IN THE SPOTLIGHT: TWO COMPANIES AMENDMENT BILLS

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IN THE SPOTLIGHT: TWO COMPANIES AMENDMENT BILLS

• 31 October 2023
• In the Spotlight
• SA Legal Academy

Please note: This report is drawn from Parliamentary Monitoring Group sound recordings of a National Assembly Trade & Industry Committee meeting held on 24 October 2024.

Provisions in the Companies Amendment Bill dealing with the non-approval of a company’s remuneration policy and implementation report are likely to change – informed by alternative mechanisms included in a Johannesburg Stock Exchange (JSE) submission on the Bill. The changes envisaged focus on the procedures to be followed:

• at the first annual general meeting at which the policy and report are considered, put to the vote and rejected
• at subsequent annual general meetings (focusing on steps taken during the preceding months to address shareholder concerns), and
• factors to be considered when determining the composition of the committee responsible for remuneration policy and reporting.

These proposals were included in a document presented by Trade, Industry & Competition Minister Ebrahim Patel during a meeting of the National Assembly’s Trade & Industry Committee on 24 October 2023, when members were briefed on his department’s response to stakeholder submissions and representations during recent parliamentary hearings. Not yet publicly available, they will be considered by the committee during deliberations on the Bill already under way and expected to continue during November.

In the department’s view, no changes are necessary to provisions in the Bill making it mandatory to disclose the names of senior executives in the context of fully disclosing the details of their remuneration packages. Stakeholder arguments opposing the disclosure of names for privacy reasons were described by the Minister as ‘flawed’.

He appears to have taken calls for the disclosure of gender pay gaps more seriously. However, being beyond the scope of the Bill, the inclusion of a clause providing for this would require another round of public consultations. The time taken by such a process could make it difficult for Parliament to pass the Bill before rising for the 2024 elections.

The same would apply to calls for changes to the Bill making the disclosure of payments to independent contractors mandatory. With that in mind, the Minister suggested that, since both recommendations have merit, they could be the focus of a separate Bill for consideration by the next Parliament.

More generally, given the increasing use of electronic communication, the next amendment Bill could also provide for the electronic delivery of notices to shareholders – as proposed in several stakeholder submissions, according to the Minister.

The Companies Second Amendment Bill having been informed by recommendations in the Zondo State Capture Commission of Inquiry report, the Minister and his department proposed minor drafting changes intended to address referencing deficiencies and remove redundant phrases.

As SA Legal Academy has already reported, the Companies Amendment Bill seeks to:

• remove certain obstacles to legitimate business activity
• facilitate greater ‘equity between directors and senior management on the one hand, and shareholders and workers on the other hand’ (among other things by ensuring greater transparency regarding the disclosure of senior executive remuneration and its ‘reasonableness’), and to
• address various policy matters affecting social and ethics committees.

The Companies Second Amendment Bill seeks to extend the time bar set out in section 162(2) of the Act in terms of which applications are made for a court order declaring a company director ‘delinquent or under probation’. This is noting:

• certain company specific Zondo Commission recommendations, which the Bill proposes should apply generally, and
• international best practice.

According to the Minister, having been widely consulted before being tabled in Parliament – and having been subjected to robust negotiations in the National Economic Development & Labour Council – most provisions in the Companies Amendment Bill are broadly supported by organised business and labour. Where objections were expressed during parliamentary hearings and in stakeholder submissions, they tended to focus on the full disclosure of executive remuneration packages.

Intended to address issues identified in the Zondo State Capture Commission of Inquiry report and widely understood to be in the public interest, the Companies Second Amendment Bill was not subjected to as comprehensive a pre-tabling consultation process as its sister Bill. According to the Minister, few objections were raised during parliamentary hearings and in written submissions on the Bill.

• Companies Amendment Bill
• JSE proposals
• Companies Second Amendment Bill

Published by SA Legal Academy Policy Watch

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