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Companies Act, 2008 (Act No. 71 of 2008)

Chapter 2 : Formation, Administration and Dissolution of Companies

Part F : Governance of companies

72. Board committees

 

(1) Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board of a company may—
(a) appoint any number of committees of directors; and
(b) delegate to any committee any of the authority of the board.

 

(2) Except to the extent that the Memorandum of Incorporation of a company, or a resolution establishing a committee, provides otherwise, the committee—
(a) may include persons who are not directors of the company, but—
(i) any such person must not be ineligible or disqualified to be a director in terms of section 69; and
(ii) no such person has a vote on a matter to be decided by the committee;
(b) may consult with or receive advice from any person; and
(c) has the full authority of the board in respect of a matter referred to it.

 

(3) The creation of a committee, delegation of any power to a committee, or action taken by a committee, does not alone satisfy or constitute compliance by a director with the required duty of a director to the company, as set out in section 76.

 

(4) `The Minister by, regulation, may prescribe-
(a) a category of companies that must each have a social and ethics committee, if it is desirable in the public interest, having regard to—
(i) annual turnover;
(ii) workforce size; or
(iii) the nature and extent of the activities of such companies
(b) the functions to be performed by social and ethics committees required by this subsection; and
(c) rules governing the composition and conduct of social and ethics committees.

 

(5) A company that falls within the category of companies that are required in terms of this section and the regulations to appoint a social and ethics committee may apply to the Tribunal for an exemption from that requirement in the following manner:
(a) The company must publish the intention to lodge an application for exemption with the Tribunal in the prescribed manner; and
(b) apply to the Tribunal, in the prescribed manner and form, for an exemption from the requirement, and the Tribunal may grant such exemption if it is satisfied that—
(i) the company has a formal mechanism within its structures, which substantially performs the functions of the social and ethics committee in terms of this section and the regulations; or
(ii) it is not reasonably necessary, having regard to the nature and extent of the structures and activities of the company and the public interest, to require the company to have a social and ethics committee;

[Section 72(5) substituted by section 13(a) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(6) An exemption granted in terms of subsection (5) is valid for five years, or such shorter period as the Tribunal may determine at the time of granting the exemption, unless set aside by the Tribunal in terms of subsection (7).

 

(6A) A social and ethics committee is not required where—
(a) the company is a subsidiary of another company that has a social and ethics committee, and the existing social and ethics committee will perform the functions required by this section on behalf of the subsidiary company; or
(b) the company has been exempted by the Tribunal in terms of subsections (5) and (6).

[Section 72(6A) inserted by section 13(b) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(6B) The Minister may prescribe the minimum qualifications, skills and experience requirements for members of the social and ethics committee that he or she may consider necessary to ensure that any such committee comprises persons with adequate relevant knowledge and experience to equip the committee to perform its functions.

[Section 72(6B) inserted by section 13(b) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024]

 

(7) The Commission, on its own initiative or on request by a shareholder, or a person who was granted standing by the Tribunal at the hearing of the exemption application, may apply to the Tribunal to set aside an exemption only on the grounds that the basis on which the exemption was granted no longer applies.

 

(7A) The social and ethics committee of a company must comprise not less than three members: Provided that—
(a) in the case of a public company and state-owned company, the majority of the members must be directors who are not involved in the day-to-day management of the business of the company and must not have been so involved at any time during the previous three financial years; and
(b) in the case of any other company, not being a public company or state-owned company, the members must consist of not less than three directors or prescribed officers, at least one of whom must be a director, who is not involved in the day-to-day management of the business of the company and must not have been so involved within the previous three financial years.

[Section 72(7A) inserted by section 13(c) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(8) A social and ethics committee of a company is entitled to-
(a) require from any director or prescribed officer of the company any information or explanation necessary for the performance of the committee's functions;
(b) request from any employee of the company any information or explanation necessary for the performance of the committee's functions;
(c) attend any general shareholders meeting;
(d) receive all notices of and other communications relating to any general shareholders meeting; and
(e) be heard at any general shareholders meeting contemplated in this paragraph on any part of the business of the meeting that concerns the committee's functions.

 

(8A) Aboard of a company that is required to have a social and ethics committee that—
(a) exists on the effective date, must appoint the first members of the committee within 12 months after—
(i) the effective date; or
(ii) the determination by the Tribunal of the company’s application, if any, and the Tribunal has not granted the company an exemption; and
(b) is incorporated on or after the effective date, must constitute a social and ethics committee within 12 months after—
(i) its date of incorporation, in the case of a public company or state-owned company; or
(ii) in the case of any other company, not being a public company or state-owned company, the date the company first met the criteria determined in terms of subsection (4)(a).

[Section 72(8A) inserted by section 13(d) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(9) A company must pay all the expenses reasonably incurred by its social and ethics committee, including, if the social and ethics committee considers it appropriate, the costs or the fees of any consultant or specialist engaged by the social and ethics committee in the performance of its functions.

 

(9A) Thereafter—
(a) at each annual general meeting of a public company or state-owned company, such company must elect a social and ethics committee; or
(b) a social and ethics committee must be appointed annually by the board of the company where such company is any other company, not being a public company or state-owned company, required to have a social and ethics committee.

[Section 72(9A) inserted by section 13(e) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(10) Section 84(6) and (7), read with the changes required by the context, apply with respect to a company that fails to appoint a social and ethics committee, as required by this section and the regulations.

 

(11) Where a vacancy arises in the social and ethics committee, the board must appoint a person within 40 days after the vacancy arises, to fill such vacancy.

[Section 72(11) inserted by section 13(f) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024 – effective 27 December 2024 per Notice 238, GG51837 dated 27 December 2024]

 

(12)

(a) A social and ethics committee must prepare for shareholders a social and ethics committee report in the prescribed manner and form describing how the committee performed its functions in terms of this Act and the regulations.
(b) The social and ethics committee must present its report—
(i) in the case of a public company or state-owned company, at its next annual general meeting; or
(ii) in the case of any other company, not being a public company or state-owned company, annually at a shareholders meeting or with a resolution as contemplated in section 60(1).

[Section 72(12) inserted by section 13(f) of the Companies Amendment Act 16 of 2024, Notice No 5082, GG50991, dated 30 July 2024]