In the evolving landscape of corporate governance in South Africa, the role of a company secretary has gained significant importance. This article delves into the statutory requirements for the appointment of a company secretary as stipulated in Section 86(1) of the Companies Act 71 of 2008, juxtaposed with Principle 10 of the King IV Report on Corporate Governance. Understanding these frameworks is crucial for companies aiming to ensure compliance while fostering effective governance.

Statutory Requirements Under the Companies Act 71 of 2008

Section 86(1) of the Companies Act 71 of 2008 mandates that every public company and state-owned company must appoint a company secretary. For private companies, the appointment of a company secretary is optional and is only required if the company’s Memorandum of Incorporation (MOI) stipulates such a requirement.

In other instances, private companies that do not have this requirement in their MOI may still elect to appoint a Company Secretary to enhance their governance processes. This decision reflects a commitment to good governance practices and the proactive management of risks, regardless of statutory obligations.

The Act outlines specific qualifications and responsibilities for the company secretary:

1. Qualifications: The company secretary must be a person who is knowledgeable and experienced in relevant laws and is suitably qualified to perform the duties assigned to this role. Importantly, the company secretary must be a permanent resident of South Africa and must remain so while serving in that capacity.

2. Duties: The core responsibilities of a company secretary include ensuring compliance with statutory requirements, maintaining company records, and facilitating communication between the board of directors and shareholders. They play a pivotal role in ensuring that the company adheres to legal obligations and governance standards.

The King IV Report and Principle 10

The King IV Report, a hallmark of corporate governance in South Africa, emphasizes the importance of ethical leadership and corporate citizenship. Principle 10 specifically focuses on the role of the company secretary as a key governance professional, highlighting a few critical aspects:

1. Independence and Objectivity: A company secretary must act independently, providing unbiased advice to the board and ensuring that corporate governance principles are followed without conflict of interest.

2. Facilitation of Governance Processes: The company secretary is responsible for coordinating the functioning of the board and its committees such as facilitating board meetings, ensuring that the board’s decisions are well-informed and compliant with legal frameworks. This includes the preparation of agendas, minutes, and ensuring that all necessary documentation is in order.

3. Approval by the Board: Principle 10 underscores the importance of the board approving the appointment of the company secretary, including the employment contract and remuneration of the company secretary. This reinforces the authority and accountability of the company secretary within the governance framework.

4. Stakeholder Engagement: The company secretary serves as a bridge between the company and its stakeholders, ensuring transparent communication and fostering trust.

The Impact on the Role of a Company Secretary in South Africa

The interplay between the Companies Act and King IV significantly shapes the role of the company secretary in South Africa. While the Act provides the legal foundation for the position, King IV elevates the role of the company secretary by requiring the board to empower this position with the necessary authority. By doing so, company secretaries are enabled to pro-actively transition from an administrative function to performing a vital role as governance professionals.

In practice, this means that company secretaries must:

• Elevate Governance Expertise: The company secretary is empowered under King IV to become a governance professional, focusing on strategic advisory roles rather than solely administrative tasks. This shift enhances the oversight and governance functions of the board.

• Implement Ethical Standards: The company secretary plays a crucial role in ensuring that the company adheres to ethical standards and best practices, fostering a culture of accountability and transparency within the organization.

• Support Risk Management: The company secretary is instrumental in supporting risk management frameworks, ensuring that the board is informed of potential risks and compliance issues that could affect the company’s operations.

Conclusion

As the regulatory environment and governance expectations continue to evolve, the role of the company secretary remains vital to the success of companies in South Africa. The dual compliance with the Companies Act and adherence to the principles set out in King IV enhances the credibility and effectiveness of the company secretary.

At Rasiluma TD Attorneys Inc., we recognize the complexities of corporate governance and the importance of effective compliance. Our team of experienced legal professionals is equipped to provide comprehensive guidance on the statutory requirements and governance best practices, ensuring that your company not only meets its legal obligations but also thrives in a competitive landscape. Trust us to be your partners in navigating the intricacies of corporate governance—together, we can ensure your business succeeds while upholding the highest standards of integrity and accountability.