BOARDS AND DIRECTORS RESPONSIBILITIES AND RISK THE IMPACT

BOARDS AND DIRECTORS RESPONSIBILITIES AND RISK THE IMPACT OF THE NEW COMPANIES ACT AND BUSINESS LEGISLATION PRESENTED BY DR JOHN W HENDRIKSE Online solutions to grow your business

BOARDS AND DIRECTORS RESPONSIBILITIES AND RISK • • • CORPORATE REFORM TIMELINES BOARD MISSION GOVERNANCE FRAMEWORK BOARD STRUCTURE BOARD RESPONSIBILITIES DIRECTORS RESPONSIBILITIES LIABILITIES OF DIRECTORS COMPETITION AMENDMENT ACT CONSUMER PROTECTION ACT CAVEAT VENDITOR Online solutions to grow your business

CORPORATE REFORM TIMELINES • THE COMPANIES ACT (Act 71 of 2008) Enacted 8 April 2009 Planned Commencement Date: 1 July 2010 Online solutions to grow your business

COMPETITION AMENDMENT ACT • Approved by Parliament 22 October 2008 Enacted 29 August 2009 Online solutions to grow your business

CONSUMER PROTECTION ACT (Act 68 of 2008) • Enacted : 29 April 2009 Planned Commencement Date : July 2010 KING III Release Date: 1 September 2009 Online solutions to grow your business

BOARD MISSION • SURVIVE AND SUCCEED • BEST INTEREST OF SHAREHOLDERS • BEST INTEREST OF COMPANY • CORPORATE STRATEGY • CORPORATE GOVERNANCE Online solutions to grow your business

GOVERNANCE FRAMEWORK SHAREHOLDERS COMPANY TRUSTEES AGENTS BOARD OF DIRECTORS PERFORMANCE CONFORMANCE Online solutions to grow your business

BOARD STRUCTURE BOARD OF DIRECTORS EXECUTIVE NON-EXECUTIVE INDEPENDENT OTHER AUDIT COMMITTEE 3 or MORE DIRECTORS Online solutions to grow your business

BOARD RESPONSIBILITIES • GOING CONCERN • SOLVENCY AND LIQUIDITY TEST • SOLVENCY – FINANCIAL POSITION Ø NET ASSET VALUE Ø MARKET VALUES & REALISABLE VALUES • LIQUIDITY Ø LIQUID ASSETS Ø SHORT TERM OBLIGATIONS • INSOLVENCY AUDIT Ø LONG TERM SUSTAINABILITY Ø SHORT TERM LIQUIDITY CAPACITY Ø CASH FLOW FROM OPERATIONS Online solutions to grow your business

DIRECTOR RESPONSIBILITIES CORE DUTIES – SECTION 76 q DISCLOSE ANY CONFLICT OF INTEREST q USE POSITION AND INFORMATION FOR COMPANY’S BENEFIT q DISCLOSURE OF MATERIAL INFORMATION q PERFORM DUTIES: - IN GOOD FAITH - IN BEST INTEREST OF THE COMPANY - WITH CARE, SKILL AND DILIGENCE Online solutions to grow your business

DIRECTOR RESPONSIBILITIES STRATEGY AND CORPORATE STRUCTURE q DUTY TO COMPLY WITH THE ACT IN RELATION TO DIFFERENT TYPES OF COMPANIES (Section 8) q DUTY TO COMPLY WITH THE COMPANY’S MEMORANDUM OF INCORPORATION (Section 13) q DUTY TO MANAGE THE BUSINESS AFFAIRS AT THE COMPANY (Section 66(1)) q DUTY TO CARRY ON THE BUSINESS WITHOUT TRADING RECKLESSLY OR UNDER INSOLVENT CONDITIONS (Section 22) Online solutions to grow your business

DIRECTOR RESPONSIBILITIES BOARD STRUCTURE AND CORPORATE ADMINISTRATION q DUTY TO APPOINT BOARD COMMITTEES (Section 72) q DUTY TO APPOINT AN AUDIT COMMITTEE (Section 94) q DUTY TO APPOINT A COMPANY SECRETARY (Section 84 & 86) q DUTY TO CALL AND CONVENE A SHAREHOLDER’S MEETING (Section 61) Online solutions to grow your business

DIRECTOR RESPONSIBILITIES ACCOUNTABILITY AND ASSURANCE q DUTY TO KEEP COMPANY RECORDS (Section 24) q DUTY TO KEEP ACCOUNTING RECORDS (Section 28) q DUTY TO COMPLY WITH CHAPTER 3 OF THE ACT (Section 34(1) & 94) q DUTY TO PAY DIRECTORS REMUNERATION IN TERMS OF MEMORANDUM OF INCORPORATION AND GET IT APPROVED BY SHAREHOLDERS BY SPECIAL RESOLUTION (Section 66(8) & 66(9)) Online solutions to grow your business

DIRECTOR RESPONSIBILITIES ACCOUNTABILITY AND ASSURANCE CONTINUES… q DUTY TO APPOINT AUDITORS (Section 90 & 92) q DUTY TO OBTAIN AN INDEPENDENT REVIEW OF THE FINANCIAL STATEMENTS (Section 30) Online solutions to grow your business

DIRECTOR RESPONSIBILITIES DISCLOSURE AND TRANSPARENCY q DUTY TO PREPARE ANNUAL FINANCIAL STATEMENTS (Section 29 & 30) q DUTY TO PREPARE A DIRECTORS REPORT (Section 30(3)) q DUTY TO ISSUE A PROSPECTUS (Section 100) q DUTY TO DISCLOSE DIRECTOR’S REMUNERATION INFORMATION (Section 30) q DUTY TO FILE AN ANNUAL RETURN (Section 33) Online solutions to grow your business

DIRECTOR RESPONSIBILITIES SHAREHOLDER TREATMENT q DUTY TO ENSURE THAT SHAREHOLDERS CAN EXERCISE THEIR VOTING POWER AND RIGHTS (Section 2(2) & 58) q DUTY TO FACILITATE A SHAREHOLDERS MEETING (Section 61) q DUTY TO OPERATE WITHIN THE FRAMEWORK OF THE COMPANY’S MEMORANDUM OF INCOPORATION (Section 15(3) & (4) & 36) q DUTY TO OPERATE IN THE BEST INTEREST OF THE SHAREHOLDERS (Section 20(6) & (7) THE COMPANY (Section 76(3)) Online solutions to grow your business

LIABILITIES OF DIRECTORS NEW COMPANIES ACT q BREACH OF DUTIES q BREACH OF ACCOUNTABILITY (Section 213 & Section 214) q RECKLESS TRADING q PROSPECTUS LIABILITY q INSOLVENCY ACT( Section 424) q PERSONAL LIABILITY COMPANY Online solutions to grow your business

COMPETITION AMENDMENT ACT q PURPOSE OF THE ACT q CRIMINAL LIABILITY q RISK q MITIGATING THE RISK Online solutions to grow your business

CONSUMER PROTECTION ACT q MARKETING ACTIVITIES q DIRECT MARKETING AND COOLING-OFF PERIOD q ADVANCE RESERVATIONS AND BOOKINGS q DISCLOSURE AND INFORMATION q FAIR AND HONEST DEALING q OVER-SELLING q CONSUMER AGREEMENTS q FAIR VALUE, GOOD QUALITY AND SAFETY q DAMAGE CAUSED BY GOODS Online solutions to grow your business

CONTINUES… q FRANCHISE AGREEMENTS q BUSINESS NAMES q CLASS ACTIONS Online solutions to grow your business

TYPES OF COMPANIES AND COMPLIANCE (New Companies Act, Act 73 of 2008) Compliance Requirements Minimum number of Shareholders Minimum number of Directors Memorandum of Incorporation (MIC) Company Records Accounting Records Financial Statements (e. g. Annual Financial Statements) Audit Public Companies State Owned Private Companies (in (SOC) public interest) 1 3 YES YES 1 1 YES YES Online solutions to grow your business

TYPES OF COMPANIES AND COMPLIANCE (New Companies Act, Act 73 of 2008) CONTINUES… Compliance Requirements Independent Review Company Secretary Audit Committee Registered Address Annual Return Annual General Meeting Deadline for AFS (after financial year end) Public Companies State Owned Companies (SOC) Private Companies (in public interest) N/A YES YES YES 6 months N/A NO NO YES NO 6 months Online solutions to grow your business

TYPES OF COMPANIES AND COMPLIANCE (New Companies Act, Act 73 of 2008) CONTINUES… Compliance Requirements Other Private Companies Minimum number of Shareholders 1 Minimum number of Directors 1 Memorandum of Incorporation YES (MIC) YES Company Records YES Accounting Records YES Financial Statements (e. g. Annual Financial Statements) By regulation Audit or voluntary Personal Liability Company Non-Profit Company (NPC) 1 1 YES YES 3 3 YES YES NO By regulation or voluntary Online solutions to grow your business

TYPES OF COMPANIES AND COMPLIANCE (New Companies Act, Act 73 of 2008) CONTINUES… Compliance Requirements Independent Review Company Secretary Audit Committee Registered Address Annual Return Annual General Meeting Deadline for AFS (after financial year end) Other Private Companies Personal Liability Company Non-Profit Company (NPC) N/A NO NO YES NO 6 months YES NO NO YES NO 6 months N/A NO NO YES NO 6 months Online solutions to grow your business

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