In July 2024, new amendments were made to the Companies Act No. 71 of 2008 (“Companies Act”), particularly related to Section 30 Of the Companies Act that deals with Directors’ remuneration.
These amendments (Companies Amendment Act 16 of 2024) include new provisions that require all public (listed) and state-owned companies to prepare and present a remuneration policy and remuneration report.
The amendment to Section 30 of the Companies Act requires all companies that must have their Annual Financial Statements (AFS) audited, as well as those that voluntary choose to have their AFS audited (as per Section 30(2)), to disclose in their AFS the remuneration and other benefits paid, payable, or receivable per Sections 30(4), (5) and (6) of the Companies Act. This information must specify each director and prescribed officer, all of whom must be named in the AFS.
New amendments for public (listed) and state-owned entities:
In addition to the above, Section 30A outlines the requirements for the remuneration policy. This policy must be approved by the shareholders of the company at the annual general meeting (AGM) by an ordinary resolution. Once approved, the policy will remain in force for three years and must be approved every three years thereafter.
Section 30B pertains to the remuneration report, which must be prepared annually, reflecting the previous financial year for presentation and approval at the AGM.
According to section 30B(3)(c), the remuneration report must include the following contents:
- A background statement
- A copy of the company’s remuneration policy
- An implementation report that includes details of:
- The total remuneration for each director and prescribed officer in the company;
- The total remuneration for the highest and lowest-paid employees, and
- The average and median total remuneration of all employees
The remuneration gap between the top 5% highest-paid and bottom 5% lowest-paid employees within the company.
Notably, total remuneration (as mentioned above) includes both salary and benefits received, including any employer contributions to benefit funds, as well as any short- or long-term incentives including share options and incentive awards. It is important to clarify that the definition of remuneration used in the remuneration report differs from the broader definition outlined in section 30(6). This broader definition, in conjunction with sections 30(4) and (5), is relevant for the remuneration disclosure in the AFS.
Section 30B(4) states that if the remuneration report is not approved at this AGM by ordinary resolution, then:
- the Remuneration committee (Remco) must present an explanation at the next AGM regarding how the shareholders’ concerns have been addressed, and
- The non-executive directors serving on the Remco must stand for re-election as Remco members at the AGM where this explanation is presented.
Section 30B(5) states that if, at the AGM in the year immediately following the one mentioned in Section 30B(4), the remuneration report for the previous financial year is also not approved by an ordinary resolution of shareholders, the non-executive directors serving on the Remco will not be eligible to continue serving on the Remco for a period of 2 years. However, they may still serve as directors if they successfully stand for re-election at that AGM.
Additionally, Section 30B(6) states that the aforementioned consequences applicable to non-executive directors serving on the Remco do not apply to those Remco members who have served for a period of less than 12 months in the year under review.
Author details:
Maryke van Deventer
maryke@nexia-sabt.co.za
3 December 2024
