New Companies Amendment Bill gets directors’ nod
The Companies Amendment Bill proposes significant changes to rules on social and ethical committees (SECs).
The newly proposed Companies Amendment Bill makes some notable changes regarding social and ethical committees (SECs). Image: iStock
The recently proposed Companies Amendment Bill proposed some significant changes to rules relating to social and ethical committees (SECs).
Most notably, clauses 6A and 6B intended for Section 72 of the Companies Act, which, respectively indicate when a social and ethics committee is not required, and to give the responsible minister authority to prescribe the minimum qualifications, skills and experience requirements for members of social and ethics committees.
The Institute of Directors of South Africa (IoDSA) and the King Committee have welcomed the proposed amendments.
“The IoDSA has consistently advocated all board members to have the necessary knowledge, skills and experience to discharge their duties adequately,” said Parmi Natesan, IoDSA CEO.
“Our Director Competency Framework will assist directors to acquire the skills [needed] on the board and the SEC,” she added.
Ansie Ramalho, chair of the King Committee highlighted three significant changes proposed by the prospective amendments:
- Public companies and state-owned enterprises to appoint SEC members at their AGMs.
- Representation of non-executive directors on the SEC.
- Tabling of an SEC report at the AGM.
Ramalho agreed with the move to give SECs more prominence.
“The requirements introduced by the Bill for the election and qualifications of members of SECs are likely to elevate its authority and effectiveness, which is critical for a committee which exercises oversight of matters, as important as the social and environmental impact of companies’ output operations,” said Ramalho.
Suggesting a “rewrite” of regulations pertaining to the responsibilities of the SEC committee, Ramalho said current regulations did not deal with oversight of company ethics by SECs.
She also said other areas for monitoring and oversight as stated in relevant regulations were not sufficiently focused for meaningful reporting – “against which the SEC could be held accountable”.
Missing puzzle piece
King Committee member and IoDSA Social and Ethics Committee Forum member, Deon Rossouw said the intention to exempt certain companies, such as subsidiaries of companies with an SEC, would make it easier to do business, while eliminating duplicate administration.
He also welcomed the inclusion of a clause requiring an SEC report to be tabled at the AGM.
“In line with modern thinking, it’s important that shareholders are informed not only about the company’s financial performance, but also about how it does business and its impact on society,” Rossouw said.
Cautioning against the new Bill’s shortfalls, Rossouw said while the potential legislation required the SEC report to be made “in the prescribed manner and form”, it did not provide guidance on the process.
“We were very thankful that the drafters dropped the requirement for the SEC report to be passed by a resolution at the AGM as was previously tabled in the 2021 Bill, which we argued was a bad idea since the report would contain historic information, thus a fait accompli which the vote cannot change,” he said.