Ebrahim Patel, Minister of Trade and Industry, has released the draft Companies Amendment Bill for public consultation, suggesting a major shake-up for South African companies.
The bill, which was first proposed in 2018, offers significant amendments to the South African Companies Act, including more disclosures on Executive compensation in the country.
Patel said in an attached explanatory memorandum that the law seeks to make it simpler to conduct business in South Africa while also combating money laundering and terrorism by providing openness around ownership.
Several reforms are suggested to make South Africa’s company laws more user-friendly, consistent with well-established concepts, and not too onerous on business activity.
“As will be seen from the explanations provided in this memorandum, many of the proposed amendments are technical in nature, based on submissions received during the extensive engagement with interested parties, and are designed to ease the doing of business by providing legal certainty where these do not currently apply, as well as providing greater flexibility to companies in ceded territories.
According to Patel, the law seeks to establish equality between directors and top management on the one hand, and shareholders and employees on the other. It is also intended to address public concerns about high levels of inequity in society, according to him.
The bill’s amendments mandate that certain types of businesses publish information on the pay of directors and prescribed officials.
Furthermore, it compels businesses to publish the average pay of all workers, as well as the ratio between the total remuneration of the company’s top 5% highest-paid employees and the total remuneration of the company’s bottom 5% lowest-paid employees.
The company’s compensation policy must also be approved by shareholders.
“Certain of the proposed amendments are designed to achieve better disclosure of senior executive remuneration and the reasonableness of the remuneration,” Patel said.
“These issues are addressed primarily in the proposed requirements of the Remuneration Report. These are issues that have raised similar concerns in other leading jurisdictions. The provisions relating to transparency on the pay gap and the reasonableness of remuneration provide an objective benchmark which will assist the public dialogue on this topic.”
“South Africa is part of a global effort by major economies to address this issue. South Africa’s grade in the Mutual Evaluation Assessment of the country’s anti-money laundering and counter-terrorism funding efforts revealed flaws in identifying the actual owner of shares in businesses.
“To remedy this, the bill proposes changes related to disclosure of ultimate beneficial ownership of a company’s shares,” Patel added.
The government’s attempts to combat money laundering and terrorism are reflected not just in proposed changes to the Companies Act, but also in other pieces of law and administration.
This is critical not just for recruiting international investors, but also for the efficient and successful operation of the local economy and the generation of employment, according to Patel.