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THE NEW COMPANIES ACT & KING III LIFTING THE BAR FOR BOARDS AND DIRECTORS IN A NUKING. 31 August 2010 Presented by: Neels Volschenk Director: Strauss Daly Inc. “It is not the strongest species that survive , nor the most intelligent, but the one most responsive to change”
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THE NEW COMPANIES ACT & KING IIILIFTING THE BAR FOR BOARDS AND DIRECTORSIN A NUKING 31 August 2010 Presented by: Neels Volschenk Director: Strauss Daly Inc.
“It is not the strongest species that survive, nor the most intelligent, but the one most responsive to change” (Charles Darwin)
This presentation may serve as an instrument to: • Navigate you in the right direction; and • enable you to identify the inner logic of Directors’ • Duties and King III
The Two (2) Pillars of Directors Duties • Fiduciary relationship • Reasonable care
The First Pillar • Fiduciary Duty • A Director of a Company must: • Not use the position of Director • To gain an advantage for the Director, or for another • person other than the Company, • Knowingly cause harm to the Company • Communicate to the Board at the earliest practical • opportunity any relevant information that comes to the • Director’s attention
The Second Pillar • The Duty of Care • A Director must exercise the powers and perform the reasonable functions of Director. • In good faith and for a proper purpose • In the best interests of the Company • With the degree of care, skill and diligence that may • reasonably be expected of a person carrying out the same • functions and having the general knowledge, skill and • expertise of that Director
Discharge the reasonable care pillar • Take reasonable diligent steps to become informed • Rational basis for the decision • The Director is entitled to rely on employees of the • Company, Legal Counsel, Accountants, or other professional • persons retained by the Company
Liability of Directors • Fiduciary Duty – First Pillar • A Director of a Company may be held liable • Where a breach of Fiduciary Duty resulted in loss, damages or costs by • the Company arising from any breach by the Director of the following duties • Where the Director’s personal financial interests is in conflict with those • of the Company • An advantage gained for himself by using his position as Director or • any information obtained • Where the Director has failed to exercise his powers and perform h • is functions in good faith and in the best interests of the Company
Liability of Directors • The Duty of Care – Second Pillar • Where his unlawful conduct resulted in loss, damage or costs sustained by • the Company under the following circumstances: • Where he has failed to exercise his powers and to perform his functions • with the degree of care, skill and diligence that may reasonably be • expected of him • Where he has breached any provision of the Act • Where he has breached any provision of the Company’s Memorandum • of Incorporation.
Liability of Directors • The Duty of Care – Second Pillar • Where his unlawful conduct resulted in loss, damage or costs sustained by • the Company under the following circumstances: • Where he has failed to exercise his powers and to perform his functions with • the degree of care, skill and diligence that may reasonably be expected of him • Where he has breached any provision of the Act • Where he has breached any provision of the Company’s Memorandum • of Incorporation.
Companies and Intellectual Property Commission The Commission will monitor and promote (enforce) compliance with the Act
KING III • Good Governance is not something that exists separately from the law • Best described as a Corporate Governance Code • King III became effective on 1 March 2010 • From 1 June 2010 it became mandatory in accordance with the JSE • listing rules for all listed companies to comply with KING III • “Nearly all men can stand adversity, but if you want to test a man’s character – give him power! (Abraham Lincoln)
KING III: Three philosophies • Sustainability • Effective leadership • Corporate citizenship
Words of Wisdom “In life and business there are two cardinal sins, the first is to act precipitously without thought and the second is not to act at all” (Carl Ichran)
