Johnathan Paoli
President Cyril Ramaphosa signed into law amendments to two acts, in order to promote the ease of doing business and imposing greater corporate transparency on earning gaps between the highest and lowest paid workers in a company.
Spokesperson for the President, Vincent Magwenya said on Sunday, said the Companies Amendment bill and the Companies Second Amendment bill constituted initiatives by the government to make the conduct of business less burdensome, to tighten the pursuit of delinquent directors for wrongdoing, including state capture, and to address the disparities in earning.
Magwenya said the proposed Companies Amendment Act is expected to streamline company law to be clear and user-friendly and the reform is important for the efficient and effective conduct of the domestic economy as well as attracting foreign investment.
In addition, he said the new law aimed at achieving equity between directors and senior management on the one hand and shareholders and workers on the other.
“In addition, the law addresses public concerns regarding high levels of inequalities in society by introducing better disclosure of senior executive remuneration and the reasonableness of the remuneration. The law requires the preparation of a remuneration report by all public and State-owned companies in respect of the previous financial year,” Magwenya said.
He confirmed that the remuneration report must be accompanied by the company’s remuneration policy, an implementation report detailing the total remuneration received by each director and prescribed office; as well as the total remuneration for the employee with the highest and lowest pay.
Magwenya said, companies are additionally required to report the average and median total remuneration for all employees, and disclose the gap between the top 5% highest paid employees and the bottom 5% lowest paid.
In terms of shares and shareholders, public and state-owned companies are now required to prepare and present a remuneration policy for shareholder approval.
Other provisions include empowering a court to validate the creation, allotment or issue of shares; and the requirement of paid shares to be transferred to a stakeholder in terms of a stakeholder agreement, until fully paid.
“These measures are directed at preventing unethical, reckless and criminal conduct in businesses that will impact negatively on shareholders, workers, clients, customers and the economy as a whole,” Magwenya said.
In relation to the Companies Second Amendment Act, the spokesperson said it centred around a response by the government to one of the recommendations of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector, including Organs of State.
This amendment seeks to extend the period during which proceedings may be launched to recover any loss, damages or costs for which a person may be held liable under the law.
The State Capture commission recommended that section 162 of the Companies Act be amended to ensure that an application for a declaration of delinquency may be brought even after two years if good cause is proven.
The new law extends the time bar for declaring a director of a company as delinquent, from 24 months to 60 months, and authorises the court to extend the period even further if so required.
“This provision ensures that directors and prescribed officers in companies can be held accountable for a significant period after they have committed alleged offences,” Magwenya said.
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