I don’t often write blogs on the JKLS Africa website anymore, it is a useless tool for marketing in my view, as bad as Facebook & LinkedIn and with the law changing continuously, dangerous to rely on. So, this is not legal advice, it is an informative article, nothing more and nothing less. Law is boring and for insane people. We know that, I say so often enough and have yet to meet a non-boring lawyer or legal scholar, including myself and that is good news to you – it means that the same old same is 99% followed – meaning that there is little chance of something odd happening in a court room. There is also nothing new in law, with the years you learn to become sceptical, cynical and at times, loathsome. But I was asked the other day what Corporate Governance means in South Africa and from the response I realised that the topic may be of some interest and it is important to you.
First, let me say that it is an incredibly difficult subject to summarise in paper but I tried to do so by using practical examples and explaining how we assisted our clients in this regard in the past. The new buzz word in Africa and South Africa is “Compliance” which is also known as “Corporate Governance.” The legal definition, for what it is worth, is: “Corporate Governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community.” In short, what the above tells you, is what is expected in business in terms of honesty, integrity and the way of doing business and it is vague, it combines many different laws, making it a nightmare for most, something waiting to bite you in the ass.
Whenever the words “Corporate Governance” are mentioned, you automatically look at the latest (this important, the latest, it changes every eight days) South African Company Act and The King Report on Corporate Governance (2016), both as amended. “King” refers to Advocate Mervyn King SC, formerly a Judge in the High Court of South Africa – the first and only name in Corporate Governance. From time to time, a system of rules and regulations are published, and read together with the Company Act and many other Acts, to ensure that no shenanigans take place in the corporate boardroom – the latest such report is known as the King IV. Thus, it comes down to forcing companies and directors, including shareholders, to act responsibly at all times whilst keeping all the above in mind. What the law is trying to prevent is Corporate collapses. The law thinks that if you keep by the rules, you will not fail as such failures are bad for everyone, the country, the shareholders, the clients and the workers above all. Therefore, the first thing to understand very clearly is that compliance is not an option to you – if the law states you must do X, you better do X, or you will be held liable and be abused from behind by the legal system. Further, the law is neutral, I say so in many legal books. It is for you to abuse the law to your side or not and if abused to your side, by being compliant, you are relatively safe and able to bat the attacks off. I cannot, without writing an entire book of 300 pages, tell you what to look out for and what to be on your guard for but I will say this - the company must be set up correctly from the beginning, properly ringfenced (another topic, let no bankster ever get his paws on you) and aware of the compliance issues demanded from it. The directors must be trained and guided and so would be everyone else working there. Sadly, there are no excuses here, you should know the law and are presumed to know. What we want is this, no one, not the police, not the taxman, not the government, not a disgruntled employee or anyone else, a shareholder, whatever, must be able to say to you that you were not compliant… that the law said you should have acted in certain ways and you did not. I say again, this is not a matter of thinking about it or you having any choice, you are either compliant or not and if not – well, ask MTN (Nigeria) what happens, you get billion, yes, billion, dollar fines if lucky, jailtime if not.
Practically, (not referring to MTN now) I saw people being arrested for fraud because they had a business card stating that they are “Director” of such and such a Company but a quick check on the Company papers, at the Company Registrations Office, does not reflect the same, they are then arrested for fraud. The charge won’t stick but the fellow may be cruelly abused in jail before we can get him out on bail. It happens, don’t think it cannot, the law is often abused by many but in itself, the law is neutral. The above demonstrates how silly Compliance can become. The difficulty here is that the law is vague, the way you behave as a director, for instance, is corporate governance. A clash of interests etc. is all part of this and thus you need direction. In all public and listed companies, the compliance guidance is done by the Company Secretary, an expert on company law and corporate governance. Smaller companies do not necessarily have such experts but guess what, they are held at the same standards. You were warned.
Koos Kotze is a former member of the South African Police Force. He served between 1985 and 1991 primarily as a sergeant in the Pretoria Flying Squad. After leaving the Police Force he obtained the law degrees B Iuris & LLB at the University of the Free State (Bloemfontein, South Africa) and was a practicing commercial law attorney for eight years. He also wrote several books on business, law, counter terrorism and security issues. He is a widower and lives in Bloemfontein, South Africa.