1.2 Statutory Matters Flashcards
What section is standard of directors conduct?
Section 76
According to section 76, what MUST a director do?
- Not use position of director
- Communicate to board info
- Exercise powers of director well
What must a director not use his position for?
- Gain advantage for himself or other
2. Knowingly cause harm to company
What is the exception for a director not to communicate infer to the board?
If he feels the info is;
- Immaterial
- Generally available to public
- Bound not to disclose info legally or ethically.
How must the director exercise his powers and functions of director?
- In good faith for proper purpose
- Best interests of company
- Degree of care and skill reasonably expected.
What should a director do to make sure he complies with standards?
- Take reasonable steps to be informed
- Have rational basis for making decisions
- Entitled to rely on: employees, legal council etc.
- Entitled to rely on reports etc.
What does the term director include?
- Alternate director
- Prescribed officer
- Person who is member of committee of board even if they aren’t on board
What section is the liability of directors and prescribed officers?
Section 77
What does section 77 deal with?
Instances where director and prescribed officer may be held liable for losses suffered by the company.
How may a director be held liable in terms of common law for breach of fiduciary duty?
- Failing to disclose any personal financial interest
- Using position to gain advantage
- Failing to act in good faith
- Failing to act in best interest in company
How may the director be held liable in terms of common law relating to delict?
- Not acting with care or skill or diligence necessary
2. Other provision specified by act or memorandum of incorporation.
How may a director be held liable to the company for any losses suffered as direct or indirect result?
- Acting for company despite knowing he lacked authority
- Agreeing to carry on business that’s as reckless or insolvent circumstances.
- Being party to act or omission that was fraud
- Signed document that was untrue or misleading.
- Present at a meeting and not voting against certain illegal acts.
What section is indemnification and directors insurance?
Section 78
What does section 78 have to say?
Any provision of an agreement that seeks to relieve a director of their duties is void. However certain protection of directors are allowed
Can a company pay the fine of a director who has been convicted of an offense? Directly or indirectly?
No
Can a company send legal expenses to director that cause matter?
Yes
What circumstances can a company NOT indemnify (protect) a director?
Where the director:
- Acted in name of company with lack of authority
- Acquiesced to carry on business recklessly, negligently or intent to fraud or under insolvent conditions
- Party to omission to fraud
- Committed willful misconduct or breach of trust
What are the four ethical values directors should have when making decisions?
- Responsibility
- Accountability
- Fairness
- Transparency
What are the five moral duties directors must have?
- Conscience
- Inclusivity
- Competence
- Commitment
- Courage
What section is audit committees?
Section 94
What doe section 94 state?
That a public, state-owned or other company in MOI, must elect an audit committee at each annual general meeting.
How many members must the audio committee have?
At least 3
What is an exception where a company dozens that’ve to elect an audit committee?
- Company is a subsidiary of another company that has an audit committee AND
- Audit committee of that company with perform functions of audit committee
What MUST each member of the audit committee be?
- A director
2. Minimum qualification
What must member of the audit committee NOT be.
- Involved day to day management
- Prescribed officer, full time executive etc.
- Supplier etc.
- Related person to the above
What does regulation 42 require of an audit committee?
That at least one third of the committee have academic qualifications in economics, law, accounting, commerce etc.
How much time does a company have to fill any vacancy n the audit committee?
40 business days
What do the duties of an audit committee include?
- Nominate registered auditor for company
- Determine fees paid to auditor
- Ensure appointment of auditor is of the act
- Determine nature and extent of any non audit services.
- Prepare financial report for that year
- Deal with complaints
