Companies Amendment Bills: proposed amendments

Meeting report

The Chairperson asked if there was a quorum.

Mr Andre Hermans, Committee Secretary, said that there was a quorum and asked if he should do the roll call.

The Chairperson said that Mr Hermans should proceed.

Mr Hermans continued with the roll call.

The Chairperson asked if there were any apologies.

Mr Hermans confirmed that there were no formal apologies but if he received apologies he would inform the Chairperson.

The Committee adopted the agenda.

The Chairperson said that in the meeting of 07 November 2023, the Committee resolved that the Department of Trade, Industry and Competition (DTIC) and the Parliamentary Legal Advisor should prepare A-lists of the Companies Amendment Bill 2023 and the Companies Second Amendment Bill 2023 (Companies Bills). The Committee also agreed that it would consider all the matters that fall outside the scope of the Companies Bills; whether they should form part of the current process or form part of the Seventh Parliament. It was resolved that Members should take the proposed amendments presented on 07 November 2023 to their respective caucuses for clear party positions. In this meeting, the Committee will consider the matters that fall outside the scope of the Companies Bills before proceeding to consider the A-list of the Companies Bills.

She said that the Parliamentary Legal Advisor will do a briefing on the matters that fall outside the scope of the Companies Bills.

Ms Fatima Ebrahim, Parliamentary Legal Advisor, Constitutional and Legal Services Office (CLSO), greeted everyone on the platform. She said that last week, 07 November 2023, she did a briefing on those matters that fall outside the ambit of the Companies Bills and would require permission from the National Assembly and to conduct further public participation if the Committee wishes to proceed in that manner. She said that she would have to go through the matters again for the Committee to clearly indicate which matters it wants to consider. The necessary documents will be drafted to get permission from the National Assembly for public participation. This process would take a few weeks. She asked if she should go through the presentation again.

The Chairperson said that Ms Ebrahim does not have to go through the whole document and should give the Committee a summary version of the matters that fall outside the scope of the Companies Bills.

Summary of the submissions for the Companies Bills seeking to amend other sections of the Act

Ms Ebrahim said that there was a public submission to amend section 16 of the Act, which was not covered in the amendments. It seeks to enable other forms of electronic communication to keep up with the current times. The Act does not provide for any electronic means of communicating circulars, notices of shareholder meetings, and similar documents. It must still be done via post. Section 30(1) also does not form part of the Companies Bills and therefore it seeks the permission of the House. It is a section that requires companies to compile their annual financial statements within six months after year-end. The Companies Tribunal does not have jurisdiction to extend the six-month period. There were some public submissions that recommended that the gender pay gap or gender pay ratio be included as part of the remuneration report. Permission from the House is needed to do that. The DTIC also said that it needed some time to formulate what the requirements would be with respect to the gender pay gap.

Section 57A deals with corporate governance codes and does not form part of the Companies Bills. The JSE mandates the disclosure of the application of the King Report principles for listed entities but there is no similar requirement in legislation. The public submissions asked that this becomes a requirement that companies confirm and stipulate that it has applied the king principles and practices. Section 62 deals with the notice of meetings. There was a concern raised by Computershare around the requirements for notices of meetings and proposed that the company’s annual general meeting notice refers to where the summarised financials will be published such as on the websites and instruct how shareholders or any person that would be interested to inspect those documents and where it may be accessed.

The next concern was around board composition and nomination criteria. There was a request that the Companies Act should be amended to include general requirements or considerations that a company must make with respect to how it composes its board and its nomination and selection process. This is to ensure that there is a board with the necessary skills. A proposed clause with how that should look like, including how the vacancies should be filled and how to deal with conflict of interest. Section 66B consists of the training and development of directors. There was a recommendation that training should be a compulsory requirement and that all directors must be trained and continuously developed professionally.

Section 69 deals with the disqualification of persons to be a director or describe officer as well as section 76 which deals with the standards of a director’s conduct. The public submissions indicated that the Act has no minimum criteria that directors must meet to serve on a board but rather does the opposite, the disqualification criteria. It was recommended that the Act include appointment criteria such as the specific skills and knowledge that a director would need to fulfill that role.

Section 75 deals with directors' personal interests. A concern was raised that since the definition of “related persons” is broad, it may have unintended consequences, where a majority of the board may not be able to consider a matter that involves two or more companies on which a director may sit. There were various ways proposed on how this could be fixed. Section 128(1)(f) deals with financial distress. There was a concern that it does not define “insolvent” and that the Act only refers to solvency and liquidity and that creates confusion. Considering the purpose of the Act and the definition of “business rescue”, one must consider the complex financial position of the company when determining whether there is a likelihood of that company being insolvent in the next six months.

Section 145(4) deals with the participation of creditors. Section 135 refers to a landlord and a landlord is usually an unsecured creditor and in other circumstances, it is a secured creditor. This is not defined in Chapter 6 and only speaks about pre and post-commencement creditors and creating further uncertainty. This has to be clarified. These are the matters that were raised. If the Committee decides to look at these concerns, the necessary documents should be drafted and permission should be requested from the National Assembly to embark on the public participation process. The necessary drafting of amendments will then be done following the public participation process.

Discussion

The Chairperson thanked Ms Ebrahim for presenting the matters that fall outside of the scope of the Companies Bills before the Committee again. The first option is to proceed with these matters and remember that gender pay gap disclosure needs to go back to the House. The second option is for these matters to stand over to the Seventh Parliament.

Mr S Mbuyane (ANC) welcomed the presentation. He proposed that those matters that fall outside the scope of the Companies Bills should not be included. The DTIC should review these proposals and determine whether they will be included in the future amendment bill. A specific recommendation should be made that the gender pay disclosure should be further investigated by the DTIC and should be captured in the legacy report.

The Chairperson said that there is one proposal.

Mr D Macpherson (DA) thanked Ms Ebrahim for the presentation. He differed from Mr Mbuyane. The Committee should do everything that it can to include these proposals in the Companies Bills. There cannot be talk about these serious issues such as gender disparity in terms of pay and then it is decided to leave those matters for the future. Even if these matters were left for the Seventh Parliament, it could take years to be dealt with. The Committee can manage this and it should be included before the Seventh Parliament. The Committee must match actions with words. He was concerned that if these matters were outsourced to the Seventh Parliament, it would not be true to the constituents and calls that have been made to address some of these very serious issues. He recommended that the recommendations should be accepted.

The Chairperson said that there is now a counter-proposal. There are now two proposals.

Dr J Ntwane (ANC) thanked Ms Ebrahim for the presentation. She said that the Committee has come so far with the process it embarked on in order to complete the Companies Bills. She proposed that rather than dealing with these matters, it should stand over to the next Parliament. This will allow the next Parliament to deal with these matters specifically and conclusively instead of doing it hurryingly. She agreed with Mr Mbuyane.

The Chairperson said that the proposal by Mr Mbuyane has now been seconded.

Ms F Mulder (FF+) said that there is certainly merit in both proposals but that he agreed with Mr Macpherson.

The Chairperson said that both proposals have been seconded and asked Mr Hermans for guidance.

Mr Hermans said that there are two proposals on the table. The Committee will now have to vote on the first proposal and then the second proposal.

The Chairperson thanked Mr Hermans and asked if Mr Macpherson wanted to say something.

Mr Macpherson said that he was dismayed at the lack of willingness to deal with some of these serious issues. The problem now is that it smells and starts to look like an attempt to pass legislation for the sake of it as opposed to actually dealing with these serious issues. Gender pay disparity is a very serious issue. Many political parties that exist in Parliament claim to be very vocal about these issues. There is a strong outcry of this in society. However, when it comes to dealing with these issues, it is suggested to deal with them later. It is a very dishonest position to claim one thing but it might not be matched with actions. There has been no reasonable position put forward as to why the Committee cannot deal with these amendments now and to finalise the Companies Bills before the next Parliament. There is a responsibility that the electorate offered and mandated to the Committee to deal with these matters but now it wants to give it away and outsource it to the next Parliament. It felt like there is an action of finalising the Companies Bills for the sake of it as opposed to putting substantive changes on the table that will deal with these serious issues. There needs to be a discussion around this because no reasons are being given. The women of this country need an explanation as to why the Committee does not want to implement fundamental change that can deal with gender pay disparity. Members owe the electorate and the people who voted them into Parliament an explanation.

The Chairperson said that there are two proposals on the table. The Committee will proceed with the vote. She noted the input of Mr Macpherson and said that Mr Mbuyane did substantiate in his input why the matters should be dealt with at a later stage.

The Committee will now go through the procedures for the vote.

Mr Hermans said that the Chairperson should put the first proposal on the floor and then he will call out the names of the Members.

The Chairperson put the first proposal of Mr Mbuyane on the floor.

Ms R Moatshe (ANC) agreed that the Committee should proceed.

Mr Macpherson voted No because the Committee should be true to its words. He would rather be on the support for dealing with gender pay disparity as opposed to just talking about it.

Dr Ntwane said voted yes.

Mr Mbuyane stood by his proposal.

Mr Hermans called out Mr C Malematja (ANC).

The Chairperson asked Mr Malematja to unmute.

Mr Macpherson suggested that the Committee proceed.

The Chairperson said that perhaps Mr Malematja has connectivity issues so the Committee will proceed.

Mr W Thring (ACDP) said that the ACDP does not support the proposal.

Mr Hermans called out Ms N Hlonyana (EFF) but there was no response.

Mr Mulder voted No.

Mr M Monakedi (ANC) supported the proposal of Mr Mbuyane.

Mr D Bergman (DA) voted No.

Mr Malematja said he supported the proposal of Mr Mbuyane.

Mr Hermans called Ms Hlonyana again but she did not respond.

The Chairperson voted in favour of the proposal by Mr Mbuyane.

Mr Hermans said that there were six votes in favour of Mr Mbuyane’s proposal and four votes against it. The Committee does not have Ms Hlonyana’s vote although she is on the platform but she is not responding. There is support for Mr Mbuyane’s proposal for letting these matters stand over to the next Parliament. He said that the Committee should go over Mr Macpherson’s proposal for record purposes.

The Chairperson said that Mr Hermans could proceed.

Ms Moatshe voted No.

Mr Macpherson voted yes because words should be matched with action.

The Chairperson said that Members should just vote.

Dr Ntwane voted No.

Mr Mbuyane voted No.

Mr Malematja voted No.

Mr Thring voted Yes.

Mr Hermans called out Ms Hlonyana but she did not respond.

Mr Mulder voted Yes.

Mr Monakedi voted No.

Mr Bergman voted Yes.

The Chairperson voted No.

Mr Hermans said that there were four votes in favour of Mr Macpherson’s proposal and six votes against the proposal. The proposal of Mr Mbuyane stands.

The Chairperson thanked the Committee and said that the voting has been concluded. The Committee will now go through the A-list for the Companies Bills.

Ms Ebrahim said that before she started she just wanted to give an update on the legal opinion that the DTIC sourced. The legal opinion has been received and was done by a very well-respected senior counsel in Johannesburg, Advocate Baloyi. This was in respect of clause four dealing with the right to any person to inspect and copy records of companies above a certain threshold, as well as clause five dealing with the naming of prescribed officers and directors when listing the remuneration. The legal opinion indicated that it is not per se unconstitutional and would be defendable in terms of the limitations clause and the right to privacy. This clears the way for the Committee to continue with those clauses. There was also an issue of retrospectivity in the Companies Second Amendment Bill which is also not unconstitutional. There is an issue of excluding the Prescription Act in its entirety and that it may have unintended consequences regarding a judgement date that is treated differently from a normal date that prescribes after three years. The exclusion of the Prescription Act is only limited to the purpose of that clause which allows a person to try and recover those losses or damages. It is not necessary to amend those any further.

A-list on the Companies Second Amendment Bill [B26-2023]

Ms Ebrahim took the Committee clause-by-clause through the A-list of the Companies Second Amendment Bill.

There were minor amendments to the clauses with some substitutions.

Clause 1: On page 2, in line 3, after ‘2008’ to insert “, as amended by section 49 of Act 3 of 2011”. On page 2, from line 7 to 13 to omit subsection (7) and to substitute the following: “(7) In relation to the proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of this section— (a) The Prescription Act, 1969 (Act No. 68 of 1969) does not apply; (b) subject to paragraph (c), such proceedings may not be commenced more than three years after the act or omission that gave rise to that liability; and (c) the court may, on good cause shown, extend the period referred to in paragraph (b) regardless of whether—(i) such period has expired or not; or (ii) the act or omission that resulted in the loss, damages or costs contemplated in this section, occurred prior to the promulgation of the Companies Amendment Act, 2023 (Act No. __ of 2023).”.

Clause 2: On page 2, in line 14, after ‘2008’ to insert “, as amended by section 101 of Act 3 of 2011”. On page 2, from line 22 to line 28 to omit subsection “(2A)” and to substitute the following subsection: “(2A)(a) The court may, on good cause shown extend the period contemplated in subsection (2)(a) in respect of any of the circumstances contemplated in subsection (2)(b) regardless of whether— (i) such period has expired or not; or (ii) the circumstances occurred prior to the promulgation of the Companies Amendment Act, 2023 (Act No.  of 2023).”. On page 3, from line 7 to 13, to omit subsection “(3A)” and to substitute the following subsection: “(3A)(a) The court may, on good cause shown extend the period contemplated in subsection (3)(a) in respect of any of the circumstances contemplated in subsection (3)(b) regardless of whether— (i) such period has expired or not; or (ii) the circumstances occurred prior to the promulgation of the Companies Amendment Act, 2023 (Act No.  of 2023).”.

The Committee agreed to the amendments.

A-list of the Companies Amendment Bill

Ms Ebrahim took the Committee clause-by-clause through the A-list of the Companies Amendment Bill.

Clause 1: On page 3, from line 3, to omit the heading to clause 1 and to substitute: "Amendment of section 1 of Act 71 of 2008, as amended by section 1 of Act 3 of 2011, section 111 of Act 19 of 2012 and section 55 of Act 22 of 2022". On page 3, in line 16, to omit the first ‘,’. On page 3, in line 16, after “Act”, to underline the second “,”. On page 3, in line 18, to omit ‘; and’ and to substitute ‘.’.  On page 3, from line 19, to omit paragraph (c).

Clause 2: On page 3, from line 31, to omit subparagraph (ii) and to substitute: “(ii) [the] such later date, if any, as set out in the Notice of Amendment.”.

Clause 4: On page 4, in line 14, to omit “no more than”. On page 4, from line 14, to omit “maximum charges” and to substitute “fee”. On page 4, in line 30, to omit “in terms of” and to substitute “[in terms of] as contemplated in”. On page 4, in line 32, before “opportunity”, to insert “requester the”. On page 4, in line 33, to omit “[to the person making such request]”.

Clause 5: On page 4, in line 41, before “director”, to insert “individual”. On page 4, in line 41, to omit “, or” and to substitute “[,or] and”. On page 4, in line 42, to omit "and such individual” and to substitute “both of whom”.

Clause 6: On page 4, from line 50, to omit Clause 6 and to substitute: “Insertion of sections 30A and 30B in Act 71 of 2008. The following sections are hereby inserted in the principal Act after section 30: “Duty to prepare and present companies remuneration policy. 30A.(1)  All public companies and state-owned companies must prepare and present for approval a remuneration policy as contemplated in subsection (2). (2) The remuneration policy— (a) Must be presented to and approved by shareholders at the annual general meeting by an ordinary resolution and if not approved must be presented at the next annual general meeting or at a shareholders meeting called for such purpose; (b) will remain in force for a period of three years from approval and must be approved every three years thereafter; and (c) may be amended prior to the end of the three-year period provided that any material amendment can only be implemented after it is approved by the shareholders by an ordinary resolution at a shareholders meeting called for this purpose or at an annual general meeting.

Duty to prepare and present companies remuneration report 30B. (1) In this section (a) “total remuneration” means all salary and benefits received including any employer contributions to benefit funds and any short-term or long-term incentives including share options and incentive awards; (b) “employee” means an employee as defined in section 213 of the Labour Relations Act, 1995 (Act No. 66 of 1995); and (c) “committee” means the remuneration committee of the company or any other committee of the company responsible for remuneration matters. (2) Each year all public companies and state-owned companies must prepare a remuneration report in respect of the previous financial year for presentation and approval at the annual general meeting. (3) The remuneration report must consist of the following separate parts: (a) Background statement; (b) a copy of the company’s remuneration policy as contemplated in section 30A(2); and (c) an implementation report containing details of: (i) the total remuneration received by each director and prescribed officer in the company; (ii) the total remuneration in respect of the employee with the highest total remuneration; (iii) the total remuneration in respect of the employee with the lowest total remuneration in the company; and (iv) the average total remuneration of all employees, median remuneration of all employees and the remuneration gap reflecting the ratio between the total remuneration of the top five per cent highest paid employees and the total remuneration of the bottom five percent lowest paid employees of the company. (4)If the remuneration report is not approved by ordinary resolution as contemplated in subsection (2) the committee must present an explanation on the manner in which the shareholders’ concerns have been taken into account at the next annual general meeting. (5) Subject to subsection (6), if at the annual general meeting contemplated in subsection (4) the remuneration report in respect of the previous financial year is also not approved by ordinary resolution of shareholders— (a) the directors who are not involved in the day-to-day management of the business of the company and who serve on the committee may continue to serve as directors provided they successfully stand for re-election at that annual general meeting; and (b) will not be eligible to serve on the committee for a period of two years calculated from the date of the annual general meeting contemplated in subsection (4).  (6) The provisions of subsections (5)(a) and (b) do not apply to members of the committee responsible for remuneration who have served for a period of less than 12 months in the year under review.”

Clause 7: On page 6, in line 6, to omit “form with the prescribed fee, and within the prescribed period” and substitute “[form with the prescribed fee, and within the prescribed period] manner”.

Clause 9: On page 6, in line 47, to omit “a trusted” and substitute “an independent”. On page 6, in line 50, after “a”, to insert “written”. On page 6, from line 50, to omit “or an arrangement or understanding”.

Clause 13:  On page 8, from line 3, to omit paragraph (ii) and to substitute: “(ii) it is not reasonably necessary, having regard to the nature and extent of the structures and activities of the company and the public interest, to require the company to have a social and ethics committee;”. On page 8, in line 23, omit “all” and substitute “the majority of”. On page 8, in line 31, after “is”, to insert “not”. On page 8, in line 44, to omit “and appoint its first members”.

Clause 19: On page 10, in line 47, to omit “b” and to substitute “by”.

Clause 21: On page 11, in line 46, to omit “and the Treasury Regulations” and to substitute “its regulations”.

Clause 23: On page 12, in line 29, omit “ ‘Financial Reporting Pronouncements’ ” and substitute “financial reporting pronouncements”.

Clause 24: On page 12, from line 34, to omit paragraph (a) and substitute: “(a) by the insertion after item 30 of the following items: ‘‘30A. Duty to prepare and present company’s remuneration policy. 30B. Duty to prepare and present companies remuneration report”.

Mr Macpherson asked if the amendment of when the remuneration committee members not being eligible for two years has been incorporated.

Ms Ebrahim said that this was included.

The Chairperson asked if there were any clarifications by Members. If not, there will be another meeting next week for the finalisation of the B-list of the Companies Bills.

Mr Hermans said that if the Committee agrees then that would be the way forward.

The Chairperson asked whether there should be a vote.

Mr Hermans said that it was not necessary.

The Committee agreed to the amendments.

Consideration and adoption of minutes of previous meetings

The Committee went through the minutes of 12, 13, and 19 September 2023; 12, 17, 18, 20, 24, 25 and 31 October 2023; and 01 and 07 November 2023.

All the minutes were adopted.

The Chairperson said that the Committee was now up to date with the minutes. She reminded Members that parties can still submit their minority views with clauses and reasons. This will be reported in the Committee reports which will be subject to change.

Mr Hermans said that the meeting with the Special Investigating Unit will still take place in Parliament on 28 November 2023. There will be a virtual meeting with the National Prosecuting Authority on 05 December 2023. There will be a meeting with the National Lotteries Commission next week as well as the consideration of the Companies Bills.

The Chairperson thanked the Members.

The meeting was adjourned.