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BOARDS AND DIRECTORS

RESPONSIBILITIES AND RISK

THE IMPACT OF THE NEW COMPANIES ACT

AND BUSINESS LEGISLATION

PRESENTED BYDR JOHN W HENDRIKSE

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BOARDS AND DIRECTORSRESPONSIBILITIES AND RISK

• CORPORATE REFORM TIMELINES• BOARD MISSION• GOVERNANCE FRAMEWORK• BOARD STRUCTURE• BOARD RESPONSIBILITIES• DIRECTORS RESPONSIBILITIES• LIABILITIES OF DIRECTORS• COMPETITION AMENDMENT ACT• CONSUMER PROTECTION ACT• CAVEAT VENDITOR


CORPORATE REFORMTIMELINES

• THE COMPANIES ACT (Act 71 of 2008)

Enacted 8 April 2009

Planned Commencement Date: 1 July 2010


COMPETITION AMENDMENT ACT

• Approved by Parliament 22 October 2008

Enacted 29 August 2009


CONSUMER PROTECTION ACT (Act 68 of 2008)

• Enacted : 29 April 2009

Planned Commencement Date : July 2010


KING IIIRelease Date: 1 September 2009

BOARD MISSION

• SURVIVE AND SUCCEED

• BEST INTEREST OF SHAREHOLDERS

• BEST INTEREST OF COMPANY

• CORPORATE STRATEGY

• CORPORATE GOVERNANCE


GOVERNANCE FRAMEWORK

SHAREHOLDERS COMPANY

AGENTS TRUSTEES

BOARD OF DIRECTORS

PERFORMANCE CONFORMANCE


BOARD STRUCTURE

BOARD OF DIRECTORS

EXECUTIVE NON-EXECUTIVE

INDEPENDENT OTHER

AUDITCOMMITTEE

3 or MORE DIRECTORS


BOARD RESPONSIBILITIES• GOING CONCERN

• SOLVENCY AND LIQUIDITY TEST

• SOLVENCY – FINANCIAL POSITION NET ASSET VALUEMARKET VALUES & REALISABLE VALUES

• LIQUIDITY LIQUID ASSETS SHORT TERM OBLIGATIONS

• INSOLVENCY AUDIT LONG TERM SUSTAINABILITY SHORT TERM LIQUIDITY CAPACITY CASH FLOW FROM OPERATIONS


CORE DUTIES – SECTION 76 DISCLOSE ANY CONFLICT OF INTEREST

USE POSITION AND INFORMATION FOR COMPANY’S BENEFIT

DISCLOSURE OF MATERIAL INFORMATION

PERFORM DUTIES:

- IN GOOD FAITH

- IN BEST INTEREST OF THE COMPANY

- WITH CARE, SKILL AND DILIGENCE

DIRECTOR RESPONSIBILITIES


STRATEGY AND CORPORATE STRUCTURE

DUTY TO COMPLY WITH THE ACT IN RELATION TO DIFFERENT TYPES OF COMPANIES (Section 8)

DUTY TO COMPLY WITH THE COMPANY’S MEMORANDUM OF INCORPORATION (Section 13)

DUTY TO MANAGE THE BUSINESS AFFAIRS AT THE COMPANY (Section 66(1))

DUTY TO CARRY ON THE BUSINESS WITHOUT TRADING RECKLESSLY OR UNDER INSOLVENT CONDITIONS (Section 22)



BOARD STRUCTURE AND CORPORATE ADMINISTRATION

DUTY TO APPOINT BOARD COMMITTEES (Section 72)

DUTY TO APPOINT AN AUDIT COMMITTEE (Section 94)

DUTY TO APPOINT A COMPANY SECRETARY (Section 84 & 86)

DUTY TO CALL AND CONVENE A SHAREHOLDER’S MEETING (Section 61)



ACCOUNTABILITY AND ASSURANCE DUTY TO KEEP COMPANY RECORDS (Section 24)

DUTY TO KEEP ACCOUNTING RECORDS (Section 28)

DUTY TO COMPLY WITH CHAPTER 3 OF THE ACT (Section 34(1) & 94)

DUTY TO PAY DIRECTORS REMUNERATION IN TERMS OF MEMORANDUM OF INCORPORATION AND GET IT APPROVED BY SHAREHOLDERS BY SPECIAL RESOLUTION (Section 66(8) & 66(9))



ACCOUNTABILITY AND ASSURANCE CONTINUES…

DUTY TO APPOINT AUDITORS (Section 90 & 92)

DUTY TO OBTAIN AN INDEPENDENT REVIEW OF THE FINANCIAL STATEMENTS (Section 30)



DISCLOSURE AND TRANSPARENCY DUTY TO PREPARE ANNUAL FINANCIAL STATEMENTS (Section

29 & 30)

DUTY TO PREPARE A DIRECTORS REPORT (Section 30(3))

DUTY TO ISSUE A PROSPECTUS (Section 100)

DUTY TO DISCLOSE DIRECTOR’S REMUNERATION INFORMATION (Section 30)

DUTY TO FILE AN ANNUAL RETURN (Section 33)



SHAREHOLDER TREATMENT DUTY TO ENSURE THAT SHAREHOLDERS CAN EXERCISE

THEIR VOTING POWER AND RIGHTS (Section 2(2) & 58)

DUTY TO FACILITATE A SHAREHOLDERS MEETING (Section 61)

DUTY TO OPERATE WITHIN THE FRAMEWORK OF THE COMPANY’S MEMORANDUM OF INCOPORATION (Section 15(3) & (4) & 36)

DUTY TO OPERATE IN THE BEST INTEREST OF THE SHAREHOLDERS (Section 20(6) & (7) THE COMPANY (Section 76(3))



NEW COMPANIES ACT

BREACH OF DUTIES

BREACH OF ACCOUNTABILITY (Section 213 & Section 214)

RECKLESS TRADING

PROSPECTUS LIABILITY

INSOLVENCY ACT( Section 424)

PERSONAL LIABILITY COMPANY

LIABILITIES OF DIRECTORS


PURPOSE OF THE ACT

CRIMINAL LIABILITY

RISK

MITIGATING THE RISK

COMPETITION AMENDMENT ACT


CONSUMER PROTECTION ACT

MARKETING ACTIVITIES

DIRECT MARKETING AND COOLING-OFF PERIOD

ADVANCE RESERVATIONS AND BOOKINGS

DISCLOSURE AND INFORMATION

FAIR AND HONEST DEALING

OVER-SELLING

CONSUMER AGREEMENTS

FAIR VALUE, GOOD QUALITY AND SAFETY

DAMAGE CAUSED BY GOODS


CONTINUES…

FRANCHISE AGREEMENTS

BUSINESS NAMES

CLASS ACTIONS


Compliance Requirements

Public Companies

State Owned Companies

(SOC)

Private Companies (in public interest)

Minimum number of Shareholders

Minimum number of Directors

Memorandum of Incorporation (MIC)

Company Records

Accounting Records

Financial Statements (e.g. Annual Financial Statements)

Audit

1

3

YES

YES

YES

YES

YES

-

1

YES

YES

YES

YES

YES

1

1

YES

YES

YES

YES

YES

TYPES OF COMPANIES AND COMPLIANCE(New Companies Act, Act 73 of 2008)



Public Companies

State Owned Companies

(SOC)

Private Companies (in public interest)

Independent Review

Company Secretary

Audit Committee

Registered Address

Annual Return

Annual General Meeting

Deadline for AFS (after financial year end)

N/A

YES

YES

YES

YES

YES

6 months

N/A

YES

YES

YES

YES

YES

6 months

N/A

NO

NO

YES

YES

NO

6 months


CONTINUES…



Other Private

Companies

Personal Liability

Company

Non-Profit Company

(NPC)

Minimum number of Shareholders

Minimum number of Directors

Memorandum of Incorporation (MIC)

Company Records

Accounting Records

Financial Statements (e.g. Annual Financial Statements)

Audit

1

1

YES

YES

YES

YES

By regulation or voluntary

1

1

YES

YES

YES

YES

NO

3

3

YES

YES

YES

YES

By regulation or voluntary


CONTINUES…



CONTINUES…


Other Private

Companies

Personal Liability

Company

Non-Profit Company

(NPC)

Independent Review

Company Secretary

Audit Committee

Registered Address

Annual Return

Annual General Meeting

Deadline for AFS (after financial year end)

N/A

NO

NO

YES

YES

NO

6 months

YES

NO

NO

YES

YES

NO

6 months

N/A

NO

NO

YES

YES

NO

6 months



THE END


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