Highlights of Corporate Governance in SA

HIGHLIGHTS OF CORPORATE GOVERNANCE IN SOUTH AFRICA

The Companies Act, No. 71 of 2008 has partially codified corporate governance standards in South Africa. The various iterations of the King Report on Corporate Governance for South Africa have also raised the bar in terms of corporate governance and ethical leadership standards in the country, the latest version being the King V Report which was released in 2025. According to Prof Mervyn King, King IV accentuated the fact that directors are not merely the agents of shareholders, but rather the heart, mind and conscience of the company. Stakeholder primacy has now become the norm and this cannot be ignored.

The decision to revise King IV was partly informed by legislative changes, the ever-evolving corporate governance landscape (including technology), the need to refine the principles and practices, the need to standardise disclosure, and the need to make the Code more user-friendly.

There are no sweeping changes introduced in the new report, that is the King V Code, which was officially launched in October 2025, thus the transition to King V should be straightforward. Understanding the foundational concepts of King V is of significant importance. The application of the King Code is mandatory for listed or public companies.

At SIKANYE we are mindful of the fact that corporate failure is not always a function of corporate leadership. Businesses can find themselves in trouble out of no fault of their own, for instance, due to black swan events. A case in point is the financial distress and insolvencies occasioned by COVID-19 and the associated lockdown regulations. To this end, the company provides a wide range of advisory services relating to business rescue in order to enable directors to timeously leverage this remedy when their organisations go through financial distress. This is done in an effort to salvage the situation early and thereby avoid formal insolvency proceedings. More often than not, directors and creditors’ committees also require guidance on how the business rescue procedure works. Business rescue should be a speedy process and timely commencement is a critical success factor. Company directors need to be aware of this procedure and how it works in order to be able to invoke it on time if and when circumstances dictate. Section 4 of the Companies Act sets out the solvency and liquidity test. In this connection, section 22 of the Act prohibits reckless trading.

Against this backdrop, governing bodies should now perform their fiduciary duties with even greater care, skill, diligence and circumspection, and with proper authority. The decisions that they make must be able to withstand scrutiny. Furthermore, the amendments to section 77 of the Act expose directors to more liability when performing their duties. The section now allows the court to extend, on good cause shown, the three-year period of prescription for claiming damages. It is also noteworthy that the operation of this amendment applies retroactively. Consequently, the period to declare a person a delinquent director or under probation has now been extended. It should be noted that over and above that, in terms of section 218(2), liability may also be triggered by a contravention of any provision of the Act. Clearly, being a board member or a prescribed officer comes with the risk of personal liability which ought to be mitigated by always acting rationally, prudently, ethically and within the confines of the law.

Ironically, the company secretarial role is often perceived as the Cinderella of all management roles in organisations, yet a company secretary is a creature of statute and courts have held that he is an officer with extensive duties and responsibilities. In effect, he is a chief governance officer providing corporate governance support and oversight. Board members, individually and as a collective, should have unfettered access to the professional guidance of the company secretary who should also jealously guard his independence by, inter alia, maintaining an arm’s-length relationship with the Board. The Board should also ensure that the company secretary is empowered and vested with the necessary authority in order to be effective.

Sikanye Governance & Corporate Secretaries (Pty) Ltd.

Registration Number:

2010/004318/07

Address

Office Address

112 Kestrel Place

Moddercrest Office Park

1 High Street

Modderfontein, 1645

Business Hours

Monday – Thursday: 08.30 – 16.30

Friday: 08.30 – 13.00

Contact Us

064 890 6851

Email:

info@sikanyegovernance.com

Website:

www.sikanyegovernance.com