DRAFT FOR DISCUSSION
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Tshisevhe Gwina Ratshimbilani Inc.
Illovo Edge Office Park, Building 1, 3rd Floor
Fricker Road CNR Harries
Illovo Sandton, 2196
P.O. Box 782352, Sandton 2146
t. +27 (0) 11 243 5027
f. +27 (0) 11 243 5028
e. info@tgrattorneys.co.za
website: www.tgrattorneys.co.za
SOE FOUNDING LEGISLATION: KING CODE ON CORPORATE GOVERNANCE FOR SOUTH AFRICA 2008
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ANALYSIS OF SOE FOUNDING LEGISLATION PROVISIONS
1. CORPORATE GOVERNANCE MATTERS: PROVISIONS ON DIRECTORS
Constitution of Board of
Directors
Provisions on Independent
Directors
Provisions of Executive Directors
Appointment and removal of
Directors
Appointment and removal of
CEO / MD
The board should comprise a
balance of power, with a majority
of non-executive directors. The
majority should be independent.
They should ensure that there is
an appropriate balance of power
and authority on the board and
that the power of the board is
not concentrated in the hands of
individuals or a block of
individuals. (Principle 2.18 and
recommendation 2.63)
As a minimum, there should be
two executive directors
appointed to the board, namely
the Chief Executive Officer
(“CEO”) and the person in charge
of finance (CFO etc.)
(recommendation 2.73)
The majority of non-executive
directors should be independent.
(recommendation 2.64)
As a minimum, there should be
two executive directors
appointed to the board, namely
the Chief Executive Officer
(“CEO”) and the person in charge
of finance (CFO etc.)
(recommendation 2.73)
Directors should be appointed
through a formal and transparent
process. Where the board as a
whole, with the assistance of a
nomination committee, subject
to shareholder approval, would
be involved in the process.
(principle 2.19 and
recommendation 2.82)
The board should appoint the
CEO and establish a framework
for the delegation of authority of
the board to the CEO. (principle
2.17)
An independent director should
be independent in character and
judgement and there should be
no relationship or circumstances
which are likely to affect, or could
appear to affect his
independence. (recommendation
2.66)
Boards should assess the skills
and suitability of a proposed
candidate director, there are
three matters that require
consideration, namely the
knowledge and experience
required for the board, the
apparent integrity of the
individual, and the skills and
capacity of the individual to
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The board should elect a
chairman of the board who is an
independent non-executive
director. The CEO of the
company should also fulfil the
role of chairman of the board.
(principle 2.16)
An independent director should
be independent in fact and in
perception of a reasonable
informed outsider.
(recommendation 65)
An independent director should:
 not be a representative
of a shareholder who
has the ability to
control or significantly
influence management
or the board;
 not have a direct or
indirect interest in the
company which exceeds
5% of the group’s total
number of shares in
issue;
 not have a direct or
indirect interest in the
company which is less
than 5% of the group’s
total number of shares
in issue, but is material
to his personal wealth;
 not have been
employed by the
company or the group
in any executive
capacity, or appointed
as the designated
auditor or partner in the
discharge his duties to the board.
(recommendation 2.81)
All new directors should have a
background check to ensure that
they have not been declared
delinquent nor are serving
probation. (recommendation
2.82)
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groups external audit
firm or senior legal
adviser for the
preceding three
financial years;
 not be an immediate
family member of an
individual who is or has
been employed by the
company or the group
in an executive capacity
in the preceding three
financial years;
 not be a professional
adviser to the group or
a director;
 be free from any
business or other
relationship which could
be seen to materially
interfere with the
individual’s capacity to
act independently;
 not receive
remuneration
contingent upon
performance of the
company.
(recommendation 67)
At least one third of nonexecutive directors should retire
by rotation annually.
(recommendation 76)
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2. CORPORATE GOVERNANCE MATTERS: PROVISIONS ON DIRECTORS CONTINUED
Duties of Directors
Directors Powers
The following principles are
applicable to directors:
 The board should
be the focal point
for and custodian
of corporate
governance. (2.1)
 The board should
appreciate that
strategy, risk,
performance and
sustainability are
inseparable. (2.2)
 The board should
provide effective
leadership based
on an ethical
foundation. (2.3)
 It should ensure
that the company
is and is seen to be
a responsible
corporate citizen.
(2.4)
 The board should
also ensure that
the company’s
ethics are
managed
effectively. (2.5)
The board is to elect a
chairman of the board who
is an independent nonexecutive director.
(principle 2.16)
Validity of Directors
Actions
No provisions.
Liability of Directors
Delegation of Powers
Offences and Penalties
No provisions.
The board should delegate
certain functions to wellstructured committees but
without abdicating its own
responsibilities. Board
committees constitute an
important element of
governance process and
should be established with
clearly agreed reporting
procedures and a written
scope of authority. The
terms of reference of
committees should be
reviewed every year and
any changes should be
approved by the board.
(principle 2.23 and
recommendations 2.125
and 2.126)
No provisions.
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




The board should
ensure that the
company has an
effective and
independent audit
committee. (2.6)
The board should
be responsible for
the governance of
risk, information
technology and
ensure that the
company complies
with all applicable
laws and considers
adherence to nonbinding rules,
codes and
standards. (2.7 –
2.9)
The board should
ensure that there
is an effective riskbased internal
audit and ensure
the integrity of the
company’s
integrated report.
(2.10 and 2.12)
The board should
appreciate that
stakeholders’
perceptions affect
the company’s
reputation. (2.11)
The board and its
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
directors should
act in the interests
of the company.
(2.14)
The board should
consider business
rescue
proceedings and
other turnaround
mechanisms as
soon as the
company is
financially
distressed as
defined in the
Companies Act 71
of 2008 (the
“Act”). (2.15)
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3. AUDIT AND REPORTING MATTERS
Report Submission Requirement
Responsible Reporting Officer
The Board should ensure the
integrity of the company’s
integrated report which should
include commentary of the
financial statements of the
company, as well as a copy of the
annual financial statements of
the company. The report should
explain how the company has
made its money. Reporting
should be integrated across all
areas of performance, reflecting
choices made in the strategic
decisions adopted by the board
and should include reporting in
the triple context of economic,
social and environmental issues.
(principle 9.1 and
recommendations 9.11 and 9.12)
Assurance over the financial
disclosure in the integrated
report should be obtained and a
formal process with regard to
sustainability reporting should be
established. (recommendation
9.17)
The audit committee should
assist the board in reviewing the
integrated report to ensure that
the information is reliable and
The board is the ultimate
custodian of the corporate
reputation and stakeholder
relationships. The board should
take account of and respond to
the legitimate interests and
expectations of shareholders
linked to company in its decision
making. (recommendation 8.4)
To whom SOE Reports
(Parliament or Government)
Transparent and effective
communication with
stakeholders is essential for
building and maintaining their
trust and confidence. (Principle
8.5)
Frequency of Reports
(Annual/Semi-Annual)
At least annually.
Reporting Standards /
Benchmarks
King III Report on Corporate
Governance.
9
does not contradict the financial
aspects of the report.
(recommendation 3.35)
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4. AUDIT AND REPORTING MATTERS
Auditing Requirements
Business Plans / Statement of
Objectives
Liquidity and Solvency Management
Provisions
Performance Review
The audit committee of a public or state
owned company must be elected by the
shareholders of the company at each
AGM. (recommendation 3.9)
The board should play a prominent role in
the strategy-development process and not
be the mere recipient of strategy as
proposed by management.
(recommendation 2.5)
The board should consider rescue
proceedings or other turnaround
mechanisms as soon as the company is
financially distressed as defined in the Act.
(principle 2.15)
The audit committee should recommend
to the shareholders the appointment,
reappointment and removal of the
external auditor. The recommendation of
the auditing firm or person should be
based on the assessment of the auditing
firm and the individual’s qualifications,
expertise and resources, effectiveness and
independence. (principle 3.9 and
recommendation 3.75)
The annual financial statements should
include a description of non-audit services
rendered by the external auditor, including
the nature and quality thereof.
(Recommendation 3.79)
The board should approve the long and
short term strategy of the business of the
company and monitor their
implementation by management.
(recommendation 2.6)
The evaluation of the board and its
committees and the individual directors
should be performed annually by the
chairman with the assistance of the
company secretary and the nominations
committee. (principle 2.22 and
recommendation 2.112)
The board should state in the integrated
report whether the appraisals of the
board, its committees have been
conducted. The report should provide an
overview of the results of the performance
assessment and the action plans to be
implemented, if any. (recommendation
2.114)
The board should ensure that its long-term
planning will result in sustainable
outcomes. The strategy development
process should take account of the
dynamics of the changing external
environment and be responsive to
changing market conditions.
(recommendation 2.10)