Financial Assistance: Directors

Question 1

What do the Companies Act provisions aim to prevent in this kind of financial assistance

Answer 1

potential conflicts of interests

Question 2

What section applies to financial assistance given to directors

Answer 2

S45

Question 3

Does it matter what the purpose of financial assistance is when it is given to directors

Answer 3

No, it does not matter what the financial assistance is for under S45

Question 4

Why can the company just not giver directors money?

Answer 4

There is already a remuneration policy to pay directors which has been approved by the shareholders

Question 5

Would a loan from time to time be financial assistance

Answer 5

yes

Question 6

What is the idea behind this provision

Answer 6

A director has to act in the best interests of the company. If he requires financial assistance, he should rather approach a bank.

Question 7

What guideline is given under s45 for what constitutes financial assistance

Answer 7

1. lending money
2. Guaranteeing a loan
3. Securing any debt or obligation
   i. e the director gets a loan and the company stands surety

Question 8

Why do we have S45

Answer 8

it protects the company from exposing its assets to risk and ensures that the company’s assets are not unnecessarily encumbered

Question 9

What is specifically excluded from financial assistance in S45

Answer 9

1. lending money in the ordinary course of business if that is its primary business
2. Accountable advances to meet legal expenses
3. Accountable advances to meet anticipated expenses incurred
4. Amount related to person’s expenses for removal at company’s request

Question 10

Who can authorize the provision of financial assistance to a director

Answer 10

the board

Question 11

What types of directors does S45 include

Answer 11

prescribed officers, related or interrelated persons and companies

Question 12

What is the additional requirement that s45 adds to the S44 requirements that must be met for financial assistance

Answer 12

Written notice to s/h and trade unions under certain circumstances;

• within 10 business days after resolution if exceeds 1/10th of 1% of company’s net worth
• within 30 days after the end of the financial year in any other case

Question 13

Why does S45 add an additional requirement

Answer 13

Transparency and governance

Question 14

consequences of non compliance with S45

Answer 14

1. void to extent inconsistent with Act or MOI
2. S45 (6) with S218 (1)
3. director liable if were at meeting and failed to vote against despite knowing inconsistent