Corporate governance Flashcards
The Board
s66(1)
-The affairs of a company must be measured by or under the direction of its directors
-Directors use all functions of the company other than those that MOI restricts
S66(2)
-A private and limited liability company is comprised of at least one company
- public companies require at least three directors
Appointments and qualifications of directors
S67(1)
-Each incorporator is the first director of a company until sufficient other directors meet the minimum requirements of the Act or MOI
s66(11)
-no legal limitations
s66(4)(b)
-A company’s MOI in the case of a profit company, other than a state-owned company, must provide for the election by shareholders of at least 50% of the directors, and 50% of any alternate directors.
S 66(7)
-Has been appointed or elected
-Has delivered to the company a written
consent to serve as its directors
-The company must within 10 business days after the person becomes a director, submit a notice to the CIPC to indicate that that director has been appointed.
Ineligible Directors
Absolutely prohibited from being a director
1) Juristic Person
2) Minor not emancipated or person without legal capacity
3) Person not meeting qualification set out in MOI OR does not meet the additional grounds for ineligibility in the MOI
Disqualified
Not absolutely prohibited
1) Court has prohibited that person from being a director - usually when the person is guilty of gross negligence in performing their duties
2) Unrehabilitated insolvent
3) Has been removed from an office of trust, on the grounds of misconduct involving dishonesty
4. Has been convicted in the Republic or elsewhere, and imprisoned without the option of a fine, or fined more than the prescribed amount, for theft, fraud, forgery, perjury…
Removal and dismissal
S7(1)- removal
-A director may be removed by an ordinary resolution adopted at a shareholders meeting
Dismissal
Example-
-Ineligible or disqualified persons
-Failure of duties as director to act in the best interests of the company
Process:
1) Director must be notified of the meeting
2) Opportunity to present their case
Duty of care and skill:
-Directors must exercise their powers with a degree of skill and care that person with similar experience would
Breach:
-Fellow directors have to prove breach of duties
-Directors are not simply liable for errors of judgment
-Liable for losses, damages, costs
Fiduciary Duties of directors:
- Act in good faith, for proper purpose and in the best interests of the company
- Exercise independent judgement
- Act within their powers
- Avoid conflict of interest and communicate information
Breach= liability of directors
Which transactions must be authorized by shareholders
1) If the Act/MOI provides that the Board must refer the matter to shareholders for a decision.
2) If vacancy on the board that MUST be filled.
3) If otherwise it is specifically required by the MOI
4) In the case of a public company - annual general meeting is required.
Terms of notice
-Must be in writing
-Include: date, time and place; and purpose of the meeting
-Company must provide the notice to the shareholders: Public or non-profit company = 15 business days, Any other company = 10 business days
Quorum
-The minimum number of members of an assembly or society that must be present at any of its meetings to make the proceedings of that meeting valid.
-At least 25% of the voting rights that are entitled to be exercised, either in person or by proxy.
-No quorum? Meeting postponed or adjourned
Voting and electronic communication
-Vote by show of hands or by poll of persons present
If it is submitted for consideration to the shareholders who are entitled to exercise voting rights regarding the decision AND
Voted in writing within 20 business days after the decision was submitted.
