Chapter 10 - Directors and board committees

Question 1

What is an Ex officio director?

Answer 1

A director who holds office as a director of a company as a result of him or her holding another office, title or status

Question 2

What is an Alternate director?

Answer 2

A person appointed to the board of directors of a company in substitution for a particular elected director of that company.

Question 3

What is an Executive director?

Answer 3

A director who participates in the day-to-day management functions within a company.

Question 4

What is an Independent director?

Answer 4

A director appointed to the board of directors from outside, who is independent and unrelated to the company and its subsidiaries.

Question 5

What is King IV?

Answer 5

King Report on Corporate Governance, 2009, or King III, the reports on corporate governance principles for South African companies.

Question 6

What is a Non-executive director?

Answer 6

A director who does not participate in the day-to-day management of a company.

Question 7

What does ineligible mean?

Answer 7

The term for a person who is absolutely prohibited from becoming a director of a company

Question 8

What does Disqualified mean?

Answer 8

The term refers to a person who is prohibited from being a director, unless a court gives him or her permission.

Question 9

What is a Board of directors?

Answer 9

The group of directors responsible for the management of the business and affairs of a company.

Question 10

What is the meaning of codification?

Answer 10

A systematic and comprehensive compilation of the entire body of law.

Question 11

What is a business judgment rule?

Answer 11

The principle states that a director is not in breach of his or her statutory duties if he or she took reasonably diligent steps to inform himself or herself of the matter in question, had no personal interest, and had a rational basis for believing that his or her decision was in the best interest of the company.

Question 12

Name 3 types of directors.

Answer 12

1. Executive Directors
2. Non-executive Directors
3. Independent Directors

Question 13

Name 5 types of directors recognised by the Companies Act.

Answer 13

1. Ex officio director
2. A director appointed in terms of the MoI.
3. An alternate director
4. An elected director
5. A temporary director who is appointed in order to fill a vacancy.

Question 14

List a minimum number of directors as per type of company.

Answer 14

1. Private company : 1 (One )
2. Personal liability company : 1 (One)
3. Public company : 3 (Three)
4. Non-profit company : 3 (Three)

Question 15

When does a person become a director of a company?

Answer 15

1. When a person has been appointed or elected in terms of the Companies Act or MoI.
2. When a person holds an office, title, designation, or similar statute entitling that person to be an ex officio director of the company.

Question 16

Who may apply for delinquency order?

Answer 16

1. A company
2. A Shareholder
3. A director
4. A company secretary or prescribed officer
5. A registered trade union/other employee representative

Question 17

What are the grounds for delinquency order?

Answer 17

The person:
1. served as a director while disqualified.

2. acted as a director while under probation in a manner that contravened the order of probation.
3. grossly abused the position of director.
4. took personal advantage of information or an opportunity.
5. intentionally or as a result of gross negligence, inflicted harm on the company/subsidiary.
6. Acted in a manner that amounts to gross negligence, willful misconduct, or breach of trust.

Question 18

What may the courts order in a declaration of delinquency?

Answer 18

The person :
1. undergo remedial education.

2. carry out a designated programme of community service.
3. pay compensation.

Question 19

When may a person be placed under probation?

Answer 19

1. while serving as a director, the person was present at a meeting and failed to vote against a resolution despite the inability of the company to satisfy the solvency and liquid tests.
2. while serving as a director, the person acted in a manner materially inconsistent with the duties of a director.
3. while serving as a director, the person acted in a way that had a result that was oppressive or unfairly prejudicial to a shareholder or another director, or that unfairly disregarded the interests of a shareholder or another director.
4. while serving as a director, the person acted in a way that had the result that the business of the company, or a related person, was being or had been carried on or conducted in a manner that was oppressive or unfairly prejudicial to a shareholder or another director, or that unfairly disregarded the interests of a shareholder or another director.
5. while serving as a director, the person exercised his or her power in a manner that was oppressive or unfairly prejudicial to a shareholder or another director, or that unfairly disregarded the interests of a shareholder or another director.
6. Within a period of 10 years after the effective date, the person has been a director of more than one company, or a managing member of more than one close corporation, irrespective of whether concurrently, sequentially, or at unrelated times, and during this time, two or more of those companies or close corporations each failed to fully pay all of their creditors or meet all of their obligations, except in terms of a business rescue plan.