CORPORATE GOVERNANCE CC

1. C G CORPORATE GOVERNANCE CC web: www.corporategovernance.co.za

2. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters • INTRODUCTION • The influence centres for our Corporate Governance are the Companies Act and the voluntary King Reports • The Board of a company has to: • Lead management • Encourage enterprise • Keep business relevant to the society around us • As Sir Adrian Cadbury said in “ Corporate Governance Overview 1999: World Bank Report”: “Corporate Governance is concerned with building the balance between: • economic and social goals and • between individual and communal goals” .

3. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters • INTRODUCTION The aim is to align as nearly as possible the interests of: • individuals • corporations and • society • The Companies Act which will become effective in 2010 highlights the importance of the Board in guiding, leading and controlling companies .

4. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 1 1 • STANDARDS OF DIRECTOR’S CONDUCT • Directors are required: • not to use their position or information obtained: • for their own interest • for the advantage of another person • Directors are required to act: • in good faith • in the best interests of the company • with a degree of care, skill and diligence • Directors are entitled to rely on information provided by: • employees of the company • legal council • accountants • other professional persons • Committees of the Board

5. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 2 • BOARD MEETINGS • A Board Meeting is obligatory if called for by: • In the case of a board with 12, or in excess of • 12 directors: 25% of the Directors • otherwise: 2 Directors • Board meetings may be held with certain, or all the directors using electronic communication. • If there is a tie in voting and the Chairperson has not previously voted, then the Chairperson may cast a deciding vote. In all other instances, the motion is not carried. • Minutes of meetings are required • Resolutions: • should be dated and numbered • sequentially; • are effective, with immediate effect.

6. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 3 • DECLARING A DIRECTOR TO BE DELINQUENT • OR UNDER PROBATION A Court may declare any Director to be delinquent or under probation, after considering an application 4 • ROUND ROBIN RESOLUTIONS: • DIRECTORS ACTING OTHER THAN AT A MEETING Round Robin resolutions will require written consent by a majority of directors. (Note: the 1973 Act referred to all directors)

7. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 5 • BOARD COMMITTEES • Non-directors • Board Committees may appoint non-directorsto a • Committee. Such persons shall not have a vote. • Note: It is clear from sections 69, 72, 75 and 78 that • the non-voting person in question does not have a • vote (S72). The definition of “director”, in section 69(1), • 75(1), 77 and 78(1), however, includes a member of a • Committee of the Board, or of the Audit Committee • for purposes of those sections which deal with • qualification/eligibility, “directors personal financial • interests”, “liability of directors and prescribed • officers” and “ indemnification and director’s • insurance”.

8. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 6 • DIRECTORS INTERESTS IN CONTRACTS • When the only director of a company does not hold all the securities, he/she may only enter into a contract in which he/she or a related person has a personal financial interest, after obtaining an ordinary resolution of shareholders. • A director may disclose their financial interests, to be used until changed or withdrawn. (Note: the 1973 Act provides that a general declaration of interest will only apply until the end of the current financial year).

9. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 6 • DIRECTORS INTERESTS IN CONTRACTS • A director is required to disclose their personal financial interest and/or that of an associated person: • before it is considered by a meeting of the • Board and recuse themselves by leaving the • meeting, without taking part in the discussion. • (Note: The 1973 act does not require the • director to recuse him/herself).

10. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 7 • REMOVAL OF DIRECTORS • A director may be removed by an ordinary resolution at a shareholders meeting • The director must be given the same notice of the resolution as shareholders • The director should be allowed to make representations to the shareholders meeting, either in person or through a representative. • The Board may remove a director: • whom it has determined is ineligible, • disqualified, incapacitated, negligent or • guilty of dereliction of duty; or • who has, as the sole South African • resident director, become non-resident

11. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 8 • LIABILITY OF DIRECTORS AND PRESCRIBED OFFICERS A director, prescribed officer and a member of a Board Committee is liable: • for a breach of fiduciary duty; • for losses, damages or cost resulting from: • acting without the necessary authority; • agreeing to the company carrying on business • in a situation in which it is insolvent, reckless, • grossly negligent or acting fraudulently; • for signing or consenting to the publication of Annual Financial Statements or a Prospectus, which contains an untrue statement; • For knowingly consenting to the issue of shares, which had not been authorised; • for granting unauthorised options;

12. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 8 • LIABILITY OF DIRECTORS AND PRESCRIBED OFFICERS • for agreeing to the granting of financial assistance to directors or other parties, when not in accordance with requirements; • for knowingly failing to voteagainst a share purchase which did not accord with the legislative requirements; A director will only be liable for failing to vote against a distribution if, immediately after so voting, the company failed to satisfy the solvency and liquidity tests and this was reasonably predictable. Liability is joint and several with other parties found liable for the act. Action to recover loss, damages or costs may not commence more than 3 years after the act or omission. An application may be submitted to a Court for relief

13. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 9 • DIRECTORS APPOINTED TO FILL A CASUAL VACANCY: • APPOINTED ON A TEMPORARY BASIS • The Board may appoint a director on a temporary basis • The appointment falls away when the shareholders appoint a director to fill the vacancy 10 • EXECUTIVE DIRECTORS: EX-OFFICIO An “ex-officio” executive director: • Has all the powersand duties of any other director and • Will cease to hold office as a director when his/her employment falls away

14. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters 11 • DIRECTORS REMUNERATION Directors remuneration: • To be approved in advance: at AGM and • Passed as a special resolution which requires: • A quorum of 25% of shareholders • Acceptance of the motion by 75% of those • present • Registration with CIPRO

15. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters • CONCLUSION • The need for independent non-executive directors has been made evident, with particular relevance to the Board Committees • We will need more professional directors, who are independent • The profession of being a director should become established • The Act provides that shareholders shall appoint the Audit Committee. This contrasts against the current status of the Audit Committee being a Board Committee, which is appointed by the Board

16. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters • CONCLUSION • In summary: • A company is an abstract • It has no mind or body of its own • Companies need a group of highly principled persons • Who for some purpose are its agent • But who are really the directing mind and • will of the company • Are ultimately answerable to shareholders • During their period of office it can make money and spend it • They assume responsibility as the highest level of the companies management

17. Companies Act 2008 C G CORPORATE GOVERNANCE CC Directorate Matters • CONCLUSION • In summary: • Directors act for others and are therefore: • Subject to audit • Supervised by legislation such as the • Companies Act • Voluntarily accept the discipline of codes • such as the King Reports • In short – Directors are the trustees of shareholders

18. C G CORPORATE GOVERNANCE CC