South Africa’s Companies Act Amendments: What Every Director Must Know

Estimated reading time: 16 minutes

Navigating the New Corporate Governance Landscape

South Africa’s corporate governance framework has undergone substantial transformation with the enactment of the Companies Amendment Act 16 of 2024 and the Companies Second Amendment Act 17 of 2024. These amendments, signed into law in July 2024, represent the government’s commitment to addressing income inequality, ensuring director accountability, and enhancing corporate transparency.

Certain provisions took effect on 27 December 2024, whilst others await proclamation during 2025. Directors and companies must understand these changes now to ensure compliance and avoid potential legal pitfalls.

The amendments reflect a global trend towards increased corporate accountability, particularly in response to shareholder activism and public concern over executive compensation disparities. These provisions apply retrospectively and will therefore apply to director conduct that took place prior to the amendment becoming effective.

Enhanced Executive Remuneration Disclosure Requirements

Individual Named Disclosure Under Section 30

One of the most significant changes is the new requirement for audited public and private companies to disclose individual director and officer remuneration by name in their annual financial statements. This represents a dramatic shift from previous aggregate reporting requirements.

The disclosure must include comprehensive remuneration details covering salaries, bonuses, benefits, employer contributions to benefit funds, share options, and incentive awards. For the purpose of Section 30 of the Companies Act, “remuneration” includes a wide range of emoluments, such as fees paid for services rendered by directors to or on behalf of a company.

Remuneration Policy Requirements (Section 30A)

All public and state-owned companies must prepare a remuneration policy that must be approved by shareholders at the annual general meeting via ordinary resolution. This policy framework introduces several key requirements:

• Triennial Approval: Once approved, policies remain effective for three years before requiring reapproval
• Material Changes: Any significant amendments require shareholder approval before implementation
• Strategic Alignment: Policies must articulate the organisation’s overall philosophy on remuneration based on business strategy

Implementation Reports and Sanctions (Section 30B)

The amendments introduce stringent accountability mechanisms for remuneration decisions. Section 30B(3) of the Amendment Act mandates that public and state-owned companies disclose critical remuneration metrics, including detailed pay-gap analysis.

If the remuneration implementation report is not approved by shareholders, then, at the next AGM, the remuneration committee must explain how shareholder concerns over the report have been considered and the non-executive directors on the remuneration committee must stand for re-election.

Companies experiencing consecutive rejections face severe consequences: non-executive directors may remain as directors if re-elected but cannot serve on remuneration committees for two years.

Extended Director Accountability Periods

Delinquency Declaration Extensions

The extension from 24 months to 60 months has several important implications for directors as they will be accountable for their actions for a longer period and their actions will be scrutinised for a longer duration. This change significantly impacts director risk profiles.

The amendments contained in the Second Companies Amendment Act which commenced on 27 December 2024 extend the time periods within which a court may declare a director delinquent or under probation and the prescription period for claims against directors for loss or damages.

Practical Implications for Directors

The extended accountability periods create several practical considerations:

• Enhanced Due Diligence: Directors must maintain comprehensive records of their decision-making processes
• Insurance Requirements: Directors’ and officers’ liability insurance policies require review to assess increased risk exposure
• Legacy Actions: Previous decisions remain subject to scrutiny for substantially longer periods

Strengthened Corporate Governance Requirements

Social and Ethics Committee Enhancements

The introduction for public companies to provide a social and ethics committee report and remuneration report at an AGM. It must now also appoint a social and ethics committee at that AGM. The amendments include significant changes to committee composition requirements.

For companies other than public and state-owned companies, members may be directors or prescribed officers and at least one must be a non-executive director, independent for at least the previous three financial years.

Public and state-owned companies face stricter requirements, with a majority of members that must be non-executive directors who have not been involved in the management of the company during the previous three financial years.

Enhanced Transparency and Public Access

The amendments substantially expand public access to corporate information. Members of the public may request to inspect and copy a company’s Memorandum of Incorporation, Company Rules, the disclosure of beneficial interest, and Director and Shareholder registers.

This transparency extends to financial information, with qualifying companies required to make annual financial statements publicly accessible. The combination of individual remuneration disclosure and public access creates unprecedented visibility into corporate compensation practices.

Auditor Independence and Appointment Changes

Amendments reduce the cooling-off period for appointment of auditors from five to two years. This change aims to balance auditor independence with practical market considerations.

The revised framework requires that auditors must not have been directors, prescribed officers, employees, or consultants for two years before appointment. Confirmation has also been provided that auditor appointments for private companies need not be at an annual general meeting.

Strategic Compliance Recommendations

Companies should prioritise immediate compliance measures: develop comprehensive remuneration policies aligned with business strategy, review board composition for social and ethics committee independence requirements, enhance record-keeping systems for director decision-making, and assess directors’ and officers’ liability coverage.

The amendments require fundamental shifts in corporate governance approaches. Corporate structuring and restructuring strategies must now incorporate enhanced transparency requirements and director accountability provisions.

Companies experiencing governance disputes or compliance challenges should consider early intervention through professional dispute resolution services to avoid escalation under the new framework. For complex compliance matters, expert legal consultation ensures proper implementation of these amendments.

Frequently Asked Questions

1. When do the remuneration disclosure requirements take effect?

The remuneration disclosure requirements under sections 30A and 30B await proclamation, expected during 2025. Companies should begin preparing immediately to ensure compliance.

2. Do the extended director accountability periods apply to past actions?

Yes, the amendments apply retrospectively to director conduct that occurred before the legislation became effective, extending accountability for prior decisions.

3. Which companies must comply with enhanced remuneration disclosure?

All companies requiring audited annual financial statements must provide named individual disclosure. Public and state-owned companies face additional remuneration policy and pay-gap reporting requirements.

Securing Your Corporate Future

The Companies Act amendments represent a fundamental shift towards enhanced corporate transparency and director accountability. Companies that proactively address these requirements will strengthen their governance frameworks whilst avoiding potential compliance pitfalls.

At OAK Law, we specialise in guiding businesses through complex corporate governance challenges. Our expertise in corporate law, combined with our understanding of the evolving regulatory landscape, ensures your company remains compliant whilst supporting strategic business objectives.Don’t let regulatory complexity jeopardise your business operations. Contact OAK Law today for expert guidance on implementing these crucial amendments and strengthening your corporate governance framework.