1. Section 30(4) of the Act and the non-binding opinion of CIPC

Section 30(4) of the Companies Act 71 of 2008 (the Act) states that the annual financial statements of each company that is required in terms of the Act to have its annual financial statements audited, must include the particulars showing the remuneration and benefits received by each director or individual holding any prescribed office in the company. On 27 October 2011, the Companies and Intellectual Property Commission (CIPC) released a non-binding opinion that private companies and personal liability companies, whether they are required in terms of the regulations to have their annual financial statements audited or not, are not required to disclose the particulars of directors’ remuneration and benefits as envisaged in Section 30(4) of the Act.

However, on 12 March 2015, CIPC released a notification that the non-binding opinion dated 27 October 2011 has been withdrawn.

2. here does this leave private companies?

Potentially, the withdrawal of CIPC’s non-binding opinion could have far reaching implications for private companies. Unfortunately, CIPC has not provided any transitional provisions or additional guidance in respect of the withdrawal of the non-binding opinion to date.

As a consequence, private companies which are required in terms of the regulations to have their annual financial statements audited (for example, a private company whose public interest score is greater than 350 calculated with reference to its annual turnover, size of workforce and extent of activities), will be required to disclose the remuneration and benefits received by each director or individual holding any prescribed office in the company. In terms of Section 30(6) of the Act, the term “remuneration” includes the following:

  1. fees paid to directors for services rendered by them to or on behalf of the company;

  2. salary, bonuses and performance-related payments;

  3. expense allowances;

  4. contributions paid under any pension scheme;

  5. the value of any option or right given directly or indirectly to a director, past director or future director, or person related to any of them;

  6. financial assistance to a director, past director or future director, or person related to any of them, for the subscription of options or securities, or the purchase of securities; and

  7. with respect to any loan or other financial assistance by the company to a director, past director or future director, or a person related to any of them, or any loan made by a third party to any such person, if the company is a guarantor of that loan, the value of any interest deferred, waived or forgiven or the difference in value between the interest that would reasonably be charged in comparable circumstances at fair market rates in an arm’s length transaction and the interest actually charged to the borrower, if less.

Section 30(5) of the Act, prescribes the form of the disclosure and states that any such disclosure must satisfy the prescribed standards, and must show the amount of any remuneration or benefits paid to or receivable by persons in respect of services rendered as directors or prescribed officers of the company, or services rendered while being directors or prescribed officers of any other company within the same group of companies, or otherwise in connection with the carrying on of the affairs of the company or any other company within the same group of companies.

3. Conclusion

We have not had sight of any suggested transitional provisions or additional guidance in respect of the withdrawal of the non-binding opinion provided by CIPC. It is currently difficult to determine what the future interpretation of Section 30(4) of the Act will be. We would, however, hope to see such transitional provisions or additional guidance to be provided soon. In the interim, however, this development must, undoubtedly, be closely monitored by private companies that are required in terms of the regulations to have their annual financial statements audited, in order to ensure that such private companies do not fall foul of the requirements of the Act.

Phillip Kruger

Legal Advisor, Johannesburg