s. 1 Auditor-General, the, s. 47(4)(a)
National Treasury must, constitutional institution, a, s. 47(4)(a)
framework to conduct cash management, s. 7(1) institution of higher education, any,
investment policies, s. 7(4) s. 47(4)(c)
uniform norms and standards, s. 6(2)(a) South African Reserve Bank, the, s. 47(4)(a)
Provincial department National, list of, sch. 3
definition, s. 1 regulations on borrowing by, s. 69
delegation of powers to, s. 10(1)(b) responsibilities of other officials
National Treasury may withdraw exclusions granted to, s. 23(1) surpluses, may not accumulate, s. 53(3)
Provincial government business enterprise transactions to be approved before conclusion,
definition, s. 1 acquisition or disposal of a shareholding, s. 54(2)(c)
list of, sch. 3 acquisition or disposal of a significant asset, s. 54(2)(d)
Provincial government component commencement or cessation of a business activity, s. 54(2)(e)
definition, s. 1 establishment of a company, s. 54(2)(a)
Provincial public entity participation in a partnership, trust or joint venture, s. 54(2)(b)
definition, s. 1 unlisted, s. 47
list of, sch. 3
National Treasury may withdraw exclusions granted to, s. 23(1) R
Provincial treasury Reconstruction and Development Programme Fund
annual consolidated financial statements, s. 19 money from donor agencies must be paid to, s. 13(1)(e)
annual Division of Revenue Act, must comply with the, s. 18(2)(c) Revenue Fund
budget, must exercise control over the, control of Provincial, s. 21
s. 18(1)(b) definition, s. 1
consolidated financial statements, must prepare, s. 19(1)(a) deposits and withdrawals by SA Revenue Services in, s. 12
definition, s. 1 deposits into Provincial, s. 22
delegations by, s. 20 exclusions from, sch. 4
established for each province, s. 17(1) National or Provincial, definition “Revenue Fund”, s. 1
establishment of, s. 17 statement of revenue and expenditure must specify actual,
functions and powers of, s. 18 borrowings for the period, s. 32(3)(c)
information required by National Treasury, must provide, expenditure per vote for the period,
s. 18(1)(h) s. 32(3)(b)
MEC for finance is the head of a, s. 17(2) revenue for the relevant period, s. 32(3)(a)
MEC for finance takes policy and other decisions of, s. 17(2) statement of revenue and expenditure with regard to, s. 32(2)
provincial budget, must prepare the, s. 18(1)(a) use of funds in emergency situations, s. 25
transparency, must promote and enforce, withdrawal of exclusions from Provincial, s. 23
s. 18(1)(c) withdrawals and investments from Provincial, s. 24
Public entity Revenue Services, see South African Revenue Services
accounting authorities for, s. 49
act with fidelity, honesty, integrity and the best interest of the
S
entity, s. 50(1)(b)
South African Revenue Services
assignments of powers and duties by, s. 56
Revenue Fund
collect all revenue due, must, s. 51(1)(b)(i)
deposit into, s. 12(1)
ensure appropriate procurement system,
withdrawals from, s. 12(2)
s. 51(1)(a)(iii)
exercise the duty of utmost care, s. 50(1)(a)
general responsibilities of, s. 51 T
financial misconduct by, s. 83 Trading entity
information to be submitted by, s. 54 accounting officer for a, s. 36(3)(b)
members must disclose personal interest to, definition, s. 1
s. 50(3)(a) Treasury, see National Treasury
prevent any prejudice to the financial interests of the state, definition, s. 1
s. 50(1)(d)
properly evaluate all major capital projects, must, s. 51(1)(a)(iv) U
annual budget and corporate plan by, s. 52 Unauthorised expenditure
annual budget by non-business, s. 53 definition, s. 1
annual report and financial statements, s. 55 financial misconduct, s. 81(1)(b)
classification of, s. 48 responsibility for, s. 64(2)
classified as, Revenue Fund, not a charge against, s. 34(1)
national government business enterprises,
s. 48(1)(a) V
national public entities, s. 48(1)(c) Vote
provincial government business enterprises, s 48(1)(b) definition, s. 1
provincial public entities, s. 48(1)(d) emergency funds, use of, attributed to a, s. 16(4)(b)
deficit, may not budget for a, s. 53(3) virement between main divisions within, s. 43
definition, s. 1
fiduciary duties of accounting authorities for, s. 50
financial misconduct by officials of a, s. 83
list of, sch. 2; sch. 3
 Part B
King IV Report on Corporate Governance
for South Africa 2016
REPORT ON CORPORATE
GOVERNANCE FOR
SOUTH AFRICA 2016
ACKNOWLEDGEMENTS
The Institute of Directors in Southern Africa and the King Committee on Corporate Governance in South Africa
acknowledge with appreciation those who support the King IV Report and corporate governance in South Africa
through their sponsorship.

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The Institute of Directors in Southern Africa and the King Committee on Corporate Governance in South Africa
acknowledge with appreciation those who support King IV and corporate governance in South Africa through
their endorsements. Each endorsement indicates support for the principles as espoused by this Report.
Endorsements can be accessed at: http://www.iodsa.co.za/?page=KingIVEndorsers
The King IV Report is dedicated to all those from the King Committee and outside it, even beyond the borders of
South Africa, who so generously gave of their time and knowledge to contribute to the development of its content.

Ansie Ramalho
King IV Project Lead, Institute of Directors in Southern Africa
1 November 2016
INDEX
FOREWORD

1
GLOSSARY OF TERMS
Page 8

2
FUNDAMENTAL CONCEPTS
Page 19

3
KING IV APPLICATION AND DISCLOSURE
Page 34

4
KING IV ON A PAGE
Page 39

5
KING IV CODE ON
CORPORATE GOVERNANCE
Page 42
Part 5.1: Leadership, ethics and corporate citizenship
Part 5.2: Strategy,performance and reporting
Part 5.3: Governing structures and delegation
Part 5.4: Governance functional areas
Part 5.5: Stakeholder relationships

6
SECTOR SUPPLEMENTS
Page 74
Part 6.1: Introduction to sector supplements
Part 6.2: Supplement for municipalities
Part 6.3: Supplement for non-profit organisations
Part 6.4: Supplement for retirement funds
Part 6.5: Supplement for small and medium enterprises
Part 6.6: Supplement for state-owned entities

7
CONTENT DEVELOPMENT PROCESS
AND KING COMMITTEE
Page 118
COPYRIGHT AND
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™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 1
 FOREWORD

2 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
FOREWORD
INTRODUCTION
The 21st Century has been characterised by fundamental changes in both business and society. These
fundamental changes provided the context within which the King Committee set out to draft King IV, and have
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New global realities are testing the leadership of organisations on issues as diverse as inequality, globalised
trade, social tensions, climate change, population growth, ecological overshoot, geopolitical tensions, radical
WUDQVSDUHQF\DQGUDSLGWHFKQRORJLFDODQGVFLHQWL¿FDGYDQFHPHQW
The United Nations Sustainable Development Goals, which were agreed by all governments in 2015, the Africa
2063 Agenda and the (South African) National Development Plan 2030 (NDP) have a common theme of value
creation that is accomplished in a sustainable manner. This is a fundamental concept of King IV.
THE CHANGED WORLD
Financial instability is one driver of these changes. Financial crises arising out of the capital crisis in the United
States of America and the Sovereign Fund crisis in the European Union have still not been resolved. Brexit
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$QRWKHUFKDQJHGULYHULVFOLPDWHFKDQJH(YHQWKRVHZKRDUHVNHSWLFDODERXWWKHVFLHQWL¿FHYLGHQFHIRUFOLPDWH
change, or who question whether climate change is attributable to human agency or simply part of a longer-term
cycle, have to acknowledge that the world has experienced extreme weather conditions that pose new risks in the
last several years.
It is a reality that organisations and individuals are using natural assets faster than nature is regenerating them.
This ecological overshoot will be exacerbated by continued population growth on the African and Asian continents.
The global population is currently at 7.5 billion, and could reach 9.3 billion by 2045 according to the United
1DWLRQV&RQVHTXHQWO\WKHSUHVVXUHRQQDWXUDODVVHWVZLOOLQFUHDVHDVWKH\DUH¿QLWHFRQWLQXLQJEXVLQHVVDV
usual is no longer an option.
Ubiquitous social media platforms are creating a world characterised by radical transparency. Corporations can no
longer conceal their actions or secrets. Technological advances, including the emergence of the Internet of things,
DUHJHQHUDWLQJKXJHDPRXQWVRIGDWDPRUHLPSRUWDQWO\VRSKLVWLFDWHGDQDO\WLFVLVFRQYHUWLQJWKDWGDWDLQWRGHHS
insight into the behaviour of humans and their organisations.
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nanotechnology and biotechnology are accelerating the transformation of production and supply chains – and
forcing professions like law and accounting to reinvent themselves.
Indeed, so profound are the disruptions to industries and business models that many believe we are in the midst
of the Fourth Industrial Revolution.
There are greater expectations from stakeholders than ever before. Activism by civil society and shareholders
have rocked companies over the last few years. The Millennial Generation (Millennials), roughly those born since
1980, is now the most numerous age cohort. Their concerns are beginning to set the global agenda. Millennials
KDYHVKRZQWKDWWKH\DUHFRQFHUQHGDERXWWKHJOREDOHQYLURQPHQWDOFUXQFKPXFKPRUHWKDQWKHJOREDO¿QDQFLDO
crises. They are consequently attracted to companies who have integrated the six capitals into their business
models. (The six capitals, as set out in the International Integrated Reporting Council’s (IIRC) Integrated
5HSRUWLQJ,5!)UDPHZRUNDUH¿QDQFLDOPDQXIDFWXUHGKXPDQLQWHOOHFWXDOQDWXUDODQGVRFLDODQG
relationship capital.)

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 3
 FOREWORD
CONTINUED

In a similar vein, it is now accepted that organisations operate in the triple context of the economy, society and the
environment. How they make their money does have an impact on these three elements and, in turn, they impact
on organisations.
In the context of all the above, governing bodies have the challenge of steering their organisations to create value
in a sustainable manner, making more but with less to meet the needs of a growing population and the reality of
dwindling natural resources.
One corollary is that the duty of care has become both more complex and more necessary. No governing body
today can say it is not aware of the changed world in which it is directing an organisation. Consequently, a
business judgement call that does not take account of the impacts of an organisation’s business model on the
triple context could lead to a decrease in the organisation’s value.
0LOWRQ)ULHGPDQ¶VHSLJUDP³7KHVRFLDOUHVSRQVLELOLW\RIEXVLQHVVLVWRLQFUHDVHLWVSUR¿WV´PXVWQRZEH
interpreted in the light of the view that an organisation is a part of society in its own right. It can no longer be seen
as existing in its own narrow universe (or “society”) of internal stakeholders and the resources needed to create
value – it also operates in, and forms part of, general society. In this view, the licensor of an organisation is not
MXVWWKRVHLQGLYLGXDOVDQGHQWLWLHVZLWKLQLWVQDUURZO\GH¿QHGYDOXHFKDLQEXWVRFLHW\DVDZKROH
THE THREE SHIFTS IN THE CORPORATE WORLD
Certain concepts form the foundation stones of King IV. They are: ethical leadership, the organisation in society,
corporate citizenship, sustainable development, stakeholder inclusivity, integrated thinking and integrated
reporting. These concepts are relevant to three connected paradigm shifts in the corporate world.
)URP¿QDQFLDOFDSLWDOLVPWRLQFOXVLYHFDSLWDOLVP
7KHUHLVQRZJHQHUDODFFHSWDQFHWKDWWKHHPSOR\PHQWWUDQVIRUPDWLRQDQGSURYLVLRQRI¿QDQFLDOFDSLWDOUHSUHVHQW
only a fraction of an organisation’s activities. Instead, inclusive capitalism takes account of the employment,
transformation and provision of all sources of capital – the six capitals – in order to reposition capitalism as the
engine of shared prosperity. It gives parity to the sources of value creation.
Financial performance alone can no longer serve as proxy for holistic value creation. As stated by Jonathan
/DEUH\IURPWKH,,5&³/RQJWHUP¿QDQFLDOSHUIRUPDQFHGHSHQGVRQWKHHI¿FLHQWDQGSURGXFWLYHPDQDJHPHQWRI
resources not currently measured by traditional accounting methodologies – human, intellectual, social and
UHODWLRQVKLSDQGQDWXUDOFDSLWDOV7KH¿QDQFLDOFDSLWDOPDUNHWV\VWHPLVLQVXI¿FLHQWWRJXDUGDJDLQVWWKHPXOWL
faceted and interconnected risks of the future and hence an inclusive market system should be adopted.”1
This new way of thinking, known as inclusive capitalism, has the potential to trigger profound change. One is
that, instead of simply providing aid to developing countries, developed country companies that are operating in
more developing countries should focus on adopting the model of inclusive capitalism in the developing country,
and thereby create value in a sustainable manner. The more an organisation’s business model positively impacts
on society and the environment, the more the quality of life in developing economies will improve. This
improvement, in turn, will positively affect the prospects for those organisations.
)URPVKRUWWHUPFDSLWDOPDUNHWVWRORQJWHUPVXVWDLQDEOHFDSLWDOPDUNHWV
The shift from short-term to long-term thinking arises from the need to create value in a sustainable manner.
In essence, sustainable capitalism refers to an economic system in which value is created in a sustainable
manner. The period indicated by long term or longer term would depend on the strategic objectives of the
organisation and the risks and opportunities presented by its external environment, including its material
stakeholders.

1
Jonathan Labrey, Three shifts toward better decision-making (posted 26 May 2015, available at http://integratedreporting.org/news/three-shifts-towards-better-
decision-making/)

4 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
$QRWKHUHOHPHQWRIWKLVWUHQGLVWKHJURZLQJVHQVHWKDWWKH¿QDQFLDOFULVLVRIDQGRWKHUVZHUHWRDODUJH
degree caused by a narrow focus on short-term objectives with little or no consideration of the long-term effects
on either the organisations concerned, or the economy as a whole. This opinion is prompting renewed focus on
WKHXQLQWHQGHGFRQVHTXHQFHVRISHUIRUPDQFHLQFHQWLYHVEXWDOVRRQZD\VWRHQFRXUDJHLQYHVWRUVDQG¿QDQFH
providers to extend their investment horizons.
In short, then, performance in terms of all-inclusive value should be assessed over the longer term. The capital
market system must reward long-term decision-making.
)URPVLORHGUHSRUWLQJWRLQWHJUDWHGUHSRUWLQJ
We live in an era of radical transparency, which is prompting a rethink on corporate reporting. This is evidenced
by the European Union’s directive on environmental, social and governance (ESG) reporting, the United
.LQJGRP¶VVWUDWHJLFUHSRUWWKHFRQWH[WRIUHSRUWV¿OHGZLWKWKH8QLWHG6WDWHV6HFXULWLHVDQG([FKDQJH
Commission, the Operating Financial Review in Australia and the listing requirements of several stock exchanges,
including the Johannesburg Bourse.
7KHWUDGLWLRQDO¿QDQFLDOUHSRUWLQJV\VWHPZDVDUHYROXWLRQDU\GHYHORSPHQWZKHQLWZDVLQVWLWXWHG,WKDVVLQFH
had to respond to market regulators, standards boards, ever more complex legislation and the regulation of
DFFRXQWLQJDQGFRUSRUDWHUHSRUWLQJ,WLVDFFHSWHGWKDWZKLOHIXOO\FRPSOLDQWDQGGXO\DXGLWHG¿QDQFLDOVWDWHPHQWV
DUHFULWLFDOWKH\DUHLQVXI¿FLHQWWRGLVFKDUJHWKHGXW\RIDFFRXQWDELOLW\6LPLODUO\DVXVWDLQDELOLW\UHSRUWLVFULWLFDO
EXWLQVXI¿FLHQW7KHUHDOLW\LVWKDWWKHUHVRXUFHVRUFDSLWDOVXVHGE\RUJDQLVDWLRQVFRQVWDQWO\LQWHUFRQQHFWDQG
LQWHUUHODWH7KHRUJDQLVDWLRQ¶VUHSRUWLQJVKRXOGUHÀHFWWKLVLQWHUFRQQHFWHGQHVVDQGLQGLFDWHKRZLWVDFWLYLWLHV
affect, and are affected by, the six capitals it uses and the triple context in which it operates.
The move from siloed reporting to integrated reporting is consistent with the concept of an inclusive, sustainable
capital market system. It has been given impetus by acceptance of the triple context in which organisations
operate and the evolution of integrated thinking. The International Federation of Accountants has promoted
integrated reporting to the G20 countries.
King IV takes cognisance of all three these shifts.
In response to these, leading organisations have begun to change the way they operate, stakeholder
management, technology and strategy being three such areas:
Stakeholder management: In order to know and understand the legitimate and reasonable needs, interests
and expectations of an organisation’s major stakeholders, management needs an ongoing relationship with those
VWDNHKROGHUV6RPHRUJDQLVDWLRQVKDYHDSSRLQWHGDFRUSRUDWHVWDNHKROGHUUHODWLRQVKLSRI¿FHUZKRVHVROHWDVNLV
to communicate with stakeholders and inform management of their legitimate and reasonable needs, interests
DQGH[SHFWDWLRQV7KLVRI¿FHUZLOODOVRLQIRUPVWDNHKROGHUVZKDWWKHRUJDQLVDWLRQH[SHFWVRIWKHP
Understanding stakeholders’ expectations will greatly assist the executive to develop better strategy. Stakeholder
relationships should be a recurring item on the governing body’s agenda so that the board can be kept apprised of
the current state of the relationships between the organisation and its stakeholders.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 5
 FOREWORD
CONTINUED

Technology governance and security: Technology governance and security have become critical issues.
7HFKQRORJ\LVQRORQJHUVLPSO\DQHQDEOHUWKHV\VWHPVFUHDWHGE\DQRUJDQLVDWLRQSURYLGHWKHSODWIRUPRQ
which it does business, and technology is now both the source of many of an organisation’s future opportunities
and of potential disruption – an excellent example of how risk and opportunity are increasingly two sides of the
same coin.
Technology is now part of the corporate DNA. Thus, the security of information systems has become critical.
Technology governance and security should become another recurring item on the governing body’s agenda.
Strategy: As the world moves from siloed to integrated thinking, people are increasingly realising that
organisations need to broaden the way they consider strategy. It is now apparent that strategy does not just
LQYROYHDFRQVLGHUDWLRQRIWKHLQSXWVLQWRWKHEXVLQHVVPRGHOVDQGWKHUHVXOWLQJRXWSXWVWKHRXWFRPHVRIWKH
organisation’s products or services must also be taken into account. In particular, organisations need to assess
what impact they are having on critical aspects of society and the environment. Consequently, every meeting of
the governing body should have an agenda item for the consideration of the full sequence from inputs to
outcomes. This will enable the governing body to discuss what the outcomes of its products are, and if they are
causing a positive or negative impact on value creation. It will be appreciated that an outcome which is contrary
to that which society expects is inconsistent with good corporate citizenship, and will result in the diminution of
DQRUJDQLVDWLRQ¶VUHSXWDWLRQWKHWUXVWLQZKLFKLWLVKHOGDQGWKHFRQ¿GHQFHVRFLHW\DVDZKROHIHHOVLQLW6XFKD
situation could well threaten the organisation’s operational legitimacy. The end result would be a destruction in the
value of the organisation.
UNIVERSAL APPLICABILITY
King I, II and III had as their foundation ethical and effective leadership. King IV is no different. Clearly, good
leadership, which is underpinned by the principles of good governance, is equally valuable in all types of
organisations, not just those in the private sector. Similarly, the principles of good governance are equally
applicable, and equally essential, in both public and private entities.
7KLVOLQNLVLPSOLFLWLQ.LQJ,,,DQG,,,.LQJ,9VHHNVWRPDNHLWH[SOLFLW6SHFL¿FDOO\WKH.LQJ&RPPLWWHHZDV
requested by many entities outside the private sector to draft King IV in such a way as to make it more easily
DSSOLFDEOHWRDOORUJDQLVDWLRQVSXEOLFDQGSULYDWHODUJHDQGVPDOOIRUSUR¿WDQGQRWIRUSUR¿W
King IV has been drafted with this in mind. Thus, for example, it talks of organisations and governing bodies,
rather than simply companies and boards of directors. Another innovation aimed at making it easier for all
organisations to use the King IV Report as a guide for good governance is the inclusion of sector supplements.
THE GLOSSARY
7RREWDLQPD[LPXPEHQH¿WIURPWKLV5HSRUWWKH&RGHDQGWKHVXSSOHPHQWVWKHXVHUVKRXOGUHDG3DUW
Glossary of Terms following this foreword so that the meanings given to technical terms are consistently
understood.

6 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
FROM “APPLY OR EXPLAIN” TO “APPLY AND EXPLAIN”
King IV has moved from “apply or explain” to “apply and explain”, but has reduced the 75 principles in King III to
17 basic principles in King IV, one of which applies to institutional investors only. 16 of these principles can be
applied by any organisation, and all are required to substantiate a claim that good governance is being practised.
The required explanation allows stakeholders to make an informed decision as to whether or not the organisation
is achieving the four good governance outcomes required by King IV. Explanation also helps to encourage
organisations to see corporate governance not as an act of mindless compliance, but something that will yield
results only if it is approached mindfully, with due consideration of the organisation’s circumstances.
This outcomes-based approach for a corporate governance code, and the “apply and explain” regime are the
original intellectual thinking of the King Committee.
APPRECIATION AND CONCLUSION
I record my thanks and appreciation to my committee and the task team, who jointly and severally devoted so
much time and effort in the interests of corporate (in its broadest sense) South Africa, without remuneration or
reimbursement of expenses. In particular, I thank Ansie Ramalho, who led the task team, convened meetings with
commentators, collated the comments to the draft report, and convened the working sessions which comprised
experts on each of the essential topics contained in this report. I must pay special tribute to her patience in
dealing with all of my comments without complaint. My thanks and appreciation also are due to our editors, and to
those who contributed to the layout of the report.
The King Committee believes that this fourth iteration will reinforce global recognition of the King Committee’s
reports on governance.

Mervyn E King SC
Chair of the King Committee
1 November 2016

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 7
 PART 1

GLOSSARY OF TERMS

8 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 The following words
carry the meaning as
indicated for purposes
of interpreting and
applying King IV.

GLOSSARY
OF TERMS
Accountability The obligation to answer for the execution of responsibilities. Accountability cannot
be delegated, whereas responsibility can be delegated without abdicating
accountability for that delegated responsibility.

Accounting authority $VGH¿QHGLQWHUPVRIVHFWLRQRIWKH3)0$LW³PHDQVDERG\RUSHUVRQ

mentioned in section 49 of the PFMA”.

AGM $*0LVWKHDEEUHYLDWLRQRIDQQXDOJHQHUDOPHHWLQJDVGH¿QHGLQWKH&RPSDQLHV
Act or, for organisations other than companies, it means the meeting that serves a
similar purpose as the AGM of a company.

Arrangement The way that people and things are organised for a particular purpose, activity or
function, including frameworks, structures, systems and methods.

Assurance The diligent application of mind to evidence, resulting in a statement or declaration

FRQFHUQLQJDQLGHQWL¿HGVXEMHFWPDWWHURUVXEMHFWPDWWHULQIRUPDWLRQDQGWKDWLV
PDGHIRUWKHSXUSRVHRIHQKDQFLQJFRQ¿GHQFHLQWKDWVXEMHFWPDWWHURUVXEMHFW
matter information.
Assurance includes, but is not limited to, assurance engagements performed by
independent, external assurance service providers (such as the external auditor)
in accordance with the International Auditing and Assurance Standards Board’s
International Engagement Standards. Such assurance “means an engagement
in which a practitioner expresses a conclusion designed to enhance the degree
RIFRQ¿GHQFHRIWKHLQWHQGHGXVHUVRWKHUWKDQWKHUHVSRQVLEOHSDUW\DERXWWKH
outcome of the evaluation or measurement of a subject matter against criteria”1.
Assurance furthermore includes, but is not limited to, assurance provided in terms
of the International Standards for the Professional Practice of Internal Auditing,
namely, “an objective examination of evidence for the purpose of providing an
independent assessment on governance, risk management and control processes
for the organization”2.
Assurance service providers and functions may include the following:
a. The organisation’s line functions that own and manage risks.
b. The organisation’s specialist functions that facilitate and oversee risk
management and compliance.
c. Internal auditors, internal forensic fraud examiners and auditors, safety and
process assessors, and statutory actuaries.
d. Independent external assurance service providers such as external auditors.
e. Other external assurance providers such as sustainability and environmental
auditors, external actuaries, and external forensic fraud examiners and auditors.
f. Regulatory inspectors.

1 International Auditing and Assurance Standards Board, The International Framework for Assurance Engagements,
(Effective for assurance reports issued on or after January 1, 2005)

2 The Institute of Internal Auditors, International Standards for the Professional Practice of Internal Auditing, (2012), p 19

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 9
 GLOSSARY OF TERMS
CONTINUED

$XGLW¿UPWHQXUH 7KHOHQJWKRIWKHDXGLW¿UPFOLHQWUHODWLRQVKLS,WVKRXOGEHFDOFXODWHGDVWKHQXPEHU
RIXQLQWHUUXSWHG¿QDQFLDO\HDUVWKDWDQDXGLW¿UPKDVDFWHGDVH[WHUQDODXGLWRURI
DQRUJDQLVDWLRQXSWRDQGLQFOXGLQJWKHRUJDQLVDWLRQ¶VODVWDXGLWHG¿QDQFLDO\HDU
%HQH¿FLDU\ In the context of a retirement fund “means a nominee of a member or a dependant
ZKRLVHQWLWOHGWRDEHQH¿WDVSURYLGHGIRULQWKHUXOHVRIWKHUHOHYDQWIXQG´DV
GH¿QHGLQVHFWLRQRIWKH3HQVLRQ)XQGV$FW
Board If it is used in the context of a company, “means the board of directors of a
FRPSDQ\´DVGH¿QHGLQVHFWLRQRIWKH&RPSDQLHV$FW
If it is used in the context of a retirement fund, “means a board of a fund as
FRQWHPSODWHGLQWHUPVRI6HFWLRQ$RIWKLV$FW´DVGH¿QHGLQVHFWLRQRIWKH
Pension Funds Act.
Boards form a subset of the wider term “governing bodies”.
Business model “An organization’s system of transforming inputs through its business activities into
RXWSXWVDQGRXWFRPHVWKDWDLPVWRIXO¿OWKHRUJDQL]DWLRQ¶VVWUDWHJLFSXUSRVHVDQG
create value over the short, medium and long term.”3
CAE Chief audit executive.
Capitals or six capitals “The capitals are stocks of value on which all organizations depend for their
success as inputs to their business model, and which are increased, decreased
or transformed through the organization’s business activities and outputs.”4
,QDFFRUGDQFHZLWKWKHVL[FDSLWDOVPRGHOWKHVHFDSLWDOVFRQVLVWRI¿QDQFLDO
manufactured, intellectual, human, social and relationship, and natural capital.
Each of these capitals are described in the International <IR> Reporting
Framework5.
CEO &KLHIH[HFXWLYHRI¿FHURUWKHKLJKHVWUDQNLQJHPSOR\HHLQDQRUJDQLVDWLRQ
regardless of naming convention.
CFO &KLHI¿QDQFHRI¿FHU
Character Character describes the attributes that make up and distinguish an individual or
a group. It is a way of being rather than a way of doing.
Code Part 5 of the King IV Report on Corporate Governance for South Africa, 2016.
Combined assurance A combined assurance model incorporates and optimises all assurance services
model and functions so that, taken as a whole, these enable an effective control
HQYLURQPHQWVXSSRUWWKHLQWHJULW\RILQIRUPDWLRQXVHGIRULQWHUQDOGHFLVLRQPDNLQJ
E\PDQDJHPHQWWKHJRYHUQLQJERG\DQGLWVFRPPLWWHHVDQGVXSSRUWWKHLQWHJULW\
of the organisation’s external reports.
Companies Act Companies Act, No 71 of 2008, as amended.

3 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), p 33, available at
http://integratedreporting.org/resource/international-ir-framework/

4 7KH,QWHUQDWLRQDO,QWHJUDWHG5HSRUWLQJ&RXQFLOThe International <IR> Framework, (13 December 2013), p 33, available at

http://integratedreporting.org/resource/international-ir-framework/

5 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), p 11-12, available at
http://integratedreporting.org/resource/international-ir-framework/

10 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Company A juristic person incorporated in terms of the Companies Act.
Competence Possessing the skills and attributes, and exhibiting the conduct that are used to
GH¿QHDQGPHDVXUHVXLWDELOLW\IRUDFHUWDLQUROHRUIXQFWLRQ
&RQÀLFWRILQWHUHVW $FRQÀLFWRILQWHUHVWXVHGLQUHODWLRQWRPHPEHUVRIWKHJRYHUQLQJERG\DQGLWV
FRPPLWWHHVRFFXUVZKHQWKHUHLVDGLUHFWRULQGLUHFWFRQÀLFWLQIDFWRULQ
appearance, between the interests of such member and that of the organisation.
,WDSSOLHVWR¿QDQFLDOHFRQRPLFDQGRWKHULQWHUHVWVLQDQ\RSSRUWXQLW\IURPZKLFK
WKHRUJDQLVDWLRQPD\EHQH¿WDVZHOODVXVHRIWKHSURSHUW\RIWKHRUJDQLVDWLRQ
including information. It also applies to the member’s related parties holding
such interests. (See also “related party” and “independence”.)
Constitution Constitution of the Republic of South Africa, 1996.
Corporate citizenship Corporate citizenship is the recognition that the organisation is an integral part of
the broader society in which it operates, affording the organisation standing as a
juristic person in that society with rights but also responsibilities and obligations. It is
also the recognition that the broader society is the licensor of the organisation.
Corporate governance )RUWKHSXUSRVHVRI.LQJ,9LVGH¿QHGDVWKHH[HUFLVHRIHWKLFDODQGHIIHFWLYH
leadership by the governing body towards the achievement of the following
governance outcomes:
• Ethical culture
• Good performance
• Effective control
• Legitimacy.
The use of “corporate” in the term “corporate governance” is used to differentiate it
from other forms of governance, for example national or political governance.
“Corporate” refers to organisations that are incorporated to form legal entities
separate from their founders and therefore applies to all forms of incorporation
whether as company, voluntary association, retirement fund, trust, legislated entity
or others.
Council “‘Municipal council’ or ‘council’ means the council of a municipality as referred to in
VHFWLRQRIWKH0XQLFLSDO6WUXFWXUHV$FW´DVGH¿QHGLQVHFWLRQRIWKH0)0$
Creation of value The positive consequences of the organisation’s business activities and outputs on
the triple context in which the organisation operates, and the capitals it uses and
affects.
CRISA Code for Responsible Investing in South Africa, 2011.
Culture In an organisational context, “the way in which members of an organisation relate to
each other, their work and the outside world in comparison to other organisations”6.
It is generally described as “the way we do things around here, even when no one
is watching”.

6 The Hofstede Centre, itim International, The Hofstede Multi-Focus Model on Organisational Culture (2016), available at
https://geert-hofstede.com/organisational-culture.html

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 11
 GLOSSARY OF TERMS
CONTINUED

Director “Means a member of the board of a company, as contemplated in section 66, or an

alternate director of a company and includes any person occupying the position of a
GLUHFWRURUDOWHUQDWHGLUHFWRUE\ZKDWHYHUQDPHGHVLJQDWHG´DVGH¿QHGLQVHFWLRQ
of the Companies Act.

Diversity Diversity should be understood as the varied perspectives and approaches offered
by members of different identity groups. For the purposes of King IV, it includes
GLYHUVLW\LQWHUPVRI¿HOGVRINQRZOHGJHVNLOOVDQGH[SHULHQFHDVZHOODVDJH
culture, race and gender.

Effective or effectively The adequate accomplishment of the desired objective or a pursuit with the
minimum expenditure of time, resources, waste and effort.

Ensure Ensure, where it is used in relation to the responsibilities of the governing body,
means to direct and oversee in good faith and with best reasonable effort towards
achieving the desired result.

ESG Environmental, social and governance.

Ethics Considering what is good and right for the self and the other, and can be expressed
in terms of the golden rule, namely, to treat others as you would like to be treated
yourself. In the context of organisations, ethics refers to ethical values applied to
decision-making, conduct, and the relationship between the organisation, its
stakeholders and the broader society.

Executive authority “In relation to a national public entity, means the Cabinet member who is
accountable to Parliament for that public entity or in whose portfolio it falls” and “in
relation to a provincial public entity, means the member of the provincial Executive
Council who is accountable to the provincial legislature for that public entity or in
ZKRVHSRUWIROLRLWIDOOV´DVGH¿QHGLQVHFWLRQ F DQG G RIWKH3)0$

Fairness Fairness refers to the equitable and reasonable treatment of the sources of value
creation, including relationship capital as portrayed by the legitimate and reasonable
needs, interests and expectations of material stakeholders of the organisation.

FSB Circular PF 130 Financial Services Board Circular PF 130.

Good performance Good performance is an organisation achieving its strategic objectives, and positive
outcomes in terms of its effects on the capitals it uses and affects and on the triple
context in which it operates. (See also “performance”.)

Governance outcomes 7KHSRVLWLYHHIIHFWVRUEHQH¿WVRIJRRGFRUSRUDWHJRYHUQDQFHIRUWKHRUJDQLVDWLRQ

These positive effects include: ethical culture, good performance, effective control,
and legitimacy.

Governing body The governing body is the structure that has primary accountability for the
governance and performance of the organisation. Depending on context, it includes,
among others, the board of directors of a company, the board of a retirement fund,
the accounting authority of a state-owned entity and a municipal council.
“Members of the governing body” (also referred to as “those charged with
governance duties”) are those who are duly appointed to serve on the governing
body and/or its committees.

12 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 GRI Global Reporting Initiative.

Group of companies ³0HDQVDKROGLQJFRPSDQ\DQGDOORILWVVXEVLGLDULHV´DVGH¿QHGLQVHFWLRQRIWKH

Companies Act.

Holding company “Means in relation to a subsidiary, a juristic person that controls that subsidiary as a
UHVXOWRIDQ\FLUFXPVWDQFHVFRQWHPSODWHGLQVHFWLRQ  D RU  D ´DVGH¿QHG
in terms of section 1 of the Companies Act.

Independence Independence generally means the exercise of objective, unfettered judgement.

When used as the measure by which to judge the appearance of independence, or
to categorise a non-executive member of the governing body or its committees as
independent, it means the absence of an interest, position, association or
relationship which, when judged from the perspective of a reasonable and informed
WKLUGSDUW\LVOLNHO\WRLQÀXHQFHXQGXO\RUFDXVHELDVLQGHFLVLRQPDNLQJ 6HHDOVR
³FRQÀLFWRILQWHUHVW´

Information Includes all data, records and knowledge in electronic or any other format, which
form part of the intellectual capital used, transformed or produced by the
organisation.

Inputs “The capitals (resources and relationships) that the organization draws upon for its
business activities.”7

Integrated report “A concise communication about how an organization’s strategy, governance,

performance and prospects, in the context of its external environment, lead to the
creation of value in the short, medium and long term.”8

Integrated reporting “A process founded on integrated thinking that results in a periodic integrated report
by an organization about value creation over time. It includes related
communications regarding aspects of value creation.”9

Integrated thinking ³,QWHJUDWHGWKLQNLQJLVGH¿QHGDVWKHDFWLYHFRQVLGHUDWLRQE\DQRUJDQL]DWLRQRIWKH

relationships between its various operating and functional units and the capitals that
the organization uses or affects.”10

Institutional investor $Q\MXULVWLFSHUVRQRULQVWLWXWLRQUHIHUUHGWRLQWKHGH¿QLWLRQRI¿QDQFLDOLQVWLWXWLRQLQ

section 1 of the Financial Services Board Act, No 97 of 1990, to the extent that
WKHVHMXULVWLFSHUVRQVRULQVWLWXWLRQVDUHWKHKROGHUVRIEHQH¿FLDOLQWHUHVWLQWKH
securities of a company. It includes retirement funds and insurance companies as
well as the custodians, nominees and service providers who act under mandate in
respect of any investment decisions and investment activities exercised in relation
to these securities.11
7 The International Integrated Reporting Council, The International <IR> Framework, (13 December 2013) available at
http://integratedreporting.org/resource/international-ir-framework/ – http://integratedreporting.org/resource/international-ir-framework/

8 The International Integrated Reporting Council, The International <IR> Framework, (13 December 2013) available at
http://integratedreporting.org/resource/international-ir-framework/ – http://integratedreporting.org/resource/international-ir-framework/

9 The International Integrated Reporting Council, The International <IR> Framework, (13 December 2013) available at
http://integratedreporting.org/resource/international-ir-framework/

10 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013) available at
http://integratedreporting.org/resource/international-ir-framework/ – http://integratedreporting.org/resource/international-ir-framework/

 $GDSWHGIURPWKHGH¿QLWLRQ³LQVWLWXWLRQDOLQYHVWRU´XVHGE\WKH&RPPLWWHHIRU5HVSRQVLEOH,QYHVWLQJ6RXWK$IULFDThe Code for Responsible Investing in South Africa

(Institute of Directors in Southern Africa 2011), p 9, available at www.iodsa.co.za

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 13
 GLOSSARY OF TERMS
CONTINUED

Integrity In the context of governance and ethics, integrity is possessing the quality of being
honest and having strong moral principles. It encompasses consistency between
stated moral and ethical standards, and actual conduct.
,QWHJULW\LQUHODWLRQWRWKHDQQXDO¿QDQFLDOVWDWHPHQWVDQGRWKHUH[WHUQDOUHSRUWV
issued by the organisation, refers to the reliability and usefulness of these reports.
(In this context, “reliability” means validity, accuracy and completeness, while
“usefulness” means consistency, relevance and measurability.)

International <IR> International Integrated Reporting Framework.

Framework

King Committee King Committee on Corporate Governance in South Africa.

King III King III Report on Governance for South Africa, 2009.

King IV King IV Report on Corporate Governance for South Africa, 2016. It refers to the
complete document that includes all of its parts.

King IV Code Part 5 of the King IV Report.

King IV Report King IV Report on Corporate Governance for South Africa, 2016. It refers to the
complete document that includes all of its parts.

Management Management includes senior management and executive management.

“Senior management” is the level of management reporting to executive
management.
“Executive management” is, after the governing body, the highest decision-making
authority in the organisation.
“Executive managers” are the members of the executive management team and
LQFOXGHH[HFXWLYHPHPEHUVRIWKHJRYHUQLQJERG\DQGSUHVFULEHGRI¿FHUVDV
GH¿QHGLQWKH&RPSDQLHV$FWRULQUHVSHFWRIRUJDQLVDWLRQVRWKHUWKDQFRPSDQLHV
those who exercise general executive control over, and management of, the whole
RUVLJQL¿FDQWSRUWLRQVRIWKHEXVLQHVVDQGDFWLYLWLHVRIWKHRUJDQLVDWLRQ

Material or materiality
As used generally in King IV, it is a “measure of the estimated effect that the
SUHVHQFHRUDEVHQFHRIDQLWHPRILQIRUPDWLRQ>RULGHQWL¿HGVXEMHFWPDWWHU@PD\
KDYHRQWKHDFFXUDF\RUYDOLGLW\RIDVWDWHPHQW>RUGHFLVLRQ@0DWHULDOLW\LVMXGJHG
LQWHUPVRILWVLQKHUHQWQDWXUHLPSDFW LQÀXHQFH YDOXHXVHYDOXHDQGWKH
circumstances (context) in which it occurs”12.
Materiality in relation to the inclusion of information in an integrated report refers to
matters that “could substantively affect the organization’s ability to create value over
the short, medium and long term”13.

May In King IV, “may” is used to describe a recommendation that is permissible but not
considered essential. (See also “should” and “must”.)

7KH%XVLQHVV'LUHFWRU\DYDLODEOHDWKWWSZZZEXVLQHVVGLFWLRQDU\FRPGH¿QLWLRQPDWHULDOLW\KWPO

13 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), p 5, available at
http://integratedreporting.org/resource/international-ir-framework/

14 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Member :KHQXVHGLQUHIHUHQFHWRDQRQSUR¿WFRPSDQ\³PHDQVDSHUVRQZKRKROGV
PHPEHUVKLSLQDQGVSHFL¿HGULJKWVLQUHVSHFWRIWKDWQRQSUR¿WFRPSDQ\DV
FRQWHPSODWHGLQ6FKHGXOH´DVGH¿QHGLQVHFWLRQRIWKH&RPSDQLHV$FW
When used in reference to a retirement fund “means a person who belongs or
EHORQJHGWRDFODVVRISHUVRQVIRUZKRVHEHQH¿WWKDWIXQGKDVEHHQHVWDEOLVKHG
EXWGRHVQRWLQFOXGHDQ\SHUVRQZKRKDVUHFHLYHGDOOWKHEHQH¿WVZKLFKPD\EH
due to that person from the fund and whose membership has thereafter been
WHUPLQDWHGLQDFFRUGDQFHZLWKWKHUXOHVRIWKHIXQG´DVGH¿QHGLQVHFWLRQRIWKH
Pension Funds Act.

MFMA Municipal Finance Management Act, No 56 of 2003, as amended.

Municipal entity or ME
“Means a) a company, co-operative trust, fund or any other corporate entity
established in terms of any applicable national or provincial legislation and which
operates under the ownership control of one or more municipalities, and includes,
in the case of a company under such ownership control, any subsidiary of that
FRPSDQ\RUE DVHUYLFHXWLOLW\´DVGH¿QHGLQVHFWLRQRIWKH0XQLFLSDO
Systems Act.

Municipal Structures Act Municipal Structures Act, No 117 of 1998, as amended.

Municipal Systems Act Municipal Systems Act, No 32 of 2000, as amended.

Must ,Q.LQJ,9³PXVW´LVXVHGVSHFL¿FDOO\WRLQGLFDWHDOHJDOREOLJDWLRQ 6HHDOVR³PD\´

and “should”.)

NGO Non-governmental organisation.

NPO 1RQSUR¿WRUJDQLVDWLRQ

1RQ3UR¿W2UJDQLVDWLRQV 1RQ3UR¿W2UJDQLVDWLRQV$FW1RRIDVDPHQGHG
Act

Organisation $FRPSDQ\UHWLUHPHQWIXQGQRQSUR¿WRUJDQLVDWLRQVWDWHRZQHGHQWLW\
municipality, municipal entity, trust, voluntary association and any other juristic
person regardless of its manner of incorporation.

Outcomes Outcomes in the context of the outcomes of the activities and outputs of an
organisation means “the internal and external consequences (positive and negative)
for the capitals as a result of an organization’s business activities and outputs”14.
It also refers to the internal and external consequences of the business activities
and outputs on the triple context in which the organisation operates.

Outputs “The products, services, by-products and waste that are produced by an
organization.”15

14 Adapted from The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), available at
http://integratedreporting.org/resource/international-ir-framework/

15 Adapted from The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), available at
http://integratedreporting.org/resource/international-ir-framework/ and Reporting on Outcomes: An Information Paper, Integrated Reporting Committee South Africa,
“Reporting on Outcomes: An Information Paper” 2015, available at www.integratedreportingsa.org

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 15
 GLOSSARY OF TERMS
CONTINUED

PBO 3XEOLF%HQH¿W2UJDQLVDWLRQ
Pension Funds Act Pension Funds Act, No 24 of 1956, as amended.
Performance “An organization’s achievements relative to its strategic objectives, and its
outcomes in terms of its effects on the capitals.”16 It includes the organisation’s
outcomes in terms of its effects on the triple context in which the organisation
operates. Performance is therefore the result (positive and negative) of the value
creation process. (See also “good performance”.)
PFMA Public Finance Management Act, No 1 of 1999, as amended.
Policy 3ROLF\JLYHVHIIHFWWRVWUDWHJ\DQGVWUDWHJLFGLUHFWLRQE\GH¿QLQJWKHIUDPHZRUNV
standards and plans that establish the scope or spheres within which judgement is
exercised, decisions are made and actions are taken.
PRI United Nations supported Principles for Responsible Investment.
3ULQFLSDORI¿FHU 7KHSULQFLSDOH[HFXWLYHRI¿FHUWREHDSSRLQWHGE\HYHU\UHJLVWHUHGIXQGLQWHUPVRI
section 8 of the Pension Funds Act.
3URYLGHUVRI¿QDQFLDO (TXLW\DQGGHEWKROGHUVDQGRWKHUVZKRSURYLGH¿QDQFLDOFDSLWDOLQFOXGLQJOHQGHUV
capital and other creditors.
Related party A related party is a person or entity as set out in section 2(1) of the Companies Act.
It applies mutatis mutandis to organisations other than companies. (See also
³FRQÀLFWRILQWHUHVW´
Responsibility Taking ownership of a duty, obligation or liability.
Responsible investment “An approach to investing that aims to incorporate environmental, social and
governance factors into investment decision-making, to better manage risk and
generate sustainable long-term returns.”17
Risk 5LVNLVDERXWWKHXQFHUWDLQW\RIHYHQWVLQFOXGLQJWKHOLNHOLKRRGRIVXFKHYHQWV
occurring and their effect, both positive and negative, on the achievement of the
organisation’s objectives. Risk includes uncertain events with a potential positive
effect on the organisation (i.e. opportunities) not being captured or not
materialising.18
Sector supplements Part 6 of the King IV Report.
Sensitive information Information that is likely to compromise competitiveness, privilege or commercial
advantage.
Shareholders “Subject to section 57(1) of the Act, means the holder of a share issued by a
FRPSDQ\DQGZKRLVHQWHUHGDVVXFKLQWKHFHUWL¿FDWHGRUXQFHUWL¿FDWHGVHFXULWLHV
UHJLVWHUDVWKHFDVHPD\EH´DVGH¿QHGLQVHFWLRQRIWKH&RPSDQLHV$FW
Depending on context, references to shareholders in King IV may also apply to the
PHPEHUVRIQRQSUR¿WFRPSDQLHV

16 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), p 33 available at –
http://integratedreporting.org/resource/international-ir-framework/

17 Principles for Responsible Investing available https://www.unpri.org/about/what-is-responsible-investment

%URDGO\EDVHGRIGH¿QLWLRQRIULVNE\WKH,QWHUQDWLRQDO2UJDQL]DWLRQIRU6WDQGDUGL]DWLRQ,62*XLGHDYDLODEOHDW
https://www.iso.org/obp/ui/#iso:std:iso:guide:73:ed-1:v1:en

16 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Should When used in King IV with reference to the principles, it indicates an aspiration or
ideal state. When used with reference to the recommended practices in King IV, it
indicates a recommended course of action that is particularly suitable, without
mentioning or excluding other possibilities.
“Should not” indicates that a certain course of action is not recommended but not
prohibited either. (See also “may” and “must”.)

SME Small and medium enterprise.

Society Refers principally to the broader society or community as part of the triple context
in which the organisation operates, and the social and relationship capital that the
organisation uses and affects. Society includes the organisation’s internal and
external stakeholders, which in turn form part of the broader society as a whole.

SOE State-owned entity.

Stakeholder inclusivity
An approach in which the governing body takes into account the legitimate and
reasonable needs, interests and expectations of all material stakeholders in the
execution of its duties in the best interests of the organisation over time.
By following this approach, instead of prioritising the interests of the providers of
¿QDQFLDOFDSLWDOWKHJRYHUQLQJERG\JLYHVSDULW\WRDOOVRXUFHVRIYDOXHFUHDWLRQ
including, among others, social and relationship capital as embodied by
stakeholders. Consequently, this is an inclusive, stakeholder-centric approach
which stands in contrast with a shareholder-centric approach.

Stakeholders ³7KRVHJURXSVRULQGLYLGXDOVWKDWFDQUHDVRQDEO\EHH[SHFWHGWREHVLJQL¿FDQWO\
affected by an organization’s business activities, outputs or outcomes, or whose
DFWLRQVFDQUHDVRQDEO\EHH[SHFWHGWRVLJQL¿FDQWO\DIIHFWWKHDELOLW\RIWKH
organization to create value over time.”19
³,QWHUQDOVWDNHKROGHUV´DUHGLUHFWO\DI¿OLDWHGZLWKWKHRUJDQLVDWLRQDQGLQFOXGHLWV
governing body, management, employees and shareholders.
“External stakeholders” could include trade unions, civil society organisations,
government, customers and consumers.
Internal stakeholders are always material stakeholders, but external stakeholders
may or may not be material.

Strategy The setting of the organisation’s short, medium and long-term direction towards
realising its core purpose and values.

Subsidiary $VGH¿QHGLQWHUPVRIVHFWLRQRIWKH&RPSDQLHV$FW³KDVWKHPHDQLQJGHWHUPLQHG
accordance with section 3 of the Act”.

Sustainability Sustainability is the ultimate, long-term goal of sustainable development.

(See also “sustainable development”.)

19 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), p 33 available at
http://integratedreporting.org/resource/international-ir-framework/

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 17
 GLOSSARY OF TERMS
CONTINUED

Sustainable development
In general, “development that meets the needs of the present without compromising
the ability of future generations to meet their needs”20.
At the level of organisations’ participation in sustainable development, it means
organisations intentionally interacting with, and responding to, the opportunities
and challenges presented by the dynamic system of the triple context in which the
organisation operates and the capitals that the organisation uses and affects, with
the aim to achieve the creation of value over time. Sustainable development is not
FRQ¿QHGWRLQGLYLGXDOPDWWHUVVXFKDVWKHHFRQRPLFYLDELOLW\RIWKHRUJDQLVDWLRQ
the natural environment or corporate social responsibility. Rather, it refers to an
integrated approach that includes these and other considerations as represented
by the triple context (see also “triple context”) and the capitals (see also “capitals”).

Technology Technology comprises the infrastructure, devices, systems and software that
generate, use or carry information and enable transactions.

Transparency The unambiguous and truthful exercise of accountability such that decision-making
processes and business activities, outputs and outcomes (both positive and
negative) are easily able to be discerned and compared with ethical standards.

Triple context The combined context of the economy, society and environment in which the
organisation operates.

Value creation or value “The process that results in increases, decreases or transformations of the capitals
creation process caused by the organization’s business activities and outputs.”21 The value creation
process therefore has neutral, positive and negative outcomes.

Values Convictions and beliefs about how the organisation and those who represent it
VKRXOGFRQGXFWWKHPVHOYHVKRZUHVRXUFHVDQGVWDNHKROGHUVVKRXOGEHWUHDWHG
ZKDWWKHFRUHSXUSRVHDQGREMHFWLYHVRIWKHRUJDQLVDWLRQVKRXOGEHDQGKRZZRUN
duties should be performed.

20 United Nations, “Report of the World Commission on Environment and Development: Our Common Future”, (Oxford, Great Britain: Oxford University Press, 1987), p 8.
Also known as the Brundtland Report after Gro Harlem Brundtland, Chairman of the Commission and available at http://www.un-documents.net/our-common-future.pdf

7KHGH¿QLWLRQRI³YDOXHFUHDWLRQ´DVSHU7KH,QWHUQDWLRQDO,QWHJUDWHG5HSRUWLQJ&RXQFLOThe International <IR> Framework (13 December 2013), p 33 available at

http://integratedreporting.org/resource/international-ir-framework/

18 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 PART 2

FUNDAMENTAL
CONCEPTS

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 19
 FUNDAMENTAL
CONCEPTS
INTRODUCTION
6LQFHWKHSXEOLFDWLRQRIWKH¿UVW.LQJUHSRUW6RXWK$IULFDKDVPDLQWDLQHGDSURXGWUDGLWLRQRIFRUSRUDWH
governance. King IV is the fourth iteration of that report, and sets out the philosophy, principles, practices and
outcomes which serve as the benchmark for corporate governance in South Africa.
Part 2 contains the fundamental concepts and philosophy on which King IV is based, the distinguishing features
of King IV and how the various developments in corporate governance, locally and internationally, since King III
FDPHLQWRHIIHFWLQKDYHLQÀXHQFHGWKHSULQFLSOHVDQGSUDFWLFHVLQWKH&RGH$¿UPJUDVSRIWKHFRQWHQWLQ
this part is necessary for effective application of King IV.

DEFINITION OF CORPORATE GOVERNANCE

&RUSRUDWHJRYHUQDQFHIRUWKHSXUSRVHVRI.LQJ,9LVGH¿QHGDVWKHH[HUFLVHRIHWKLFDODQGHIIHFWLYHOHDGHUVKLS
by the governing body towards the achievement of the following governance outcomes:
• Ethical culture
• Good performance
• Effective control
• Legitimacy.
Ethical and effective leadership should complement and reinforce each other.

Ethical leadershipLVH[HPSOL¿HGE\LQWHJULW\ Effective leadership is results-driven. It is about

competence, responsibility, accountability, fairness achieving strategic objectives and positive outcomes.
and transparency. It involves the anticipation and Effective leadership includes, but goes beyond, an
prevention, or otherwise amelioration, of the negative LQWHUQDOIRFXVRQHIIHFWLYHDQGHI¿FLHQWH[HFXWLRQ
consequences of the organisation’s activities and
outputs on the economy, society and the environment
and the capitals that it uses and affects.

20 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
The governing body’s primary governance role and responsibilities are depicted below as part of the dynamic of
the organisation’s business cycle1. This role and responsibilities include to steer the organisation and set its
strategic direction, on the basis of which management will develop the strategy which is to be approved by the
governing body. To give effect to the organisation’s strategy, management formulates policy and operational
plans, also to be approved by the governing body. Management then, implements and executes strategy in
accordance with policy and plans which are overseen and supervised by the governing body. The governing body
¿QDOO\HQVXUHVWKDWWKHUHLVDFFRXQWDELOLW\IRURUJDQLVDWLRQDOSHUIRUPDQFHWKURXJKDPRQJRWKHUVUHSRUWLQJDQG
disclosure. The latter in turn forms the basis for reviewing strategic direction which starts the business cycle anew.

Steers and sets strategic

direction
with regards to both:-
Approves policy and
i) the organisation’s planning that give effect
VWUDWHJ\DQG to the strategy and the set
LL WKHZD\LQZKLFKVSHFL¿F direction.
governance areas are to
be approached, addressed
and conducted.

Governing Body's Primary

Governance Role
and Responsibilities

Ensures accountability
Oversees and monitors
for organisational performance
implementation and execution
by means of, among others,
by management.
reporting and disclosure.

The governing body’s primary governance role and responsibilities, as described above, are replicated and
incorporated as the structural basis for the recommended practices under each of the governance areas (for
example ethics, risk, compliance, remuneration and stakeholder relationships) covered by the Code. Thus, the
practices are organised in accordance with the following series of responsibilities: The governing body assumes
responsibility for providing the direction for how each governance area should be approached, addressed and
conducted. This is followed by formulation of policy in the form of frameworks, standards and plans by
management to be approved by the governing body. The governing body oversees and monitors implementation
DQGH[HFXWLRQE\PDQDJHPHQWDQG¿QDOO\HQVXUHVWKDWWKHUHLVDFFRXQWDELOLW\IRUWKHSHUIRUPDQFHLQUHVSHFW
of each of these governance areas through reporting and disclosure.

1 Adapted from Bob Tricker, Corporate Governance Principles, Policies and Practices6HFRQGHGLWLRQ 2[IRUG8QLYHUVLW\3UHVV S

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 21
 FUNDAMENTAL CONCEPTS
CONTINUED

By organising the recommended practices in accordance with the governance role and responsibilities as
explained above, King IV provides governing bodies with a model for the way in which any area that is subject to
their governance should be approached.

OBJECTIVES OF KING IV
King IV’s objectives are to:
• Promote corporate governance as integral to running an organisation and delivering governance outcomes
such as an ethical culture, good performance, effective control and legitimacy.
• %URDGHQWKHDFFHSWDQFHRIWKH.LQJ,9E\PDNLQJLWDFFHVVLEOHDQG¿WIRULPSOHPHQWDWLRQDFURVVDYDULHW\RI
sectors and organisational types.
• Reinforce corporate governance as a holistic and interrelated set of arrangements to be understood and
implemented in an integrated manner.
• Encourage transparent and meaningful reporting to stakeholders.
• Present corporate governance as concerned with not only structure and process, but also with an ethical
consciousness and conduct.

22 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
THE UNDERPINNING PHILOSOPHIES OF KING IV
$OWKRXJK.LQJ,9GRHVQRWUHSUHVHQWDVLJQL¿FDQWGHSDUWXUHIURPWKHSKLORVRSKLFDOXQGHUSLQQLQJVRI.LQJ,,,
FRQFHSWVKDYHGHYHORSHGDQGEHHQUH¿QHG7KHFRQFHSWVXVHGLQ.LQJ,9DUHGHSLFWHGEHORZ

Sustainable development
Sustainable development understood as development that meets the needs of the
present without compromising the ability of future generations to meet their needs is
DSULPDU\HWKLFDODQGHFRQRPLFLPSHUDWLYH,WLVD¿WWLQJUHVSRQVHWRWKHRUJDQLVDWLRQ
being an integral part of society, its status as a corporate citizen and its stakeholders'
needs, interests and expectations.

Integrated thinking
Takes account of the connectivity
and interdependencies between
the range of factors that affect an
organisation’s ability to create value
over time.

The organisation as Corporate citizenship

an integral part of As the organisation is an integral
society part of society, it has corporate
Organisations operate in a citizenship status. This status
societal context, which they confers rights, obligations and
affect and by which they are responsibilities on the organisation
Stakeholder inclusivity towards society and the natural
affected.
There is an interdependent environment on which
relationship between the organisation society depends.
and its stakeholders, and the
organisation’s ability to create value for
itself depends on its ability to create
value for others. An organisation
becomes attuned to the opportunities and
challenges posed by the triple context in
which it operates by having regard to
the needs, interests and expectations
of material stakeholders.

Integrated reporting

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 23
 FUNDAMENTAL CONCEPTS
CONTINUED

Integrated thinking
King IV advocates integrated thinking which takes account of the TRIPLE CONTEXT AND
connectivity and interdependencies between the range of factors that THE SIX CAPITALS
affect an organisation’s ability to create value over time. Integrated King IV refers to the ‘triple
thinking underpins all of the following: context’ or the combined
• seeing the organisation as an integral part of society and thus as a context of the economy, society
FRUSRUDWHFLWL]HQ and environment in which the
organisation operates. The
• WKHVWDNHKROGHULQFOXVLYHDSSURDFK reference in King IV to ‘context’
• VXVWDLQDEOHGHYHORSPHQWDQG is in the singular as these three
dimensions are intertwined and
• integrated reporting. should be viewed as an
integrated whole.
The organisation as an integral part
The triple context is portrayed in
of society
more granular fashion by the
Organisations operate in a societal context which they affect and by
forms of capital that the
which they are affected.
organisation uses or affects.
$QRUJDQLVDWLRQKDVDVRFLHW\VSHFL¿FWRLWVHOIZKLFKLQFOXGHVLWV The ‘six-capitals’ model,
internal and external stakeholders with a material stake in its LGHQWL¿HV¿QDQFLDO
activities. But the organisation is also a juristic person in the broader manufactured, intellectual,
society in which it operates. Organisations are dependent on this human, social and relationship,
broader society to, for instance, provide a conducive operating and natural capitals. The model
environment, a viable customer base and the skills that the proposes these six forms of
organisation requires. In turn, organisations contribute to the broader capital, but it is at the discretion
VRFLHW\DVFUHDWRUVRIZHDOWKSURYLGHUVRIJRRGVVHUYLFHVDQG of each organisation to identify
HPSOR\PHQWFRQWULEXWRUVWRWKH¿VFXVDQGGHYHORSHUVRI the important physical and
human capital. intangible resources that it uses
This idea of interdependency between organisations and society is or affects.
supported by the African concept of Ubuntu or Botho, captured by the The triple context and the six
expressions uMuntu ngumuntu ngabantu and Motho ke motho ka capitals are concepts which are
batho±,DPEHFDXVH\RXDUH\RXDUHEHFDXVHZHDUHUbuntu and used in King IV as alternative
Botho imply that there should be a common purpose to all human lenses. Both are pathways to
endeavours (including corporate endeavours) which is based on integrated thinking and
service to humanity. sustainable development.
As a logical consequence of this interdependency, one person In King IV, the choice to use
EHQH¿WVE\VHUYLQJDQRWKHU7KLVLVDOVRWUXHIRUDMXULVWLFSHUVRQ either concept is dictated by its
ZKLFKEHQH¿WVLWVHOIE\VHUYLQJLWVRZQVRFLHW\RILQWHUQDODQGH[WHUQDO setting but generally, triple
stakeholders, as well as the broader society. context is used to denote the
In line with this ethos, organisations should also take responsibility for combined external environment
the environmental outcomes of their activities and outputs, as those in which the organisation
affect society as a whole. operates, while six capitals is
used when a more detailed or
nuanced perspective is
recommended.

24 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
Corporate citizenship
As the organisation is an integral part of society, it has corporate citizenship status. This status confers rights,
obligations and responsibilities on the organisation towards society and the natural environment on which society
depends. The notion of corporate citizenship recognises that the organisation is licensed to operate by its internal
and external stakeholders, and by society in the broad sense.
7KH&RPSDQLHV$FWDOVRUHÀHFWVWKHFRPSDQ\KDYLQJREOLJDWLRQVWRVRFLHW\)RUH[DPSOHLWVWDWHVLQVHFWLRQ
that the purposes of the act include to “promote compliance with the Bill of Rights as provided for in the
&RQVWLWXWLRQ´DQGLW³UHDI¿UPVWKHFRQFHSWRIWKHFRPSDQ\DVDPHDQVRIDFKLHYLQJHFRQRPLFDQGVRFLDOEHQH¿WV´
Further support for the idea of corporate citizenship is offered by the obligation in the Companies Act for certain
companies to establish a social and ethics committee.

Stakeholder-inclusive approach
There is an interdependent relationship between the organisation and its stakeholders, and the organisation’s
ability to create value for itself depends on its ability to create value for others.2 An organisation becomes attuned
to the opportunities and challenges posed by the triple context in which it operates by having regard to the needs,
interests and expectations of material stakeholders. When using the six capitals model as an alternative lens, it is
evident that each of the forms of capital has one or more stakeholders with an interest in it.3
King IV (like its predecessors) advocates a stakeholder-inclusive approach, in which the governing body takes
account of the legitimate and reasonable needs, interests and expectations of all material stakeholders in the
execution of its duties in the best interests of the organisation over time. By following this approach, instead of
SULRULWLVLQJWKHLQWHUHVWVRIWKHSURYLGHUVRI¿QDQFLDOFDSLWDOWKHJRYHUQLQJERG\JLYHVSDULW\WRDOOVRXUFHVRIYDOXH
creation, including among others, social and relationship capital as embodied by stakeholders.
Stakeholder inclusivity involves the balancing of interests over time by way of prioritising and, in some instances,
trading off interests. A decision on how to achieve this balance is made on a case-by-case basis as current
circumstances and exigencies require, but should always be done in the best interests of the organisation over
the longer term. Balancing the needs, interests and expectations of stakeholders is a dynamic and ongoing
process. The quality of stakeholder relationships indicates how effectively an organisation is able to strike this
balance in making its decisions.
Part 5.5 in the King IV Code contains the principles and practices that deal with relationships in accordance with
the stakeholder-inclusive approach.

2 The International Integrated Reporting Council, The International <IR> Framework, (13 December 2013), p 10, available at
http://integratedreporting.org/resource/international-ir-framework/

 5
 REHUW*(FFOHVDQG7LP<RXPDQV³0DWHULDOLW\LQ&RUSRUDWH*RYHUQDQFH7KH6WDWHPHQWRI6LJQL¿FDQW$XGLHQFHVDQG0DWHULDOLW\´Harvard Business School,
Working Paper 16 – 023, September 3, 2015

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 25
 FUNDAMENTAL CONCEPTS
CONTINUED

Shareholders, members and the stakeholder-inclusive approach

Adopting the stakeholder-inclusive approach means that the best interests of the company are not necessarily
always equated to the best interests of shareholders. It also means that shareholders do not necessarily have
a predetermined precedence over other stakeholders. Consequently, this is an inclusive, stakeholder-centric
approach that stands in contrast to a shareholder-centric approach. Stakeholder inclusivity means that the
board considers other stakeholders not merely as instruments to serve the interests of shareholders, but as
having intrinsic value for decision-making in the best interests of the company over time.
The position taken in King IV is that, “directors owe their duties to the company and the company alone as the
company is a separate legal entity from the moment it is registered until it is deregistered… The company is
represented by several interests and these include the interests of shareholders, employees, consumers, the
community and the environment. Thus requiring directors to act in good faith in the interest of ‘the company’
FDQQRWQRZDGD\VPHDQDQ\WKLQJRWKHUWKDQDEOHQGRIDOOWKHVHLQWHUHVWVEXW¿UVWDQGIRUHPRVWWKH\PXVWDFW
in the best interest of the company as separate legal entity… An interest that may be primary at one particular
point in time in the company’s existence may well become secondary at a later stage”4.
7KHLQWHUHVWVRIVKDUHKROGHUVDQGVWDNHKROGHUVDUHLQWHUGHSHQGHQWWKXVIROORZLQJDVWDNHKROGHULQFOXVLYH
approach maximises this symbiosis to promote the company’s long-term sustainability.
The above position is put forward in respect of companies, but also applies to other organisations, including
UHWLUHPHQWIXQGVDQGQRQSUR¿WRUJDQLVDWLRQV7KRVHFKDUJHGZLWKJRYHUQDQFHGXWLHVLQWKHVHRUJDQLVDWLRQV
should similarly recognise the interdependent nature of the relationship between members and other
stakeholders and its consequences for decision-making in the best interests of the organisation over time.

Sustainable development
Sustainable development, understood as “development that meets the needs of the present without compromising
the ability of future generations to meet their needs”5LVDSULPDU\HWKLFDODQGHFRQRPLFLPSHUDWLYH,WLVD¿WWLQJ
response to the organisation being an integral part of society, its status as a corporate citizen and its stakeholders’
needs interests and expectations.
The survival and success of organisations are intertwined with, and related to, three interdependent sub-systems:
the triple context of the economy, society and the natural environment. In the South African setting, addressing
inequality in society through economic transformation is a good example of a challenge that affects all three these
sub-systems in which organisations operate.
Organisations and their leadership need to intentionally interact with, and respond to, the challenges and
opportunities presented by the dynamic system of the triple context in which it operates and the capitals that the
organisation uses and affects, with the aim to achieve the creation of value over time. Such an integrated
approach is a hallmark of sustainable development and it is for this reason that the organisation’s core purpose,
its risks and opportunities, strategy, business model, performance and sustainability are presented in King IV as
inseparable elements of the value creation process.

4 Esser I, Du Plessis JJ, “The Stakeholder Debate and Directors’ Fiduciary Duties”, SA Merc LJ 346-36, p360, 2007 (19) . See also Esser I, Delport PA “Shareholder
protection philosophy in terms of the Companies Act 71 of 2008 THRHR 2016 (79), p 1–29 where the authors state: “It is our view that the inclusive approach should be
followed in interpreting section 76(3)(b). As mentioned above, in terms of the inclusive approach, directors must consider the interests of various stakeholders on a
case-by-case basis. In the end the decision must be in the best interests of the company, even if it is to the detriment of the shareholders.”

5 United Nations, “Report of the World Commission on Environment and Development: Our Common Future”, (Oxford, Great Britain: Oxford University Press, 1987), p 8.
Also known as the Brundtland Report after Gro Harlem Brundtland, Chairman of the Commission and available at http://www.un-documents.net/our-common-future.pdf

26 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
DISTINGUISHING FEATURES OF KING IV
The following are the features of King IV that distinguish it from its predecessors:
• King IV advocates an outcomes-based approach. Achieving the principles, and therefore ultimately good
governance, optimises the organisation to realise the intended governance outcomes: ethical culture, good
performance, effective control and legitimacy. (Refer to Part 3: King IV Application and Disclosure for further
explanation and to Part 4: King IV on a Page.)
• Clear differentiation is made between principles and practices. Principles are achieved by mindful consideration
and application of the recommended practices. (Refer to Part 3: King IV Application and Disclosure for further
explanation.)
• King IV has been designed and drafted to make it more accessible to users, and also to reinforce governance
as a holistic and integrated set of arrangements. (Refer to Part 4: King IV on a Page as a demonstration of
this point.)
• Broader forms of address are used in King IV, namely “organisations”, “governing body” and “those charged
with governance duties”.
• Supplements are provided to help organisations across a variety sectors and organisational types to interpret
and implement King IV as is suited to their particular circumstances. (Refer to Part 6: Sector Supplements.)
• King IV provides guidance on how to apply the recommended practices proportionally in line with the
organisation’s size and resources, and extent and complexity of the organisation’s activities. (Refer to Part 3:
King IV Application and Disclosure for more guidance on proportionality.)
• To balance the less prescriptive approach adopted in King IV, there is greater emphasis on transparency with
regards to how judgement was exercised when considering the practice recommendations contained in King IV.
To reinforce this qualitative application of its principles and practices, King IV proposes an ”apply and explain”
regime, in contrast to “apply or explain” in King III. (Refer to Part 3: King IV Application and Disclosure for more
detail and guidance on the application regime of King IV.)

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 27
 FUNDAMENTAL CONCEPTS
CONTINUED

HIGHLIGHTS OF THE KING IV CODE

The following is a summary of how emerging issues and corporate governance developments since the issue of
.LQJ,,,LQDUHDGGUHVVHGLQWKHSULQFLSOHVDQGSUDFWLFHVFRQWDLQHGLQWKH&RGH,WDOVRKLJKOLJKWVVSHFL¿F
areas of focus and some of the differences between King III and King IV.

Integrated reporting
7KHQRWLRQRILQWHJUDWHGUHSRUWLQJZDVLQWURGXFHGLQ.LQJ,,,EXWWKHXQGHUVWDQGLQJRILWKDVVLJQL¿FDQWO\HYROYHG
since then. Integrated reporting is an outcome of integrated thinking and is presented as such in King IV. Reporting,
including integrated reporting, is dealt with in Part 5.2 of the Code, where it is positioned as the culmination of a
series of leadership responsibilities executed by the governing body. The governing body steers and sets the
GLUHFWLRQRIWKHRUJDQLVDWLRQDSSURYHVSROLF\DQGSODQQLQJRYHUVHHVDQGPRQLWRUVPDQDJHPHQWDQGWKHQ¿QDOO\
provides for accountability on organisational performance through, among others, reporting and disclosure.
In order to clarify the standing of the integrated report in relation to other reports, King IV deals with it as one of the
many reports that may be issued by the organisation, as is necessary, to comply with legal requirements, and/or to
PHHWWKHSDUWLFXODULQIRUPDWLRQQHHGVRIPDWHULDOVWDNHKROGHUV7KHVHRWKHUUHSRUWVLQFOXGHWKH¿QDQFLDO
statements, the sustainability report, the social and ethics committee report, or other online or printed information
or reports.
An integrated report could be a standalone report which connects the more detailed information in other reports
DQGZKLFKDGGUHVVHVDWDKLJKOHYHODQGLQDFRPSOHWHFRQFLVHZD\WKHPDWWHUVWKDWFRXOGVLJQL¿FDQWO\DIIHFW
the organisation’s ability to create value. It could also be a distinguishable, prominent and accessible part of
DQRWKHUUHSRUWZKLFKDOVRLQFOXGHVWKH¿QDQFLDOVWDWHPHQWVDQGRWKHUUHSRUWVLVVXHGLQFRPSOLDQFHZLWKOHJDO
requirements.6
When drafting King IV, reliance was placed on the International <IR> Framework as issued by the International
Integrated Reporting Council7. The Integrated Reporting Committee of South Africa8 has endorsed the
International <IR> Framework as good practice on how to prepare an integrated report and the committee’s
further guidance on integrated reporting should be followed.

Balanced composition of governing bodies and independence

Having members of the governing body who are independent in appearance is an essential element in most
governance codes. King IV seeks to contextualise the relevance of independence correctly, namely that:
• All members of the governing body, whether they are categorised as executive, non-executive or independent
non-executive have, as a matter of law, a duty to act with independence of mind in the best interests of the
organisation.
• Although important, independence in appearance is but one consideration in achieving balance in the
composition of the governing body.
7KHRYHUULGLQJFRQFHUQ DVUHÀHFWHGE\3ULQFLSOHZKLFKGHDOVZLWKWKHFRPSRVLWLRQRIWKHJRYHUQLQJERG\ LV
whether the governing body is knowledgeable, skilled, experienced, diverse and independent enough to
discharge fully its governance role and responsibilities.
The need for the governing body to set and disclose progress towards targets for race and gender diversity has
VSHFL¿FDOO\EHHQLQFOXGHGLQWKH&RGH
6 Integrated Reporting SA available at http://www.integratedreportingsa.org/Home/Theoctopusmodel.aspx

7 The International Integrated Reporting Council, The International <IR> Framework (13 December 2013), available at
http://integratedreporting.org/resource/international-ir-framework/

8 Integrated Reporting SA available at www.integratedreportingsa.org

28 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
Delegation to management
The King IV Code provides for the governing body to delegate the implementation and execution of approved
VWUDWHJ\WKURXJKSROLF\DQGRSHUDWLRQDOSODQVWRPDQDJHPHQWYLDWKHFKLHIH[HFXWLYHRI¿FHU &(2 5DWKHUWKDQ
GHDOLQJZLWKWKHHVWDEOLVKPHQWRIVSHFL¿FPDQDJHPHQWSRVLWLRQVIRUIXQFWLRQDODUHDVDVZDVGRQHLQ.LQJ,,,
the practices in the King IV Code contain recommendations for the governing body to oversee that key
functional areas are headed by competent individuals and are adequately resourced.

Delegation to committees
King IV, like King III, deals with delegation by the governing body within its own structures. Principle 8 of King IV
QRZFODUL¿HVWKHREMHFWLYHVIRUWKHVHGHOHJDWLRQDUUDQJHPHQWVZKLFKDUHWRSURPRWHLQGHSHQGHQWMXGJHPHQW
WRDVVLVWZLWKEDODQFHRISRZHUDQGWRDVVLVWZLWKWKHHIIHFWLYHGLVFKDUJHRILWVGXWLHVE\WKHJRYHUQLQJERG\
In accordance with the drafting convention adopted for King IV, the recommended practices do not prescribe
which committees should be established by the governing body – the governing body should judge what is
appropriate for the organisation. The practices furthermore recommend that the allocation of roles and
responsibilities, and the composition of committees, should be considered holistically. The aim here is to
promote effective collaboration among committees with minimal overlap and fragmentation of duties, as well as
a balanced distribution of power.

Corporate governance services to the governing body

5DWKHUWKDQGHDOLQJZLWKWKHRI¿FHRIWKHFRPSDQ\VHFUHWDU\LQLVRODWLRQWKHSUHPLVHRIWKH.LQJ,9&RGHLVWKDW
the governing body should ensure that it has access to professional and independent guidance on corporate
governance. For most companies, this will be provided by the company secretary. The Code recommends that
even those companies and other organisations not obliged to appoint a company secretary should, as a matter
of leading practice, consider appointing a company secretary or other professional to provide such services to
the governing body.

Performance evaluations of the governing body

King III recommended that an evaluation of the governing body, its committees and its individual members be
FRQGXFWHGHYHU\\HDU7RSURYLGHIRUVXI¿FLHQWWLPHWRDSSURSULDWHO\UHVSRQGWRWKHUHVXOWVRIVXFKSHUIRUPDQFH
evaluations, the King IV Code recommends for a formal evaluation process to be conducted at least every
WZR\HDUV(YHU\DOWHUQDWH\HDUWKHJRYHUQLQJERG\VKRXOGVFKHGXOHDQRSSRUWXQLW\IRUFRQVLGHUDWLRQUHÀHFWLRQ
and discussion of its performance.

Social and ethics committees

Regulation 43 of the Companies Act was issued after King III and does not address the ethics role of the social
and ethics committee beyond mentioning ethics in the name of the committee. King IV seeks to expand on this,
and the role ascribed to the social and ethics committee is that of oversight and reporting on organisational
ethics, responsible corporate citizenship, sustainable development and stakeholder relationships.
This role includes organisational ethics and cover the statutory duties, but the intent is to encourage leading
practice by having the social and ethics committee progress beyond mere compliance to contribute to the
creation of value. Accordingly, King IV urges organisations that are not legally required to establish a social and
ethics committee, nevertheless to consider creating a structure that would achieve the aims of such a
committee.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 29
 FUNDAMENTAL CONCEPTS
CONTINUED

Social and ethics committees (continued)

King IV also recommends a higher standard for the composition of this committee than what is provided for
in the Companies Act. The recommended practices thus include that a majority of the members should be
non-executive members of the governing body so as to ensure that independent judgement is brought to bear.

Risk and opportunity

7KHGH¿QLWLRQIRUULVNXVHGLQ.LQJ,9FRQVLVWVRIWKUHHSDUWVQDPHO\uncertainty of events, the likelihood of such
events occurring and their effect, both positive and negative.
King IV’s understanding of risk thus balances the traditional, negative view of risk with one that recognises the
potential opportunities inherent in some risks. Thus, an opportunity may present itself as the potential upside of
a risk that could adversely affect the achievement of organisational objectives.
However, it is also recognised in King IV that opportunities do not always originate from the current risks of the
organisation. This is particularly true of the strategic opportunities that should be considered when setting the
organisation’s strategic direction. Consideration of the risks associated with such strategic opportunities affect
whether the opportunity will be captured by the organisation or not.
Due to the rising complexity of risk and hence the need to strengthen oversight, the King IV Code recommends
that the risk committee comprises a majority of non-executive members of the governing body. This
recommendation goes beyond what was required in King III.

Technology and information

In King IV, cognisance had to be taken of the advances in technology that are revolutionising businesses and
societies, and transforming products, services and business models. So profound are these effects that many
believe they herald the dawn of a Fourth Industrial Revolution.
7KHVHDGYDQFHVKDSSHQTXLFNO\DQGFDQFDXVHVLJQL¿FDQWGLVUXSWLRQRSSRUWXQLWLHVDQGULVNV2UJDQLVDWLRQV
should strengthen the processes that help them to anticipate change and to respond by capturing new
opportunities and managing emerging risks. The practices under Principle 12 are designed to assist the
governing body to do so.
Information, like technology, is a growing source of competitive advantage for the enhancement of the
intellectual capital of an organisation.
In King IV, it is recognised that information and technology overlap but are also distinct sources of value creation
which pose individual risks and opportunities. It is to reinforce this distinction that this section in the King IV
Code now refers to technology and information instead of information technology.

Compliance
As in King III, the King IV Code recommends that those charged with governance should ensure that compliance
is understood, not only as an obligation, but also as a source of rights and protection. A holistic view is needed on
how applicable laws and non-binding rules, codes and standards relate to one another. This includes how
corporate governance codes relate to applicable legislation.
The Code further recommends that governing bodies should ensure continual monitoring of the regulatory
environment, and that developments are responded to as necessary.

30 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
Remuneration
Many international regulators and institutional investors are paying additional attention to disclosure and voting
on remuneration. King IV had to consider the appropriate means of dealing with these developments, taking into
account that South Africa is a participant in the global investment market but with its own unique set of
circumstances.
King IV aims to foster enhanced accountability on remuneration. One of the ways that it addresses this is by
LQFOXGLQJPRUHGH¿QLWLYHGLVFORVXUHUHTXLUHPHQWVDPRQJZKLFKWKDWUHPXQHUDWLRQVKRXOGEHGLVFORVHGLQWKUHH
SDUWVQDPHO\DEDFNJURXQGVWDWHPHQWDQRYHUYLHZRIWKHUHPXQHUDWLRQSROLF\DQGDQLPSOHPHQWDWLRQUHSRUW
It also recommends that shareholders of companies be provided the opportunity to pass separate non-binding
advisory votes on the policy and the implementation report. The remuneration policy should record the
measures that the board commits to in the event that either the remuneration policy or the implementation
report, or both have been voted against by 25% or more of the voting rights exercised by shareholders. The
Code recommends that such measures should include engagement and addressing objections and concerns.
King IV furthermore recommends the use of performance measures that support positive outcomes across the
triple context in which the organisation operates, and/or all the capitals that the organisation uses or affects.
7KLVLVDGHSDUWXUHIURPOLQNLQJUHPXQHUDWLRQWR¿QDQFLDOSHUIRUPDQFHRQO\,QUHVSHFWRIH[HFXWLYH
remuneration, it is also recommended that an account be provided of the performance measures and targets
used as a basis for awarding of variable remuneration.
An important introduction in King IV is that the remuneration of executive management should be fair and
responsible in the context of overall employee remuneration. It should be disclosed how this has been
addressed. This acknowledges the need to address the gap between the remuneration of executives and those
at the lower end of the pay scale.

Assurance and internal audit

King III introduced the combined assurance model, but this concept needed to evolve to become more useful
and effective.
,Q.LQJ,9WKHPRGHODVVXPHVDQXQGHUVWDQGLQJRIDVVXUDQFHWKDWJRHVEH\RQGWKHWHFKQLFDOGH¿QLWLRQVRI
assurance. A combined assurance model incorporates and optimises all assurance services and functions so
WKDWWDNHQDVDZKROHWKHVHHQDEOHDQHIIHFWLYHFRQWUROHQYLURQPHQWVXSSRUWWKHLQWHJULW\RILQIRUPDWLRQXVHG
IRULQWHUQDOGHFLVLRQPDNLQJE\PDQDJHPHQWWKHJRYHUQLQJERG\DQGLWVFRPPLWWHHVDQGVXSSRUWWKHLQWHJULW\
of the organisation’s external reports.
The King IV Code’s recommendations do not prescribe the design of the model, but allow for the governing
body to exercise its judgement in this regard.
Internal audit, as one of the assurance service providers to the organisation, remains pivotal to corporate
governance. Its role has further evolved in recent years. It has become a trusted advisor that adds value by
contributing insight into the activities of the organisation and, as a further enhancement, foresight. This is the
ideal positioning that is envisaged for internal audit in King IV.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 31
 FUNDAMENTAL CONCEPTS
CONTINUED

Auditor and audit requirements

0DQGDWRU\URWDWLRQRIDXGLW¿UPVDQGPDQGDWRU\WHQGHULQJKDYHEHHQLQWURGXFHGLQVRPHMXULVGLFWLRQVLQDQ
attempt to reinforce auditor independence and audit quality. King IV leaves the consideration and decision on
whether to implement either to the audit committee and governing body, subject to legal requirements.
The Code, however, makes certain practice recommendations with regard to auditor independence, amongst
WKHPWKDWWKHWHQXUHRIDQDXGLW¿UPQHHGVWREHGLVFORVHG
Following the UK Corporate Governance Code9 and in the interest of more informative reporting on the auditing
SURFHVV.LQJ,9UHFRPPHQGVWKDWWKHDXGLWFRPPLWWHHGLVFORVHVVLJQL¿FDQWPDWWHUVFRQVLGHUHGE\LWLQUHODWLRQ
WRWKHDQQXDO¿QDQFLDOVWDWHPHQWVDQGKRZWKHVHZHUHDGGUHVVHGE\WKHFRPPLWWHH7KLVSURYLGHVXVHUVRIWKH
¿QDQFLDOVWDWHPHQWVZLWKWKUHHGLIIHUHQWSHUVSHFWLYHVRQWKHDQQXDO¿QDQFLDOVWDWHPHQWV
• 7KHJRYHUQLQJERG\¶VSHUVSHFWLYHLQSUHSDULQJWKHDQQXDO¿QDQFLDOVWDWHPHQWV±SDUWLFXODUO\VLJQL¿FDQW
assumptions that the governing body had made.
• 7KHSHUVSHFWLYHRIWKHDXGLWRURQZK\FHUWDLQDUHDVZHUHFRQVLGHUHGWREHRIPRVWVLJQL¿FDQFHLQWKHDXGLW
and how they were addressed in the audit.
• 7KHDXGLWFRPPLWWHH¶VSHUVSHFWLYHRQWKHPDWWHUVLWUHJDUGHGDVVLJQL¿FDQWDQGKRZLWGLVFKDUJHGLWV
responsibilities in relation to those.
In King IV it is also recommended that the audit committee discloses its views on audit quality with reference to
audit quality indicators.

Tax
Tax has become a complex matter with various dimensions. The governing body should be responsible for a
tax policy that is compliant with the applicable laws, but that is also congruent with responsible corporate
citizenship, and that takes account of reputational repercussions. Hence, responsible and transparent tax policy
is put forward as a corporate citizenship considerations in King IV.

Shareholder activism
When it comes to the quality of an organisation’s application of voluntary codes of governance principles and
SUDFWLFHVLWLVVDLGWKDWLWVVWDNHKROGHUVDUHWKHXOWLPDWHFRPSOLDQFHRI¿FHUV6KDUHKROGHUVDVDSDUWLFXODU
sub-set of stakeholders, have certain rights that are enshrined in company legislation and that strengthen their
ability to hold boards of companies to account. By virtue of this ability, shareholders also have the power to
serve as proxies for wider stakeholder interests.
,QVWLWXWLRQDOLQYHVWRUV LQWXUQDVXEVHWRIVKDUHKROGHUV SDUWLFXODUO\DUHH[WUHPHO\LQÀXHQWLDO7KHW\SHVRI
investment decisions they make and how they exercise their rights as shareholders, either reinforce or weaken
good governance in the companies in which they invest.
&RPPHQVXUDWHZLWKWKHULJKWVDQGLQÀXHQFHWKDWVKDUHKROGHUVKDYHLWVKRXOGEHFRQVLGHUHGWKDWVKDUHKROGHUV
KDYHQROHJDORU¿GXFLDU\UHVSRQVLELOLWLHVWRWKHFRPSDQLHVLQZKLFKWKH\LQYHVW)XUWKHUPRUHVKDUHKROGHUVDUH
in many instances transient and have the right to vote on matters that may have a longer-term impact than what
the period of their shareholding may be.

 7
 KH)LQDQFLDO5HSRUWLQJ&RXQFLO/LPLWHG8.&RGHRQ&RUSRUDWH*RYHUQDQFH $SULO SDYDLODEOHDWZZZIUFRUJXN

32 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 ,QVWLWXWLRQDOLQYHVWRUVRZHWKHLU¿GXFLDU\GXW\WRPHPEHUVRIUHWLUHPHQWIXQGVWKHLUGHSHQGDQWVDQG
EHQH¿FLDULHVDQGWKLVKDVFHUWDLQFRQVHTXHQFHVIRUKRZLQVWLWXWLRQDOLQYHVWRUVVKRXOGH[HUFLVHWKHLUULJKWV
7KH)UHVK¿HOGV5HSRUW10 published in 2005 stated that “integrating ESG considerations into an investment
DQDO\VLVVRDVWRPRUHUHOLDEO\SUHGLFW¿QDQFLDOSHUIRUPDQFHLVFOHDUO\SHUPLVVLEOHDQGLVDUJXDEO\UHTXLUHGLQ
all jurisdictions”. This is supported by regulation 28(2)(c)(ix) of the Pension Funds Act: “before making an
LQYHVWPHQWLQDQGZKLOHLQYHVWHGLQDQDVVHW>WKHIXQGDQGLWVERDUGPXVW@FRQVLGHUDQ\IDFWRUZKLFKPD\
materially affect the sustainable long-term performance of the asset including, but not limited to, those of an
environmental, social and governance character”. This is also the position put forward by the Code for
Responsible Investing in South Africa (CRISA)11ZKLFKVWDWHVLQLWV¿UVWSULQFLSOHWKDWLQVWLWXWLRQDOLQYHVWRUV
“should incorporate sustainability considerations, including ESG issues, into their investment process as part of
WKHGHOLYHU\RIVXSHULRUULVNDGMXVWHGUHWXUQVWRWKHXOWLPDWHEHQH¿FLDULHV´
,QFRQVLGHUDWLRQRIWKHULJKWVLQÀXHQFHDQGOHJDOGXWLHVWKDWLQVWLWXWLRQDOLQYHVWRUVKDYHDVGHVFULEHGDERYH
King IV sets out in Principle 17 that the governing body of an institutional investor organisation should ensure
that responsible investment is practiced by the organisation to promote the good governance and the creation
of value by the companies in which it invests. Responsible investing principles and practices are set out in the
CRISA12, which accord with the Principles on Responsible Investing13 and the International Corporate
Governance Network Global Stewardship Code14.

Dispute resolution
Since alternative dispute resolution mechanisms were introduced formally in King III, resolving disputes
effectively has gained increased importance in light of labour strike action becoming protracted and, in some
cases, hostile. Relationships are a form of capital on which all organisations rely. A dispute resolution process
should be regarded as an opportunity not only to resolve the dispute at hand, but also to maintain and enhance
the social and relationship capital of an organisation.
As a result, King IV in Part 5.5 recommends that dispute-resolution mechanisms and associated processes be
adopted and implemented as part of the overall management of stakeholder relationships.

)UHVK¿HOGV%UXFNKDXV'HULQJHU³$/HJDO)UDPHZRUNIRUWKH,QWHJUDWLRQRI(QYLURQPHQWDO6RFLDODQG*RYHUQDQFH,VVXHVLQWR,QVWLWXWLRQDO,QYHVWPHQW´
UNEP Finance InitiativeSDYDLODEOHDWZZZXQHS¿RUJ¿OHDGPLQGRFXPHQWVIUHVK¿HOGVBOHJDOBUHVSBSGI

11 Committee for Responsible Investment in South Africa, Code for Responsible Investment in South Africa (Institute of Directors in Southern Africa, 2011),
available at: www.iodsa.co.za

12 Committee for Responsible Investment in South Africa, Code for Responsible Investment in South Africa (Institute of Directors in Southern Africa, 2011),
available at: www.iodsa.co.za

13 Principles for Responsible Investing available at: https://www.unpri.org/about/the-six-principles

14 International Corporate Governance Network, International Corporate Governance Network Global Stewardship Code, (2016), available at:
https://www.icgn.org/policy/stewardship-codes

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 33
 PART 3

KING IV APPLICATION
AND DISCLOSURE

34 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
KING IV APPLICATION
AND DISCLOSURE
LEGAL STATUS OF KING IV
The legal status of King IV, as with its predecessors, is that of a set of voluntary principles and leading practices.
Corporate governance could apply on a statutory basis as rules, as a voluntary code of principles and practices,
or as a combination of the two. In South Africa, as in many jurisdictions around the world, a hybrid system of
corporate governance has developed as, over time, some practices of good governance have been legislated in
SDUDOOHOZLWKWKHYROXQWDU\.LQJFRGHVRIJRYHUQDQFH,IWKHUHLVDFRQÀLFWEHWZHHQOHJLVODWLRQDQG.LQJ,9QRZRU
in the future, the law prevails.
7KHUHLVDQLPSRUWDQWDUJXPHQWDJDLQVWWKHPDQGDWRU\³FRPSO\RUHOVH´IUDPHZRUN$RQHVL]H¿WVDOODSSURDFK
cannot logically be suitable, because the types of businesses and activities carried out by organisations are so
varied. There is also a danger that the governing body may become focused on mindless compliance instead of
applying its mind to the best governance practice for the particular issue before it.
Good governance does not exist separately from the law, and a corporate governance code that applies on a
voluntary basis may also trigger legal consequences. A court considers all relevant circumstances in determining
the appropriate standard of conduct for those charged with governance duties, including what the generally
accepted practices for a particular setting and situation are. Voluntary governance codes such as King IV
UHFRPPHQGOHDGLQJSUDFWLFHVIRUKRZJRYHUQDQFHGXWLHVVKRXOGEHGLVFKDUJHGDQGWKHUHIRUHLQÀXHQFHDQGDIIHFW
what practices are considered and eventually adopted and implemented by governing bodies. The more widely
certain recommended practices in codes of governance are adopted, the more likely it is that a court would regard
conduct that conforms to these practices as meeting the required standard of care. In this way the provisions of
YROXQWDU\FRGHVRIJRYHUQDQFH¿QGWKHLUZD\LQWRMXULVSUXGHQFHWREHFRPHSDUWRIWKHFRPPRQODZ&RQVHTXHQWO\
failure to meet an established corporate governance practice, albeit not legislated, may invoke liability.
For directors of companies, adopting good corporate governance practice will be especially important if they were
to rely on the protection afforded by the business judgement rule as provided for in the Companies Act in the
FRXUVHRIOLWLJDWLRQ,QWKHDEVHQFHRIUREXVWDQGVRXQGJRYHUQDQFHVWUXFWXUHVDQGSURFHVVHVLWZLOOEHGLI¿FXOW
LIQRWLPSRVVLEOHIRUDGLUHFWRUWRVKRZWKDWUHDVRQDEO\GLOLJHQWVWHSVKDYHEHHQWDNHQWREHFRPHLQIRUPHGWKDW
PDWHULDO¿QDQFLDOLQWHUHVWVZHUHDEVHQWRUGHDOWZLWKDSSURSULDWHO\DQGWKDWWKHUHZDVDUDWLRQDOEDVLVIRU
believing – and that the director did believe – that a decision was in the best interests of the company.

SCOPE OF APPLICATION OF KING IV

Codes of corporate governance are concerned with the role and responsibilities of the governing body and its
interaction with management and other material stakeholders. The governing body is the focal point of corporate
governance in an organisation, and hence the primary audience of King IV.
Furthermore, the King IV Report aspires to apply to all organisations, regardless of their form of incorporation.
A main objective of the King IV Report is to broaden acceptance of corporate governance by making it accessible
DQG¿WIRUDSSOLFDWLRQDFURVVDYDULHW\RIVHFWRUVDQGRUJDQLVDWLRQDOW\SHV
,QSXUVXLWRIWKLVJRDOWKH.LQJ,95HSRUWLQFOXGHVVXSSOHPHQWVIRUVSHFL¿FVHFWRUV,QDGGLWLRQWKH&RGHLWVHOI
has been drafted to be suitable for application by all organisations. This was done by phrasing principles and
intended governance outcomes so that they embody the essence of the Code and can be applied with the
necessary changes in terminology. The principles and intended outcomes being the essence, the practices can
EHWKHQDGDSWHGDQGPRGL¿HGDVVXLWDEOHIRUWKHVHFWRUDQGLQDFFRUGDQFHZLWKSURSRUWLRQDOLW\FRQVLGHUDWLRQVDV
outlined below.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 35
 KING IV APPLICATION AND DISCLOSURE
CONTINUED

PRACTICES, PRINCIPLES AND GOVERNANCE

OUTCOMES
A major challenge in the implementation of codes of corporate governance is that recommended practices could
be mindlessly implemented as if they were rules, resulting in corporate governance becoming a mere compliance
EXUGHQ7KLVLQÀH[LELOLW\DOVROHDGVWRDQLQDELOLW\WRLQWHUSUHWDQGDSSO\FRGHVRIFRUSRUDWHJRYHUQDQFHLQDZD\
that is appropriate for the organisation and the sector in which it operates. Mindful application, on the other hand,
KDUQHVVHVWKHEHQH¿WVRIFRUSRUDWHJRYHUQDQFHLQWKHLQWHUHVWVRIWKHRUJDQLVDWLRQDQGDSSO\LQJWKHJRYHUQDQFH
code comes to be seen as a process of adding rather than subtracting value.
Understanding the relationship between governance outcomes, principles and practices as depicted below is key
to mindful application of the King IV Code. It also supports one of the objectives of King IV, namely to reinforce
corporate governance as a holistic and integrated set of arrangements.

Governance outcomes
*RYHUQDQFHRXWFRPHVDUHWKHEHQH¿WVWKDW
organisations could realise if the underlying
principles - and therefore, ultimately, good
governance - are achieved.
These governance outcomes are:
• Ethical culture • Effective control
• Good performance • Legitimacy

Principles
Principles embody the aspirations of the
journey towards good corporate governance.
They guide on what organisations should strive
to achieve by the application of governance
practices. Principles build on and reinforce
RQHDQRWKHUWKH\DUHSKUDVHGVRWKDWWKH\DUH
fundamental to good corporate governance
and hold true across all organisations.

Practices
Practices are recommended at the level of
leading practice. The practices associated with
a particular principle should be applied so that
they support and give effect to the aspiration
as expressed in that principle. Practices may
be scaled in accordance with proportionality
considerations.

36 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
PROPORTIONALITY
,PSOHPHQWLQJ.LQJ,9RQDSURSRUWLRQDOEDVLVPHDQVWKDWWKHSULQFLSOHV¿QGDSSOLFDWLRQDVWKH\VWDQGWKH\
embody the aspirations of, and are fundamental to the journey towards good governance. The practices as
recommended in the Code, however, are positioned at the level of leading practices, and may therefore not be
suitable and appropriate for all organisations. Mindless compliance and a quantitative approach is not the aim.
Instead, King IV strives to instil a qualitative approach in which recommended practices are implemented to
achieve the principles and realise the intended governance outcomes.
Even where not expressly stated in the Code, practices are meant to be scaled in accordance with the following
proportionality considerations particular to the organisation:
• Size of turnover and workforce.
• Resources.
• Extent and complexity of activities, including impact on the triple context in which it operates.
Application of practices on a proportional basis is subject to legal provisions and giving effect to the principle that
the practices are associated with.

DISCLOSURE ON APPLICATION OF KING IV

King IV application regime
The application regime for King IV is “apply and explain”:

Apply principles Explain practices

All principles are phrased as aspirations and ideals
that organisations should strive for in their journey
towards good governance and realising the governance
outcomes. The principles are basic and fundamental to
good governance, and application thereof is therefore
assumed.
Explanation should be provided in the form of a
narrative account, with reference to practices that
demonstrate application of the principle. The
explanation should address which recommended or
other practices have been implemented, and how
these achieve or give effect to the principle.

What should be disclosed on the application of King IV?

6SHFL¿FGLVFORVXUHUHFRPPHQGDWLRQVDUHLQFOXGHGXQGHUHDFKSULQFLSOHRIWKH.LQJ,9&RGH7KHVH
recommendations are intended as guidance and a starting point for disclosure on the particular principle.
The detail of information to be provided in the narrative should be guided by materiality, and should enable
stakeholders to make an informed assessment of the quality of the organisation’s governance.
There is no need to disclose whether each practice has been implemented or not, as this is quantitative and does
not necessarily add to the quality of disclosure. There is also no need to disclose against the outcomes, as it can
be left to the user to draw inferences from the narrative provided.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 37
 KING IV APPLICATION AND DISCLOSURE
CONTINUED

Where should King IV disclosure be made?

7KHJRYHUQLQJERG\KDVWKHGLVFUHWLRQWRGHWHUPLQHZKHUHWKH.LQJ,9GLVFORVXUHVZLOOEHPDGHIRUH[DPSOHLQ
the integrated report, sustainability report, social and ethics committee report, or other online or printed
information or reports.
The governing body may also choose to disclose its application of King IV in more than one of these reports.
Duplication of King IV disclosures should be avoided by making use of cross-referencing. Group companies
should also make use of cross-referencing to avoid duplicate disclosures.
King IV disclosure should be updated at least annually, formally approved by the governing body and be publicly
accessible.

Roadmap to disclosure on the application of King IV

Consider the recommended

practices associated with the
In respect of each principle, as
principle that are not already
the point of departure, explain in
Start disclosure on King IV by included in the narrative. Expand
narrative form the matters that
referencing all of the principles the explanation to these other
the King IV Code recommends
in the Code. practices only if necessary to
IRUVSHFL¿FGLVFORVXUHXQGHU
further demonstrate how their
each principle.
implementation supports the
achievement of the principle.

Assess the completed

disclosure and make the
necessary enhancements to
ensure that it will enable the
users of the report to make
an informed assessment of
the quality of governance in
so far as the application of
the particular principle (and
ultimately all of the principles
in King IV) is concerned.
If applicable and necessary,
explain what alternative practices
(practices other that those the
King IV Code recommends
in respect of this principle)
have been implemented, and
how the implementation of
these practices supports the
achievement of the principle.

EFFECTIVE DATE
'LVFORVXUHRQWKHDSSOLFDWLRQRI.LQJ,9LVHIIHFWLYHLQUHVSHFWRI¿QDQFLDO\HDUVVWDUWLQJRQRUDIWHU$SULO
but immediate transition is encouraged. King IV replaces King III in its entirety.

38 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 PART 4

KING IV ON A PAGE

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 39
 KING IV ON A PAGE
LEADERSHIP BY THE
GOVERNING BODY PRINCIPLES
These are the governing body’s primary governance role Principles embody the aspirations of the journey
and responsibilities. towards good corporate governance.

Principle 1: The governing body should lead

ethically and effectively.
Principle 2: The governing body should govern the
ethics of the organisation in a way that
supports the establishment of an ethical
culture.
Principle 3: The governing body should ensure that
the organisation is and is seen to be a
Steers and sets responsible corporate citizen.

strategic direction Principle 4: The governing body should appreciate

that the organisation’s core purpose,
its risks and opportunities, strategy,
business model, performance and
sustainable development are all
inseparable elements of the value
creation process.
Approves policy Principle 5: The governing body should ensure
that reports issued by the organisation
and planning enable stakeholders to make informed
assessments of the organisation’s
performance and its short, medium and
long-term prospects.
Principle 6: The governing body should serve as the
focal point and custodian of corporate
Oversees and governance in the organisation.
Principle 7: The governing body should comprise
monitors the appropriate balance of knowledge,
skills, experience, diversity and
independence for it to discharge its
governance role and responsibilities
objectively and effectively.
Principle 8: The governing body should ensure that
Ensures its arrangements for delegation within
its own structures promote independent
accountability judgement, and assist with balance of
power and the effective discharge of its
duties.
Principle 9: The governing body should ensure that
the evaluation of its own performance
and that of its committees, its chair
and its individual members, support
continued improvement in its
performance and effectiveness.

40 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 GOVERNANCE
PRINCIPLES OUTCOMES
They guide on what organisations should strive to Practices support 7KHVHDUHWKHEHQH¿WVWKDW
achieve by the application of governance practices. and give effect to organisations could realise through
the principles. good governance.

Principle 10: The governing body should ensure that

the appointment of, and delegation to,
management contribute to role clarity and
the effective exercise of authority and
responsibilities.
Principle 11: The governing body should govern risk
in a way that supports the organisation
in setting and achieving its strategic
objectives.
Principle 12: The governing body should govern
technology and information in a way that
supports the organisation setting and
achieving its strategic objectives.
Principle 13: The governing body should govern
Ethical
compliance with applicable laws and culture
adopted, non-binding rules, codes and
standards in a way that supports the
PRACTICES

organisation being ethical and a good

corporate citizen. Good
Principle 14: The governing body should ensure that performance
the organisation remunerates fairly,
responsibly and transparently so as to
promote the achievement of strategic
objectives and positive outcomes in the
short, medium and long term.
Effective
Principle 15: The governing body should ensure that control
assurance services and functions enable
an effective control environment, and that
these support the integrity of information
for internal decision-making and of the Legitimacy
organisation’s external reports.
Principle 16: In the execution of its governance role
and responsibilities, the governing body
should adopt a stakeholder-inclusive
approach that balances the needs,
interests and expectations of material
stakeholders in the best interests of the
organisation over time.
Principle 17: The governing body of an institutional
investor organisation should ensure that
responsible investment is practiced by
the organisation to promote the good
governance and the creation of value by
the companies in which it invests.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 41
 PART 5

KING IV CODE ON
CORPORATE GOVERNANCE
Part 5.1: Leadership, ethics and corporate citizenship
Part 5.2: Strategy, performance and reporting
Part 5.3: Governing structures and delegation
Part 5.4: Governance functional areas
Part 5.5: Stakeholder relationships

42 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

KING IV CODE ON CORPORATE

GOVERNANCE
PART 5.1: LEADERSHIP, ETHICS AND
CORPORATE CITIZENSHIP
Leadership

Principle 1: The governing body should lead ethically and effectively.

RECOMMENDED PRACTICES
1. Members of the governing body should individually and collectively cultivate the following characteristics and
exhibit them in their conduct:
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i. Members of the governing body must act in good faith and in the best interests of the organisation.
  LL 0HPEHUVRIWKHJRYHUQLQJERG\VKRXOGDYRLGFRQÀLFWVRILQWHUHVW,QFDVHVZKHUHDFRQÀLFWFDQQRWEH
avoided, it should be disclosed to the governing body in full at the earliest opportunity, and then
proactively managed as determined by the governing body and subject to legal provisions.
iii. Members of the governing body should act ethically beyond mere legal compliance.
iv. Members of the governing body should set the tone for an ethical organisational culture.
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  L 0
 HPEHUVRIWKHJRYHUQLQJERG\VKRXOGWDNHVWHSVWRHQVXUHWKDWWKH\KDYHVXI¿FLHQWZRUNLQJ
knowledge of the organisation, its industry, the triple context in which it operates, the capitals it uses
and affects as well as of the key laws, rules, codes and standards applicable to the organisation.
ii. Members of the governing body must act with due care, skill and diligence, and take reasonably
diligent steps to become informed about matters for decision.
iii. Members of the governing body should continuously develop their competence to lead effectively.
 F 5HVSRQVLELOLW\
i. Members of the governing body should assume collective responsibility for steering and setting the
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LPSOHPHQWDWLRQDQGH[HFXWLRQE\PDQDJHPHQWDQGHQVXULQJDFFRXQWDELOLW\IRURUJDQLVDWLRQDO
performance.
ii. Members of the governing body should exercise courage in taking risks and capturing opportunities,
but do so in a responsible manner and in the best interests of the organisation.
iii. Members of the governing body should take responsibility for anticipating, preventing or otherwise
ameliorating the negative outcomes of the organisation’s activities and outputs on the triple context in
which it operates, and the capitals that it uses and affects.
iv. Members of the governing body should attend meetings of the governing body and its committees, and
GHYRWHVXI¿FLHQWWLPHDQGHIIRUWWRSUHSDUHIRUWKRVHPHHWLQJV
 G $FFRXQWDELOLW\
Members of the governing body should be willing to answer for the execution of their responsibilities, even
when these were delegated.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 43
 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

 H )DLUQHVV
i. Members of the governing body should adopt a stakeholder-inclusive approach in the execution of their
governance role and responsibilities.
ii. Members of the governing body should direct the organisation in such a way that it does not adversely
affect the natural environment, society or future generations.
 I 7UDQVSDUHQF\
Members of the governing body should be transparent in the manner in which they exercise their
governance role and responsibilities.
2. The governing body should embody the above ethical characteristics in order to offer effective leadership that
results in achieving strategic objectives and positive outcomes over time.
3. The arrangements by which the members of the governing body are being held to account for ethical and
effective leadership should be disclosed. These arrangements would include, but are not limited to, codes of
conduct and performance evaluations of the governing body and its members.

Organisational ethics

Principle 2: The governing body should govern the ethics of the organisation in a
way that supports the establishment of an ethical culture.

RECOMMENDED PRACTICES
4. The governing body should assume responsibility for the governance of ethics by setting the direction for how
ethics should be approached and addressed by the organisation.
5. The governing body should approve codes of conduct and ethics policies that articulate and give effect to its
direction on organisational ethics.
6. The governing body should ensure that codes of conduct and ethics policies:
a. encompass the organisation’s interaction with both internal and external stakeholders and the broader
VRFLHW\DQG
b. address the key ethical risks of the organisation.
7. The governing body should ensure that the codes of conduct and ethics policies provide for arrangements that
familiarise employees and other stakeholders with the organisation’s ethical standards. These arrangements
should include:
a. publishing the organisation’s codes of conduct and policies on the organisation’s website, or on other
SODWIRUPVRUWKURXJKRWKHUPHGLDDVLVDSSURSULDWH
b. the incorporation by reference, or otherwise, of the relevant codes of conduct and policies in supplier and
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c. including the codes of conduct and ethics policies in employee induction and training programmes.
8. The governing body should delegate to management the responsibility for implementation and execution of
the codes of conduct and ethics policies.

44 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

9. The governing body should exercise ongoing oversight of the management of ethics and, in particular,
oversee that it results in the following:
a. Application of the organisation’s ethical standards to the processes for the recruitment, evaluation of
performance and reward of employees, as well as the sourcing of suppliers.
b. Having sanctions and remedies in place for when the organisation’s ethical standards are breached.
c. The use of protected disclosure or whistle-blowing mechanisms to detect breaches of ethical standards
and dealing with such disclosures appropriately.
d. The monitoring of adherence to the organisation’s ethical standards by employees and other stakeholders
through, among others, periodic independent assessments.
10. The following should be disclosed in relation to organisational ethics:
a. An overview of the arrangements for governing and managing ethics.
b. Key areas of focus during the reporting period.
c. Measures taken to monitor organisational ethics and how the outcomes were addressed.
d. Planned areas of future focus.

Responsible corporate citizenship

Principle 3: The governing body should ensure that the organisation is and is seen
to be a responsible corporate citizen.

RECOMMENDED PRACTICES
11. The governing body should assume responsibility for corporate citizenship by setting the direction for how it
should be approached and addressed by the organisation.
12. The governing body should ensure that the organisation’s responsible corporate citizenship efforts include
compliance with the Constitution of South Africa (including the Bill of Rights), the law, leading standards, and
adherence to its own codes of conduct and policies.
13. The governing body should oversee that the organisation’s core purpose and values, strategy and conduct are
congruent with it being a responsible corporate citizen.
14. The governing body should oversee and monitor, on an ongoing basis, how the consequences of the organisation’s
activities and outputs affect its status as a responsible corporate citizen. This oversight and monitoring should be
performed against measures and targets agreed with management in all of the following areas:
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development of employees).
 E (FRQRP\ LQFOXGLQJHFRQRPLFWUDQVIRUPDWLRQSUHYHQWLRQGHWHFWLRQDQGUHVSRQVHWRIUDXGDQGFRUUXSWLRQ
and responsible and transparent tax policy).
 F 6
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of human rights).
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biodiversity).

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 45
 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

15. The following should be disclosed in relation to corporate citizenship:

a. An overview of the arrangements for governing and managing responsible corporate citizenship.
b. Key areas of focus during the reporting period.
c. Measures taken to monitor corporate citizenship and how the outcomes were addressed.
d. Planned areas of future focus.

46 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 5.2: STRATEGY, PERFORMANCE

AND REPORTING
Strategy and performance

Principle 4: The governing body should appreciate that the organisation’s

core purpose, its risks and opportunities, strategy, business model, performance
and sustainable development are all inseparable elements of the value
creation process.

RECOMMENDED PRACTICES
1. The governing body should assume responsibility for organisational performance by steering and setting the
direction for the realisation of the organisation’s core purpose and values through its strategy.
2. The governing body should delegate to management the formulation and development of the organisation’s
short, medium and long-term strategy.
3. The organisation’s short, medium and long-term strategy as formulated and developed by management
should be approved by the governing body. When considering the proposed strategy for approval, the
governing body should challenge it constructively with reference to, among others, the following:
a. The timelines and parameters which determine the meaning of short, medium and long term respectively.
 E 7KHULVNVRSSRUWXQLWLHVDQGRWKHUVLJQL¿FDQWPDWWHUVFRQQHFWHGWRWKHWULSOHFRQWH[WLQZKLFKWKH
organisation operates.
c. The extent to which the proposed strategy depends on the resources and relationships connected to the
various forms of capital.
d. The legitimate and reasonable needs, interests and expectations of material stakeholders.
e. The increase, decrease or transformation of the various forms of capitals that may result from the
execution of the proposed strategy.
f. The interconnectivity and inter-dependence of all of the above.
4. The governing body should ensure that it approves the policies and operational plans developed by
management to give effect to the approved strategy. These should include the key performance measures
and targets for assessing the achievement of strategic objectives and positive outcomes over the short,
medium and long term.
5. The governing body should delegate to management the responsibility to implement and execute the
approved policies and operational plans.
6. The governing body should exercise ongoing oversight of the implementation of strategy and operational
plans by management against agreed performance measures and targets.
7. The governing body should oversee that the organisation continually assesses, and responsibly responds to,
the negative consequences of its activities and outputs on the triple context in which it operates, and the
capitals which it uses and affects.
8. As part of its oversight of performance, the governing body should be alert to the general viability of the
organisation with regard to its reliance and effects on the capitals, its solvency and liquidity, and its status as a
going concern.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 47
 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

In respect of disclosure on strategy and performance, refer to Reporting below.

Reporting

Principle 5: The governing body should ensure that reports issued by the
organisation enable stakeholders to make informed assessments of the
organisation’s performance, and its short, medium and long-term prospects.

RECOMMENDED PRACTICES
9. The governing body should assume responsibility for the organisation’s reporting by setting the direction for
how it should be approached and conducted.
10. The governing body should approve management’s determination of the reporting frameworks (including
reporting standards) to be used, taking into account legal requirements and the intended audience and
purpose of each report.
7KHJRYHUQLQJERG\VKRXOGRYHUVHHWKDWUHSRUWVVXFKDVWKHDQQXDO¿QDQFLDOVWDWHPHQWVVXVWDLQDELOLW\
reports, social and ethics committee reports, or other online or printed information or reports are issued, as is
necessary, to comply with legal requirements, and/or to meet the legitimate and reasonable information needs
of material stakeholders.
12. The governing body should oversee that the organisation issues an integrated report at least annually, which
is either:
a. a standalone report which connects the more detailed information in other reports and addresses, at a high
OHYHODQGLQDFRPSOHWHFRQFLVHZD\WKHPDWWHUVWKDWFRXOGVLJQL¿FDQWO\DIIHFWWKHRUJDQLVDWLRQ¶VDELOLW\WR
FUHDWHYDOXHRU
 E DGLVWLQJXLVKDEOHSURPLQHQWDQGDFFHVVLEOHSDUWRIDQRWKHUUHSRUWZKLFKDOVRLQFOXGHVWKHDQQXDO¿QDQFLDO
statements and other reports that must be issued in compliance with legal provisions.
13. The governing body should approve management’s bases for determining materiality for the purpose of
deciding which information should be included in external reports.
14. The governing body should ensure the integrity of external reports as provided for in Part 5.4, Assurance of
External Reports.
15. The governing body should oversee that the following information is published on the organisation’s website,
or on other platforms or through other media as is appropriate for access by stakeholders:
a. Corporate governance disclosures required in terms of this Code (refer to Part 3: King IV Application and
Disclosure for more detail).
b. Integrated reports.
 F $QQXDO¿QDQFLDOVWDWHPHQWVDQGRWKHUH[WHUQDOUHSRUWV

48 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 5.3: GOVERNING STRUCTURES AND

DELEGATION
Primary role and responsibilities of the governing body

Principle 6: The governing body should serve as the focal point and custodian of
corporate governance in the organisation.

RECOMMENDED PRACTICES
1. The governing body should exercise its leadership role by:
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 F R
 YHUVHHLQJDQGPRQLWRULQJRILPSOHPHQWDWLRQDQGH[HFXWLRQE\PDQDJHPHQWDQG
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
2. The governing body should ensure that its role, responsibilities, membership requirements and procedural
conduct are documented in a charter which it regularly reviews to guide its effective functioning.
3. The governing body should approve the protocol to be followed in the event that it or any of its members or
committees need to obtain independent, external professional advice at the cost of the organisation on
matters within the scope of their duties.
4. The governing body should approve the protocol to be followed by its non-executive members for
requisitioning documentation from, and setting up meetings with, management.
5. The following should be disclosed in relation to the primary role and responsibilities of the governing body:
a. The number of meetings held during the reporting period, and attendance at those meetings.
 E :KHWKHUWKHJRYHUQLQJERG\LVVDWLV¿HGWKDWLWKDVIXO¿OOHGLWVUHVSRQVLELOLWLHVLQDFFRUGDQFHZLWKLWVFKDUWHU
for the reporting period.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

Composition of the governing body

Principle 7: The governing body should comprise the appropriate balance of

knowledge, skills, experience, diversity and independence for it to discharge its
governance role and responsibilities objectively and effectively.

RECOMMENDED PRACTICES
&RPSRVLWLRQ
6. The governing body should assume responsibility for its composition by setting the direction and approving the
processes for it to attain the appropriate balance of knowledge, skills, experience, diversity and independence
to objectively and effectively discharge its governance role and responsibilities.
7. When determining the requisite number of members of the governing body, the following factors should be
considered:
a. The appropriate mix of knowledge, skills and experience, including the business, commercial and industry
experience, needed to govern the organisation.
b. The appropriate mix of executive, non-executive and independent non-executive members.
 F 7
 KHQHHGIRUDVXI¿FLHQWQXPEHURIPHPEHUVWKDWTXDOLI\WRVHUYHRQWKHFRPPLWWHHVRIWKHJRYHUQLQJ
body.
d. The need to secure a quorum at meetings.
e. Regulatory requirements.
f. Diversity targets relating to the composition of the governing body.
8. The governing body should comprise a majority of non-executive members, most of whom should be
independent.
 $
 VDPLQLPXPWKHFKLHIH[HFXWLYHRI¿FHU &(2 DQGDWOHDVWRQHRWKHUH[HFXWLYHVKRXOGEHDSSRLQWHGWRWKH
governing body to ensure that it has more than one point of direct interaction with management. The executive
RWKHUWKDQWKH&(2DSSRLQWHGWRWKHJRYHUQLQJERG\PD\EHWKHFKLHI¿QDQFHRI¿FHU &)2 RUDQRWKHU
designated executive as is appropriate for the organisation.
10. The governing body should promote diversity in its membership across a variety of attributes relevant for
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as well as age, culture, race and gender.
11. The governing body should set targets for race and gender representation in its membership.
12. The governing body should establish arrangements for periodic, staggered rotation of its members so as to
invigorate its capabilities by introducing members with new expertise and perspectives while retaining valuable
knowledge, skills and experience and maintaining continuity.
13. The governing body should establish a succession plan for its membership which should include the
LGHQWL¿FDWLRQPHQWRUVKLSDQGGHYHORSPHQWRIIXWXUHFDQGLGDWHV

50 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

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14. The nomination of candidates for election as members of the governing body should be approved by the
governing body as a whole.
15. The processes for nomination, election and ultimately, the appointment of members to the governing body
should be formal and transparent.
16. Before nominating a candidate for election, the governing body should consider the following:
a. The collective knowledge, skills and experience required by the governing body.
b. The diversity of the governing body.
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17. Nomination for re-election of an incumbent of the governing body should be considered by the governing body
on the basis of that member’s performance, including attendance at meetings of the governing body and its
committees.
18. A candidate for election as a non-executive member of the governing body should be requested to provide the
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VXI¿FLHQWWLPHDYDLODEOHWRIXO¿OWKHUHVSRQVLELOLWLHVDVPHPEHURIWKHJRYHUQLQJERG\
19. Prior to their nomination for election, candidates’ backgrounds should be independently investigated, and their
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including details of existing professional commitments, should accompany the notice of the AGM, together
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re-election.
21. Upon election, the terms and conditions for serving as a member of the governing body should be formalised
in a letter of appointment.
22. The governing body should ensure that incoming members are inducted to enable them to make the maximum
contribution within the shortest time possible.
23. Members of the governing body with no or limited governance experience should be provided with mentorship
and encouraged to undergo training.
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developments, and risks and changes in the external environment of the organisation, should be provided for
members of the governing body.
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25. Subject to legal provisions, each member of the governing body should submit to the governing body a
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26. At the beginning of each meeting of the governing body or its committees, all members should be required
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FRQÀLFWVVKRXOGEHSURDFWLYHO\PDQDJHGDVGHWHUPLQHGE\WKHJRYHUQLQJERG\DQGVXEMHFWWROHJDOSURYLVLRQV
27. Non-executive members of the governing body may be categorised by the governing body as independent
if it concludes that there is no interest, position, association or relationship which, when judged from the
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making in the best interests of the organisation.

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 KING IV CODE ON CORPORATE GOVERNANCE
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28. The governing body should consider the following and other indicators holistically, and on a substance-over-
form basis, when assessing the independence of a member of the governing body for purposes of
categorisation. The member of the governing body:
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HPSOR\HHRUDUHSUHVHQWDWLYHRIVXFKSURYLGHURI¿QDQFLDOFDSLWDORUIXQGLQJ
 E LIWKHRUJDQLVDWLRQLVDFRPSDQ\SDUWLFLSDWHVLQDVKDUHEDVHGLQFHQWLYHVFKHPHRIIHUHGE\WKHFRPSDQ\
c. if the organisation is a company, owns securities in the company, the value of which is material to the
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e. has been the designated external auditor responsible for performing the statutory audit for the
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¿QDQFLDO\HDUV
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JRYHUQLQJERG\
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h. is a member of the governing body or the executive management of another organisation which is a
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i. is entitled to remuneration contingent on the performance of the organisation.
29. A non-executive member of the governing body may continue to serve, in an independent capacity, for longer
than nine years if, upon an assessment by the governing body conducted every year after nine years, it is
concluded that the member exercises objective judgement and there is no interest, position, association or
relationship which, when judged from the perspective of a reasonable and informed third party, is likely to
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30. The following should be disclosed with regards to the composition of the governing body:
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skills, experience, diversity and independence.
b. The targets set for gender and race representation in the membership of the governing body, and progress
made against these targets.
c. The categorisation of each member as executive or non-executive.
d. The categorisation of each non-executive member as independent or not and, when a non-executive
member of the governing body has been serving for longer than nine years, a summary of the views of the
governing body on the independence of the member.
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f. Each member’s period of service on the governing body.
g. The age of each member.
h. Other governing body and professional positions held by each member.
i. The reasons why any members of the governing body have been removed, resigned or retired.

52 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

&KDLURIWKHJRYHUQLQJERG\
31. The governing body should elect an independent non-executive member as chair to lead the governing body
in the objective and effective discharge of its governance role and responsibilities.
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the following functions:
a. To lead in the absence of the chair.
b. To serve as a sounding board for the chair.
c. To act as an intermediary between the chair and other members of the governing body, if necessary.
d. To deal with shareholders’ concerns where contact through the normal channels has failed to resolve
concerns, or where such contact is inappropriate.
e. To strengthen independence on the governing body if the chair is not an independent non-executive
member of the governing body.
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of interest.
g. To lead the performance appraisal of the chair.
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documented in the charter of the governing body or elsewhere.
34. The CEO of the organisation should not also chair the governing body, and the retired CEO should not
become the chair of the governing body until three complete years have passed after the end of the
CEO’s tenure.
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with the governing body, should determine the number of outside professional positions that the chair is
allowed to hold, taking into account the relative size and complexity of the organisations involved.
36. When determining which of its committees the chair of the governing body should serve on, either as member
or chair, the governing body should consider how this affects the overall concentration and balance of power
on the governing body. Generally, the following should apply:
a. The chair should not be a member of the audit committee.
b. The chair may be a member of the committee responsible for remuneration but should not be its chair.
c. The chair should be a member of the committee responsible for nominations of members of the governing
body and may also be its chair.
d. The chair may be a member of the committee responsible for risk governance and may also be its chair.
e. The chair may be a member of the social and ethics committee but should not be its chair.
37. The governing body should ensure there is succession planning in place for the position of chair.
38. The following should be disclosed in relation to the chair:
a. Whether the chair is considered to be independent.
b. Whether or not an independent non-executive member of the governing body has been appointed as the
lead independent, and the role and responsibilities assigned to the position.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

Committees of the governing body

Principle 8: The governing body should ensure that its arrangements for
delegation within its own structures promote independent judgement, and assist
with balance of power and the effective discharge of its duties.

RECOMMENDED PRACTICES
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39. The governing body should determine if and when to delegate particular roles and responsibilities to an
individual member or members of the governing body, or to standing or ad hoc-committees. The exercise of
judgement by the governing body in this regard, is subject to legal requirements and should be guided by what
is appropriate for the organisation and achieving the objectives of the delegation.
40. In the event that the governing body determines not to delegate all or some of the responsibilities dealt with in
WKLV&RGHDVSDUWRIWKHUHVSRQVLELOLWLHVRIDVSHFL¿FFRPPLWWHHWKHJRYHUQLQJERG\VKRXOGHQVXUHWKDWLWIXO¿OV
those responsibilities itself.
41. Delegation to an individual member or members of the governing body should be recorded in writing and
approved by the governing body. The record should set out the nature and extent of the responsibilities
delegated, decision-making authority, the duration of the delegation, and the delegates’ reporting
responsibilities.
42. Delegation to committees should be recorded by means of a formal terms of reference that should be
approved and reviewed annually by the governing body.
43. The terms of reference should, at a minimum, deal with the following:
a. The composition of the committee and, if applicable, the process and criteria for the appointment of any
committee members who are not members of the governing body.
b. The committee’s overall role and associated responsibilities and functions.
c. Delegated authority with respect to decision-making.
d. The tenure of the committee.
e. When and how the committee should report to the governing body and others.
f. The committee’s access to resources and information.
g. The meeting procedures to be followed.
h. The arrangements for evaluating the committee’s performance.
44. The governing body should consider the allocation of roles and associated responsibilities and the
composition of membership across committees holistically, so as to achieve the following:
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competing approaches.
c. A balanced distribution of power in respect of membership across committees, so that no individual has the
ability to dominate decision-making, and no undue reliance is placed on any individual.

54 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

45. The governing body should ensure that each committee, as a whole, has the necessary knowledge, skills,
experience and capacity to execute its duties effectively.
46. Each committee should have a minimum of three members subject to legal provisions, where applicable.
47. Members of the executive and senior management should be invited to attend committee meetings either by
standing invitation or on an ad hoc-basis to provide pertinent information and insights in their areas of
responsibility.
48. Every member of the governing body is entitled to attend any committee meeting as an observer. However,
unless that member is also a member of the committee, the member is not entitled to participate without the
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fees is agreed to by the governing body and shareholders.
49. Any delegation by the governing body of its responsibilities to a committee or a member of the governing body
member will not by or of itself constitute a discharge of the governing body’s accountability. The governing
body should apply its collective mind to the information, opinions, recommendations, reports and statements
presented by the committee or the member.
50. The following should be disclosed in relation to each committee of the governing body:
a. Its overall role and associated responsibilities and functions.
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c. Any external advisers or invitees who regularly attend committee meetings.
d. Key areas of focus during the reporting period.
e. The number of meetings held during the reporting period and attendance at those meetings.
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reference for the reporting period.
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51. The establishment of an audit committee is a statutory requirement for some organisations. As a matter of
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consider establishing an audit committee, the role of which should be to provide independent oversight of,
among others:
a. the effectiveness of the organisation’s assurance functions and services, with particular focus on combined
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IXQFWLRQDQG
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external reports issued by the organisation.
52. A statutory audit committee has the power to make decisions regarding its statutory duties, and is accountable
for its performance in this regard. In addition to its statutory duties, the governing body may delegate other
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governing body remains ultimately accountable for such delegated responsibilities.
53. If the governing body delegates risk governance to the audit committee, the audit committee should satisfy
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54. Whether or not the governance of risk is delegated to the audit committee, the audit committee should oversee
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CONTINUED

7KHPHPEHUVRIWKHDXGLWFRPPLWWHHVKRXOGDVDZKROHKDYHWKHQHFHVVDU\¿QDQFLDOOLWHUDF\VNLOOVDQG
experience to execute their duties effectively.
56. All members of the audit committee should be independent, non-executive members of the governing body.
57. The governing body should appoint an independent, non-executive member to chair the audit committee.
58. The audit committee should meet annually with the internal and external auditors respectively, without
management being present, to facilitate an exchange of views and concerns that may not be appropriate for
discussion in an open forum.
59. In addition to required statutory disclosure and the disclosures recommended in paragraph 50, the following
should also be disclosed in relation to the audit committee:
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i. the policy and controls that address the provision of non-audit services by the external auditor, and the
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  LL WKHWHQXUHRIWKHH[WHUQDODXGLW¿UPDQGLQWKHHYHQWRIWKH¿UPKDYLQJEHHQLQYROYHGLQDPHUJHURU
DFTXLVLWLRQLQFOXGLQJWKHWHQXUHRIWKHSUHGHFHVVRU¿UP
  LLL WKHURWDWLRQRIWKHGHVLJQDWHGH[WHUQDODXGLWSDUWQHUDQG
  LY V LJQL¿FDQWFKDQJHVLQWKHPDQDJHPHQWRIWKHRUJDQLVDWLRQGXULQJWKHH[WHUQDODXGLW¿UP¶VWHQXUHZKLFK
may mitigate the attendant risk of familiarity between the external auditor and management.
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and how these were addressed by the committee.
c. The audit committee’s views on the quality of the external audit, with reference to audit quality indicators
such as those that may be included in inspection reports issued by external audit regulators.
d. The audit committee’s views on the effectiveness of the chief audit executive and the arrangements for
internal audit.
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FRQWUROVDQGRQWKHQDWXUHDQGH[WHQWRIDQ\VLJQL¿FDQWZHDNQHVVHVLQWKHGHVLJQLPSOHPHQWDWLRQRU
H[HFXWLRQRILQWHUQDO¿QDQFLDOFRQWUROVWKDWUHVXOWHGLQPDWHULDO¿QDQFLDOORVVIUDXGFRUUXSWLRQRUHUURU
 I 7
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g. The arrangements in place for combined assurance and the committee’s views on its effectiveness.
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60. The governing body should consider allocating the oversight of the following to a dedicated committee,
or adding it to the responsibilities of another committee as is appropriate for the organisation:
a. The process for nominating, electing and appointing members of the governing body.
b. Succession planning in respect of governing body members.
c. Evaluation of the performance of the governing body.

56 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

61. All members of the committee for nominations should be non-executive members of the governing body,
and the majority should be independent.
Refer to paragraph 50 for the recommended disclosures in relation to the committee responsible for nominations.
&RPPLWWHHUHVSRQVLEOHIRUULVNJRYHUQDQFH
62. The governing body should consider allocating the oversight of risk governance to a dedicated committee,
or adding it to the responsibilities of another committee as is appropriate for the organisation.
63. If the committees for audit and risk are separate, the governing body should consider for one or more
members to have joint membership of both committees for more effective functioning.
64. The committee for risk governance should have executive and non-executive members, with a majority being
non-executive members of the governing body.
Refer to paragraph 50 for the recommended disclosures in relation to the committee responsible for risk.
&RPPLWWHHUHVSRQVLEOHIRUUHPXQHUDWLRQ
65. The governing body should consider allocating oversight of remuneration to a dedicated committee, or adding
it to the responsibilities of another committee as is appropriate for the organisation.
66. All members of the committee for remuneration should be non-executive members of the governing body, with
the majority being independent non-executive members of the governing body.
67. The committee for remuneration should be chaired by an independent non-executive member.
Refer to paragraph 50 for the recommended disclosures in relation to the committee responsible for remuneration.
6RFLDODQGHWKLFVFRPPLWWHH
68. For some companies, the establishment of a social and ethics committee is a statutory requirement. The
governing body of any organisation not so obliged should consider allocating oversight of, and reporting on,
organisational ethics, responsible corporate citizenship, sustainable development and stakeholder
relationships to a dedicated committee, or adding it to the responsibilities of another committee as is
appropriate for the organisation.
69. The responsibilities of the social and ethics committee should include its statutory duties (if applicable) and
any other responsibilities delegated to it by the governing body.
70. The social and ethics committee should, subject to legal provisions, have executive and non-executive
members, with a majority being non-executive members of the governing body.
Refer to paragraph 50 for the recommended disclosures in relation to the social and ethics committee.

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 KING IV CODE ON CORPORATE GOVERNANCE
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Evaluations of the performance of the governing body

Principle 9: The governing body should ensure that the evaluation of its own
performance and that of its committees, its chair and its individual members,
support continued improvement in its performance and effectiveness.

RECOMMENDED PRACTICES
71. The governing body should assume responsibility for the evaluation of its own performance and that of its
committees, its chair and its individual members by determining how it should be approached and conducted.
72. The governing body should appoint an independent non-executive member to lead the evaluation of the
chair’s performance if a lead independent is not in place.
73. A formal process, either externally facilitated or not in accordance with methodology approved by the
governing body, should be followed for evaluating the performance of the governing body, its committees, its
chair and its individual members at least every two years.
74. Every alternate year, the governing body should schedule in its yearly work plan an opportunity for
FRQVLGHUDWLRQUHÀHFWLRQDQGGLVFXVVLRQRILWVSHUIRUPDQFHDQGWKDWRILWVFRPPLWWHHVLWVFKDLUDQGLWV
members as a whole.
75. The following should be disclosed in relation to the evaluation of the performance of the governing body:
a. A description of the performance evaluations undertaken during the reporting period, including their scope,
whether they were formal or informal, and whether they were externally facilitated or not.
b. An overview of the evaluation results and remedial actions taken.
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effectiveness.

Appointment and delegation to management

Principle 10: The governing body should ensure that the appointment of, and
delegation to, management contribute to role clarity and the effective exercise of
authority and responsibilities.

RECOMMENDED PRACTICES
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76. The governing body should appoint the CEO.
77. The CEO should be responsible for leading the implementation and execution of approved strategy, policy and
operational planning, and should serve as the chief link between management and the governing body.
78. The CEO should be accountable, and report to, the governing body.
79. The CEO should not be a member of the remuneration, audit or nomination committees, but should attend by
invitation any meeting, or part thereof, if needed to contribute pertinent insights and information.

58 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

80. The CEO and the governing body should agree on whether the CEO takes up additional professional
positions, including membership of other governing bodies outside the organisation. Time constraints and
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development.
81. The governing body should satisfy itself that there is succession planning for the CEO position in place to
provide continuity of executive leadership. Succession planning should be reviewed periodically, and should
provide for both succession in emergency situations and succession over the longer term.
82. The governing body should formally evaluate the performance of the CEO against agreed performance
measures and targets at least annually.
83. The following should be disclosed in relation to the CEO:
a. The notice period stipulated in the CEO’s employment contract and the contractual conditions related to
termination.
b. Other professional commitments of the CEO, including membership of governing bodies outside the
organisation.
c. Whether succession planning is in place for the CEO position.
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84. The governing body should set the direction and parameters for the powers which are to be reserved for itself,
and those that are to be delegated to management via the CEO.
85. The governing body should approve a delegation of authority framework that articulates its set direction on
reservation and delegation of power.
86. The governing body should ensure that the delegation of authority framework addresses the authority to
appoint executives who will serve as H[RI¿FLR-executive members of the governing body and to make other
executive appointments.
87. The governing body should oversee that key management functions are:
a. headed by an individual with the necessary competence and authority, and
b. adequately resourced.
88. The governing body should satisfy itself that there is succession planning in place for executive management
and other key positions to provide continuity of leadership. Succession planning should be reviewed
periodically, and provide for both succession in emergency situations and succession over the longer term.
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contributes to role clarity and the effective exercise of authority and responsibilities should be disclosed.
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90. The governing body should ensure that it has access to professional and independent guidance on corporate
governance and its legal duties, and also that it has support to coordinate the functioning of the governing
body and its committees.
91. For some companies, the appointment of a company secretary is a statutory requirement. In respect of those
companies, the company secretary provides professional corporate governance services. The governing body
of an organisation not so obliged should, as a matter of leading practice, consider appointing a company
secretary or other professional, as is appropriate for the organisation, to provide professional corporate
governance services to the governing body.

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92. The governing body should approve the arrangements for the provision of professional corporate governance
services, including whether to outsource them to a juristic person, or to make a full-time or part-time
appointment.
5HJDUGOHVVRIWKHDUUDQJHPHQWVLWKDVDSSURYHGWKHJRYHUQLQJERG\VKRXOGHQVXUHWKDWWKHRI¿FHRIWKH
company secretary or other professional providing corporate governance services, is empowered and that the
position carries the necessary authority.
94. The governing body should approve the appointment, including the employment contract and remuneration of
the company secretary or other professional providing corporate governance services. The governing body
should oversee that the person appointed has the necessary competence, gravitas and objectivity to provide
independent guidance and support at the highest level of decision-making in the organisation.
95. The governing body should have primary responsibility for the removal of the company secretary or other
professional providing corporate governance services.
96. The company secretary or other professional providing corporate governance services should have unfettered
access to the governing body but, for reasons of independence, should maintain an arms-length relationship
ZLWKLWDQGLWVPHPEHUVDFFRUGLQJO\WKHFRPSDQ\VHFUHWDU\VKRXOGQRWEHDPHPEHURIWKHJRYHUQLQJERG\
97. The company secretary or other professional providing corporate governance services should report to the
governing body via the chair on all statutory duties and functions performed in connection with the governing
body. Regarding other duties and administrative matters, the company secretary or other professional
providing corporate governance services should report to the member of executive management designated
for this purpose as is appropriate for the organisation.
98. The performance and independence of the company secretary or other professional providing corporate
governance services should be evaluated at least annually by the governing body.
99. The arrangements in place for accessing professional corporate governance services and a statement on
whether the governing body believes those arrangements are effective should be disclosed.

60 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 5.4: GOVERNANCE FUNCTIONAL AREAS

Risk governance

Principle 11: The governing body should govern risk in a way that supports the
organisation in setting and achieving its strategic objectives.

RECOMMENDED PRACTICES
1. The governing body should assume responsibility for the governance of risk by setting the direction for how
risk should be approached and addressed in the organisation. Risk governance should encompass both:
 D WKHRSSRUWXQLWLHVDQGDVVRFLDWHGULVNVWREHFRQVLGHUHGZKHQGHYHORSLQJVWUDWHJ\DQG
b. the potential positive and negative effects of the same risks on the achievement of organisational objectives.
2. The governing body should treat risk as integral to the way it makes decisions and executes its duties.
3. The governing body should approve policy that articulates and gives effect to its set direction on risk.
4. The governing body should evaluate and agree the nature and extent of the risks that the organisation should
be willing to take in pursuit of its strategic objectives. It should approve in particular:
 D WKHRUJDQLVDWLRQ¶VULVNDSSHWLWHQDPHO\LWVSURSHQVLW\WRWDNHDSSURSULDWHOHYHOVRIULVNDQG
b. the limit of the potential loss that the organisation has the capacity to tolerate.
5. The governing body should delegate to management the responsibility to implement and execute effective risk
management.
6. The governing body should exercise ongoing oversight of risk management and, in particular, oversee that it
results in the following:
a. An assessment of risks and opportunities emanating from the triple context in which the organisation
operates and the capitals that the organisation uses and affects.
b. An assessment of the potential upside, or opportunity, presented by risks with potentially negative effects
on achieving organisational objectives.
c. An assessment of the organisation’s dependence on resources and relationships as represented by the
various forms of capital.
d. The design and implementation of appropriate risk responses.
e. The establishment and implementation of business continuity arrangements that allow the organisation to
operate under conditions of volatility, and to withstand and recover from acute shocks.
f. The integration and embedding of risk management in the business activities and culture of the
organisation.
7. The governing body should consider the need to receive periodic independent assurance on the effectiveness
of risk management.
8. The nature and extent of the risks and opportunities the organisation is willing to take should be disclosed
without compromising sensitive information.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

9. In addition, the following should be disclosed in relation to risk:

a. An overview of the arrangements for governing and managing risk.
b. Key areas of focus during the reporting period, including objectives, the key risks that the organisation
faces, as well as undue, unexpected or unusual risks and risks taken outside of risk tolerance levels.
c. Actions taken to monitor the effectiveness of risk management and how the outcomes were addressed.
d. Planned areas of future focus.

Technology and information governance

Principle 12: The governing body should govern technology and information in a
way that supports the organisation setting and achieving its strategic objectives.

RECOMMENDED PRACTICES
10. The governing body should assume responsibility for the governance of technology and information by setting
the direction for how technology and information should be approached and addressed in the organisation.
11. The governing body should approve policy that articulates and gives effect to its set direction on the
employment of technology and information.
12. The governing body should delegate to management the responsibility to implement and execute effective
technology and information management.
13. The governing body should exercise ongoing oversight of technology and information management and,
in particular, oversee that it results in the following:
a. Integration of people, technologies, information and processes across the organisation.
b. Integration of technology and information risks into organisation-wide risk management.
c. Arrangements to provide for business resilience.
d. Proactive monitoring of intelligence to identify and respond to incidents, including cyber attacks and
adverse social media events.
e. Management of the performance of, and the risks pertaining to, third-party and outsourced service
providers.
 I 7
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LQIRUPDWLRQLQFOXGLQJWKHHYDOXDWLRQRISURMHFWVWKURXJKRXWWKHLUOLIHF\FOHVDQGRIVLJQL¿FDQWRSHUDWLRQDO
expenditure.
g. The responsible disposal of obsolete technology and information in a way that has regard to environmental
impact and information security.
h. Ethical and responsible use of technology and information.
i. Compliance with relevant laws.

62 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

14. The governing body should exercise ongoing oversight of the management of information and, in particular,
oversee that it results in the following:
a. The leveraging of information to sustain and enhance the organisation’s intellectual capital.
 E $QLQIRUPDWLRQDUFKLWHFWXUHWKDWVXSSRUWVFRQ¿GHQWLDOLW\LQWHJULW\DQGDYDLODELOLW\RILQIRUPDWLRQ
c. The protection of privacy of personal information.
d. The continual monitoring of security of information.
15. The governing body should exercise ongoing oversight of the management of technology and, in particular,
oversee that it results in the following:
a. A technology architecture that enables the achievement of strategic and operational objectives.
b. The management of the risks pertaining to the sourcing of technology.
c. Monitoring and appropriate responses to developments in technology, including the capturing of potential
opportunities and the management of disruptive effects on the organisation and its business model.
16. The governing body should consider the need to receive periodic independent assurance on the effectiveness
of the organisation’s technology and information arrangements, including outsourced services.
17. The following should be disclosed in relation to technology and information:
a. An overview of the arrangements for governing and managing technology and information.
 E .H\DUHDVRIIRFXVGXULQJWKHUHSRUWLQJSHULRGLQFOXGLQJREMHFWLYHVVLJQL¿FDQWFKDQJHVLQSROLF\
VLJQL¿FDQWDFTXLVLWLRQVDQGUHPHGLDODFWLRQVWDNHQDVDUHVXOWRIPDMRULQFLGHQWV
c. Actions taken to monitor the effectiveness of technology and information management and how the
outcomes were addressed.
d. Planned areas of future focus.

Compliance governance

Principle 13: The governing body should govern compliance with applicable laws
and adopted, non-binding rules, codes and standards in a way that supports the
organisation being ethical and a good corporate citizen.

RECOMMENDED PRACTICES
18. The governing body should assume responsibility for the governance of compliance with applicable laws and
adopted, non-binding rules, codes and standards by setting the direction for how compliance should be
approached and addressed in the organisation.
19. The governing body should approve policy that articulates and gives effect to its direction on compliance, and
WKDWLGHQWL¿HVZKLFKQRQELQGLQJUXOHVFRGHVDQGVWDQGDUGVWKHRUJDQLVDWLRQKDVDGRSWHG

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

20. The governing body should delegate to management responsibility for implementation and execution of
effective compliance management.
21. The governing body should exercise ongoing oversight of compliance and, in particular, oversee that it results in
the following:
a. Compliance being understood not only for the obligations it creates, but also for the rights and protections
it affords.
b. Compliance management taking a holistic view of how applicable laws and non-binding rules, codes and
standards relate to one another.
c. Continual monitoring of the regulatory environment and appropriate responses to changes and
developments.
22. The governing body should consider the need to receive periodic independent assurance on the effectiveness
of compliance management.
23. The following should be disclosed in relation to compliance:
a. An overview of the arrangements for governing and managing compliance.
b. Key areas of focus during the reporting period.
c. Actions taken to monitor the effectiveness of compliance management and how the outcomes were
addressed.
d. Planned areas of future focus.
0DWHULDORUUHSHDWHGUHJXODWRU\SHQDOWLHVVDQFWLRQVRU¿QHVIRUFRQWUDYHQWLRQVRIRUQRQFRPSOLDQFHZLWK
VWDWXWRU\REOLJDWLRQVZKHWKHULPSRVHGRQWKHRUJDQLVDWLRQRURQPHPEHUVRIWKHJRYHUQLQJERG\RURI¿FHUV
should be disclosed.
'HWDLOVRIPRQLWRULQJDQGFRPSOLDQFHLQVSHFWLRQVE\HQYLURQPHQWDOUHJXODWRUV¿QGLQJVRIQRQFRPSOLDQFHZLWK
environmental laws, or criminal sanctions and prosecutions for such non-compliance should be disclosed.

Remuneration governance

Principle 14: The governing body should ensure that the organisation remunerates
fairly, responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.

RECOMMENDED PRACTICES
5HPXQHUDWLRQSROLF\
26. The governing body should assume responsibility for the governance of remuneration by setting the direction
for how remuneration should be approached and addressed on an organisation-wide basis.
27. The governing body should approve policy that articulates and gives effect to its direction on fair, responsible
and transparent remuneration.

64 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

28. The remuneration policy should be designed to achieve the following objectives:
a. To attract, motivate, reward and retain human capital.
b. To promote the achievement of strategic objectives within the organisation’s risk appetite.
c. To promote positive outcomes.
d. To promote an ethical culture and responsible corporate citizenship.
29. The remuneration policy should address organisation-wide remuneration and include provision for the
IROORZLQJVSHFL¿FDOO\
a. Arrangements towards ensuring that the remuneration of executive management is fair and responsible in
the context of overall employee remuneration in the organisation.
b. The use of performance measures that support positive outcomes across the economic, social and
HQYLURQPHQWDOFRQWH[WLQZKLFKWKHRUJDQLVDWLRQRSHUDWHVDQGRUDOOWKHFDSLWDOVWKDWWKHRUJDQLVDWLRQXVHV
or affects.
c. If the organisation is a company, the voting by shareholders on the remuneration policy and
implementation report, and for the implementation of related responding measures as outlined under
Voting on Remuneration below.
30. All elements of remuneration that are offered in the organisation and the mix of these should be set out in the
remuneration policy, including:
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 F S
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e. the provisions, if any, for pre-vesting forfeiture (malus) and post-vesting forfeiture (claw-back) of
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g. the fees of non-executive members of the governing body.
31. The governing body should oversee that the implementation and execution of the remuneration policy
achieves the objectives of the policy.
5HPXQHUDWLRQUHSRUW
32. The governing body should ensure that remuneration is disclosed by means of a remuneration report in
three parts:
a. A background statement.
b. An overview of the main provisions of the remuneration policy.
c. An implementation report which contains details of all remuneration awarded to individual members of the
governing body and executive management during the reporting period.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

Background statement
7KHEDFNJURXQGVWDWHPHQWVKRXOGEULHÀ\SURYLGHFRQWH[WIRUUHPXQHUDWLRQFRQVLGHUDWLRQVDQGGHFLVLRQVZLWK
reference to:
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b. the most recent results of voting on the remuneration policy and the implementation report and the
PHDVXUHVWDNHQLQUHVSRQVHWKHUHWR
c. key areas of focus and key decisions taken by the remuneration committee during the reporting period,
LQFOXGLQJDQ\VXEVWDQWLDOFKDQJHVWRWKHUHPXQHUDWLRQSROLF\
 G ZKHWKHUUHPXQHUDWLRQFRQVXOWDQWVKDYHEHHQXVHGDQGZKHWKHUWKHUHPXQHUDWLRQFRPPLWWHHLVVDWLV¿HG
WKDWWKH\ZHUHLQGHSHQGHQWDQGREMHFWLYH
 H WKHYLHZVRIWKHUHPXQHUDWLRQFRPPLWWHHRQZKHWKHUWKHUHPXQHUDWLRQSROLF\DFKLHYHGLWVVWDWHGREMHFWLYHV
and
f. future areas of focus.
Overview of remuneration policy
34. The overview of the main provisions of the remuneration policy should address the objectives of the policy and
the manner in which the policy seeks to accomplish these. The overview should include the following:
a. The remuneration elements and design principles informing the remuneration arrangements for executive
management and, at a high level, for other employees.
b. Details of any obligations in executive employment contracts which could give rise to payments on
WHUPLQDWLRQRIHPSOR\PHQWRURI¿FH
c. A description of the framework and performance measures used to assess the achievement of strategic
objectives and positive outcomes, including the relative weighting of each performance measure and the
period of time over which it is measured.
d. An illustration of the potential consequences on the total remuneration for executive management, on a
VLQJOHWRWDO¿JXUHEDVLVRIDSSO\LQJWKHUHPXQHUDWLRQSROLF\XQGHUPLQLPXPRQWDUJHWDQGPD[LPXP
performance outcomes.
e. An explanation of how the policy addresses fair and responsible remuneration for executive management
in the context of overall employee remuneration.
 I 7
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g. The basis for the setting of fees for non-executive directors.
h. A reference to an electronic link to the full remuneration policy for public access.

66 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Implementation report
35. The implementation report, which includes the remuneration disclosure in terms of the Companies Act, should
UHÀHFWWKHIROORZLQJ
a. The remuneration of each member of executive management, which should include in separate tables:
  L D
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UHPXQHUDWLRQHOHPHQWVWKDWLWFRPSULVHVHDFKGLVFORVHGDWIDLUYDOXH
ii. the details of all awards made under variable remuneration incentive schemes in the current and prior
\HDUVWKDWKDYHQRW\HWYHVWHGLQFOXGLQJWKHQXPEHURIDZDUGVWKHYDOXHVDWGDWHRIJUDQWWKHLUDZDUG
YHVWLQJDQGH[SLU\GDWHV ZKHUHDSSOLFDEOH DQGWKHIDLUYDOXHDWWKHHQGRIWKHUHSRUWLQJSHULRGDQG
iii. the cash value of all awards made under variable remuneration incentive schemes that were settled
during the reporting period.
b. An account of the performance measures used and the relative weighting of each, as a result of which
awards under variable remuneration incentive schemes have been made, including: the targets set for the
SHUIRUPDQFHPHDVXUHVDQGWKHFRUUHVSRQGLQJYDOXHRIWKHDZDUGRSSRUWXQLW\DQGIRUHDFKSHUIRUPDQFH
measure, how the organisation and executive managers, individually, performed against the set targets.
 F 6
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d. A statement regarding compliance with, and any deviations from, the remuneration policy.
9RWLQJRQUHPXQHUDWLRQ(only applicable to companies)
36. In terms of the Companies Act, fees for non-executive directors for their services as directors must be
submitted for approval by special resolution by shareholders within the two years preceding payment.
37. The remuneration policy and the implementation report should be tabled every year for separate non-binding
advisory votes by shareholders at the AGM.
38. The remuneration policy should record the measures that the board commits to take in the event that either
the remuneration policy or the implementation report, or both have been voted against by 25% or more of the
voting rights exercised. Such measures should provide for taking steps in good faith and with best reasonable
effort towards the following at a minimum:
a. An engagement process to ascertain the reasons for the dissenting votes.
b. Appropriately addressing legitimate and reasonable objections and concerns raised, which may include
amending the remuneration policy, or clarifying or adjusting remuneration governance and/or processes.
39. In the event that either the remuneration policy or the implementation report, or both were voted against by
25% or more of the voting rights exercised, the following should be disclosed in the background statement of
the remuneration report succeeding the voting:
a. with whom the company engaged, and the manner and form of engagement to ascertain the reasons for
GLVVHQWLQJYRWHVDQG
b. the nature of steps taken to address legitimate and reasonable objections and concerns.

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 KING IV CODE ON CORPORATE GOVERNANCE
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Assurance

Principle 15: The governing body should ensure that assurance services and
functions enable an effective control environment, and that these support the
integrity of information for internal decision-making and of the organisation’s
external reports.

RECOMMENDED PRACTICES
&RPELQHGDVVXUDQFH
40. The governing body should assume responsibility for assurance by setting the direction concerning the
arrangements for assurance services and functions. The governing body should delegate to the audit
committee, if in place, the responsibility for overseeing that those arrangements are effective in achieving the
following objectives:
a. Enabling an effective internal control environment.
b. Supporting the integrity of information used for internal decision-making by management, the governing
body and its committees.
c. Supporting the integrity of external reports.
41. The governing body should satisfy itself that a combined assurance model is applied which incorporates and
optimises the various assurance services and functions so that, taken as a whole, these support the objectives
for assurance.
42. The governing body should oversee that the combined assurance model is designed and implemented to
FRYHUHIIHFWLYHO\WKHRUJDQLVDWLRQ¶VVLJQL¿FDQWULVNVDQGPDWHULDOPDWWHUVWKURXJKDFRPELQDWLRQRIWKHIROORZLQJ
assurance service providers and functions as is appropriate for the organisation:
a. The organisation’s line functions that own and manage risks.
b. The organisation’s specialist functions that facilitate and oversee risk management and compliance.
c. Internal auditors, internal forensic fraud examiners and auditors, safety and process assessors, and
statutory actuaries.
d. Independent external assurance service providers such as external auditors.
e. Other external assurance providers such as sustainability and environmental auditors, external actuaries,
and external forensic fraud examiners and auditors.
f. Regulatory inspectors.
43. The governing body and its committees should assess the output of the organisation’s combined assurance with
objectivity and professional skepticism, and by applying an enquiring mind, form their own opinion on the integrity
of information and reports, and the degree to which an effective control environment has been achieved.

68 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

$VVXUDQFHRIH[WHUQDOUHSRUWV
44. The governing body should assume responsibility for the integrity of external reports issued by the
organisation by setting the direction for how assurance of these should be approached and addressed.
45. The governing body’s direction in this regard should take into account legal requirements in relation to
assurance, with the following additional considerations:
a. Whether assurance should be applied to the underlying data used to prepare a report, or to the process for
preparing and presenting a report, or both.
b. Whether the nature, scope and extent of assurance are suited to the intended audience and purpose of
a report.
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of the report.
7KHJRYHUQLQJERG\VKRXOGVDWLVI\LWVHOIWKDWWKHFRPELQHGDVVXUDQFHPRGHOLVHIIHFWLYHDQGVXI¿FLHQWO\UREXVW
for the governing body to be able to place reliance on the combined assurance underlying the statements that
the governing body makes concerning the integrity of the organisation’s external reports.
47. External reports should disclose information about the type of assurance process applied to each report, in
addition to the independent, external audit opinions provided in terms of legal requirements. This information
should include:
a. a brief description of the nature, scope and extent of the assurance functions, services and processes
XQGHUO\LQJWKHSUHSDUDWLRQDQGSUHVHQWDWLRQRIWKHUHSRUWDQG
b. a statement by the governing body on the integrity of the report and the basis for this statement, with
reference to the assurance applied.
Refer to Part 5.3: Audit committee for recommended disclosures by the audit committee concerning the
organisation’s application of combined assurance.
,QWHUQDODXGLW
48. The governing body should assume responsibility for internal audit by setting the direction for the internal audit
arrangements needed to provide objective and relevant assurance that contributes to the effectiveness of
governance, risk management and control processes. The governing body should delegate oversight of
internal audit to the audit committee, if in place.
7KHJRYHUQLQJERG\VKRXOGDSSURYHDQLQWHUQDODXGLWFKDUWHUWKDWGH¿QHVWKHUROHDQGDVVRFLDWHG
responsibilities and authority of internal audit, including addressing its role within combined assurance and the
internal audit standards to be adopted.
50. The governing body should ensure that the arrangements for internal audit provide for the necessary skills and
resources to address the complexity and volume of risk faced by the organisation, and that internal audit is
supplemented as required by specialist services such as those provided by forensic fraud examiners and
auditors, safety and process assessors, and statutory actuaries.
51. If a chief audit executive (CAE) position is provided for in the arrangements for internal audit, the governing
body should ensure that the position is set up to function independently from management who designs and
implements the controls that are in place, and that the position carries the necessary authority.
52. The governing body should approve the appointment of the CAE, including the employment contract and
UHPXQHUDWLRQRIWKH&$(DQGHQVXUHWKDWWKHSHUVRQZKR¿OOVWKHSRVLWLRQKDVWKHQHFHVVDU\FRPSHWHQFH
gravitas and objectivity.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

53. For reasons of independence, the CAE should have access to the chair of the audit committee.
54. For reasons of independence, the CAE should not be a member of executive management, but should be
invited to attend executive meetings, as necessary, to be informed about strategy and policy decisions and
their implementation.
55. Where internal audit services are co-sourced or outsourced, the governing body should ensure that there is
FODULW\RQZKRIXO¿OVWKHUROHRI&$(
56. The CAE should report to the chair of the audit committee on the performance of duties and functions that
relate to internal audit. On other duties and administrative matters, the CAE should report to the member of
executive management designated for this purpose as appropriate for the organisation.
57. The governing body should have primary responsibility for the removal of the CAE.
58. The governing body should monitor on an ongoing basis that internal audit:
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accordingly.
59. The governing body should ensure that internal audit provides an overall statement annually as to the
effectiveness of the organisation’s governance, risk management and control processes.
60. The governing body should ensure that an external, independent quality review of the internal audit function is
FRQGXFWHGDWOHDVWRQFHHYHU\¿YH\HDUV
7KHJRYHUQLQJERG\VKRXOGREWDLQFRQ¿UPDWLRQDQQXDOO\IURPWKH&$(WKDWLQWHUQDODXGLWFRQIRUPVWRD
recognised industry code of ethics.
Refer to Part 5.3: Audit committee for recommended disclosures by the audit committee concerning internal audit
arrangements and the internal control environment.

70 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 5.5: STAKEHOLDER RELATIONSHIPS

Stakeholders

Principle 16: In the execution of its governance role and responsibilities, the
governing body should adopt a stakeholder-inclusive approach that balances the
needs, interests and expectations of material stakeholders in the best interests of
the organisation over time.

RECOMMENDED PRACTICES
6WDNHKROGHUUHODWLRQVKLSV
1. The governing body should assume responsibility for the governance of stakeholder relationships by setting
the direction for how stakeholder relationships should be approached and conducted in the organisation.
2. The governing body should approve policy that articulates and gives effect to its direction on stakeholder
relationships.
3. The governing body should delegate to management the responsibility for implementation and execution of
effective stakeholder relationship management.
4. The governing body should exercise ongoing oversight of stakeholder relationship management and, in
particular, oversee that it results in the following:
a. Methodologies for identifying individual stakeholders and stakeholder groupings.
b. Determination of material stakeholders based on the extent to which they affect, or are affected by, the
activities, outputs and outcomes of the organisation.
c. Management of stakeholder risk as an integral part of organisation-wide risk management.
d. Formal mechanisms for engagement and communication with stakeholders, including the use of dispute
resolution mechanisms and associated processes.
e. Measurement of the quality of material stakeholder relationships, and appropriate responses to the
outcomes.
5. The following should be disclosed in relation to stakeholder relationships:
a. An overview of the arrangements for governing and managing stakeholder relationships.
b. Key areas of focus during the reporting period.
c. Actions taken to monitor the effectiveness of stakeholder management and how the outcomes were
addressed.
d. Future areas of focus.

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 KING IV CODE ON CORPORATE GOVERNANCE
CONTINUED

6KDUHKROGHUUHODWLRQVKLSV(Applicable to companies only)

6. The board should oversee that the company encourages proactive engagement with shareholders, including
engagement at the annual general meeting (AGM) of the company.
7. All directors should be available at the AGM to respond to shareholders’ queries on how the board executed
its governance duties.
 7KHERDUGVKRXOGHQVXUHWKDWWKHGHVLJQDWHGSDUWQHURIWKHH[WHUQDODXGLW¿UPDWWHQGVWKH$*0
9. The board should ensure that shareholders are equitably treated, and that the interests of minority
shareholders are adequately protected.
10. The minutes of the AGMs of listed companies should be made publicly available.
5HODWLRQVKLSVZLWKLQDJURXSRIFRPSDQLHV(Applicable to companies within a group)
11. The board of the holding company should assume responsibility for governance across the group by setting
the direction for how the relationships and exercise of power within the group should be approached and
conducted.
12. The board should approve a group governance framework that articulates and gives effect to its direction on
relationships and the exercise of authority across the group.
13. The adoption and implementation of the policies, structures and procedures of the holding company is a
matter for consideration and approval by the board of the subsidiary company as a separate legal entity. The
board of the holding company should therefore ensure that the boards of its subsidiaries are included in the
development of the group governance framework.
7KHERDUGRIWKHKROGLQJFRPSDQ\VKRXOGHQVXUHWKDWWKHJURXSJRYHUQDQFHIUDPHZRUNGRHVQRWFRQÀLFWZLWK
the memoranda of incorporation, delegations of authority, shareholder agreements, board charters, board
committee terms of reference, and related policies and agreements within the group.
15. The board of the holding company should ensure that the group governance framework recognises each
VXEVLGLDU\ZLWKLQWKHJURXSDVDVHSDUDWHDQGLQGHSHQGHQWMXULVWLFSHUVRQWRZKRPLWVGLUHFWRUVRZH¿GXFLDU\
duties.
16. The board of the holding company should ensure that the group governance framework addresses
governance matters as is appropriate for the group, including the following:
a. Delineation of the rights and role of the holding company.
b. If applicable, delegation of certain responsibilities by the board of a subsidiary to a board committee of the
holding company, without abdicating accountability, and subject to agreed reporting and information-
sharing arrangements.
c. The extent to which governance and operational policies of the holding company have been adopted by
subsidiary companies in the group.
d. Engagement by the holding company with the board of a subsidiary company before the holding company
exercises its rights to elect directors to the board of the subsidiary.
e. Arrangements to address the risk of breaching legal duty in relation to the use of information obtained
while acting as director of one company in the group for the purposes of another company in the group.

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 Ethical Good Effective Legitimacy
culture performance control

17. The board of the holding company should ensure that the agreed group governance framework is
implemented across the group.
18. The holding company should disclose an overview of the group governance framework that is implemented
across the group.
19. The subsidiary company should disclose what responsibilities it has delegated to board committees of the
holding company and the extent to which it has adopted the policies and procedures of the holding company.

Responsibilities of institutional investors

Principle 17: The governing body of an institutional investor organisation should

ensure that responsible investment is practiced by the organisation to promote the
good governance and the creation of value by the companies in which it invests.

RECOMMENDED PRACTICES
20. The governing body of an institutional investor should assume responsibility for governing responsible
investing by setting the direction for how it should be approached and conducted by the organisation.
21. The governing body should approve policy that articulates its direction on responsible investment. This policy
should provide for the adoption of a recognised responsible investment code, principles and practices.
22. The governing body should delegate to management, if in place, or alternatively, to the outsourced service
provider if investment decisions and investment activities are outsourced, the responsibility to implement and
execute its policy on responsible investment.
23. Where the institutional investor outsources investment decisions or investment activities to custodians,
nominees, consultants or other service providers, the governing body should oversee that the outsourcing is
UHJXODWHGE\IRUPDOPDQGDWHZKLFKUHÀHFWVDQGJLYHVHIIHFWWRLWVUHVSRQVLEOHLQYHVWPHQWSROLF\
24. The governing body should ensure that service providers are held accountable for complying with the formal
mandate.
25. The responsible investment code adopted by the institutional investor and the application of its principles and
practices should be disclosed.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 73
 PART 6

SECTOR SUPPLEMENTS

Part 6.1: Introduction to sector supplements

Part 6.2: Supplement for municipalities
Part 6.3: Supplement for non-profit organisations
Part 6.4: Supplement for retirement funds
Part 6.5: Supplement for small and medium enterprises
Part 6.6: Supplement for state-owned entities

74 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

SECTOR SUPPLEMENTS
PART 6.1: INTRODUCTION TO SECTOR
SUPPLEMENTS
How to use the supplements
The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance. Exactly how this should be done is explained below, but the following
is a quick guide:
All governance outcomes as per the Code apply.
All principles as per the Code apply, with the necessary adaptation of terminology as explained in each
supplement.
The recommended practicesLQWKH&RGHVKRXOGEHFRQVLGHUHGWRJHWKHUZLWKWKHVSHFL¿FUHFRPPHQGDWLRQV
contained in each supplement and industry or sector codes and guidance issued by professional and
industry bodies and regulators. Implementation of practices is subject to applicable legislation and scaling for
proportional application as is appropriate for the organisation.
Reference should be made to the King IV Implementation Roadmap outlined below.

In keeping with the balance of the King IV Report, the supplements are primarily aimed at the governing body, it
being the focal point of corporate governance within the organisation.
In these supplements, “corporate” refers to organisations that are incorporated to form legal entities separate from
WKHLUIRXQGHUV,WWKHUHIRUHGRHVQRWDSSO\RQO\WRFRPSDQLHVRUIRUSUR¿WHQWHUSULVHVEXWDOOIRUPVRILQFRUSRUDWLRQ
whether as company, voluntary association, retirement fund, trust, legislated entity or others. The term “corporate
governance” is used to differentiate it from other forms of governance, for example national or political
governance.

Purpose of the supplements

The purpose of the supplements is to provide high-level guidance and direction on how the King IV Code should
be interpreted and applied by a variety of sectors and organisational types.
SUPPLEMENTS FOR SPECIFIC SECTORS AND CATEGORIES OF ORGANISATION
The King IV Report does not include supplements for all sectors and categories of organisations. It was decided
to issue supplements that were representative of a wide range of sectors and categories of organisations. Those
VHFWRUVDQGFDWHJRULHVRIRUJDQLVDWLRQVIRUZKLFKVSHFL¿FVXSSOHPHQWVDUHQRWSURYLGHGVKRXOGFRQVLGHUWKH
particular supplement which is most closely aligned to their organisational structure.
High-level guidance on interpretation and application of King IV
The supplements illustrate how the King IV Code should be interpreted and applied in various contexts, situations
and legislative regimes. Due to the wide variety of such, and the numerous governance challenges that may
present themselves as a result, it is not possible to cover all in the supplements. Furthermore, an attempt to do so
would be contrary to the normative rather than prescriptive approach of King IV.

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 SECTOR SUPPLEMENTS
CONTINUED

Instead of addressing all the potential variables, the supplements are intended to demonstrate how the Code
should be interpreted and applied in a number of representative contexts, situations and legislative regimes. It is
hoped that these demonstrations will enable those charged with governance duties to adapt the practices to their
particular governance challenges – including those challenges not addressed in the supplements – while still
giving effect to the aspirations expressed in the principles. The examples in the supplements are designed to
demonstrate the manner in which governing bodies should apply their minds to King IV and do not replace the
exercise of judgement by providing detailed solutions for all situations.
&HUWDLQDVSHFWVRI.LQJ,9DUHHPSKDVLVHGLQSDUWLFXODUVXSSOHPHQWVIRUWKHLUUHOHYDQFHWRDVSHFL¿FVHFWRU,W
would be inaccurate to conclude that those aspects in the King IV Code that are not dealt with or not referred to
VSHFL¿FDOO\LQWKHVXSSOHPHQWVQHHGQRWEHFRQVLGHUHG

Reconciling King IV to legislation

Applicable legislation sets the minimum governance standards to be complied with. If King IV sets the bar higher,
organisations should strive to achieve the higher aspiration in the interest of sound governance. If there is a
FRQÀLFWEHWZHHQWKHOHJLVODWLRQDQG.LQJ,9WKHOHJLVODWLRQSUHYDLOV+RZHYHUWKHPHUHIDFWWKDW.LQJ,9DGYRFDWHV
DKLJKHUVWDQGDUGRIJRYHUQDQFHWKDQWKHOHJLVODWLRQGHPDQGVGRHVQRWLQLWVHOIQHFHVVDULO\FRQVWLWXWHDFRQÀLFW
$FRQÀLFWRQO\DULVHVZKHQ.LQJ,9DQGOHJLVODWHGSURYLVLRQVFDQQRWEHUHFRQFLOHGQRWZKHQWKH\DUHPHUHO\
different. Therefore, implementing a higher standard than that required by law will still be compliant with the
minimum requirements of the law.
The diagram below depicts the framework for governance of organisations:

1. Applicable legislation sets the minimum

standards to be complied with. If King IV sets
the bar higher, organisations should strive to
achieve the higher aspiration in the interest of
VRXQGJRYHUQDQFH,IWKHUHLVDFRQÀLFWEHWZHHQ
the legislation and King IV, the legislation
prevails.

1 2. King IV principles are phrased so that they

hold true across all organisations. The
principles are the embodiment of the aspirations
in the journey towards good corporate

2 governance. They guide on what organisations

should strive to achieve by the application of
governance practices.

3. King IV practices should be adapted

to meet the challenges of sectoral contexts,
situations and legislative regimes. The King IV
supplements together with industry or sector
codes and guidance explain how this is to be

3 done.

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 Ethical Good Effective Legitimacy
culture performance control

In certain instances, references to particular acts, sections of acts and regulations are included in the
supplements to demonstrate the linkage and alignment between the principles and recommendations of King IV
and legislation, albeit that different terminology or wording is used. King IV seeks to promote and give substance
and effect to legislation, and it should be interpreted in this light.

Proportional application
Even within the same sector, organisations vary largely in size, resources, and extent and complexity of activities.
Appreciating this is important when interpreting King IV in order to apply it.
The following examples illustrate how recommended practices could be scaled in accordance with proportionality
considerations:
:KHUHLWLVUHFRPPHQGHGLQWKH&RGHWKDWFHUWDLQIXQFWLRQVVKRXOGEHHVWDEOLVKHG±IRUH[DPSOH¿QDQFHULVN
technology and information, compliance or internal audit functions – such functions could consist of a senior
employee instead of a team of people. If proportionality considerations warrant it, further scaling could be
achieved by allocating part-time responsibility for the function to such an employee. Outsourcing of functions is
DQRWKHUDOWHUQDWLYHDQGVRLVVKDULQJIXQFWLRQVDQGUHVRXUFHVZLWKDI¿OLDWHGRUJDQLVDWLRQV
$UHFRPPHQGDWLRQWKDWDFRPPLWWHHRIWKHJRYHUQLQJERG\VKRXOGEHIRUPHGFRXOGLIMXVWL¿HGE\SURSRUWLRQDOLW\
FRQVLGHUDWLRQVEHUHSODFHGE\KDYLQJWKHJRYHUQLQJERG\FDUU\LQJRXWWKHIXQFWLRQVQRUPDOO\IXO¿OOHGE\VXFK
committee. Alternatively, the governing body could formally delegate, without abdicating accountability, to one of
its members to investigate, consider and prepare submissions for recommendation and consideration by the full
governing body.
Where the Code recommends that a formal policy be established, it could be accomplished by formalising in
writing a few guiding criteria and processes, and by continually developing the document as learning evolves. The
EHQH¿WVRIEHLQJLQWHQWLRQDODQGGHYRWLQJWKHQHFHVVDU\FRQVLGHUDWLRQWRSXWWLQJSROLFLHVDQGVWUXFWXUHVLQSODFH
VKRXOGQRWEHXQGHUHVWLPDWHG'RLQJVRFODUL¿HVLQWHQWLRQDQGHQVXUHVDOLJQPHQWDPRQJWKRVHDIIHFWHGE\WKH
policy on the nature and extent of responsibilities, functions and authority delegated.
Proportional application of the practices should still give effect to the principles. Refer to Part 3: King IV
Application and Disclosure for more guidance on proportionality.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 77
 SECTOR SUPPLEMENTS
CONTINUED
King IV implementation roadmap
Map applicable legal provisions
that pertain to the duties of those
charged with governance to the
relevant King IV principles and
their associated practices.
78 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
Identify the legal provisions that
cannot be reconciled with the
VSHFL¿F.LQJ,9SUDFWLFHV
Note these legal provisions as
the point of departure for the
development of the organisation’s
governance practices.
Assess the outcomes of the
implementation of King IV on a
qualitative basis by the measure
of achievement of the aspirations
as per the principles and the
realisation of the governance
outcomes. Take the necessary
steps for enhancement of
practices, if and where necessary.
Consider the remaining King IV
practices in conjunction with
(i) the illustrations in the
supplement, (ii) industry or sector
codes and guidance, and (iii)
proportionality considerations,
to develop a set of organisation-
VSHFL¿FJRYHUQDQFHSUDFWLFHV
This consideration should set
out to achieve the aspirations as
expressed in the principles.
Implement and apply King IV
in accordance with the organi-
VDWLRQVSHFL¿FJRYHUQDQFH
practices as developed, and
as ultimately approved by the
governing body.
 Ethical Good Effective Legitimacy
culture performance control

PART 6.2: SUPPLEMENT FOR MUNICIPALITIES

The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance.

0XQLFLSDOLWLHVWKHPDFURYLHZDQGEHQH¿WVRI
corporate governance
The structural and institutional arrangements are different for the different types of municipalities – metropolitan,
district and local municipalities. The common feature is that they are accountable to the communities they serve.
In terms of section 152(1) of the Constitution, the objectives of local government (which consists of municipalities) are:
• to provide democratic and accountable government for local communities;
• to ensure the provision of services to communities in a sustainable manner;
• to promote social and economic development;
• to promote a safe and healthy environment; and
• to encourage the involvement of communities and community organisations in the matters of local government.
Section 153 of the Constitution furthermore refers to the developmental duties of municipalities. Thus,
PXQLFLSDOLWLHVSURYLGHDIRXQGDWLRQIRURXUGHPRFUDF\WKHHI¿FLHQF\ZLWKZKLFKWKH\GHOLYHUVHUYLFHVLVWKHEDVLV
for economic and social cohesion in the context of a developmental state.
Good governance is essential to ensure the success of the municipality itself, and to protect and advance the
interests of those whom it serves. Good corporate governance assists by enhancing the functioning of leadership
structures, and by providing the arrangements which enable the council to govern the municipality in such a way
that it is able to meet its objectives.

Scope
This supplement applies to category A, B and C municipalities as provided for in the Municipal Structures Act.
Even within the same sector, organisations vary largely in size, resources, and extent and complexity of activities.
The scope of this supplement was, therefore, limited for the sake of clarity. An attempt to address too wide a
range of variables may defeat the intent of the supplement, namely to demonstrate how the practices in the Code
should be interpreted and applied in a number of representative contexts, situations and legislative regimes.
Municipalities falling outside the scope of this supplement should still align with the principles and consider the
practices while adapting them along the approach as demonstrated in this supplement. Refer to Part 6.1:
Introduction to Sector Supplements for the King IV Implementation Roadmap to assist with this.

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 SECTOR SUPPLEMENTS
CONTINUED

King IV and municipalities

TERMINOLOGY
In order to apply the King IV Code to municipalities without having to repeat it in its entirety, it is necessary to
explain how the terminology used in the Code could be substituted for terminology applicable to municipalities.
Although leadership structures in municipalities are not directly comparable to those of other organisations, the
following guidelines can be used when interpreting the terminology in the King IV Code in a municipal context:

Term used in the King IV Code Relevant term for municipalities

Organisation Municipality
Governing body Municipal council
Management Management of the municipality, including the
PXQLFLSDOPDQDJHUDVDFFRXQWLQJRI¿FHUDQGVHQLRU
PDQDJHPHQWDVGH¿QHGLQWKH0XQLFLSDO)LQDQFH
Management Act (MFMA).
Members of the governing body Councillors
Chair of the governing body Speaker
&KLHIH[HFXWLYHRI¿FHU 0XQLFLSDOPDQDJHURUDFFRXQWLQJRI¿FHU
External auditor Auditor-General of South Africa (Auditor-General)
Shareholder Municipalities do not have shareholders, but in many
respects, community members can be regarded as
such.

7KHRI¿FHRIPD\RURUH[HFXWLYHPD\RURIDPXQLFLSDOLW\GRHVQRWKDYHDQHTXLYDOHQWLQWKH.LQJ,9&RGH
+RZHYHUWKLVGRHVQRWVXJJHVWWKDWWKHPD\RURUH[HFXWLYHPD\RURIDPXQLFLSDOLW\GRHVQRWIXO¿ODJRYHUQDQFH
function in a municipality. In respect of these politically elected positions, the Municipal Structures Act, MFMA and
other pertinent legislation must be followed.
BACKGROUND
Municipalities are autonomous, but operate within a system of cooperative governance in terms of the
Constitution. Cooperative governance requires that the various spheres of government (national, provincial and
local) cooperate in exercising their powers and performing their functions. The governance of municipalities
should be viewed in the context of cooperative governance without detracting from municipal autonomy.
KING IV PRINCIPLES AND PRACTICES
The essence of the King IV Code, as represented by its governance outcomes and principles, applies to
municipalities with the necessary adaptation in terminology. Principles are repeated below for ease of reference.

80 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 1: The council should lead ethically and effectively.

(WKLFDODQGHIIHFWLYHOHDGHUVKLSLVH[HPSOL¿HGE\LQWHJULW\FRPSHWHQFHUHVSRQVLELOLW\DFFRXQWDELOLW\IDLUQHVVDQG
transparency. Members of the council should individually and collectively cultivate these characteristics and
exhibit them in their conduct, as set out in the practices under Principle 1. This is congruent with section 195 of
the Constitution, in terms of which public administration must be governed by the democratic values and
principles enshrined in the Constitution, including that a high standard of professional ethics must be promoted
and maintained. Section 50 of the Municipal Systems Act echoes this and a Code of Conduct for Councillors is
included in Schedule 1 of that act. Schedule 5 of the Municipal Structures Act similarly includes a Code of
Conduct for Councillors. The practices associated with Principle 1 should be considered to supplement and
provide substance to these legal provisions.

Principle 2: The council should govern the ethics of the municipality in a way that
supports the establishment of an ethical culture.

In addition to assuming responsibility for their own character and conduct, in accordance with Principle 2,
municipal councils should govern the ethics of the municipality. Schedule 2 of the Municipal Systems Act contains
a Code of Conduct for Municipal Staff Members. The recommended practices under Principle 2 provide useful
guidance on how to ensure and oversee adherence to this code and the ethics of the municipality, generally.

Principle 3: The council should ensure that the municipality is and is seen to be a
responsible corporate citizen.

Corporate citizenship is an alternative expression of the objectives of the municipality as set out in section 152(1)
of the Constitution (see above). Therefore, the recommended practices under Principle 3 apply with the necessary
adaptation to municipalities as a means to give effect to these objectives.

Principle 4: The council should appreciate that the municipality’s core purpose, its
risks and opportunities, strategy, business model, performance and sustainable
development are all inseparable elements of the value creation process.

The practices recommended under Principle 4 address the development and approval of the organisation’s
strategy, implementation thereof and organisational performance. For municipalities, strategy-development and
performance-management processes are largely legislated and the practices in King IV should therefore be
PRGL¿HGDFFRUGLQJO\

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 SECTOR SUPPLEMENTS
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Principle 5: The council should ensure that reports issued by the municipality
enable stakeholders to make informed assessments of the municipality’s
performance and its short, medium and long-term prospects.

Reports issued by the municipality are a means of communicating with its community. Reports that are
underpinned by integrated thinking and that present information about the resources and relationships on which
the municipality relies, its activities, outputs and outcomes in an integrated manner, are an effective way of
informing the community and other stakeholders about the municipality’s performance. It also demonstrates
accountability.
The role of the council with regards to reporting by the municipality is prescribed by legislation. The recommended
practices under Principle 5 should be considered by the council, and adapted as is necessary to reconcile with
legal provisions, so as to assist with executing its reporting duties.

Principle 6: The council should serve as the focal point and custodian of corporate
governance in the municipality.

The council should serve as the focal point of corporate governance as provided for in Principle 6. In accordance
with the Municipal Systems Act, a municipality is “an organ of state within the local sphere of government
exercising legislative and executive authority within an area”. In terms of section 151 of the Constitution, both
legislative and executive authority vest in the council.
The legislative and executive authority that the council derives from the Constitution and other legislation, gives it
dominium over the taxes and levies collected from those who reside within the borders of the municipality for the
supply of electricity, water, sanitation, refuse removal and other services. Also, municipal elections are a means by
which citizens nominate representatives, giving them the power to make decisions and execute them on their
EHKDOI7KHUHIRUHHYHQWKRXJKWKH0)0$DVFULEHV¿GXFLDU\GXWLHVWRWKHPXQLFLSDOPDQDJHUDVDFFRXQWLQJ
RI¿FHUWKHFRXQFLOVKDUHVLQWKHVH¿GXFLDU\GXWLHVE\YLUWXHRILWVFRQVWLWXWLRQDOUROH
Under Principle 6, the primary leadership role of any governing body is expressed as encompassing the following:
a. steering the organisation and setting its strategic direction;
b. approving policy and planning that give effect to the direction provided;
c. overseeing and monitoring of implementation and execution by management; and
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
It should be noted that the terminology used under this principle, namely strategy leading to policymaking, is
usually used in the reverse in a government setting with policy directives leading to strategic initiatives and plans.
Notwithstanding, and even though the Constitution, MFMA, Municipal Structures Act and Municipal Systems Act
DOODOORFDWHVSHFL¿FUHVSRQVLELOLWLHVWRWKHFRXQFLOWKHDERYHLVDXVHIXOIUDPHZRUNIRUWKHFRXQFLOWRDWWDLQDQ
overarching understanding of its role. It should be used as a standing reference point by the council when
discharging its responsibilities in any area of governance.

82 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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Principle 7: The council should comprise the appropriate balance of knowledge,

skills, experience, diversity and independence for it to discharge its governance
role and responsibilities objectively and effectively.

Knowledge, skills, experience and diversity of councillors

Principle 7 deals with the criteria for the composition of the governing
Summary of recommended
body. In a municipality, a mixed electoral system is followed for the
practices for the council’s
election of councillors in terms of which, depending on the category
access to the appropriate
of municipality, about half of the councillors are elected through a
proportional representation ballot where voters vote for a party. balance of knowledge, skills,
The other half are elected as ward councillors by the residents in each experience, diversity and
ward. The composition of councils can therefore, not be proactively independence:
planned by means of a nomination process on the basis of the • Political parties should
knowledge, skills, experience, diversity and independence required,
deploy councillors with
as dealt with in the recommended practices under Principle 7.
the necessary skills and
Even though the legislated provisions pertaining to election of council competency.
members prevail over the King IV recommended practices for nomination,
election and appointment, the council should still strive towards the • Council should ensure
aspiration expressed in this principle, as its composition is a key factor in-depth induction for
driving the performance of a municipality. Political parties can assist with councillors.
the achievement of this aspiration by deploying councillors with the • Council should ensure the
necessary knowledge, skills, experience and diversity.
establishement of
There should also be a strong emphasis on in-depth induction for newly professional education
elected councillors at the start of a new political term in the interest of programmes.
bolstering knowledge on the council. The council should furthermore
ensure that a continued and robust professional education programme • Council should make use of
IRUFRXQFLOORUVLVHVWDEOLVKHGZKLFKUXQVIRUWKHIXOOWHUPRIRI¿FHWR H[WHUQDOH[SHUWLVHRQVSHFL¿F
ensure the building of competence. matters outside the
knowledge, skills and
Employing external expertise as recommended in the practices under
experience of councillors,
Principle 7 will further assist the council with its oversight duties in the
when required.
HYHQWWKDWREMHFWLYHLQSXWRQVSHFL¿FPDWWHUVRXWVLGHWKHNQRZOHGJH
skills and experience of councillors is required.

Independence of councillors
Independence of the members of the governing body is dealt with under Principle 7. Municipal councillors are
HOHFWHGWRUHSUHVHQWORFDOFRPPXQLWLHVRQWKHFRXQFLOEXWWKH\PD\KDYHSDUW\SROLWLFDODI¿OLDWLRQVZKLFKUHVXOWLQ
them not being independent in appearance. However, as a matter of law, all councillors must exercise objective
judgement when executing their legal duties in the best interests of the municipality and its community.
This is reinforced in the Code of Conduct for Councillors in Schedule 1 of the Municipal Systems Act. The constitutional
integrity of the council as a collective body acting at all times in the best interests of the municipality and the community
it serves, enjoys priority over the interests of individual councillors.
Speaker
7KHUHLVQRLQGHSHQGHQWFKDLURIFRXQFLODVSURYLGHGIRULQWKH&RGH7KHUROHRIFKDLULVIXO¿OOHGE\WKHVSHDNHU
It is recommended that the practices under Principle 7 in relation to the chair be considered for how they could
supplement the legislated role of the speaker.

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 SECTOR SUPPLEMENTS
CONTINUED

Principle 8: The council should ensure that its arrangements for delegation within
its own structures promote independent judgement, and assist with balance of
power and the effective discharge of its duties.

The Municipal Systems Act provides in section 59 that the council must “develop a system of delegation that will
PD[LPLVHDGPLQLVWUDWLYHDQGRSHUDWLRQDOHI¿FLHQF\DQGSURYLGHIRUDGHTXDWHFKHFNVDQGEDODQFHV´7KH0XQLFLSDO
Systems Act prescribes a wide range of powers and functions that may or may not be delegated. Councils may
only delegate authority if they are expressly or by implication authorised to do so by law. The recommended
practices under Principles 8 and 10 should be considered subject to these legal provisions.
In terms of section 79 of the Municipal Structures Act, the council is entitled to set up committees such as
Municipal Public Accounts Committees1 to assist with general oversight of the municipality’s performance.
This aligns with the practices recommended under Principle 8 of the Code, which address delegation by the
council within its own structures.
The audit committee’s duties as regards to the appointment and independence of the auditor, as set out in the
recommended practices under this principle, apply differently in municipalities as the Auditor-General serves as
the external auditor for a municipality. Furthermore, the structure and functions of the municipal audit committee
are prescribed by legislation and prevail over the recommended practices in the Code. However, in so far as the
legislation allows, the Code’s recommended practices in respect of the execution of the duties of the audit
committee should be considered to supplement the minimum standard set by law.

Principle 9: The council should ensure that the evaluation of its own performance
and that of its committees, its speaker and its individual councillors, support
continued improvement in its performance and effectiveness.

The evaluation of the performance of the governing body, its members and committees as addressed by Principle 9
and its associated practices, applies to municipalities. In respect of council members who are deployed by political
parties, it is recommended that the council and political parties collaborate on the manner and form in which the
performance of the council and councillors should be assessed. The results of the performance evaluations should
be responded to by the council so as to achieve continued improvement in its performance and effectiveness as per
the principle.

1 Municipal Public Accounts Committee, “Enhancing Oversight in the Municipality Practical Guide”, SALGA and National Treasury, March 2012. Also refer to
section 129(4) of the MFMA.

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 Ethical Good Effective Legitimacy
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Principle 10: The council should ensure that the appointment of, and delegation
to, management contribute to role clarity and the effective exercise of authority
and responsibilities.

In accordance with Principle 10 and also section 82 of the Municipal Structures Act, the council should appoint the
municipal manager. The regulations for performance management and minimum competency levels of municipal
managers should be taken into account in this regard. It is in the interest of the council to ensure that it appoints
competent municipal management, so that it is able to place reasonable reliance for its decision-making on any
information, opinions, recommendations, reports or statements presented by management.
Under Principle 10, it is furthermore recommended that the council should ensure that it has access to
professional and independent guidance on corporate governance and its legal duties, and also that it has support
WRFRRUGLQDWHWKHIXQFWLRQLQJRIWKHFRXQFLODQGLWVFRPPLWWHHV)RUFRPSDQLHVWKLVUROHLVIXO¿OOHGE\WKHFRPSDQ\
secretary. As a matter of leading practice, it is recommended that municipal councils appoint a suitably
experienced professional to provide these services.

Principle 11: The council should govern risk in a way that supports the municipality
in setting and achieving its strategic objectives.

Principle 12: The council should govern technology and information in a way that
supports the municipality setting and achieving its strategic objectives.

Principle 13: The council should govern compliance with applicable laws and
adopted, non-binding rules, codes and standards in a way that supports the
municipality being ethical and a good corporate citizen.

Principle 14: The council should ensure that the municipality remunerates fairly,
responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.

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Principle 15: The council should ensure that assurance services and functions
enable an effective control environment, and that these support the integrity of
information for internal decision-making and of the municipality’s external reports.

7KHUHFRPPHQGHGSUDFWLFHVXQGHU3ULQFLSOHVWRZKLFKGHDOZLWKVSHFL¿FJRYHUQDQFHIXQFWLRQDODUHDV
should be interpreted and applied in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

Principle 16: In the execution of its governance role and responsibilities, the
council should adopt a stakeholder-inclusive approach that balances the needs,
interests and expectations of material stakeholders in the best interests of the
municipality over time.

Stakeholders
The primary stakeholder of a municipality is its community. In terms of section 2 of the Municipal Systems Act, a
municipality consists of a community, a council and an administration. Therefore, communities must be involved,
and community engagement should go beyond one-way communication from the municipality to its community.
Other stakeholders include community organisations, political parties active in the municipality, national and
provincial departments and industry and sector bodies. The practice recommendations under Principle 16 are
applicable to give effect to the duties of the council in relation to governing stakeholder relationships.
In alignment with government initiatives already under way, it is recommended that municipal councils proactively
set up reviews of municipal service delivery by the citizenry, as a way of monitoring and evaluating municipal
performance.
Municipal entities as stakeholders of municipalities
In keeping with Principle 16, the council is legally obliged to oversee the performance of administration and
executive organs of the municipality, including the municipal entities (MEs). MEs should be managed as a
material stakeholder grouping. The council should ensure that the business plan of the ME, developed in terms of
section 87 of the MFMA, the municipal mandate and the Integrated Development Plan are all aligned. Integrating
the strategy plan and execution thereof between the municipality and the MEs, ensures that the MEs operate
within the mandate, powers and functions assigned and agreed with the municipality. A governance framework,
broadly based on the recommended practices for group companies under Principle 16, is useful and should be
considered by municipal councils to govern their relationship with the MEs.
(Note that Principle 17 does not apply to municipalities.)

86 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 6.3: SUPPLEMENT FOR NON-PROFIT

ORGANISATIONS
The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance.

132VWKHPDFURYLHZDQGEHQH¿WVRIFRUSRUDWHJRYHUQDQFH
7DNLQJLQWRDFFRXQWWKHFULWLFDOUROHQRQSUR¿WRUJDQLVDWLRQV 132V IXO¿OLWLVLQWKHLQWHUHVWRIWKHZKROHRIVRFLHW\
that this sector should thrive. This role is articulated as follows by the World Bank:
• providing goods and services – especially meeting needs which have not hitherto been met by either the state
or by the private sector;
• assisting the government to achieve its development objectives – in particular through contributing skills for
which NPOs have comparative advantage, such as public information, education and communications
campaigns, or providing information about the situations and needs of particularly vulnerable groups;
• helping citizens to voice their aspirations, concerns and alternatives for consideration by policy makers, thereby
giving substance to governments’ policies regarding freedoms of association and speech;
• helping to enhance the accountability and transparency of government and local government programmes and
RIRI¿FLDOV1

Good corporate governance contributes to the success of an NPO as it enhances the functioning of its
leadership structures and provides the arrangements by which the governing body should govern the NPO so
WKDWLWLVDEOHWRPHHWLWVVWUDWHJLFREMHFWLYHV7KHSDUWLFXODUEHQH¿WVWKDWFRXOGEHGHULYHGIURPWKHJRRG
governance of an NPO include the following:
• Added credibility and enhanced reputation.
• Increased impact of activities and advocacy through stronger stakeholder relationships and more effective
operational processes.
• Access to funding, grants and loans on better terms.
• The ability to leverage a wider pool of expertise for employment and volunteer work.
• Better fraud prevention due to improved controls.
• Business continuity arrangements that permit the NPO to operate under conditions of volatility, and to
withstand and recover from acute shocks.
• Leadership continuity through succession planning.

 :
 RUOG%DQN³7KH5ROHRI1RQSUR¿WRUJDQL]DWLRQVLQ'HYHORSPHQW7KHH[SHULHQFHRIWKH:RUOG%DQN´The World Bank, available at
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTSOCIALDEVELOPMENT/
EXTPCENG/0,,contentMDK:20507529~menuPK:1278313~pagePK:148956~piPK:216618~theSitePK:410306,00.htmll

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 SECTOR SUPPLEMENTS
CONTINUED

Scope
$Q132FDQEHLQFRUSRUDWHGLQYDULRXVIRUPVLQFOXGLQJDVDQRQSUR¿WFRPSDQ\FKDULWDEOHWUXVWYROXQWDU\
association, club or fund. NPOs may also be referred to as non-governmental organisations (NGOs) or as Public
%HQH¿W2UJDQLVDWLRQV 3%2V ±WKHODWWHUUHIHUVWRWKHWD[H[HPSWVWDWXVRIFHUWDLQDFWLYLWLHVRIRUJDQLVDWLRQV
JUDQWHGE\WKH6RXWK$IULFDQ5HYHQXH6HUYLFHDQGQRWWKHLUIRUPRILQFRUSRUDWLRQDOWKRXJKIRUSUR¿WRUJDQLVDWLRQV
GRQRWTXDOLI\IRUWKLVVWDWXV7KHWHUP³VRFLDOHQWHUSULVHV´GHVFULEHVRUJDQLVDWLRQVWKDWIXO¿OVRFLDORU
HQYLURQPHQWDOQHHGV7KH\FRXOGEHVHWXSDVIRUSUR¿WHQWLWLHVWKDWRSHUDWHDVSULYDWHFRPSDQLHVVROH
proprietorships, business trusts or partnerships.2
7KLVVXSSOHPHQWDGGUHVVHVQRQSUR¿WOHJDOIRUPVEXWLVQRWOLPLWHGWRRUJDQLVDWLRQVWKDWKDYHEHHQJUDQWHG132
VWDWXVLQWHUPVRIWKH1RQ3UR¿W2UJDQLVDWLRQV$FW,WWKXVDSSOLHVWR1*2V3%2VDQGRWKHU132VEXWZRXOG
H[FOXGHVRFLDOHQWHUSULVHVWKDWIROORZDIRUSUR¿WEXVLQHVVPRGHO

King IV and NPOs

TERMINOLOGY
In order to apply the King IV Code to NPOs without having to repeat it in its entirety, it is necessary to explain how
the terminology used in the Code could be interchanged for terminology applicable to NPOs.

Term used in the King IV Code Relevant term for NPOs

Organisation A board, commission, company, corporation, fund,
trust, voluntary association, or other term that would be
applicable.
Governing body Board or other term that would be applicable.
Shareholder 0HPEHURIDQ132LQFRUSRUDWHGDVDQRQSUR¿W
company with members, or member of a voluntary
association and also a donor as the provider of
¿QDQFLDOFDSLWDOWRWKH132,IGRQRUIXQGLQJLV
provided once-off, ad hoc or anonymously and no
continuing relationship exists, references to
shareholders do not apply to this category of funders.

In this supplement, the collective nouns “NPO” or “organisation” are used interchangeably. The supplement also
refers generically to “governing body” and “member of the governing body”.
KING IV PRINCIPLES AND PRACTICES
The essence of King IV, as represented by its governance outcomes and principles, applies to NPOs with the
necessary adaptation in terminology. Principles are repeated below for ease of reference.

2 Bertha Institute of Social Innovation and Entrepreneurship, A Guide to Legal Forms for Social Enterprises in South Africa (2015), p 5, available at
KWWSZZZJVEXFWDF]D¿OHV%HUWKD&HQWUH*XLGH/HJDO)RUPV6RFLDO(QWHUSULVHV6RXWK$IULFDSGI

88 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 1: The governing body should lead ethically and effectively.

(WKLFDODQGHIIHFWLYHOHDGHUVKLSLVH[HPSOL¿HGE\LQWHJULW\FRPSHWHQFHUHVSRQVLELOLW\DFFRXQWDELOLW\IDLUQHVVDQG
transparency. Members of the governing body should individually and collectively cultivate these characteristics
and exhibit them in their conduct as set out in the practices under Principle 1.
,QFOXGHGLQWKHHWKLFDOGXWLHVRIWKHJRYHUQLQJERG\DUHLWVOHJDOGXWLHV7KH¿GXFLDU\GXWLHVRIWKHPHPEHUVRIWKH
governing body of an NPO are, as a matter of law, owed to the organisation itself and not the party or
constituency by which the member is appointed. These legal duties stand regardless of whether members of the
governing body of an NPO act pro bono or for a minimum fee.
A governing body whose members are appointed as representatives of constituents, donors or other stakeholders
RIWKH132VKRXOGEHHVSHFLDOO\SURDFWLYHLQPDQDJLQJSRWHQWLDODQGDFWXDOFRQÀLFWV7KHVHFRQÀLFWVXVXDOO\
manifest in the entanglement of the private and professional interests of an individual. Examples of typical
FRQÀLFWVLQDQ132HQYLURQPHQWLQFOXGHFRPPXQLW\PHPEHUVEHLQJWKHEHQH¿FLDULHVRIWKHRXWSXWVRIWKH
organisation’s efforts, also serving on the NPO’s executive or governance structures; and the appointment of
relatives and friends as employees or paid consultants or suppliers. The following practice under Principle 1
VKRXOGEHLPSOHPHQWHGLQWKLVUHJDUG³0HPEHUVRIWKHJRYHUQLQJERG\VKRXOGDYRLGFRQÀLFWVRILQWHUHVW,QFDVHV
ZKHUHDFRQÀLFWFDQQRWEHDYRLGHGLWVKRXOGEHGLVFORVHGWRWKHJRYHUQLQJERG\LQIXOODWWKHHDUOLHVWRSSRUWXQLW\
and then proactively managed as determined by the governing body and subject to legal provisions.”

Principle 2: The governing body should govern the ethics of the organisation in a
way that supports the establishment of an ethical culture.

In addition to assuming responsibility for its own character and conduct, in accordance with Principle 2, the
governing body should govern the ethics of the NPO. The practices associated with this principle guide on how
the governing body should discharge this responsibility.

Principle 3: The governing body should ensure that the organisation is and is seen
to be a responsible corporate citizen.

%\YLUWXHRIDGYRFDWLQJIRUDQGIXO¿OOLQJVRFLDODQGHQYLURQPHQWDOQHHGVDFWLQJDVDFROOHFWLYHYRLFHDQGKROGLQJ
others responsible, NPOs are an integral part of the societal dynamic. NPOs are thus corporate citizens and
should apply the recommended practices pertaining to responsible corporate citizenship under Principle 3.

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Principle 4: The governing body should appreciate that the organisation’s core
purpose, its risks and opportunities, strategy, business model, performance and
sustainable development are all inseparable elements of the value creation process.

The practices recommended under Principle 4 address the development and approval of the organisation’s
strategy, implementation thereof and organisational performance.
7KHJRYHUQLQJERG\RIDQ132VKRXOGEDODQFHLWVSULRULWLHVVRDVWRERWKUHPDLQ¿QDQFLDOO\YLDEOHDQGGHOLYHURQ
environmental or social objectives as per its constitution. This accords with King IV’s assertion that performance
encompasses the triple context of the economy, society and the environment in which the organisation operates.
To accomplish this, it is important that an NPO clearly understands its strategy and business model as part of the
YDOXHFUHDWLRQSURFHVV7KH&RGHVRI*RRG3UDFWLFHIRU6RXWK$IULFDQ1RQ3UR¿W2UJDQLVDWLRQVLVVXHGE\WKH
'HSDUWPHQWRI6RFLDO'HYHORSPHQW &RGHVRI*RRG3UDFWLFHIRU6RXWK$IULFDQ132V VSHFL¿FDOO\KLJKOLJKWWKUHH
major responsibilities of the leaders of an emerging NPO to ensure survival and growth:
• (QVXULQJWKDWLWVVHUYLFHSURJUDPPHLVPHHWLQJFRPPXQLW\QHHGVRUSUREOHPVHIIHFWLYHO\DQGHI¿FLHQWO\
• (QVXULQJLWHVWDEOLVKHVDUHOLDEOHDQGVXVWDLQDEOHVXSSRUWEDVHLQRUGHUWRIXO¿OLWVZRUN
• Putting procedures in place to ensure the careful and accountable handling of all the organisation’s resources
and programmes.3
This guidance together with the recommended practices under Principle 4 will assist the governing bodies of
NPOs with the processes for strategy development and oversight of implementation and execution.

Principle 5: The governing body should ensure that reports issued by the
organisation enable stakeholders to make informed assessments of the
organisation’s performance and its short, medium and long-term prospects.

Reports are a powerful means for an NPO to communicate meaningfully with its stakeholders, among others,
EHQH¿FLDULHVGRQRUVDQGUHJXODWRUV5HSRUWVWKDWDUHXQGHUSLQQHGE\LQWHJUDWHGWKLQNLQJDQGWKDWSUHVHQW
information about the resources and relationships on which the NPO relies, its activities, outputs and outcomes in
an integrated manner, are an effective way of informing stakeholders about the NPO’s performance. It also
demonstrates accountability.

3 Adapted from: Department of Social Development, &RGHVRI*RRG3UDFWLFHIRU6RXWK$IULFDQ1RQSUR¿W2UJDQLVDWLRQV (2001), p 7; available at

http://www.dsd.gov.za/npo/index.php?option=com_docman&task=cat_view&gid=20&Itemid=116

90 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

The G4 Global Reporting Initiative’s Sector Disclosures for NGOs highlights why reporting is important to NPOs:
• It enables NPOs to report on the extent to which they act as sustainable organisations in society.
• It provides NPOs with the opportunity to demonstrably meet the same standards of transparency and disclosure
of positive and negative aspects of performance that are asked of other sectors.
• It provides opportunities for the organisation itself and its stakeholders to assess its policies and programmes
and effectiveness, and the economic, social and environmental impacts of its activities.
• Through the process of reporting, an NPO can critically examine its own activities, benchmark itself with other
organisations, learn from experience and make improvements over time to better serve the causes it pursues.4
The practices under Principle 5 should be considered by the governing body to assist with its reporting
responsibilities.

Principle 6: The governing body should serve as the focal point and custodian of
corporate governance in the organisation.

The governing body’s status as the focal point and custodian of corporate governance, as set out in Principle 6, is
DQDWXUDOFRQVHTXHQFHRILWV¿GXFLDU\GXWLHVWRZDUGVWKHRUJDQLVDWLRQ7KLVFRPPRQODZGXW\RULJLQDWHVIURPWKH
fact that the governing body is entrusted with assets and interests, other than its own.
Under Principle 6, the primary leadership role of any governing body is expressed as encompassing the following:
a. steering the organisation and setting its strategic direction;
b. approving policy and planning that give effect to the direction provided;
c. overseeing and monitoring of implementation and execution by management; and
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
The above is a useful framework for the governing body of an NPO to attain an overarching understanding of its
role. It should be used as a standing reference point by the governing body when discharging its responsibilities in
any area of governance.
As stated in the Codes of Good Practice for South African NPOs5, the role of an NPO’s governing body tends to
emerge from the circumstances that gave birth to the organisation. As the organisation evolves and grows, so the
JRYHUQLQJERG\¿QGVLWVHOIIDFHGZLWKHYROYLQJFKDOOHQJHV$WDQ\VWDJHRIWKHRUJDQLVDWLRQDOOLIHF\FOHLWLV
important for a governing body to be clear on how best to lead and provide direction.

4 Adapted from: Global Reporting Initiatives, G4 Sustainability Reporting Guidelines – Sector Disclosures for NGOs, (2013); p 8

5 Department of Social Development, &RGHVRI*RRG3UDFWLFHIRU6RXWK$IULFDQ1RQSUR¿W2UJDQLVDWLRQV (2001), p 13, available at

http://www.dsd.gov.za/npo/index.php?option=com_docman&task=cat_view&gid=20&Itemid=116

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Principle 7: The governing body should comprise the appropriate balance of

knowledge, skills, experience, diversity and independence for it to discharge its
governance role and responsibilities objectively and effectively.

Principle 7 provides for the governing body to be composed so it is able to discharge its governance role and
responsibilities objectively and effectively. Where members of the governing body of an NPO are appointed as
representatives of constituents, donors or other stakeholders, it is challenging to achieve the balance of
knowledge, skills, experience, diversity and independence needed.
A formal process for the nomination, election and ultimately appointment of members of the governing body will
help to ensure that the knowledge, skills, experience, diversity and independence requirements of the governing
ERG\DUHLGHQWL¿HGWKDWWKHUHTXLUHPHQWVDUHFRPPXQLFDWHGWRWKRVHZKRDUHUHVSRQVLEOHIRUQRPLQDWLRQDQG
election, and that candidates are properly vetted. The practices recommended in support of Principle 7 should be
considered to accomplish this.
In order to overcome resource constraints and an inability to pay market-related fees for the services of
professional members of its governing body, an NPO should collaborate with professional bodies in its search for
governing body members. Many experienced professionals are prepared to serve their communities through
serving on the governing bodies of NPOs for no or minimal fees.
There is no optimum size and composition for the governing body of an NPO. There may be statutory
requirements and other considerations to be taken into account, such as where the NPO is in its growth cycle.
The governing body of an NPO and its chair should guard against members of the governing body sending
representatives to the governing body meetings, instead of attending themselves. Legally, this practice puts both
the member of the governing body and his or her representative at risk.

Principle 8: The governing body should ensure that its arrangements for
delegation within its own structures promote independent judgement, and assist
with balance of power and the effective discharge of its duties.

The establishment and delegation to committees of the governing body as addressed in the practices under
Principle 8 should be considered in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

92 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 9: The governing body should ensure that the evaluation of its own
performance and that of its committees, its chair and its individual members,
support continued improvement in its performance and effectiveness.

The evaluation of the performance of the governing body, its members and committees as addressed by Principle 9
and its associated practices, applies to NPOs. The results of the performance evaluations should be responded
to by the governing body so as to achieve continued improvement in its performance and effectiveness as per
the principle.

Principle 10: The governing body should ensure that the appointment of, and
delegation to, management contribute to role clarity and the effective exercise of
authority and responsibilities.

An NPO may be said to be maturing when members of the governing body are not involved in the day-to-day
UXQQLQJRIWKHRSHUDWLRQVPDQDJHPHQWRIVWDIIRURWKHUIXQFWLRQVRIWKHFKLHIH[HFXWLYHRI¿FHU6 The practices
under Principle 10 are pertinent in this regard. Due to resource constraints, delegation to members of the
governing body may be necessary under certain circumstances, but should only be considered and implemented
ZLWKWKHQHFHVVDU\JRYHUQDQFHSURFHVVHVDQGFRQWUROVLQSODFHSDUWLFXODUO\DVWKH\UHODWHWRFRQÀLFWVRILQWHUHVW
Under Principle 10, King IV furthermore recommends that the governing body should ensure that it has access to
professional and independent guidance on corporate governance and the legal duties of the governing body, and
also that it has support to coordinate the functioning of the governing body and its committees. For companies,
WKLVUROHLVIXO¿OOHGE\WKHFRPSDQ\VHFUHWDU\$VDPDWWHURIOHDGLQJSUDFWLFHLWLVUHFRPPHQGHGWKDWWKH
governing bodies of NPOs appoint a suitably experienced professional to provide these services. Consult the
guidance on proportional application provided in Part 6.1: Introduction to Sector Supplements for how this could
be implemented by NPOs.

Principle 11: The governing body should govern risk in a way that supports the
organisation in setting and achieving its strategic objectives.

 '
 HSDUWPHQWRI6RFLDO'HYHORSPHQW&RGHVRI*RRG3UDFWLFHIRU6RXWK$IULFDQ1RQSUR¿W2UJDQLVDWLRQV  SDYDLODEOHDW
http://www.dsd.gov.za/npo/index.php?option=com_docman&task=cat_view&gid=20&Itemid=116

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Principle 12: The governing body should govern technology and information in a
way that supports the organisation setting and achieving its strategic objectives.

Principle 13: The governing body should govern compliance with applicable laws
and adopted, non-binding rules, codes and standards in a way that supports the
organisation being ethical and a good corporate citizen.

Principle 14: The governing body should ensure that the organisation remunerates
fairly, responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.

Principle 15: The governing body should ensure that assurance services and
functions enable an effective control environment, and that these support the
integrity of information for internal decision-making and of the organisation’s
external reports.

7KHUHFRPPHQGHGSUDFWLFHVXQGHU3ULQFLSOHVWRZKLFKGHDOZLWKVSHFL¿FJRYHUQDQFHIXQFWLRQDODUHDV
should be interpreted and applied in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

Principle 16: In the execution of its governance role and responsibilities, the
governing body should adopt a stakeholder-inclusive approach that balances the
needs, interests and expectations of material stakeholders in the best interests of
the organisation over time.

Principle 16 addresses stakeholder relationships. Some NPOs have shareholders or members, and others have
GRQRUVRUIXQGHUVZKRDUHWKHSULPDU\SURYLGHUVRI¿QDQFLDOFDSLWDOWRWKH1322WKHUVWDNHKROGHUVLQFOXGH
HPSOR\HHVUHJXODWRUVPHGLDSDUWQHUVEHQH¿FLDULHVFRPPXQLWLHVVXSSOLHUVDQGFUHGLWRUV7KHUHFRPPHQGHG
practices under this principle assist with establishing stakeholder relationships that result in legitimacy, something
that is critical to the long-term viability and sustainability of the NPO.
Additional guidance is to be found in Section 4 of the G4 Global Reporting Initiative’s Sector Disclosures for
NGOs7, which is instructive on executing accountability to stakeholders.
(Note that Principle 17 does not apply to NPOs.)

7 Global Reporting Initiatives, G4 Sustainability Reporting Guidelines – Sector Disclosures for NGOs, (2013), p 31, available at
https://www.globalreporting.org/standards/sector-guidance/sectorguidanceG4/Pages/default.aspx

94 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 6.4: SUPPLEMENT FOR RETIREMENT FUNDS

The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance.

5HWLUHPHQWIXQGVWKHPDFURYLHZDQGEHQH¿WVRI
corporate governance
Retirement funds are an important part of the institutional investor industry, which consists of retirement funds,
insurance companies as well as custodians, nominees and service providers who act under mandate in respect of
any investment decisions and activities.
Retirement funds play an important role in the overall system of governance. They make investment decisions
and have rights as shareholders, and the way in which these decisions are made and rights are exercised either
reinforce or weaken the corporate governance of the companies that they invest in. Also, these funds owe
¿GXFLDU\GXWLHVWRWKHLUPHPEHUV7KH\WKHUHIRUHQHHGWREHZHOOJRYHUQHGDQGDSSO\WKHSULQFLSOHVRIUHVSRQVLEOH
investing in the quest for long-term, sustainable returns.
5HWLUHPHQWIXQGVWKDWIROORZDQGPDQGDWHUHVSRQVLEOHLQYHVWLQJZLHOGVLJQL¿FDQWSRZHUIRUWKHHQKDQFHPHQWRI
the checks and balances that are essential for an overall effective ecosystem of corporate governance and the
creation of value. In King IV following responsible investing principles and practices is put forward as part and
parcel of the good governance of retirement funds.

Scope
This supplement applies to all retirement funds, including the following types of funds in accordance with their
GH¿QLWLRQVLQWKH,QFRPH7D[$FW1RRIDVDPHQGHG
• Pension funds
• Provident funds
• Preservation funds
• Retirement annuity funds.
Even within the same sector, organisations vary largely in size, resources, and extent and complexity of activities.
The scope of the supplement was, therefore, limited for the sake of clarity. An attempt to address too wide a range
of variables may defeat the intent of the supplement, namely to demonstrate how the practices in the Code should
be interpreted and applied in a number of representative contexts, situations and legislative regimes. Retirement
funds falling outside the scope of this supplement should still align with the principles and consider the practices
while adapting them along the approach as demonstrated in the supplement. Refer to Part 6.1: Introduction to
Sector Supplements for the King IV Implementation Roadmap to assist with this.

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King IV and retirement funds

BACKGROUND
In addition to legislation and King IV, the Code for Responsible Investing in South Africa1 (CRISA) is a voluntary
FRGHDSSOLFDEOHWRLQVWLWXWLRQDOLQYHVWRUVWKHGH¿QLWLRQRIZKLFKLQFOXGHVUHWLUHPHQWIXQGV&5,6$DQG.LQJ,9DUH
complementary codes that reinforce and complement each other. Other industry or sector codes and guidance,
such as Financial Services Board Circular PF 1302 (FSB Circular PF 130) should be considered in conjunction
with this supplement. (Refer to the governance framework included in Part 6.1: Introduction to Sector
Supplements.)
TERMINOLOGY
In order to apply the King IV Code to retirement funds without having to repeat it in its entirety, it is necessary
to explain how the terminology used in the Code could be interchanged for terminology applicable to
retirement funds.

Term used in the King IV Code Relevant term for retirement funds
Organisation Retirement fund, including pension fund, provident
fund, preservation fund or retirement annuity fund.
Governing body %RDUGRIWKHIXQGDVGH¿QHGLQWKH3HQVLRQ)XQGV$FW
&KLHIH[HFXWLYHRI¿FHU 6LPLODUEXWQRWLGHQWLFDOWR3ULQFLSDO2I¿FHU
Shareholder Member of the retirement fund and, depending on the
context, could include the sponsoring employee.

In this supplement, the collective nouns “retirement fund” or “fund” are used interchangeably, as are “board” and
“governing body”.
KING IV PRINCIPLES AND PRACTICES
The essence of King IV as represented by its governance outcomes and principles apply to retirement funds with
the necessary adaptation in terminology. Principles are repeated below for ease of reference.

Principle 1: The board should lead ethically and effectively.

(WKLFDODQGHIIHFWLYHOHDGHUVKLSLVH[HPSOL¿HGE\LQWHJULW\FRPSHWHQFHUHVSRQVLELOLW\DFFRXQWDELOLW\IDLUQHVVDQG
transparency. Members of the board of the fund should individually and collectively cultivate these characteristics
and exhibit them in their conduct as set out in the practices under Principle 1.

Principle 2: The board should govern the ethics of the fund in a way that supports
the establishment of an ethical culture.

In addition to setting an example through its own character and behaviour, the board should also ensure that the
ethics of the fund is governed effectively. Principle 2 and its supporting practices apply to both a retirement fund
with its own staff complement to carry out the administration, and to a fund that outsources those services. When
outsourced, the board should satisfy itself that the fund’s service providers manage their ethics effectively through
codes of conduct, ethics policies and supporting processes.

1 Committee for Responsible Investment in South Africa, Code for Responsible Investment in South Africa (Institute of Directors in Southern Africa, 2011),
available at: www.iodsa.co.za

2 Financial Services Board, Good Governance for Retirement Funds – Circular 130, 2007 available at https://www.fsb.co.za/

96 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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Principle 3: The board should ensure that the fund is and is seen to be a
responsible corporate citizen.

Compliance with Regulation 28 of the Pension Funds Act and, in particular, the preamble stating that prudent
investing “should give appropriate consideration to any factor which may materially affect the sustainable long-
term performance of the fund’s assets, including factors of an environmental, social and governance character”,
VKRXOGEHVHHQDVDQLQWHJUDOSDUWRIWKH¿GXFLDU\GXWLHVRIWKHERDUGRIDIXQG
Principle 3 conveys the same intent, albeit using different terminology. A retirement fund gives substance to its
duty to be a responsible corporate citizen by ensuring that its investment analyses and practices, whether
executed by the fund itself or an asset or fund manager or other service provider, take account of sustainability
including environmental, social and governance (ESG) considerations, as provided for in Principle 1 of CRISA.
Principle 3 of King IV includes that the fund should accept ownership responsibility for its investment
arrangements and investment activities as provided for in Principle 2 of CRISA.

Principle 4: The board should appreciate that the fund’s core purpose, its risks
and opportunities, strategy, business model, performance and sustainable
development are all inseparable elements of the value creation process.

The practices recommended under Principle 4 address the development and approval of the organisation’s
strategy, implementation thereof and organisational performance. These practices should be considered and
adapted by the board of the fund, being mindful of the fact that, unlike a commercial enterprise, the purpose of a
UHWLUHPHQWIXQGLVPRUHQDUURZO\GH¿QHGWRSURYLGHWKHEHQH¿WVWRLWVPHPEHUVWKHLUEHQH¿FLDULHVDQGGHSHQGDQWV
as set out by its rules. The performance of a retirement fund consists of delivering targeted investment returns in
terms of its investment strategy without irresponsible risk-taking, and managing expenses to maximise value for
money.3 For a retirement fund, it is especially critical that a long-term view is taken of the fund’s performance in the
interests of its members.

Principle 5: The board should ensure that reports issued by the fund enable
stakeholders to make informed assessments of the fund’s performance and its
short, medium and long-term prospects.

Reports are a powerful means for a retirement fund to communicate meaningfully with its stakeholders, among
others, members and regulators. Reports that are underpinned by integrated thinking and that present information
about the resources and relationships on which the fund relies, its activities, outputs and outcomes in an
integrated manner, are an effective way of informing stakeholders about the retirement fund’s performance. It also
demonstrates accountability. The practices under Principle 5 should be considered by the board to assist with its
reporting responsibilities.
In addition, it is recommended that retirement funds apply the disclosure practices as recommended under
3ULQFLSOHRI&5,6$DVWKHVHSHUWDLQVSHFL¿FDOO\WRGHPRQVWUDWLQJDFFRXQWDELOLW\RQLQYHVWPHQWGHFLVLRQVDQG
activities.

3 Stewart, F. and J. Yermo , “Pension Fund Governance: Challenges and Potential Solutions”, OECD Working Papers on Insurance and Private Pensions, No. 18, OECD
publishing, © OECD. doi:10.1787/241402256531, 2008

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Principle 6: The board should serve as the focal point and custodian of corporate
governance in the fund.

The board’s status as the focal point and custodian of corporate governance, as set out in Principle 6, is a natural
FRQVHTXHQFHRILWV¿GXFLDU\GXWLHVWRZDUGVWKHPHPEHUVRIWKHIXQG7KLVFRPPRQODZGXW\RULJLQDWHVIURPWKH
fact that the board is entrusted with assets and interests, other than its own.
Under Principle 6, the primary leadership role of any governing body is expressed as encompassing the following:
a. steering the organisation and setting its strategic direction;
b. approving policy and planning that give effect to the direction provided;
c. overseeing and monitoring of implementation and execution by management; and
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
The above is a useful framework for the board of a retirement fund to attain an overarching understanding of its
role. It should be used as a standing reference point by the board when discharging its responsibilities in any area
of governance.
Principle 6 and its associated recommended practices should be read together with section 7C of the Pension
Funds Act.

Principle 7: The board should comprise the appropriate balance of knowledge,

skills, experience, diversity and independence for it to discharge its governance
role and responsibilities objectively and effectively.

Election and appointment of board members

Even though the election and appointment mechanisms of members of retirement fund boards are prescribed in
legislation, the boards of retirement funds should still strive towards the aspiration expressed in Principle 7. One
of the ways in which this can be achieved is by using external expertise as recommended in the practices under
3ULQFLSOHWRDVVLVWWKHERDUGZLWKLWVRYHUVLJKWGXWLHVLQWKHHYHQWWKDWREMHFWLYHLQSXWRQVSHFL¿FPDWWHUVRXWVLGH
its knowledge, skills and experience is required.
Another manner in which balanced board composition can be accomplished is for employers or sponsors to use
their powers of appointment to ensure that the board has members with the necessary expertise and experience.
Those board members appointed by the employer should not be involved in the employer’s decisions as regards
the fund, and employers should not use their power of appointment of board members to ensure some sort of
control over funds.4 Also, a process of engagement with the employees who elect retirement fund board members
should be initiated to convey the nature of board members’ duties and the competencies required, so that
informed elections take place.
As is the case with all organisations, professional development and learning are of critical importance in ensuring
that those charged with the governance of retirement funds are able to execute their duties effectively. Ongoing
development programmes should include responsible investment and ESG matters.

4 Rosemary Hunter, “The Governance Of Pension Funds”, April 2002

(Paper presented by Rosemary Hunter to the annual convention of the Financial Planning Institute Durban)

98 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

,QGHSHQGHQFHRIERDUGPHPEHUVDQGFRQÀLFWVRILQWHUHVW
Members of the board should act with independence of mind, regardless
Summary of recommended
of who elected or appointed them. Members of the board should not act practices for the board’s
as representatives of their constituencies, and meetings of the board access to the appropriate
should not be understood as forums for collective bargaining. Doing so balance of knowledge, skills,
UHVXOWVLQERDUGPHPEHUVIDFLQJFRQÀLFWVEHWZHHQWKHLQWHUHVWVRIWKRVH experience, diversity and
who appointed or elected them and the interests of the fund itself.5 independence:
)XQGVEHQH¿WIURPERDUGPHPEHUVZKRDUHLQGHSHQGHQWLQDSSHDUDQFH • The board should make use
as this supports balanced, objective decision-making in the best interests of external expertise on
of the fund and its members. It is recommended that at least half of the VSHFL¿FPDWWHUVRXWVLGHWKH
members of the board are independent and appointed from a pool of knowledge, skills and
professional board members. Such independent board members should experience of the board
be free from any relationships that could, in the opinion of a reasonable when required.
and informed outside party, affect their objectivity. Smaller funds should • Employers or sponsors
consider appointing at least one independent, professional board member. should use their powers of
Independent board members could add objective judgement in dealing appointment to ensure that
ZLWKWKHFRQÀLFWVRILQWHUHVWWKDWWKRVHERDUGPHPEHUVZKRDUHDOVR the board has members with
PHPEHUVRIWKHIXQGPD\KDYH&RQÀLFWVPD\DULVHLQERWKH[SHQVHDQG the necessary expertise and
investment allocations and in the context of valuations. Valuations can be experience.
especially complex when dealing with portfolio companies and assets • The board should ensure
WKDWDUHGLI¿FXOWWRDVVHVV7KHERDUGVKRXOGHQVXUHWKDWDSROLF\H[LVWV engagement with those who
ZKLFKSURYLGHVIRUKRZWKHVHFRQÀLFWVRILQWHUHVWVKRXOGEHPDQDJHG elect board members.
$OOPHPEHUVRIWKHERDUGDUHERXQGWRWUHDWDVFRQ¿GHQWLDODQ\LQIRUPDWLRQ • The board should ensure
that comes to their attention during the course of performing their duties as ongoing development
such. Such information cannot be disclosed to outside parties, including to programmes for its members.
those who elected the members of the board and to fund members, without
the express permission of the board on behalf of the fund.

Principle 8: The board should ensure that its arrangements for delegation within
its own structures promote independent judgement, and assist with balance of
power and the effective discharge of its duties.

Principle 8 deals with the establishment of board committees. The boards of all funds that undergo a statutory
audit should consider having an audit committee to ensure proper oversight of the quality of the audit and the
independence of the auditor. Retirement funds should also consider investment committees to set investment
strategy and monitor the performance of asset and fund managers against the strategy. Death and disability
committees may be appropriate for larger funds.
Regardless of the actual board committees that are established, the practices that address board committees
under this principle are generally applicable to retirement funds and should be considered in conjunction
with industry or sector codes and guidance, applicable legislation and proportionality considerations.

5 Rosemary Hunter, “The Governance Of Pension Funds”, April 2002

(Paper presented by Rosemary Hunter to the annual convention of the Financial Planning Institute Durban)

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 SECTOR SUPPLEMENTS
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Principle 9: The board should ensure that the evaluation of its own performance
and that of its committees, its chair and its individual members, support continued
improvement in its performance and effectiveness.

The evaluation of the performance of the governing body, its members and committees as addressed by Principle 9
and its associated practices, applies to retirement funds. The results of the performance evaluations should be
responded to by the board so as to achieve continued improvement in its performance and effectiveness as per
the principle.

Principle 10: The board should ensure that the appointment of, and delegation to,
management contribute to role clarity and the effective exercise of authority and
responsibilities.

Outsourcing
Many retirement funds outsource all or part of the fund’s administrative functions and investment activities.
Delegation of responsibilities to a third party does not absolve the board from accountability. Oversight of service
providers to whom the administration of the fund or investment decisions or investment activities are outsourced,
is an integral part of the board’s governance role, as the board can be held liable for their actions. The practices
as recommended in the Code under Principle 10 are helpful guidance on oversight of management and should
be applied by the board with the necessary adaptation in relation to fund administrators and other service
providers.
When administrative and investment functions are outsourced, mechanisms and processes should be introduced
for adequate and effective oversight in the same way as the board would have done if all these functions were
conducted by the management of the fund. The board should ensure that a clear mandate is in place between the
retirement fund and the fund administrator and other service providers. The mandate should provide for
performance measures and targets and the application of responsible investing principles and practices.
Execution of such mandates by outsourced service providers should be supervised by the board.
7KHERDUGPXVWEHHVSHFLDOO\SURDFWLYHLQRYHUVHHLQJKRZVHUYLFHSURYLGHUVPDQDJHFRQÀLFWVRILQWHUHVW7KLV
challenge is particularly acute when various funds’ investments are pooled and managed by the same investment
manager, and the board should ensure that the interests of the retirement fund are treated fairly in relation to the
potential competing interests of the co-investment vehicles and parallel funds.
$SSRLQWPHQWRISULQFLSDORI¿FHU
$QRWKHUPDWWHUWKDWIDOOVXQGHU3ULQFLSOHLVWKHDSSRLQWPHQWRIWKHSULQFLSDORI¿FHU,QWHUPVRIWKH3HQVLRQ
)XQGV$FWWKHERDUGDSSRLQWVWKHSULQFLSDORI¿FHU+HQFHWKHSULQFLSDORI¿FHULVDFFRXQWDEOHWRWKHERDUGDQGWKH
board, in turn, is accountable to the members of the fund. (The board also has a secondary line of accountability
WRWKHVSRQVRULQJHPSOR\HURIWKHIXQGDVWKHUHWLUHPHQWIXQGLVIXO¿OOLQJDQREOLJDWLRQRQEHKDOIRIWKHHPSOR\HU
7KHSULQFLSDORI¿FHUPD\DOVREHDERDUGPHPEHUEXWPD\LQWHUPVRI)6%&LUFXODU3)QRWDFWDVWKHFKDLU
of the board.

100 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Professional corporate governance services to the governing body

Under Principle 10, it is furthermore recommended that the board should ensure that it has access to professional
and independent guidance on corporate governance and its legal duties, and also that it has support to coordinate
WKHIXQFWLRQLQJRIWKHERDUGDQGLWVFRPPLWWHHV)RUFRPSDQLHVWKLVUROHLVIXO¿OOHGE\WKHFRPSDQ\VHFUHWDU\$V
a matter of leading practice, it is recommended that boards of retirement funds appoint a suitably experienced
professional to provide these services.

Principle 11: The board should govern risk in a way that supports the fund in
setting and achieving its strategic objectives.

Principle 12: The board should govern technology and information in a way that
supports the fund setting and achieving its strategic objectives.

Principle 13: The board should govern compliance with applicable laws and
adopted, non-binding rules, codes and standards in a way that supports the fund
being ethical and a good corporate citizen.

Principle 14: The board should ensure that the fund remunerates fairly,
responsibly and transparently so as to promote the achievement of stategic
objectives and positive outcomes in the short, medium and long term.

Principle 15: The board should ensure that assurance services and functions
enable an effective control environment, and that these support the integrity of
information for internal decision-making and of the fund’s external reports.

7KHUHFRPPHQGHGSUDFWLFHVXQGHU3ULQFLSOHVWRZKLFKGHDOZLWKVSHFL¿FJRYHUQDQFHIXQFWLRQDODUHDV
should be interpreted and applied in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

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 SECTOR SUPPLEMENTS
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Principle 16: In the execution of its governance role and responsibilities, the board
should adopt a stakeholder-inclusive approach that balances the needs, interests
and expectations of material stakeholders in the best interests of the fund
over time.

Principle 16 addresses stakeholder relationships. The stakeholders of a retirement fund include, among others,
the members of the fund, their dependents and nominees, the participating employer, the sponsor (if different from
the participating employer), the Registrar of Pension Funds and the respective service providers. The
recommended practices under this principle assist in establishing stakeholder relationships that contribute to the
sustainability of the fund.

Principle 17: The board should ensure that responsible investment is practiced by
the fund to promote the good governance and the creation of value by the
companies in which it invests.

Principle 17 invokes the application of the principles and practices of responsible investing as advocated in
CRISA, and which should be applied by all retirement funds as a matter of good governance.

102 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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PART 6.5: SUPPLEMENT FOR SMALL AND

MEDIUM ENTERPRISES
The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance.

60(VWKHPDFURYLHZDQGEHQH¿WVRIFRUSRUDWHJRYHUQDQFH
Small and medium enterprises (SMEs) are the drivers of a growing and inclusive economy, and of societal
transformation. In order to survive, SMEs need to be innovative and entrepreneurial, and open to technological
FKDQJHDQGSURGXFWLYLW\JURZWK7KH\DUHWKHUHIRUHDQLQWHJUDOSDUWRIWKHUHQHZDOSURFHVVWKDWGH¿QHVDPDUNHW
economy. SMEs play a particularly important role as job creators, thus providing a way for people to enter the
formal economy and join the mainstream of society.1

Good corporate governance contributes to the success of an SME, as it enhances the functioning of its
leadership structures and helps the governing body to govern in such a way that the SME meets its strategic
REMHFWLYHV6RPHRIWKHIXUWKHUEHQH¿WV60(VFDQGHULYHIURPJRRGFRUSRUDWHJRYHUQDQFHLQFOXGHWKHIROORZLQJ
• Added credibility and enhanced reputation.
• Access to capital and loans on better terms.
• The ability to attract talent for employment.
• Improved access to customers and market participants.
• Better positioning to capture business opportunities.
• Better fraud prevention due to improved controls.
• Business continuity arrangements that permit the SME to operate under conditions of volatility, and to withstand
and recover from acute shocks.
• Leadership continuity through succession planning.
• %HWWHUPDQDJHPHQWRIWKHULVNRIFRQÀLFWLQIDPLO\EXVLQHVVHV

Scope
)RUWKHSXUSRVHVRIWKLVVXSSOHPHQWDQ60(LVGH¿QHGDVDSULYDWHIRUSUR¿WFRPSDQ\ZKLFKKDVDSXEOLFLQWHUHVW
score of at least 350 calculated in terms of regulation 26(2) of the Companies Act.
Even within the same sector, organisations vary largely in size, resources, and extent and complexity of activities.
The scope of this supplement was, therefore, limited for the sake of clarity. An attempt to address too wide a
range of variables may defeat the intent of the supplement, namely to demonstrate how the practices in the Code
should be interpreted and applied in a number of representative contexts, situations and legislative regimes.
SMEs falling outside the scope of this supplement should still align with the principles and consider the practices
while adapting them along the approach as demonstrated in the supplement. Refer to Part 6.1: Introduction to
Sector Supplements for the King IV Implementation Roadmap to assist with this.

1 Adapted from: François Groepe, “The role of the small business in the economy”, October 2015 (address given by him while he was the Deputy Governor of the
South African Reserve Bank at the AHI conference, George, 9 October 2015).

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King IV and SMEs

TERMINOLOGY
In order to apply the King IV Code to SMEs without having to repeat it in its entirety, it is necessary to explain how
the terminology used in the Code could be interchanged for terminology applicable to SMEs.

Term used in the King IV Code Relevant term for SMEs (within the
scope of this supplement)
Organisation Company or SME
Governing body Board
Members of the governing body Directors

BACKGROUND
SMEs typically grow from the investment of energy, passion and resources by founding members over time,
sometimes over decades and generations. Such SMEs eventually become a family partnership, consortium,
syndicate or even company owned by a number of outside shareholders. The risk is for the governance structures
and processes not to evolve and mature as the company does. Corporate governance facilitates stable and
sustainable development and the ability to leverage opportunities. It is therefore important for SMEs to ensure that
a foundation of good governance is established from the beginning, so that it is entrenched in the way the
business is conducted.
A key consideration in developing corporate governance in tandem with the growth of the company is the
transition of ownership and management. Business growth ultimately requires an evolution from an
entrepreneurial to a professionally managed organisational system2.
KING IV PRINCIPLES AND PRACTICES
The essence of King IV, as represented by its governance outcomes and principles, applies to SMEs with the
necessary adaptation in terminology. Principles are repeated below for ease of reference.

Principle 1: The board should lead ethically and effectively.

(WKLFDODQGHIIHFWLYHOHDGHUVKLSLVH[HPSOL¿HGE\LQWHJULW\FRPSHWHQFHUHVSRQVLELOLW\DFFRXQWDELOLW\IDLUQHVVDQG
transparency. Directors should individually and collectively cultivate these characteristics and exhibit them in their
conduct as set out in the practices under Principle 1.

Principle 2: The board should govern the ethics of the company in a way that
supports the establishment of an ethical culture.

In addition to setting an example through its own character and behaviour, the board should also ensure that the
SME’s ethics is governed effectively in accordance with Principle 2. The practices associated with this principle
guide on how the board should discharge this responsibility.

2 Tony Balshaw, Thrive! Making Family Business Work (Human & Rousseau (Pty) Ltd, 2003), p116

104 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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Principle 3: The board should ensure that the company is and is seen to be a
responsible corporate citizen.

Due to the critical role of SMEs in an inclusive, growing economy and societal transformation, they are integral
to society. SMEs also form part of the supply chain of other organisations, and are held accountable by their
customers for responsible corporate citizenship and ethical practices. In short, SMEs are corporate citizens and
should apply the recommended practices pertaining to responsible corporate citizenship under Principle 3 as is
appropriate to their particular circumstances.

Principle 4: The board should appreciate that the company’s core purpose, its
risks and opportunities, strategy, business model, performance and sustainable
development are all inseparable elements of the value creation process.

The practices recommended under Principle 4 address the development and approval of the organisation’s
strategy, implementation thereof and organisational performance.
King IV asserts that organisations contribute to the creation of value and perform well by enhancing the triple
context of the economy, society and the environment and the capitals that they use or affect. By understanding
the connection between sustainability and the business, an SME can measure its business performance, identify
areas for improvement and manage change effectively. This will drive performance and innovation within the
SME.3 The practices recommended under Principle 4 are helpful guidance for accomplishing this.

Principle 5: The board should ensure that reports issued by the company enable
stakeholders to make informed assessments of the company’s performance and
its short, medium and long term prospects.

Reports are a powerful means for SMEs to communicate meaningfully with stakeholders, among others,
VKDUHKROGHUVFXVWRPHUVDQGSRWHQWLDOSURYLGHUVRI¿QDQFLDOFDSLWDO5HSRUWVWKDWDUHXQGHUSLQQHGE\LQWHJUDWHG
thinking and that present information about the resources and relationships on which the SME relies, its activities,
outputs and outcomes in an integrated manner, are an effective way of informing stakeholders about the SME’s
performance. It also demonstrates accountability. The practices under Principle 5 should be considered by the
board to assist with its reporting responsibilities.

3 Adapted from: Global Reporting Initiative, GRI Ready to Report? Introducing sustainability reporting for SMEs booklet (2014) available at
https://www.globalreporting.org/resourcelibrary/Ready-to-Report-SME-booklet-online.pdf

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Principle 6: The board should serve as the focal point and custodian of corporate
governance in the company.

The board’s status as the focal point and custodian of corporate governance, as set out in Principle 6, is a natural
FRQVHTXHQFHRILWV¿GXFLDU\GXWLHVWRZDUGVWKHFRPSDQ\7KLVFRPPRQODZGXW\RULJLQDWHVIURPWKHIDFWWKDWWKH
board is entrusted with assets and interests, other than its own.
Even though SMEs are often more informal in conducting their business activities, there is a need to put their
corporate governance on a formal footing. A key element of this is recognition of the board’s overarching
leadership and governance role as provided for in Principle 6, and its supporting practices. Under this principle,
the primary leadership role of any governing body is expressed as encompassing the following:
a. steering the organisation and setting its strategic direction;
b. approving policy and planning that give effect to the direction provided;
c. overseeing and monitoring of implementation and execution by management; and
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
The above is a useful framework for the board of an SME to attain an overarching understanding of its role. It
should be used as a standing reference point by the board when discharging its responsibilities in any area of
governance.
In an SME, a director is often also a shareholder and manager. In the interest of role clarity, it is recommended
that formal processes be put in place to differentiate between a single individual’s roles as director, manager and
shareholder. For example, board meetings should be scheduled separately from management meetings even
though the same persons may be involved in both. As the founder’s role changes from shareholder-director-
PDQDJHUWRVKDUHKROGHUGLUHFWRUDQG¿QDOO\WRMXVWVKDUHKROGHUWKHGHJUHHRILQYROYHPHQWDQGJRYHUQDQFH
VWUXFWXUHVZLOODOVRQHHGWRFKDQJH7UDQVLWLRQZLOOEHHDVLHULIUROHVKDYHEHHQGH¿QHGDQGNHSWVHSDUDWHIURP
the start.
Formalising a description of each of these roles in writing will further assist individuals to identify in which capacity
WKH\VKRXOGEHDFWLQJHVSHFLDOO\ZKHQVSHFL¿FDXWKRULWLHVDUHH[HUFLVHG,WLVUHFRPPHQGHGWKDWDQ60(¶V
shareholders sign an agreement with the board (even if they are related or consisting of the same individuals),
and incorporate in this agreement a board charter, a management charter and a delegation of authority.

106 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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Principle 7: The board should comprise the appropriate balance of knowledge,

skills, experience, diversity and independence for it to discharge its governance
role and responsibilities objectively and effectively.

3ULQFLSOHDQGLWVUHODWHGSUDFWLFHVDUHDSSOLFDEOHWR60(VEXWWKHIROORZLQJSRLQWVVKRXOGVSHFL¿FDOO\EH
considered:
Enhancing board independence
All directors should, as a matter of law, exercise independent judgement in the best interests of the company.
Having directors who are also independent in appearance in that there is no interest, position, association or
UHODWLRQVKLSZKLFKLVOLNHO\WRDIIHFWRUPD\DSSHDUWRXQGXO\LQÀXHQFHRUFDXVHELDVFRXOGSRVHDFKDOOHQJHWR
SMEs due to capacity and resource constraints.
Nevertheless, input free from perceived and actual bias adds value to board deliberations, and serves as an
added control. Therefore, SMEs should strongly consider inviting an experienced and competent person to serve
as a non-executive and, ideally, independent director. If this is not possible, such a person may be consulted on
an ad hoc-basis, and invited to attend board meetings, as and when necessary, to obtain objective input until such
time as the SME is in a position to appoint a full-time, independent, non-executive director. As the company grows
in capacity, resources and consequently impact, steps should be taken to include a number of non-executive
directors and at least one independent non-executive director who serves as chair.
Having a mix of executive and non-executive and one or more independent directors on the board also mitigates
the risk that emotive issues drive decision-making, especially in family-owned companies or where the authority of
the founding member is entrenched.
Encouraging professional development
Directors of SMEs who are not experienced non-executive directors should undergo corporate governance
WUDLQLQJVRWKDWWKH\DUHDGHTXDWHO\HTXLSSHGWRIXO¿OWKHLU¿GXFLDU\GXWLHV
Nomination, election and appointment of non-executive directors
Many SMEs do not have a separate nominations committee to deal with the selection and nomination of new
directors. It is thus recommended that the board charter clearly outlines the nomination, election and appointment
SURFHVVWKHNQRZOHGJHVNLOOVDQGH[SHULHQFHUHTXLUHGIURPGLUHFWRUVDQGDQ\RWKHUVSHFL¿FHOLJLELOLW\FULWHULD
Once a number of non-executive directors are serving on the board, the formation of a nominations committee
should be considered.
Non-executive directors should be formally appointed and fees and obligations agreed upfront. Creating a
professional relationship with board members will help to establish a sound governance structure that is
progressively less affected by emotive issues that may be connected to family dynamics or a more informal
working environment.

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Rotation and succession of directors

In order to ensure that there is a balance of power as envisaged in Principle 7, the board needs to ensure that
non-executive directors are rotated on a regular basis so as to maintain objectivity, which is one of the non-
executive director’s primary contributions. At the same time, care must be taken to protect the required
institutional knowledge. For an SME, too-regular rotation may not be practical or feasible (especially if the SME
only has one or two non-executive directors) and thus non-executive directors of SMEs may serve for longer
periods than in larger companies.
%HFDXVHDVLQJOHLQGLYLGXDORIWHQIXO¿OVWKHUROHVRIGLUHFWRUPDQDJHUDQGVKDUHKROGHU60(VIDFHWKHULVNRI
increased dependence on key individuals. Succession planning for directors and managers should be put in place
WRHQVXUHWKDWNH\SRVLWLRQVFDQEH¿OOHGWHPSRUDULO\RQDQHPHUJHQF\EDVLVDQGRYHUWKHORQJHUWHUP7KLVLV
often a challenge in SMEs, and can affect business growth and continuity from one generation to the next if not
dealt with appropriately.
An effective succession plan requires deliberate and well-thought-out processes that are tested and considered
over time. The succession plan should describe how the successor will be chosen, what kind of knowledge, skills
and experience will be required, what training and grooming will be necessary and how all of this should be
accomplished.4

Principle 8: The board should ensure that its arrangements for delegation within
its own structures promote independent judgement, and assist with balance of
power and the effective discharge of its duties.

Principle 8 deals with delegation by the board to board committees. Due to capacity and resource constraints, it
may not be possible for an SME to have all the board committees as recommended in the Code. With this being
the case, the board is responsible for ensuring that it addresses those matters which a board committee would
otherwise have addressed. Agendas should be appropriately structured or, if necessary, separate meetings should
EHVHWXSWRHQVXUHVXI¿FLHQWIRFXVRQRQHSDUWLFXODUWRSLFRUDUHD VXFKDVDXGLWULVNDQGHWKLFV 

Principle 9: The board should ensure that the evaluation of its own performance
and that of its committees, its chair and its individual members, support continued
improvement in its performance and effectiveness.

The evaluation of the performance of the governing body, its members and committees as addressed by Principle 9
and its associated practices, applies to SMEs. The results of the performance evaluations should be responded to
by the board of the SME so as to achieve continued improvement in its performance and effectiveness as per the
principle.

4 Tony Balshaw, Thrive! Making Family Business Work, (Human & Rousseau (Pty) Ltd, 2003), p114

108 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
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Principle 10: The board should ensure that the appointment of, and delegation to,
management contribute to role clarity and the effective exercise of authority and
responsibilities.

The practices under Principle 10 are pertinent in helping SMEs to attain clarity on the respective roles of the board
and management. The boards of SMEs should apply these practices to achieve this aim.
Under Principle 10, it is furthermore recommended that the board should ensure that it has access to professional
and independent guidance on corporate governance and its legal duties, and also that it has support to coordinate
WKHIXQFWLRQLQJRIWKHERDUGDQGLWVFRPPLWWHHV)RUFRPSDQLHVWKLVUROHLVIXO¿OOHGE\WKHFRPSDQ\VHFUHWDU\
As a matter of leading practice, it is recommended that boards of SMEs appoint a company secretary to provide
these services. Consult the guidance on proportional application provided in Part 6.1: Introduction to Sector
Supplements for how this could be implemented by SMEs.

Principle 11: The board should govern risk in a way that supports the company in
setting and achieving its strategic objectives.

Principle 12: The board should govern technology and information in a way that
supports the company setting and achieving its strategic objectives.

Principle 13: The board should govern compliance with applicable laws and
adopted, non-binding rules, codes and standards in a way that supports the
company being ethical and a good corporate citizen.

Principle 14: The board should ensure that the company remunerates fairly,
responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.

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 SECTOR SUPPLEMENTS
CONTINUED

Principle 15: The board should ensure that assurance services and functions
enable an effective control environment, and that these support the integrity of
information for internal decision-making and of the company’s external reports.

7KHUHFRPPHQGHGSUDFWLFHVXQGHU3ULQFLSOHVWRZKLFKGHDOZLWKVSHFL¿FJRYHUQDQFHIXQFWLRQDODUHDV
should be interpreted and applied in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

Principle 16: In the execution of its governance role and responsibilities, the board
should adopt a stakeholder-inclusive approach that balances the needs, interests
and expectations of material stakeholders in the best interests of the company
over time.

Principle 16 addresses stakeholder relationships. Due to the sometimes informal nature of relationships at an
SME, shareholders may be more involved than is the case with bigger companies. With family businesses,
shareholders also have personal ties with managers and directors which necessitate communication structures
that create a bridge between family and business matters. Consideration should be given to establishing a formal
forum in which shareholders of an SME may raise broad questions. Issues typically addressed in such a forum
could include, among others, succession planning, growth and return on investment, dividend policy, acquisitions
DQGRUGLVSRVDOVJRLQJSXEOLFVKDUHKROGHUVDFUL¿FHVDQGPDQDJHPHQWSHUIRUPDQFH5
The company and its shareholders should also agree on policies for future equity ownership. Such policies should
deal, for example, with the transfer, acquisition and disposal of shares in the SME, including the method of valuing
shares equitably.6
The recommended practices under Principle 16 should be applied by the SME in respect of all its stakeholders.
(Note that Principle 17 does not apply to SMEs.)

5 See Tony Balshaw, Thrive! Making Family Business Work, (Human & Rousseau (Pty) Ltd, 2003), p96-97 for more information on the role of the family
shareholders’ committee.

6 Tony Balshaw, Thrive! Making Family Business Work, (Human & Rousseau (Pty) Ltd, 2003), p123

110 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

PART 6.6: SUPPLEMENT FOR STATE-OWNED

ENTITIES
The supplements should be read together with the balance of the King IV Report, particularly Part 1:
Glossary of Terms, Part 2: Fundamental Concepts, Part 3: King IV Application and Disclosure and Part 5:
King IV Code on Corporate Governance.

62(VWKHPDFURYLHZDQGEHQH¿WVRIFRUSRUDWHJRYHUQDQFH
As the Presidential Review Committee on State-owned Enterprises1 makes clear, state-owned enterprises (which
include state-owned entities (SOEs)), create the foundation that underpins economic growth and transformation,
and thus have an important part in addressing the economic and social challenges facing the country. “South
Africa aspires to be a Developmental State … [and] SOEs need to be aligned to this agenda. If the country is to
attain improved quality of life underpinned by a robust democracy and a just society, along with other initiatives,
WKH6WDWHPXVWSUHVLGHRYHUYLDEOHHI¿FLHQWHIIHFWLYHDQGFRPSHWLWLYH62(V´
Good corporate governance is paramount to the success of the SOE itself, and to protect and advance the
interests of the country and its citizenry. Governance helps enhance the functioning of leadership structures
of an SOE, and provides the arrangements by which the SOE should be governed so that it is able to meet its
strategic objectives.

Scope
This supplement applies to all public entities listed in Schedules 2 and 3 of the Public Finance Management Act
(PFMA).
Even within the same sector, organisations vary largely in size, resources, and extent and complexity of activities.
The scope of this supplement was, therefore, limited for the sake of clarity. An attempt to address too wide a
range of variables may defeat the intent of the supplement, namely to demonstrate how the practices in the Code
should be interpreted and applied in a number of representative contexts, situations and legislative regimes.
SOEs falling outside the scope of this supplement should still align with the principles and consider the practices
while adapting them along the approach as demonstrated in the supplement. Refer to Part 6.1: Introduction to
Sector Supplements for a King IV Implementation Roadmap to assist with this.

1 Presidential Review Committee on State-owned Enterprises, ([HFXWLYHVXPPDU\RIWKH¿QDOUHSRUW9ROXPH, p 7, available at

www.thepresidency.gov.za/electronicreport/...1/volume_1.pdf

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 SECTOR SUPPLEMENTS
CONTINUED

King IV and SOEs

TERMINOLOGY
In order to apply the King IV Code to SOEs without having to repeat it in its entirety, it is necessary to explain how
the terminology used in the Code could be interchanged for terminology applicable to SOEs. Although structures
in SOEs are not necessarily directly comparable to those of other organisations, the following can be used as a
guideline when interpreting the terminology in the King IV Code in an SOE context:

Term used in the King IV Code Relevant term for SOEs

Organisation Business enterprise, board, commission, company,
corporation, or other type of entity as provided for in the
enabling legislation.
Governing body ³$FFRXQWLQJDXWKRULW\´DVGH¿QHGLQWKH3)0$RUERDUG
or other terminology as provided for in the enabling
legislation.
Members of the governing body Members of the accounting authority or board
External auditor Auditor General of South Africa
Shareholder ³([HFXWLYHDXWKRULW\´DVGH¿QHGLQWKH3)0$

In this supplement, “SOE” and “entity” are used interchangeably, as are, ”governing body” and “accounting
authority”, and “shareholder “and “executive authority”.
KING IV PRINCIPLES AND PRACTICES
The essence of King IV, as represented by its governance outcomes and principles, applies to SOEs with the
necessary adaptation in terminology. Principles are repeated below for ease of reference.

Principle 1: The accounting authority should lead ethically and effectively.

(WKLFDODQGHIIHFWLYHOHDGHUVKLSLVH[HPSOL¿HGE\LQWHJULW\FRPSHWHQFHUHVSRQVLELOLW\DFFRXQWDELOLW\IDLUQHVVDQG
transparency. Members of the accounting authority should individually and collectively cultivate these
characteristics and exhibit them in their conduct as set out in the practices under Principle 1. This is congruent
with section 195 of the Constitution in terms of which public administration must be governed by the democratic
values and principles enshrined in the Constitution, including that a high standard of professional ethics must be
promoted and maintained.

Principle 2: The accounting authority should govern the ethics of the SOE in a way
that supports the establishment of an ethical culture.

In addition to setting the example through its own character and conduct, the accounting authority should also
ensure that the ethics of the SOE is governed effectively in accordance with Principle 2. The practices associated
with this principle guide on how the accounting authority should discharge this responsibility.

112 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 3: The accounting authority should ensure that the SOE is and is seen to
be a responsible corporate citizen.

By virtue of their public-interest mandates, corporate citizenship is core to the purpose of an SOE. Also, taxpayers
contribute to the funding of SOEs. SOEs are thus accountable to these citizens, and the state organs that are
representative of these citizens, for discharging their responsibilities in accordance with their mandates.
Therefore, Principle 3 and the practices recommended under it should be applied by SOEs as a means by which
to give expression to their public-interest mandates.

Principle 4: The accounting authority should appreciate that the SOE’s core
purpose, its risks and opportunities, strategy, business model, performance and
sustainable development are all inseparable elements of the value creation process.

The practices recommended under Principle 4 address the development and approval of the organisation’s
strategy, implementation thereof and organisational performance. These practices should be considered by SOEs
DQGPRGL¿HGNHHSLQJWKHIROORZLQJLQPLQG
The strategic priorities of government, as decided by Cabinet, are devolved to the appropriate ministers and
departments. Where in respect of an SOE, its executive authority is different from the minister responsible for
policy, the policy ministry sets industry or sector policy on a country-wide basis and the role of the executive
DXWKRULW\LVWKHQWRVHWSROLF\SDUDPHWHUVIRUDVSHFL¿F62(ZLWKLQWKLVIUDPHZRUN7KHDFFRXQWLQJDXWKRULW\RI
an SOE should actively seek common understanding between the entity and the executive authority on how to
UHFRQFLOHFRPSHWLQJREMHFWLYHVVRWKDWDVWUDWHJLFSODQIRUWKH62(FDQEHGHYHORSHGZLWKLQWKHVHFRQ¿QHV
$VIDUDVSHUIRUPDQFHLVFRQFHUQHG62(VKDYHWREDODQFHWKHLUSULRULWLHVVRDVWRERWKIXO¿OWKHLUPDQGDWHDQG
UHPDLQ¿QDQFLDOO\VXVWDLQDEOH7KLVLVFRQJUXHQWZLWK.LQJ,9¶VDVVHUWLRQWKDWSHUIRUPDQFHHQFRPSDVVHVERWKDQ
organisation’s achievements relative to its strategic objectives, and positive outcomes in terms of its effects on the
capitals and the triple context in which it operates.
In order to obtain clarity and alignment on strategic objectives, key performance measures and targets and
potential trade-offs to be made, it is recommended that these be agreed in writing between the entity, as
represented by its accounting authority, and the shareholder, even where such an agreement is not required in
terms of legislation.

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 SECTOR SUPPLEMENTS
CONTINUED

Principle 5: The accounting authority should ensure that reports issued by the
SOE enable stakeholders to make informed assessments of the SOE’s
performance and its short, medium and long-term prospects.

Reports are a powerful means for an SOE to communicate meaningfully with its stakeholders, among others, the
executive authority and taxpayers. Reports that are underpinned by integrated thinking and that present
information about the resources and relationships that the entity relies on, its activities, outputs and outcomes in
an integrated manner, are an effective way of informing stakeholders about the SOE’s performance. It also
demonstrates accountability. The practices under Principle 5 should be considered by the accounting authority to
assist with its reporting responsibilities.

Principle 6: The accounting authority should serve as the focal point and
custodian of corporate governance in the SOE.

7KHDFFRXQWLQJDXWKRULW\LVWKHJRYHUQLQJERG\RIDQ62(DQGWKXVEHDUV¿GXFLDU\UHVSRQVLELOLWLHVLQWHUPVRI
section 50 of the PFMA and, where the SOE is a company, also section 75 of the Companies Act. The governing
body’s status as the focal point and custodian of corporate governance, as set out in Principle 6, is a natural
FRQVHTXHQFHRILWV¿GXFLDU\GXWLHVZKLFKRULJLQDWHIURPWKHIDFWWKDWWKHDFFRXQWLQJDXWKRULW\LVHQWUXVWHGZLWK
assets and interests, other than its own.
Under Principle 6, the primary leadership role of any governing body is expressed as encompassing the following:
a. steering the organisation and setting its strategic direction;
b. approving policy and planning that give effect to the direction provided;
c. overseeing and monitoring of implementation and execution by management; and
d. ensuring accountability for organisational performance by means of, among others, reporting and
disclosure.
It should be noted that the terminology used under this principle, namely strategy leading to policymaking, is
usually used in the reverse in a government setting with policy directives leading to strategic initiatives and plans.
Notwithstanding, the supporting practices are helpful in giving effect to the duties of the accounting authority as
set out in the PFMA and other legislation. The above is also a useful framework for the accounting authority to
attain an overarching understanding of its role. It should be used as a standing reference point by the accounting
authority when discharging its responsibilities in any area of governance.

114 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 7: The accounting authority should comprise the appropriate balance of

knowledge, skills, experience, diversity and independence for it to discharge its
governance role and responsibilities objectively and effectively.

The composition of its accounting authority is a key factor driving the performance of an SOE. Like the governing
bodies of all organisations, an SOE’s accounting authority must have the right balance of knowledge, skills,
experience, diversity and independence for it to discharge its governance role and responsibilities objectively and
effectively. The practices recommended under Principle 7, with regards to the appointment of members of the
governing body, and the role of a nominations committee in this process, are relevant to SOEs. Even when
accounting authorities do not have the power to nominate or elect members, they should actively seek to
collaborate with the shareholder on this critical issue.
The SOE and the executive authority should be transparent regarding the processes followed for the nomination,
election and appointment of governing body members. The accounting authority and executive authority should
also, subject to legal provisions, agree to put in place arrangements for the staggered rotation of members of the
accounting authority. This should be done in order to introduce members with new expertise and perspectives
whilst retaining valuable knowledge, skills and experience and maintaining continuity.

Principle 8: The accounting authority should ensure that its arrangements for
delegation within its own structures promote independent judgement, and assist
with balance of power and the effective discharge of its duties.

The practices recommended in support of Principle 8, which deal with the delegation of responsibilities by the
governing body to its committees, are applicable to SOEs, subject to legal provisions. In particular, it should be
noted that the duties of the audit committee in relation to the appointment and independence of the external
DXGLWRUDSSO\GLIIHUHQWO\DVWKH$XGLWRU*HQHUDO ZKRFDQDJUHHWRWKHDSSRLQWPHQWRIDWKLUGSDUW\WRIXO¿OWKLVUROH 
generally serves as the external auditor of SOEs. Furthermore, the composition of an SOE’s audit committee is
prescribed by legislation, which prevails over the recommended practices in the Code. However, the practices
with regards to objective oversight by the audit committee over all assurance service providers and functions and
the quality of their output still apply as provided for under Principle 8.

Principle 9: The accounting authority should ensure that the evaluation of its own
performance and that of its committees, its chair and its individual members,
support continued improvement in its performance and effectiveness.

The evaluation of the performance of the governing body, its members and committees as addressed by Principle
9 and its associated practices, applies to SOEs. The results of the performance evaluations should be responded
to by the accounting authority so as to achieve continued improvement in its performance and effectiveness as
per the principle.

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 115
 SECTOR SUPPLEMENTS
CONTINUED

Principle 10: The accounting authority should ensure that the appointment of, and
delegation to, management contribute to role clarity and the effective exercise of
authority and responsibilities.

Principle 10 provides for the appointment of, and delegation of responsibilities to, competent executive management. In
SOEs, the executive authority (as opposed to the accounting authority) often has the power, in terms of enabling
OHJLVODWLRQRUWKH62(¶VIRXQGLQJGRFXPHQWVWRDSSRLQWWKHFKLHIH[HFXWLYHRI¿FHU &(2 $VDPDWWHURIJRRGSUDFWLFH
the appointment of the CEO of an SOE should be a robust and transparent process that involves the accounting
DXWKRULW\WRWKHJUHDWHVWH[WHQWSRVVLEOHHYHQLIWKHVKDUHKROGHUKDVWKHULJKWWRPDNHWKH¿QDODSSRLQWPHQW
It should furthermore be agreed between the accounting authority and the shareholder that the CEO reports to the
governing body. The governing body and shareholder should ensure that the CEO’s letter of appointment and the
delegation of authority to the CEO clearly set out that:
• The CEO is accountable to the accounting authority,
• The accounting authority agrees performance measures and targets with the CEO and assesses the
performance of the CEO accordingly, and
• The accounting authority has primary responsibility for the removal of the CEO.
Under Principle 10, it is also recommended that the accounting authority should ensure that it has access to
professional and independent guidance on corporate governance and its legal duties, and also that it has support
WRFRRUGLQDWHWKHIXQFWLRQLQJRIWKHDFFRXQWLQJDXWKRULW\DQGLWVFRPPLWWHHV)RUFRPSDQLHVWKLVUROHLVIXO¿OOHGE\
the company secretary. As a matter of leading practice, it is recommended that the accounting authority of an
SOE appoint a company secretary or suitably experienced professional to provide these services.

Principle 11: The accounting authority should govern risk in a way that supports
the SOE in setting and achieving its strategic objectives.

Principle 12: The accounting authority should govern technology and information
in a way that supports the SOE setting and achieving its strategic objectives.

Principle 13: The accounting authority should govern compliance with applicable
laws and adopted, non-binding rules, codes and standards in a way that supports
the SOE being ethical and a good corporate citizen.

Principle 14: The accounting authority should ensure that the SOE remunerates
fairly, responsibly and transparently so as to promote the achievement of strategic
objectives and positive outcomes in the short, medium and long term.

116 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
 Ethical Good Effective Legitimacy
culture performance control

Principle 15: The accounting authority should ensure that assurance services
and functions enable an effective control environment, and that these support
the integrity of information for internal decision-making and of the SOE’s
external reports.

7KHUHFRPPHQGHGSUDFWLFHVXQGHU3ULQFLSOHVWRZKLFKGHDOZLWKVSHFL¿FJRYHUQDQFHIXQFWLRQDODUHDV
should be interpreted and applied in conjunction with industry or sector codes and guidance, applicable legislation
and proportionality considerations.

Principle 16: In the execution of its governance role and responsibilities, the
accounting authority should adopt a stakeholder-inclusive approach that balances
the needs, interests and expectations of material stakeholders in the best interests
of the SOE over time.

Government is a primary stakeholder of SOEs in various capacities: Firstly, it is the shareholder concerned with
¿QDQFLDOYLDELOLW\WKHFRQVHTXHQFHVRIWKH62(¶VDFWLYLWLHVDQGRXWSXWVRQWKHWULSOHFRQWH[WDQGWKHFDSLWDOVDQGWKH
SOE’s delivery against its mandate. Secondly, government is the industry policymaker overseeing implementation of
service delivery. Thirdly, it is the regulator concerned with the industry practices of SOEs, their pricing structures
and the interests of consumers.27KHVHYDULRXVUROHVPD\RYHUODSDQGPD\HYHQFRQÀLFWZLWKHDFKRWKHU
In addition, the SOE, together with Cabinet and the executive authority, is accountable to the National Assembly, and
SDUWLFXODUO\WKH6WDQGLQJ&RPPLWWHHRQ3XEOLF$FFRXQWVRQWKHEDVLVRIWKHDQQXDO¿QDQFLDOVWDWHPHQWVDQGWKH
audit reports of the Auditor-General, and to the Portfolio Committees for service-delivery performance by the SOE.3
The accounting authority of an SOE should, therefore, ensure that it proactively engages with government, in all
its various stakeholder capacities, to foster a working relationship and develop a mutual understanding of how
these various expectations and accountabilities are to be reconciled.
As far as its relationship with government as shareholder is concerned, the accounting authority of an SOE should
HQVXUHWKDWWKHVKDUHKROGHUFRPSDFWRUVLPLODUDJUHHPHQWGH¿QHVWKHUROHRIWKHDFFRXQWLQJDXWKRULW\DQGWKH
executive authority respectively. Generally, the executive authority should provide direction on policy to the SOE,
and the accounting authority should oversee its effective implementation by the entity in accordance with
strategic, corporate and business plans. The shareholder compact or such other agreement should provide for an
alternative dispute resolution procedure if there is a dispute about the interpretation of the compact or agreement.
The recommended practices under Principle 16 should be applied by the SOE in respect of all its stakeholders.
(Note that Principle 17 does not apply to SOEs.)

2 Higgo du Toit, “Governance Oversight Role Over State Owned Entities”, National Treasury, 25 November 2005, p 5, available at
http://www.treasury.gov.za/publications/other/soe/governance%20oversight%20Role.pdf

3 Higgo du Toit, “Governance Oversight Role Over State Owned Entities”, National Treasury 25 November 2005, p 2, available at
http://www.treasury.gov.za/publications/other/soe/governance%20oversight%20Role.pdf

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 117
 PART 7

CONTENT DEVELOPMENT AND

KING COMMITTEE

118 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.
CONTENT DEVELOPMENT
AND KING COMMITTEE
CONTENT DEVELOPMENT PROCESS
The process for developing King IV was designed to build on the strengths of King III. The King Committee also
strived to involve as many as possible of those who would be affected by King IV in its development. To this end,
the King IV process was widely consultative, with a participative and inclusive approach to the development of
its content.
The drafting of King IV was led by the King IV Project Lead, who was assisted by a task team (see below)
appointed by the King Committee from its membership to oversee the drafting process. The King Committee itself
SURYLGHG¿QDODSSURYDO
The philosophy, principles and practices in King III were the starting point for content development. The input
gained from extensive face-to-face consultative meetings with individual stakeholders, and the matters that had to
be addressed as a result of local and international corporate governance developments, were also considered.
Together, these formed the basis for the development of the King IV content.
There were no standing working groups or sub-committees established for drafting of content. A combination of
technical corporate governance experts and representatives from interest groups or sectors volunteered to
participate in a series of facilitated working sessions. Particular governance topics and the governance of
RUJDQLVDWLRQVLQWKHQRQSUR¿W60(UHWLUHPHQWIXQGDQGSXEOLFVHFWRUVZHUHH[SORUHGWKURXJKWKHVHVHVVLRQV$Q
appreciative inquiry methodology was used by professional facilitators as the model for the working sessions
ZKLFKEURXJKWDERXWDIRFXVRQZKDWFXUUHQWO\ZRUNVDQGZKDWWKHSRVVLELOLWLHVDUHUDWKHUWKDQWKHGH¿FLHQFLHVRI
the status quo. These facilitated working sessions were then supplemented by a number of ad hoc-focus group
VHVVLRQVFRQYHQHGWRDGGUHVVVSHFL¿FJRYHUQDQFHWRSLFVDQGWKHYDULRXVVHFWRUVLQPRUHGHSWK
The draft King IV Report was subjected to a formal public comment process which resulted in further engagement
DQGFRQVXOWDWLRQEHIRUH¿QDOLVDWLRQ
King IV is a culmination of all of the efforts and processes as set out above. It is the sincere hope of the King
Committee that it will be embraced by corporate South Africa, in its wider sense, and that it will contribute to a
healthy economy, society and environment.

MEMBERS OF KING COMMITTEE

KING IV TASK TEAM MEMBERS:
Ms Ansie Ramalho (King IV Project Lead)
Mr Mohamed Adam
Ms Linda de Beer
Ms Lindie Engelbrecht
Mr Richard Foster
Mr Michael Judin
Dr Suresh Kana
Dr Len Konar
Ms Parmi Natesan
Ms Annamarie van der Merwe

™ 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED. 119
 CONTENT DEVELOPMENT AND KING COMMITTEE
CONTINUED

KING COMMITTEE MEMBERS

(Unless otherwise indicated the members below served from August 2014, when the content development
process started, until the launch of King IV on 1 November 2016.)

Prof Mervyn King Independent

Mr Mohamed Adam Independent
Mr Bernard Agulhas Independent Regulatory Board for Auditors
Mr Roy Andersen Independent
Mr Suleman Badat Auditor General of South Africa
Ms Linda de Beer Independent
Mr John Burke Johannesburg Stock Exchange
Mr Chose Choeu The South African Chamber of Commerce and Industry
Dr Gert Cruywagen The Institute of Risk Management South Africa
Ms Friede Dowie Business Leadership South Africa
Mr Shahied Daniels South African Institute of Professional Accountants (until July 2015)
Ms Lindie Engelbrecht South African Institute of Chartered Accountants
Mr Richard Foster Independent
Mr Jaco de Jager $VVRFLDWLRQRI&HUWL¿HG)UDXG([DPLQHUV6$&KDSWHU
Mr Michael Judin Independent
Dr Suresh Kana Independent
Dr Reuel Khoza Independent
Dr Len Konar Independent
Ms Khanyisile Kweyama Business Unity South Africa (from February 2016)
Mr Mabulenyana Marweshe Financial Services Board (until April 2016)
Ms Justine Mazzocco The Institute of Internal Auditors South Africa (from February 2015)
Ms Julie Methven Compliance Institute Southern Africa
Mr Ewald Müller Independent
Mr Jayce Nair National Treasury
Ms Parmi Natesan Institute of Directors in Southern Africa
Mr Madimetja Lucky Phakeng Takeover Regulation Panel
Ms Ansie Ramalho Institute of Directors in Southern Africa
Prof Deon Rossouw The Ethics Institute (from February 2015)
Ms Matsietsi Mokholo Department of Public Enterprises (from September 2016)
Mr Stephen Sadie Chartered Secretaries Southern Africa
Mr Marius van den Berg Independent
Ms Annamarie van der Merwe Independent
Mr Anton van Wyk Independent
Mr Andre Visser Johannesburg Stock Exchange
Adv Rory Voller Companies and Intellectual Property Commission
Vacant Association for the Advancement of Black Accountants of
Southern Africa
Vacant Law Society of South Africa

120 © 2016 THE INSTITUTE OF DIRECTORS IN SOUTHERN AFRICA NPC. ALL RIGHTS RESERVED.