Speech delivered on occasion of the Companies Amendment Bill debate by Avril Harding
2004-08-25. These legislative changes are necessary in the light of the corporate governance scandals. Similarly the fact that very few directors of listed companies know their actual fiduciary duties as directors is alarming.
The main purpose of the Bill is to
replace some outdated provisions of the Companies Amendment Act,
1973.
The Bill extends the liability to other directors liable for all debts incurred by the company for the period during which a disqualified person acted as a director or directly or indirectly took part in or was concerned in the management of the company concerned.
Whilst the primary aim of the bill is to ensure good corporate governance as part of the overall reform of the Companies Act, there is limit to legislating for corporate governance.
The ID is satisfied that question of shares dealing is dealt with. The Bill seeks to prevent the illegal transfer of the ownership of a share as current law does not provide for the aggrieved person -- the original holder -- to get a court order to reverse the sale or get compensation from the new holder of the share.
It also deals with securities that are transferable without a written instrument and not evidenced by a certificate. This refers to the JSE Securities Exchange's electronic share trading system, Strate. This ties with new securities draft legislation before Parliament.
The Bill will inadvertently see to it that quality of directors appointed to boards will improve. People who are sequestrated will not be easily appointed to boards. These legislative changes are necessary in the light of corporate governance scandals. The worrying factor is that people who come from the SMME sector and who had business failures in that sector will find it difficult to be appointed as directors. I state this in view of the fact that it is common knowledge that the SMME sector has a large measure of failed businesses.
As Section 218 and 219 provide criteria when persons become disqualified from serving on boards of companies. The intention is of expanding the conditions under which persons can be prevented from serving as directors and by more clear definition of the consequences of such definition.
The rationale why body corporates are not allowed to assist companies is not clear. In terms of Section 218 (1), such a body corporate is prevented form direct or indirectly taking part in management of a company. In practice however, where a company does not have the required expertise it obtains expertise from outside most notably body corporates. The question then is why should any company not procure specialist management services from a body corporate simply because of its corporate formation. The ID does not agree with exclusion of body corporates who offer specialized management service to companies in distress.
Furthermore while delinquent directors must be reported by the Board to shareholders and fellow directors, may not serve in any management capacity. This places the onus on company management to monitor malpractices at operational level.
Section 91.4cA
This section prohibits the court from granting an order to remove the name of a member from the sub-register unless such a person was party to or had notice of the illegality with regards transfer of uncertificated securities. This promotes secure title of bona fide buyers and projects integrity of the market.
The issue of joint of joint and several liability for debts incurred by delinquent directors is fair and reasonable as it forces directors to peer review each others performance at board level and monitoring financials of the company.
The ID supports the amendment to bill as it will enhance corporate governance objectives in the broader scope of corporate law reform in South Africa.
The Bill extends the liability to other directors liable for all debts incurred by the company for the period during which a disqualified person acted as a director or directly or indirectly took part in or was concerned in the management of the company concerned.
Whilst the primary aim of the bill is to ensure good corporate governance as part of the overall reform of the Companies Act, there is limit to legislating for corporate governance.
The ID is satisfied that question of shares dealing is dealt with. The Bill seeks to prevent the illegal transfer of the ownership of a share as current law does not provide for the aggrieved person -- the original holder -- to get a court order to reverse the sale or get compensation from the new holder of the share.
It also deals with securities that are transferable without a written instrument and not evidenced by a certificate. This refers to the JSE Securities Exchange's electronic share trading system, Strate. This ties with new securities draft legislation before Parliament.
The Bill will inadvertently see to it that quality of directors appointed to boards will improve. People who are sequestrated will not be easily appointed to boards. These legislative changes are necessary in the light of corporate governance scandals. The worrying factor is that people who come from the SMME sector and who had business failures in that sector will find it difficult to be appointed as directors. I state this in view of the fact that it is common knowledge that the SMME sector has a large measure of failed businesses.
As Section 218 and 219 provide criteria when persons become disqualified from serving on boards of companies. The intention is of expanding the conditions under which persons can be prevented from serving as directors and by more clear definition of the consequences of such definition.
The rationale why body corporates are not allowed to assist companies is not clear. In terms of Section 218 (1), such a body corporate is prevented form direct or indirectly taking part in management of a company. In practice however, where a company does not have the required expertise it obtains expertise from outside most notably body corporates. The question then is why should any company not procure specialist management services from a body corporate simply because of its corporate formation. The ID does not agree with exclusion of body corporates who offer specialized management service to companies in distress.
Furthermore while delinquent directors must be reported by the Board to shareholders and fellow directors, may not serve in any management capacity. This places the onus on company management to monitor malpractices at operational level.
Section 91.4cA
This section prohibits the court from granting an order to remove the name of a member from the sub-register unless such a person was party to or had notice of the illegality with regards transfer of uncertificated securities. This promotes secure title of bona fide buyers and projects integrity of the market.
The issue of joint of joint and several liability for debts incurred by delinquent directors is fair and reasonable as it forces directors to peer review each others performance at board level and monitoring financials of the company.
The ID supports the amendment to bill as it will enhance corporate governance objectives in the broader scope of corporate law reform in South Africa.
