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FINANCE AD HOC COMMITTEE
23 June 2004
PUBLIC INVESTMENT CORPORATION BILL: BRIEFING ON AMENDMENTS
Chairperson: Ms B Hogan
Documents handed out
Public Investment Corporation Bill [B6-04]
The Committee was briefed on proposed amendments to the tabled version of the Public Investment Corporation Bill.
The exclusion of the application of certain sections of the Companies Act to the Public Investment Corporation was necessary because the sections require the of presence seven shareholders for certain purposes. The PIC would not be able to comply with these sections because it would have only one shareholder. Clause 6(3) of the tabled would be amended to allow the Minister to issue directives only when it is in the public interest or reasonably necessary to do so. Clause 9 would also be changed with the effect that the PIC would have to go through the normal Financial Advisory and Intermediary Services Act registration process. It would also have to pay fees to be registered as a financial services provider. Clauses 3(3) and 13 were deleted.
The Public Investment Corporation commissioners were present at the meeting. Mr B Maasdorp (Director: Hofmeyer, Herbstein and Gihwala Inc.) presented on behalf of the Corporation. He said that Clause 2(7) excludes the application of certain sections of the Companies Act to the PIC.
Sections 344(d) of the Companies Act provides for a winding up of a public company should the number of shareholders drop to less than seven. The application of this and other sections referred to in clause 2(7) would give rise to some problems because the PIC would have one shareholder only.
The Chairperson added that should the Minister of Finance transfer some shares in the corporation, the Act would have to be amended and make section 344(d) applicable to the corporation.
Mr Maasdorp noted that Clause 2(7) already states that the exclusions apply only when the state is the sole or majority shareholder.
Mr Molefe (CEO: PIC) said that Clause 3(3) creates problems for a number of clauses. He proposed that it should be deleted. The Committee agreed to the proposal.
Mr Y Bhamjee (ANC) proposed the deletion of Clause 13. The clause requires the corporation to be subject to the Public Finance Management Act. Such compliance is already a requirement and there is no need to legislate for it. The Committee accepted the proposal.
Mr Maasdorp explained that in general the sections of the Companies Act listed in Clause 2(7) of the Bill deal with the number of shareholders required for certain purposes. In most instances seven shareholders are required. The Corporation would not be able to comply with the sections because it would have one shareholder only. Hence they are excluded.
Mr M Stephens (UDM) suggested that the phrase "as long as the state is the sole or majority shareholder of the corporation" in Clause 2(7) should be deleted. The Committee accepted this.
Mr Molefe noted that in a previous discussion an issue had been raised that Clause 6(3) is too broad. He suggested that the clause be amended to read:
6(3) The Minister may issue directives to the board if:
(a) it is in the public interest; or
(b) it is reasonably necessary to do so.
Mr L Gabela (ANC) felt that the clause was still too broad. He asked who would determine what is reasonable or in the public interest.
Mr Molefe replied that the Minister of Finance would determine what is reasonable. Such a decision could be challenged in court. There are many instances wherein the courts had been called to decide on the reasonableness of decisions or what constitutes public interest. There are well-established tests that help a court to decide such cases.
Mr Stephens commented that the wording of the clause showed a lot of improvement. Any stakeholder could take the Minister to court. But the problem is that the field in which the Minister could issue directives is still too wide. It seemed like the Minister could still issue directives regarding human resource policies of the Corporation.
Mr Maasdorp said that one could not have a closed list of circumstances under which the Minister would be allowed to issue directives. The Minister should be able to issue directives regarding human resources policies should this be reasonably necessary or in the public interest.
Mr Bhamjee noted that Clause 8 leaves the management of the corporation to the board. He felt that the Minister's power to issue directives might undermine Clause 8.
Ms Hogan replied that the Minister is a custodian of funds managed by the PIC. The Minister needs an open mandate to do what is necessary but the courts still has jurisdiction to set aside his directives.
Mr Stephens suggested that the word "or" in the proposed Clause 6(3) a) should be replaced by "and" so as to make the clause more strict. This would mean that the Minister would only be able to intervene if it is in the public interest and reasonably necessary to do so.
Mr Maasdorp felt that this would be too strict. Sometimes something might be necessary but at the same time not necessarily in the public interest.
Ms Hogan added that the Minister has big responsibilities regarding the PIC and therefore he should not be overburdened.
There was a general agreement that the proposed clause should be accepted and not further amended.
Mr Molefe said that there would no longer be automatic registration of the PIC as a financial services provider as initially provided for by Clause 9(1). The PIC would also pay registration fees.
The meeting was adjourned.