The Prescribed Officer
Regulation 38 of the Companies Act 71 of 2008 (“the Act”) introduced the term “prescribed officer” to South African company law. Unlike directors, prescribed officers are not appointed or elected to the board. The Act provides that despite not being a director of a particular company, a person is a prescribed officer of the company for all purposes of the Act if that person:
- Exercises general executive control and management over the whole, or a significant portion, of the business and activities of the company; or
- Regularly participates, to a material degree, in the exercise of general executive control and management over the whole, or a significant portion, of the business and activities of the company
Duties of the Prescribed Officer
- Disclosure: To disclose any material information that comes to their attention
- Good Faith: To act in good faith and by using this position for the intended purpose
- Conflict of Interest: To avoid advantage of personal gain from information obtained, even if the advantage was obtained openly, in good faith and at no expense to the company
- Personal Financial Interests: To disclose any personal financial interest in matters in which the company also has a material interest
- Care, Skill and Diligence: To act with a reasonable degree of care, skill and diligence, as well as to act in the best interest of the company at all times
Liabilities by the Prescribed Officer
- Jointly and Severally Liable: The liability is joint and several with any other person who is or may be held liable for the same act
- General Liability: For any loss, damages or costs sustained by the company as a direct or indirect consequence of the breach of the fiduciary trust, duty of care, skill and diligence or any other provision of the Act or the Memorandum of Incorporation
- Specific Liability: For loss, damage or costs sustained by the company as a result of any of the following:
- Knowingly acting without authority
- Fraudulent and reckless conduct
- Authorising the publication of false or misleading financial statements or any other information
- Being present at a meeting, or participating in the making of a decision
and failing to vote against certain actions that they know to be unlawful
The Company Secretary
The appointment of a company secretary in South Africa is regulated by Section 86 of the Companies Act, 2008, read in conjunction with paragraph 3.84 (h) of the JSE Listings Requirements (for public listed companies).
The company secretary is the company’s named representative on legal documents, and it is their responsibility to ensure that the company and its directors operate within the law.
A public company or state-owned company in South Africa must, in terms of the Companies Act, appoint a Company Secretary (s86 (1)). A juristic person or partnership may also be appointed as a company secretary (s87). For public
listed companies, the board should annually consider and satisfy itself on the competence, qualifications and experience of the company secretary and report to shareholders in this regard (JSE Listings Requirements – paragraph 3.84 (h)).
Duties of the Company Secretary
The company secretary’s duties include, but are not restricted to, providing the directors of the company collectively and individually, with guidance as to their duties, responsibilities and powers, making the directors aware of any law relevant to or affecting the company and reporting to the board any failure on the part of the company or a director to comply with the Memorandum of Incorporation or the Companies Act. Section 88(2)(e) also requires the company secretary to certify, in the company’s annual financial statements, whether the company has complied with its reporting obligations in terms of the Companies Act.
Is the Company Secretary a Prescribed Officer?
In the event that a company secretary exercises the extent of management or control that the definition of a prescribed officer requires, the company secretary would be a prescribed officer. Whether a Company Secretary is regarded as a prescribed officer should be determined on a case-by-case basis
Company secretaries can no longer afford to take a passive stance in the
companies and on the boards they serve. They are expected to behave as
pro-active and professional gatekeepers to the board (and even other
stakeholders) on all governance related matters and to discharge their
statutory duties set out in the Companies Act and elsewhere.