The Companies Act makes it compulsory for at least 50% of the board to be elected by shareholders, via a shareholders’ resolution. If there is a vacancy in the number of elected directors, the remaining directors have the power to appoint someone as a director on a temporary basis (via a board resolution) until the shareholders have filled the vacancy themselves. The newly appointed director must deliver a written consent to serve as a director to the company.
The minimum number of directors prescribed in terms of the Act is one but there is no maximum number prescribed. The Act does not specify any qualifications that must be held in order to qualify as a director nor are any resident directors required. However, in terms of South Africa’s tax legislation, the company must have at least one director residing in South Africa at any given time.
In addition a person may only become a director when they have explicitly given their consent to serve as a director after having been appointed, elected, or being entitled to serve as an ex officio director.
The following persons are ineligible for appointment as a director:
The following persons are disqualified from being appointed as a director:
Please note that in some cases a court may exempt the above “disqualified” persons from disqualification.
There are no compulsory board composition requirements in South Africa.
There is no prescribed minimum number of board meetings required each year. However, a board meeting must be held within 6 months from the financial year end in order to approve the annual financial statements, so there is an implied minimum of one.
A board meeting may be conducted by electronic communication entirely or one or more directors may participate in a meeting by electronic communication, eg teleconference/ videoconference. This is provided that the facility enabling the electronic communication enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting.
A decision that could be voted on at a board meeting may instead be adopted by written consent of a majority of the directors, given in person, or by electronic communication, provided that each director has received notice of the matter to be decided.
The source of the directors’ powers emanate from the company’s Memorandum and the Act. Subject to the Memorandum, directors are entitled to delegate particular powers/authority but not responsibility and may stipulate that the directors’ powers are individual. If no such provision exists in the Memorandum, the powers of the directors are joint.
In terms of the Act, if a director has a personal financial interest in respect of a matter to be considered at a board meeting, or knows that a related person has a personal financial interest in the matter, the director:
Please note that the above procedure does not apply in the circumstances where there is only one director of the company. In the circumstances where a company has only one director, but the director does not hold all of the beneficial interests of all of the issued securities (ie is not the sole shareholder) of the company, the director may not: