AUE2602
CORPORATE GOVERNANCE AND STATUTORY MATTERS
corporate governance definition appply & explain
exercise of ethical & effective leadership by governing *The application regime for King IV is “apply and explain”
body towards: '- principles are applied & practices are explained.
*ethical culture * Explanations should be provided in the form of a
* good performance narrative account that addresses which recommended
* effective control or other practices have been implemented and how these
* legitimacy. achieve or give effect to the related principle.
Directors cannot avoid adhering to principles of good corporate governance, because there is a link between
good governance & compliance with the law. The directors themselves have legal duties stipulated in the
Companies Act 71 of 2008.
Stakeholder inclusivity
* It is the duty of the board to “take account of the legitimate & reasonable needs, interests & expectations of all
the company’s material stakeholders”.
*decisions taken in the execution of duties should be made in the “best interests of the company”. ( within the
parameters of sustainable development and being a responsible corporate citizen)
*interests of the shareholders do not automatically take precedence over the interests of other stakeholders
*not merely an instrument to serve the interests of the stakeholder, but as a matter of intrinsic value
The company as an integral part of society
*A company operates in a “societal context”. The company affects and is affected by society.
*Companies, their own & greater societies are strongly intertwined thus decisions & actions they make affect them
*Companies are dependent on broader society to provide skills, customers & an appropriate operating env.
*Companies in return provide goods,services & employment. They create wealth & pay taxes
An organisation has a society specific to itself, which includes internal & external stakeholders.
*Idea of interdependency between org. & society is supported by ubuntu – I am because you are; you are because I am.
*Ubuntu implies that there should be a common purpose to all human endeavours (including corporate endeavours)
, based on service in humanity.
Directorship
Appointment of directors Removal of directors
Voting
*Each director has 1 vote, majority vote appr. a resolution.
*If a tied vote, the chair has a casting vote if they
didn't initially vote, otherwise the matter being voted on,
fails (the chair does not get two votes in the event of a tie).
, Directors personal financial interests Quorum
*All contracts between a director & company are voidable *Majority of directors must be present b4 vote is called.
at the option of the company. *Unless MOI provides otherwise, if all directors
*Should be no “conflict of interest” between director &co. acknowledge actual receipt of the notice, are present
*Directors are required to look after the interests at the meeting, or waive the notice of the meeting,
of the co. & not their own. the meeting may proceed even if the required notice
*If a director has a personal financial interest, or knows a period was not given or there was a defect in giving the
person related to him has a PFI in a matter to be notice.
considered at a meeting of the board, that director: Quorum of directors for directors meeting for companies
- must disclose PFI & its general nature b4 the matter is with the following no. of directors:
considered at the meeting. 2-2 9-5
- must disclose to any material info. relating to the matter 3- 2 12- 7
- May disclose any observations/insights if requested to ie. Half of the directors plus one gives you a majority
- Can't take part in consideration of the matter & must Excluded from quorum for a public co. meeting:
leave the meeting. * Company secretary
* Chief audit executive ie. Anyone not a director
Directors include
* an alternate director * a member of a board
*a prescribed officer *committee and also includes a former director.
KING IV in relation to sections 76 to 78 of the companies Act
*The King IV Report states that the governing body should lead ethically & effectively.
*It states that members of the gov. body should individually & collectively cultivate the following characteristics
& exhibit them in their conduct: integrity, competence, responsibility, accountability, fairness & transparency.
*The principles thus strongly relate to section 76, which states that directors should exercise their powers
in good faith, in the best interests of the company & with reasonable care, skill & diligence.
*The King IV ethical values of responsibility, accountability & fairness are clearly addressed in sections 77 to 78,
where liability, indemnification & directors' insurance are described.
*There is a link between good governance and compliance with the law
AUDIT COMMITTEES
Members must not be
*involved in day 2 day manag. of co. or in py
*a prescribed officer, or full-time executive
employee in the last 3 years
*a material supplier or customer
* related to any person subject to the above
prohibitions.
Members must
* be director of the company, & satisfy any
min. qualifications the Minister prescribes
Duties of the audit committee Appointment of company secretary and auditor
*Appoint a registered independent auditor * A public or state-owned company must appoint:
* determine the audit fees & terms of engagement. - a company secretary ( not disqualified director)
*Ensure appointment of auditor complies with the - an auditor (unless Auditor general conducts an audit)
provisions of this Act & any other legislation. - an audit committee
* determine nature & extent of any non-audit services * A public or state-owned company must maintain
that the auditor may/ may not provide. a record of secretary and auditor:
*Prepare a report to be included in the AFS. - name of person/entity
– describe how audit committee carried out its functions - date of appointmnet
– stating whether the audit committee is satisfied that - registration
the auditor was independent of the company, & - registered office address
* commenting in any way the committee considers appr. * Private companies with significant pi scores & those
on the AFS,acc. practices & internal financial control. whose MOI requires so must appoint an auditor.
*Deal with any concern/complaints relating to: * If MOI requires so the entity must appoint a secretary
– the acc. practices & internal audit of the company
– the content or auditing of the AFS
– the internal financial controls of the company, or
– any related matter
CORPORATE GOVERNANCE AND STATUTORY MATTERS
corporate governance definition appply & explain
exercise of ethical & effective leadership by governing *The application regime for King IV is “apply and explain”
body towards: '- principles are applied & practices are explained.
*ethical culture * Explanations should be provided in the form of a
* good performance narrative account that addresses which recommended
* effective control or other practices have been implemented and how these
* legitimacy. achieve or give effect to the related principle.
Directors cannot avoid adhering to principles of good corporate governance, because there is a link between
good governance & compliance with the law. The directors themselves have legal duties stipulated in the
Companies Act 71 of 2008.
Stakeholder inclusivity
* It is the duty of the board to “take account of the legitimate & reasonable needs, interests & expectations of all
the company’s material stakeholders”.
*decisions taken in the execution of duties should be made in the “best interests of the company”. ( within the
parameters of sustainable development and being a responsible corporate citizen)
*interests of the shareholders do not automatically take precedence over the interests of other stakeholders
*not merely an instrument to serve the interests of the stakeholder, but as a matter of intrinsic value
The company as an integral part of society
*A company operates in a “societal context”. The company affects and is affected by society.
*Companies, their own & greater societies are strongly intertwined thus decisions & actions they make affect them
*Companies are dependent on broader society to provide skills, customers & an appropriate operating env.
*Companies in return provide goods,services & employment. They create wealth & pay taxes
An organisation has a society specific to itself, which includes internal & external stakeholders.
*Idea of interdependency between org. & society is supported by ubuntu – I am because you are; you are because I am.
*Ubuntu implies that there should be a common purpose to all human endeavours (including corporate endeavours)
, based on service in humanity.
Directorship
Appointment of directors Removal of directors
Voting
*Each director has 1 vote, majority vote appr. a resolution.
*If a tied vote, the chair has a casting vote if they
didn't initially vote, otherwise the matter being voted on,
fails (the chair does not get two votes in the event of a tie).
, Directors personal financial interests Quorum
*All contracts between a director & company are voidable *Majority of directors must be present b4 vote is called.
at the option of the company. *Unless MOI provides otherwise, if all directors
*Should be no “conflict of interest” between director &co. acknowledge actual receipt of the notice, are present
*Directors are required to look after the interests at the meeting, or waive the notice of the meeting,
of the co. & not their own. the meeting may proceed even if the required notice
*If a director has a personal financial interest, or knows a period was not given or there was a defect in giving the
person related to him has a PFI in a matter to be notice.
considered at a meeting of the board, that director: Quorum of directors for directors meeting for companies
- must disclose PFI & its general nature b4 the matter is with the following no. of directors:
considered at the meeting. 2-2 9-5
- must disclose to any material info. relating to the matter 3- 2 12- 7
- May disclose any observations/insights if requested to ie. Half of the directors plus one gives you a majority
- Can't take part in consideration of the matter & must Excluded from quorum for a public co. meeting:
leave the meeting. * Company secretary
* Chief audit executive ie. Anyone not a director
Directors include
* an alternate director * a member of a board
*a prescribed officer *committee and also includes a former director.
KING IV in relation to sections 76 to 78 of the companies Act
*The King IV Report states that the governing body should lead ethically & effectively.
*It states that members of the gov. body should individually & collectively cultivate the following characteristics
& exhibit them in their conduct: integrity, competence, responsibility, accountability, fairness & transparency.
*The principles thus strongly relate to section 76, which states that directors should exercise their powers
in good faith, in the best interests of the company & with reasonable care, skill & diligence.
*The King IV ethical values of responsibility, accountability & fairness are clearly addressed in sections 77 to 78,
where liability, indemnification & directors' insurance are described.
*There is a link between good governance and compliance with the law
AUDIT COMMITTEES
Members must not be
*involved in day 2 day manag. of co. or in py
*a prescribed officer, or full-time executive
employee in the last 3 years
*a material supplier or customer
* related to any person subject to the above
prohibitions.
Members must
* be director of the company, & satisfy any
min. qualifications the Minister prescribes
Duties of the audit committee Appointment of company secretary and auditor
*Appoint a registered independent auditor * A public or state-owned company must appoint:
* determine the audit fees & terms of engagement. - a company secretary ( not disqualified director)
*Ensure appointment of auditor complies with the - an auditor (unless Auditor general conducts an audit)
provisions of this Act & any other legislation. - an audit committee
* determine nature & extent of any non-audit services * A public or state-owned company must maintain
that the auditor may/ may not provide. a record of secretary and auditor:
*Prepare a report to be included in the AFS. - name of person/entity
– describe how audit committee carried out its functions - date of appointmnet
– stating whether the audit committee is satisfied that - registration
the auditor was independent of the company, & - registered office address
* commenting in any way the committee considers appr. * Private companies with significant pi scores & those
on the AFS,acc. practices & internal financial control. whose MOI requires so must appoint an auditor.
*Deal with any concern/complaints relating to: * If MOI requires so the entity must appoint a secretary
– the acc. practices & internal audit of the company
– the content or auditing of the AFS
– the internal financial controls of the company, or
– any related matter
