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Stephen Sadie

Theresa May puts corporate governance on the agenda

Well who would have expected Theresa May, in launching her campaign to be the leader of the Conservative Party and Prime Minister of the United Kingdom, to focus so directly on corporate governance issues as the central platform of her speech. By the time she finished her speech on 11 July 2016, the only other candidate, Andrea Leadsom, had stepped down paving the way for Theresa May to become party leader and Prime Minister. In doing this Theresa May has put corporate governance in the spotlight and its ripple effects have reverberated around the globe. She has put forward seven key propositions.

  1. According to May, non-executive directors come from “the same narrow social and professional circles as the executive team.” In order to ensure greater representation, May asserts that “We’re going to have not just consumers represented on company boards, but employees as well.” Including employees on boards draws on the practice of Germany and Austria where two tier boards exist on which employee representatives play a central role. France also includes employees on their boards.

  2. Without saying it in so many words, May seems to be moving from a shareholder primacy model to a stakeholder primacy model. We are quite familiar with this in South Africa as King III has long advocated this, as does King IV.

  3. May also deals with the vexed issue of remuneration. She argues that she wants annually “to make shareholder votes on corporate pay not just advisory but binding.” These measures go further than former UK Business Secretary, Vince Cable, who forced companies to hold a binding vote on pay policy once every three years. May’s speech comes hot on the heels of the Brexit vote where the majority of those outside of London felt excluded from the economic sector.

  4. May calls for more transparency, including the “full disclosure on bonus targets and the publication of ‘pay multiple’ data: that is, the ratio between the CEO’s pay and the average company worker’s pay.” There were a number of shareholder revolts against high pay in the UK at well-known companies including BP, Anglo American, and Smith & Nephew.

  5. May threatens to “crack down on individual and corporate tax avoidance and evasion” particularly where big multinationals such as Amazon, Google and Starbucks have tended to display such behaviour.

  6. She further confirms that it is “not anti-business to suggest that big business needs to change.”

  7. May ends off with the conclusion that “Better governance will help these companies to take better decisions.” I think we can all agree with that. http://www.wlrk.com/docs/TheresaMayJuly11Speech.pdf

The above speech has been followed up by The Business, Innovation and Skills (BIS) Committee of the UK Parliament, which on 19 September 2016, launched an enquiry focusing on executive pay, directors’ duties and the composition of boardrooms, including worker representation and gender balance in executive positions. Theresa May’s speech and the ripple effect it has caused around the world illustrates what a connected world we live in and has certainly given the world much food for thought. We look forward to the launch of our own King IV on 1 November 2016, which will bring to an end two years of hard work. This too is certain to arouse interest around the world.

I hope you enjoy reading this edition of the e-Zine.

Development of case law in relation to directors' duties and liability

Natasha Bouwman FCIS, LLB, LLM
Director, Chartered Secretaries Southern Africa

The fiduciary duties that directors owe their company basically entail that they act in good faith, for a proper purpose and in the best interests of the company.  Further, in exercising their powers and carrying out their office, directors are required to act with the required degree of care and skill. These duties are partly codified in section 76 of the Companies Act 71 of 2008 (2008 Companies Act), which should be read with the common law to establish the exact content of the fiduciary duties. Section 77 deals with directors’ liability and section 75 with directors’ personal financial interests. This article highlights recent case law on directors’ duties and liability.

The Companies Act 61 of 1973 (the 1973 Act) criminalised transgressions by directors. The 2008 Act aims to decriminalise transgressions by directors and allows for recourse against directors personally.

Reckless management of the company and fraudulent misrepresentations in bid documents - Engelbrecht NO and others v Zuma and others [2015] 3 All SA 590 (GP)

The four applicants were provisional liquidators. The first respondent was the Chairman of the Board of the insolvent company Aurora Empowerment Systems (Pty) Ltd ("Aurora"). The second and third respondents were directors of Aurora and the fourth and fifth respondents were managers of Aurora.

The applicants sued the respondents in terms of section 424(1) of the 1973 Companies Act which imposes liability for reckless or fraudulent trading, read with section 77 of the 2008 Companies Act.  Despite the repeal of the 1973 Act by the 2008 Act, section 424(1) of the 1973 Act applies in the winding up of insolvent companies. Section 77 of the 2008 Act imposes liability on directors and prescribed officers. The applicants sought an order that the respondents (directors and managers of Aurora) were personally liable for the debts owed by Aurora to six insolvent mining companies, which were in provisional liquidation (namely Aurora Empowerment Systems (Pty) Ltd to Pamodzi Gold Orkney (Pty) Ltd, Pamodzi Gold East Rand (Pty) Ltd, Nigel Goldmining (Pty) Ltd, The Grootvlei Proprietary Mines Ltd, Consolidated Modderfontein Mines Ltd and Consolidated Modderfontein Mines 1979 (Pty) Ltd).

The second to fifth respondents were declared personally liable, jointly and severally, in terms of section 424 of the 1973 Companies Act for liabilities incurred by Aurora to the six insolvent mining companies, which were in provisional liquidation. The first respondent (Chairman) was declared personally liable for Aurora‘s liabilities to all the six companies in provisional liquidation, which liabilities arose on or after 1 December 2009, jointly and severally with the second to fifth respondents. The Chairman was in a different position from the other respondents as he was not involved in the day-to-day management of Aurora's business and not directly involved in the negotiations with the liquidators (he was informed about the state of affairs by the other respondents).  His position was judged in the light of his personal circumstances and knowledge of the Aurora affairs. Based on the facts, the court found that the Chairman was put upon inquiry at the latest at the end of 2009 and could not be heard to protest his ignorance of the true situation after that date. The Chairman’s failure to act once he knew of the dire state of affairs was found to be clearly a reckless disregard of his duties as a director. If he really did not know, it was because he deliberately chose not to be informed. Thus, the Chairman was held liable for all losses that were incurred on or after 1 December 2009.

In summary, the Judge held that “The second to fifth respondents are guilty of wilful deception by presenting the bid documents containing numerous false assertions to the liquidators. They are further guilty of reckless management of Aurora's affairs from the inception of the ITCMA agreements to the date of cancellation thereof. The applicants are therefore entitled to the order they seek against them both on the basis of fraudulent misrepresentations in the bid documents and on the grounds of the reckless conduct of the insolvent companies' business”.

Personal financial interests - Omar v Inhouse Venue Technical Management (Pty) Limited and others [2015] 2 All SA 39 (WCC)

The court called this a "commercial divorce case". Two shareholders in a private company, one with a larger portfolio of shares than the other, have fallen out and wanted to go their separate ways. The applicant ("Omar") was the minority shareholder (45%) in the first respondent ("Inhouse"), which was a company in distress, while the second respondent ("Gearhouse SA"), a wholly owned subsidiary of Gearhouse SA Holdings (Pty) Ltd) held 50% of the shares. The remaining 5% was held by the third respondent ("Govender"). The fourth and fifth respondents ("Lapid" and "Abbas") were directors of and effectively controlled Gearhouse Holdings and Gearhouse SA. Lapid, Abbas, Omar, Govender and three others (Abbas' wife, Neelofa Khan, James Demore and Nkosinathi Biko) were the directors of Inhouse. Omar wanted to be fairly compensated for his minority shareholding. Lapid and Abbas stated that a fair offer was made to him but Omar was not happy with their proposal and has sought relief under section 163 of the 2008 Companies Act.

The fourth and fifth respondents were declared to have acted in contravention of section 75 of the 2008 Companies Act as they failed to disclose their personal financial interests in transactions undertaken by the first respondent. Non-compliance with the provisions of section 75(5) by Abbas and or Lapid rendered the particular transaction or agreement approved of invalid unless there had been ratification under section 75(7)(b)(i) or validation by the court under section 75(8). The court declared invalid the transactions involving rentals payable by Inhouse, purchases from fellow subsidiaries and the payment of so called "Group charges".

The court ordered that a chartered accountant be appointed to determine the fair market value of the applicant's shareholding in Inhouse (taking into account the contraventions of section 75 of the Act in respect of purchases from related parties, rental paid to related parties and management fees paid by Inhouse).

Personal financial interests - Cook v Hesber Impala (Pty) Limited and others [2016] JOL 36194 (GJ)

The first respondent (Hesber Impala (Pty) Limited) was the owner of a piece of land located in a private game reserve. The land of the first respondent was descibed as being situated "along a beautiful stretch of river surrounded by magnificent indigenous bush". It allegedly was the most ideal location in the reserve for a tourism operation like tented camps that can offer accommodation to guests who visit and stay in the reserve. Also, it was ideal because the tourism operator could offer visitors to the reserve, game drives and boat rides from that location. Another company, Sibuya Game Reserve & Lodge (Pty) Ltd ("Sibuya"), was providing accommodation and conducting commercial tourism operations on the property owned by the first respondent without paying any consideration to it. Further, a close corporation, Salisbury Trading CC ("Salisbury"), was grazing its game animals on that land without paying anything to the first respondent.

The Fox Family Trust owns 100% of the issued shares of Sibuya as well as 100% membership in Salisbury. The applicant (a director of Hesber Impala (Pty) Limited) claimed that both Sibuya and Salisbury were making use of the first respondent's only valuable asset, its land, for free. This came about because the second to fourth respondents (directors of Hesber Impala (Pty) Limited) had a financial interest in both Sibuya and Salisbury.

At the meeting of the board of directors of the first respondent on 28 February 2014, the applicant proposed and voted in favour of the company charging a rent to Sibuya and Salisbury for the use of its land. The second to fourth respondents voted against the proposed resolutions. The court was of the view that all of the directors at the board of directors meeting of the first respondent on 28 February 2014 had a personal financial interest in the subject matter of the proposed resolutions and that the resolutions were not carried.

Recap: The 8th Premier Corporate Governance Conference 2016

Our 8th Premier Corporate Governance Conference took place on 30 August – 1 September 2016 at the Wanderers Club and was attended by over 200 delegates.

A key feature of this year’s conference was the discussions on recent changes in the corporate governance environment. The main topics that were covered included:

  • King IV – covered by Prof Mervyn King
  • Legislation – covered by Prof Michael Katz and Anthony Norton
  • Integrated reporting – covered by Sue Lund, Prof Warren Maroun and Leigh Roberts
  • Public sector governance – covered by David Makovah, Tsakani Ratsela and Carol Paton
  • Responsible investing – covered by Adrian Bertrand and Dr Nimrod Mbele
  • Company secretarial matters – covered by Ian Isdale, Elsabe Kirsten and Stephen Sadie
  • Board matters – Linda de Beer, Mohamed Adam and Greg Prinsloo

The feedback has been very positive. We extend our thanks to all who attended as well as our MC, Jeremy Maggs, our speakers, sponsors, and exhibitors and the Wanderers Club management, who all made this year's conference the huge success it was.

The presentations and a gallery can be found on the website.

Meet our members

Mabakubung Khuluoane ACIS, CIPFA Diploma, GA (L)
Financial controller: Treasury Department, Ministry of Finance, Lesotho

Studies and Professional membership

I studied with the Institute of Business Studies (IBS), where I obtained a diploma in 1997. Thereafter I enrolled for CSSA, which I completed in 2002 at Technikon Natal. In 2008 I completed the CSSA Board qualification.

In 2008 I enrolled for a professional qualification in public sector accounting. The qualification is jointly provided by the Chartered Public Finance and Accountancy (CIPFA) and Lesotho Institute of Accountants (LIA) through the Centre for Accounting Studies. I have completed my international certificate and diploma and I am working towards achieving the Chartered Accountancy level.

I am a member of the LIA at General Accountant level. I am also a member of the Public Finance and Taxation committee within the LIA. Furthermore, I am a member of the Public Accounts Committee on behalf of the Office of the Accountant General.

Career path, workplace and job description

My career path is on public financial management. I currently work for the Treasury Department within the Ministry of Finance in Lesotho. Substantively I hold the position of Financial controller in the Cash Management Division. I also act in the vacant position of the Deputy Accountant General in the same Division. The mandate of the Division is to develop and implement cash management strategies and preparation of financial reporting of Lesotho Government. I therefore am the technical head of the Division. I also lead ongoing reforms in my areas of responsibility.

Things that I enjoy in my work

  • Coordinating a team of pioneers in cash management matters
  • Direct contact with International Partners of the Government as we learn about cash management and enhance financial reporting
  • Enhancing compliance with the Public Financial Management and Accountability Act 2011
  • Being a change agent

Challenges at work

  • Capacity development issues
  • Resistance from fellow colleagues in the line ministries to act on time
  • Structural issues within the Ministry of Finance and outside


I chose the CSSA qualification to provide me with the right skills in corporate governance. It has really enabled me to perform my duties with integrity and enhanced compliance with the legal framework in my area of responsibility.

I am so proud of my CSSA qualification and I can recommend it to anyone who wishes to be independent and objective in their professional judgement. This qualification has a strong ethical background, which augments the discipline of an individual.

Inspirational anecdote

Ethical conduct always pays - I was once faced with a situation where I had to show due care and skill in my duties against my superiors. I had to act with due respect to make them understand the issues that surrounded my decision. They were impressed and I was later promoted to a senior position.

Leisure time

I spend time with family. I also enjoy gardening and aerobics.

How do you enjoy spending your leisure time?

I love spending time with my family and reading is an absolute passion of mine.

Students in the spotlight

Michelle McDonald
Company Secretary, Marsh (Pty) Limited

Brief background on yourself – where you studied, your career path, where you currently work?

My career has been a very varied one, ranging from secretary, HR administrator, finance PA and company secretary.  My company secretary career started in the early 1990’s at Alexander Forbes where I started as a PA then progressed to assistant company secretary and finally company secretary before having a break from the working world to start a family.    I have been working at Marsh for the past 14 years where my role was a combination of company secretary and HR Administrator until 2012 when I was transferred into the finance department after our merger with Alexander Forbes Risk Services, reporting to the CFO.  My role has been solely that of company secretary since July 2013 when our previous CFO left and our new CFO was appointed.  She has a good understanding of the importance of the company secretary’s role in the organisation and is very supportive.

What does your current job entail?

As the company secretary, I am responsible for all the statutory duties of our South African and Namibian entities (9 in total) such as the submission of statutory documents with CIPC, arranging board and sub-committee meetings, taking minutes, updating the Board and sub-committee charters, liaising with board members and shareholders and ensuring compliance with the Companies Act and King III.  I am also responsible for the oversight of the statutory documents and processes of our entities in the Africa Region (Botswana, Zimbabwe, Zambia, Malawi, Uganda and Nigeria).

What do enjoy about your career? What are your greatest challenges from day to day?

I enjoy the diversity the role offers and the chance to always learn something new. Over the past 3 years, I have been fortunate enough to be involved in a number of exiting initiatives such as putting together a Social, Ethics and Transformation Committee and every year I have at least one project over and above my normal duties.  My greatest challenge would be to try and change the perception some people still have that a company secretary’s main duty is as a minute taker only.

Why did you choose the CSSA qualification/how has the course contributed to your career?

The CSSA qualification is internationally recognised and the programme offers a broad spectrum of subjects that will benefit anyone working in the corporate business environment.

Why would you recommend the qualification to others?

The qualification will benefit anyone working in the corporate business environment as it enables and equips people to follow many different career paths.

What is your view on the role of the Chartered Secretary in the work place of today?

The role of the Chartered Secretary is an ever-evolving one. Gone are the days of simply being a minute-taker.  The Chartered Secretary has a pivotal role to play in ensuring that the company complies with the Companies Act and King code, as well as ensuring effective communication with the board of directors and shareholders.

Inspirational anecdotes for fellow members and students?

Something I always aspire to is to try and learn something new every day.

How do you enjoy spending your leisure time?

I enjoy spending time with my children and animals, reading and listening to music.

Mary Anne Lamb
Accounts Department, St Johns College


I began my tertiary studies at Rhodes University where I studied for a B Com, majoring in Accounting and Mercantile Law.  After completing the degree, I worked at what was then Arthur Young & Co for eighteen months, and then changed career direction to computer programming.  After doing a programming course, I worked at Southern Life Insurance as a programmer and assistant analyst for five years before taking a career break to raise my children.  During this time I was involved in property letting on a small scale. 

After fifteen years I returned to the workplace, which necessitated updating my computer and accounting skills.  I worked in a small accounting firm environment for two years then moved to the finance department at St John’s College where I am presently working.  I am looking to make another career move in the near future.

Present job

My present job is running the accounts receivable department at St John’s College, Johannesburg, which is challenging in the current economic climate.  I love the academic environment, the stunning school campus and the teaching staff. Teachers are special people and in my view should be appreciated and respected for the important work they do – educating and helping shape the next generation.   It is a sad fact that good teachers are sometimes the only stable adult role models that many South African children have.

CSSA Qualification and Studies

I chose to study for the CSSA qualification quite late in life as I became the sole breadwinner in the family when my husband was medically boarded.  I wanted to update my business knowledge because there has been a tremendous change in this field since my undergraduate years.  The pace of change is such that continual learning is no longer an option for any professional.

I would highly recommend the CSSA qualification as it is gives students a well rounded business knowledge, is practical in nature and is internationally recognised. 

I thoroughly enjoyed the CSSA courses and am genuinely sad to be finishing my studies this year.  I love being in the academic environment with students from a wide variety of cultures, business backgrounds and ages.  I wish to pay tribute to my excellent lecturers at Wits University and Rissik Business School, who are the reason I passed all my exams well and will be graduating this year. 

Studying part time is challenging when one has to juggle studies with a demanding job and family responsibilities.  It requires hard work, discipline, perseverance and a long suffering and supportive spouse and family, but the end result is well worth the sacrifices.

The Chartered Secretary in today's workplace

The Chartered Secretary has a vital and wide ranging role in the company.  One important responsibility is to ensure that the board of directors operates efficiently and effectively.   Another is to ensure that the company complies with the ever changing legal and regulatory requirements and is run according to principles of good governance and ethical practices, which should be embedded in the company’s policies, procedures and culture.

My leisure time

My leisure time is spent looking after my disabled husband, spending time with family and friends, participating in church life, walking my dogs, reading and listening to music.

Important dates in 2016

Exams begin 17 October
Postponements (after examinations due to death, health) 17 – 28 October
Integrated Reporting Awards 16 November
Results released 2 December
Script review applications 16 December
Individual feedback report applications 16 December


This is the third edition of the Chartered Secretaries Southern Africa e-Zine 2016. Should you have any suggestions or specific information you would like included in future editions, please revert to the membership and marketing department, membership@chartsec.co.za.