Implementation of The Companies Amendment Bill
The Minister of Trade and Industry has initiated the process to implement various changes in South African law with a new Companies Amendment Bill. The Bill, made available for public feedback in 2021, includes significant amendments, one of which requires publicly traded firms to reveal the pay ratio between their highest-paid employees and the lowest-paid 5%, aiming to expose inequality.
South Africa is perceived as one of the most unequal nations globally, with significant wealth disparities. The issue of exorbitant executive remuneration has stirred controversy, with some top executives earning more than R500,000 daily, starkly contrasting the average daily income of R800 and the minimum wage of R25.
Understanding Upcoming Legislative Changes
- Remuneration policies must be articulated in a separate section within the remuneration report.
- A section must be defined to detail the implementation of the remuneration policy, including the specifics of compensation and benefits received by each director.
- A detailed outline of the entire compensation package of a high-paid employee, encompassing all wages and benefits. This could pertain to the CEO or any other executive or designated officer.
- A detailed outline of the entire compensation package of a low-paid employee, encompassing all wages and benefits.
- The average compensation of all employees, the median remuneration of all employees, and the ratio gap between the total earnings of the top 5% highest-paid workers and the bottom 5% lowest-paid workers.
This updated report, containing the above specifications, requires the company Board’s approval before it is presented to shareholders at the annual general meeting. It must then be presented for a vote by the shareholders for endorsement.
The new regulations don’t exclusively concentrate on remuneration. They also highlight other aspects, such as beneficial ownership and enhancing the simplicity of conducting business by eliminating “excessive bureaucracy” and making the rules clear, user-friendly, aligned with well-settled principles, and not overly oppressive for business operations.
The Aim of the Companies Amendment Bill
- Introduce specific definitions and modify the definition of “securities”.
- Clarify the timing of when an Amendment Notice of a Memorandum of Incorporation becomes effective.
- Stipulate that the Commission should publish a notice of the location of a company’s records.
- Distinguish situations where access to a company’s records may be restricted.
- Stipulate the creation, presentation, and voting procedures for companies’ remuneration policies and directors’ compensation reports.
- Establish guidelines for the submission request of an annual financial statement copy.
- Grant the court legal authority to confirm the irregular creation, allotment, or issuance of shares.
- Specify that shares which have not been fully paid should be transferred to a stakeholder and managed according to a stakeholder agreement.
- Exempt subsidiary companies from obligations related to financial assistance.
- Establish scenarios where special resolution is required for a company’s acquisition of its own shares.
- Stipulate that a social and ethics committee report should be presented at public company’s annual general meetings.
- Define the conditions under which a private company will be considered regulated.
- Stipulate the publication of the application for exemption from the requirement to form a social and ethics committee.
- Outline the structure of the social and ethics committee.
- Establish guidelines for creating a social and ethics committee report to be presented at the annual general meeting or shareholders meeting.
- In the case of a private company, personal liability company, or non-profit company, provide for selecting an auditor at a shareholders’ meeting if such appointment is mandated.
- Broaden the definition of an “employee share scheme” to encompass scenarios where company shares are purchased.
- Establish provisions for post-commencement finance for unsettled amounts owed to landlords during business rescue proceedings.
- Allow the Commission to replace a disputed company name under specific conditions.
- Stipulate that the Companies Tribunal can only mediate, conciliate, and arbitrate in relation to relief or complaints as per the Act.
- Provide guidelines for declarations that the Financial Reporting Standards Council may issue.
By initiating these amendments, the government is laying out a strategic plan to appeal to and draw in foreign and domestic investors. This is essential to gain the capital needed for businesses to expand and thrive, boosting economic growth.
Ensure Compliant Annual Reports
Is Your Business At Risk For Online Fraud?While business executives frequently assess risks that could impact their enterprises, one they often overlook is the potential threat of...
The popularity of trusts has generally decreased in business, due to the tightening of tax provisions around trusts, reducing their effectiveness as a vehicle to legitimately reduce...
Increasingly, individuals are appreciating the value of trusts in estate planning. Thanks to the continued growth in these vehicles, we offer dedicated trust accounting services to our...