Concepts unique to companies- other components of companies

Image result for companies

Board of Directors

   Elected by shareholders at AGM

   Co-ordinates and creates company policies

   Consists of at least 3 directors

   MOI allows for higher number of directors

   Public companies have between 8 and 12 directors.

   At least 50% of directors must be elected by share holders with voting rights.

   Act allows direct appointment of a director by a specified person in the MOI.

   Directors must act

            - in good faith and for a proper purpose

            - in the best interest of the company

            - with degree of skill, care and diligence that may reasonably be expected of someone     with same knowledge and skills

 

• May be held responsible for any loss, damage or cost sustained by company

as a result of a breach of the directors' fiduciary duty or the duty to act with care, skill and diligence.

 

*fiduciary = being responsible for property and power entrusted to you.

 

Types of directors ( according to King III Report) :

 

   Executive- involved in day-to-day management of company or as a full-time salaried employee.

   Non-executive - are independent of management on all issues including strategy, performance, sustainability resources, transformation, employment equity etc.

   Independent - have not been employed by Company in any way during previous 3 years and should be independent from any business relationship(supplier/customer) with the company. Their role is to bring to the Board independent judgement and broad business experience.

 

Chairperson and CEO of Board must be separate individuals King Ill and JSE listing requirements.

 

* King III = document that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company.

 

Roles and Functions of Board

 

   Provide strategic direction and approve strategic plans

   Retain full and effective control of company

   Ensure that company complies with legislation - Delegate appropriate powers to management and monitor them

   Identify and monitor key risks and ensure Company has effective internal control measures to manage all risks

   Identify and monitor key performance areas for the Board and management.

 

Management of company

 

   Day-to-day running of business

   Appointed to meet company objectives

 

 

Independent auditors

 

   Appointed by shareholders at AGM

   Audit committee must verify independence of individual that will be responsible for the audit.

   Must be regularly rotated every 5 years . Express an opinion on financial statements and indicate whether the user can rely on financial statements

 

Audit and Risk Committee

 

   Appointed by shareholders at every AGM

   Consist of 3 members who must be directors and:

            - not involved in daily management

            - not be full time executive employee for the past 3 financial years

            - not be a material supplier or customers

            - not be related to anybody who fall within above criteria.

 

Social and Ethics Committee

 

   Appointed by shareholders at AGM if company has public interest score of at least 750 points.

   Consist of at 3 directors with I director not being part of daily management of company.

   Must consult with social and advisory panel - representatives from employees of company, community, as well as certain professional bodies.

   Reports to shareholders at AGM

   Monitor company's activities with regards to

-    social and economic development - good corporate citizenship (promote equality, prevent unfair discriminations reduce corruption

-    environment, health and public safety

-    Consumer relationships

-    labour and employment

 

Shareholders

 

• Vote on major issues select directors and fundamental changes

   entitled to dividends

   own portion of company o opportunity to inspect books and records

 

Separation of ownership from control (corporate governance)

 

   Separate ownership = owners have delegated part of their control and rights to managers of company

   Can take this away from managers if dissatisfied with how business is managed. • Shareholders elect directors, who appoint managers

   Directors must represent interest of shareholders and determine policies that managers carry out.

   There is a need to independently monitor and control throng King code.

 

JSE Limited

 

   Provides market where shares can be traded freely under a regulated procedure.

   Bound by Stock Exchange Control Act 1of 1985.

   Prescribes rules and regulations in form of Listing Requirements.

   Companies must adopt IFRS in financial Statements

 

* International Financial Reporting Standards

Lesson Files
Lesson Questions