The Department of Trade, Industry and Competition invites the public to comment on the Draft Companies Amendment Bill.
The series of amendments in the 2021 Bill are aimed at achieving three policy objectives;
- improving ease of doing business in respect of certain provisions of the Companies Act;
- providing for greater transparency on wage ratios at firm level and;
- addressing true or beneficial ownership of companies, to address money laundering challenges.
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Improving ease of doing business
Company law should, among other factors, be clear, user friendly, consistent with well-established principles and not be over burdensome on the conduct of business. This is important not only for the attraction of foreign investors but also for the efficient and effective conduct of the domestic economy and for the creation of jobs. A number of changes are proposed to the Companies Act to align he legislation with this objective. These are based on submissions received during the extensive engagement with business associations, firms, lawyers and investor groups and are designed to ease the doing of business through providing legal certainty where these do not currently apply, providing greater flexibility to companies in certain circumstances, or removing unnecessary provisions in the Act.
Providing for greater transparency on wage ratios
The Bill seeks to clarify responsibilities between directors and senior management on the one hand, and shareholders on the other hand as well as addressing public concerns regarding high levels of inequalities in society. Excessive remuneration particularly at the highest levels of a company is a matter of great concern internationally and in SA.
The amendments respond to shareholder concerns regarding excessive executive pay through two principal mechanisms: first, greater disclosure requirements in annual reports of companies; and second, improved shareholder rights in respect of remuneration policies.
Amendments in the Bill require that certain categories of firms disclose information on the remuneration of directors and prescribed officers. Furthermore, it requires that companies disclose the average remuneration of all employees, and the ratio between the total remuneration of the top 5% highest paid employees and the total remuneration of the bottom 5% of the lowest paid employees of the company. Shareholder approval is required for the company’s remuneration policy.
Addressing true or beneficial ownership of companies, to address money laundering challenges
Uncovering true or beneficial ownership is a critical measure in global efforts to confront and address money laundering, corruption and the financing of terrorism. The Companies Amendment Bill proposes new provisions on beneficial ownership, placing an obligation on companies to know and disclose the identity of their true shareholders who hold a beneficial interest amounting to 5% or more of the total shares in a company