AUE1601 - Companies act Summary with Q&A

List the requirements for the standards of director’s conduct in terms of the Companies Act.

Réponse: In terms of section 76, a director of a company must not use the position of director, or any information obtained while acting in the capacity of a director (a) To gain an advantage for the director, or for another person other than the company or a wholly-owned subsidiary of the company; or (b) To knowingly cause harm to the company or a subsidiary of the company; and The director must communicate to the board at the earliest practicable opportunity any information that comes to the director’s attention, unless the director (a) Reasonably believes that the information is immaterial to the company; or (b) Generally available to the public, or known to the other directors; or (c) Is bound not to disclose that information by a legal or ethical obligation of confidentiality. A director of a company, when acting in that capacity, must exercise the powers and perform the functions of director (a) In good faith and for a proper purpose; (b) In the best interests of the company; and (c) With the degree of care, skill and diligence that may reasonably be expected of a person (i) Carrying out the same functions in relation to the company as those carried out by that director; and (ii) Having the general knowledge, skill and experience of that director.

How do you calculate the public interest score?

Réponse: CALCULATION OF PUBLIC INTEREST SCORE • 1 point for every one of the average number of employees employed during the year • 1 point for every R1 million (or portion thereof) in third party liability of the company at the financial year-end • 1 point for every R1 million (or portion thereof) in turnover during the financial year • 1 point for every individual who at the end of the financial year, is known by the company to directly or indirectly have a beneficial interest in the company’s issued securities

Explain the Companies Act requirements concerning pre-incorporation contracts.

Réponse: A person may enter into a written agreement in the name of or on behalf of, an entity that is contemplated to be incorporated, but does not yet exist at the time. A person who does anything as explained above, is jointly and severally liable with any other such person for liabilities created as provided for in the pre-incorporation contract while so acting, if (a) The contemplated entity is not subsequently incorporated; or (b) After being incorporated, the company rejects any part of such an agreement. If, after its incorporation, a company enters into an agreement on the same terms as, or in substitution for, an agreement contemplated above, the liability of the person in respect of the substituted agreement is discharged. Within three months after the date on which a company was incorporated the board of that company may completely, partially or conditionally ratify or reject any pre-incorporation contract purported to have been made in its name or on its behalf. If, within three months after the date on which a company was incorporated, the board has neither ratified nor rejected a particular pre-incorporation contract, the company will be regarded as having ratified that agreement. To the extent that a pre-incorporation contract has been ratified (a) The agreement is enforceable against the company as if the company had been a party to the agreement when it was made; and (b) The liability of a person who entered into the pre-incorporation contract in respect of the ratified agreement is discharged. If a company rejects the agreement before the incorporation of the company, a person who bears any liability for that rejected agreement may assert a claim against the company for any benefit it has received, or is entitled to receive, in terms of the agreement.

Explain the duties of the audit committee in terms of the companies act

Réponse: THE DUTIES OF THE AUDIT COMMITTEE IN TERMS OF THE COMPANIES ACT ARE TO  nominate a registered auditor for appointment as auditor by the shareholders (must be satisfied nominated person/firm is independent)  Determine the auditors’ fees and terms of engagement.  Ensure the appointment of the auditor complies with the Companies Act and the Auditing Profession Act.  determine the nature and extent of any non-audit services the auditor may provide to the entity; and  Pre-approve any agreement with the auditor for the provision of these services. Prepare a report to be included in the AFS which • describes how the audit committee carried out its function. • states whether the auditor was independent of the company. • Comments in any way the committee considers appropriate of the financial statements, the accounting practices and internal controls of the company. Receive and deal with appropriately, any concerns or complaints relating to • The accounting practices and internal audit of the company; • The content or audit of the AFS; • Internal financial controls; or • Any related matters. Make submissions to the board on any matters dealt with in (2.6) above. Perform other functions determined by the board.