LESSONS FROM ADMINISTERING LESSONS FROM ADMINISTERING COMPANIES IN THE REST OF AFRICACOMPANIES IN THE REST OF AFRICA

Chartered Secretaries Southern Africa

Corporate GovernanceConference

10 September 2009 Sandton Convention Centre

Carina WesselsCarina Wessels

• Perspective and scopePerspective and scope

• Key lessons and recommendationsKey lessons and recommendations

• Health and safetyHealth and safety

• LanguageLanguage

• Shareholder / director conflictsShareholder / director conflicts

• Multiple jurisdictionsMultiple jurisdictions

• ExamplesExamples

OVERVIEWOVERVIEW

PERSPECTIVE AND SCOPEPERSPECTIVE AND SCOPE

RECOMMENDATIONS:

• Training and documentation to prepare employees

• Subscription to pre-warning system

• Up-to-date yellow card, prophylaxes, medical pack and special medicine

• Subscription to 24-hour monitoring service

• Appointment of local protocol officers

• Implementation and testing of appropriate evacuation protocol

• Policies, procedures and monitoring of malaria and other serious illnesses

LESSON: Significant additional risk to health and safety – employees to be sufficiently prepared

HEALTH AND SAFETYHEALTH AND SAFETY

Total Expatriates = 21 : 80.8% Total Non Expatriates = 86 : 76.7%

RECOMMENDATIONS:

• Affiliations with established companies

• Use of reputable legal firm

RISKS:

• Cost (Fairly small operations USD60 000 – USD80 000 / annum)

• Incorrect translations

LESSON: Difficult to obtain legislation and documentation in English

LANGUAGELANGUAGE

LANGUAGELANGUAGE

RECOMMENDATIONS:

• Local assistant / compliance administrator proficient in local language

• “Neutral director” to act as translator at board meetings

RISKS:

• Translating director unable to participate effectively

• External translator involved before, during and after board meeting – confidentiality

• Cost (Fairly small operations USD60 000 – USD80 000 / annum)

• Time

• “Cultural” subtleties

LESSON: Informed decision to be made regarding the company secretary’s language proficiency

LESSON: Increased difficulty in guiding board where individuals are in constant conflict as to their varied roles

Government = host = decide on licences = partner / shareholder = director / often chairman

Botswana:

• Director of subsidiary (not wholly owned) may, subject to company constitution and prior agreement by shareholders, act in best interests of holding company, even if not in subsidiary company’s interests

• Director of joint venture may, subject to company constitution, act in best interests of shareholder/s, even if not in the company’s interests

SHAREHOLDER / DIRECTOR CONFLICTSSHAREHOLDER / DIRECTOR CONFLICTS

RECOMMENDATIONS:

• Strong and resolute chairman / deputy chairman and company secretary

• Continuous “education” process by company secretary (diplomacy)

• Board charter and code of ethics

• Clearly defined reserved powers, which are effectively enforced

• Clearly defined delegation to the board

• Equal number of directors’ and shareholders’ meetings

• Fair and reasonable directors’ fees

RISKS:

• Constant conflict

• Conflicts of interest impacting good governance

SHAREHOLDER / DIRECTOR CONFLICTSSHAREHOLDER / DIRECTOR CONFLICTS

RECOMMENDATIONS:

• Reputable local agent

RISKS:

• Penalties (i.e. British Virgin Islands: USD10 000 / incident)

• Deregistration

LESSON: Ensure sufficient understanding of requirementsand full compliance in ALL jurisdictions (even in deemed “under-regulated” jurisdictions)

MULTIPLE JURISDICTIONSMULTIPLE JURISDICTIONS

LESSON: Ensure management and control do not lead to tax residency

Income Tax Act 58 of 1962: Company shall be a resident of RSA if it has its place of effective management in the RSA

• SARS’s “effective management” test looks at the level below the board of directors and focuses on the place where policy is executed and implemented

• Only one level of management i.e. the board, “effective management” must ipso facto be exercised by the board

• Multiple locations – where business operations are actually carried out or conducted or place with the strongest economic nexus

MULTIPLE JURISDICTIONSMULTIPLE JURISDICTIONS

RECOMMENDATIONS:

• Ensure key management and commercial decisions necessary for the conduct of the business are made outside RSA (and any other affected areas)

• Prepare and communicate detailed policy and procedure regarding do’s and don’ts – where to sign documents, where policies and strategies emanate from

• No board or committee meetings should take place in RSA in person or via teleconference with the chairman located RSA

RISKS:

• Having a majority of RSA directors or executives working under the same roof, even if board meetings etc occur elsewhere

• Mere fact that a non South African company is responsible for the management and administration of another non South African company, does not circumvent the effective management rules

MULTIPLE JURISDICTIONSMULTIPLE JURISDICTIONS

• Company Law, Law 1/04, of 13 February 2004

• General assembly = all shareholders

• Minutes of annual general assembly = to be handwritten in minute book

• Secretary is responsible for preparing the minutes of the general assembly and is also a signatory to the minutes – no other mention of Secretary

• Board of directors only required in joint stock companies and must be of an unequal number

• Corporate entity may be a director, but must designate an individual to represent it – severally liable for individual’s actions

• Directors shall meet once per month, unless amended in articles

• Luanda – traffic impact on working hours and general operations not to be underestimated

PRACTICAL EXAMPLES - ANGOLAPRACTICAL EXAMPLES - ANGOLA

• Companies Act, 2003

• Mandatory appointment of one or more Secretaries for all companies other than closed companies

• Prescribed qualifications for public and non-exempt private Company Secretaries:

• Qualified auditor

• Member of the Botswana Institute of Accountants

• Member of the Southern African Institute of Chartered Secretaries and Administrators

• Legal practitioner

• Member of a professional association of Company Secretaries approved by the Minister

PRACTICAL EXAMPLES - BOTSWANAPRACTICAL EXAMPLES - BOTSWANA

• Companies Act = Code de Commerce (portions dating from 1887)

• Organisation for Harmonisation of Business Law in Africa (OHADA) membership pending

• Board of directors = board of managers

• Shareholders = associates

• No mention of a Company Secretary and duties to be performed

• Severe tax penalties: avoid holding company purely holding an interest in a subsidiary / joint venture

• Associates meeting minutes (French version) to be notarised

• Kinshasa - not permitted to take any photographs – will be arrested!

PRACTICAL EXAMPLES - DRCPRACTICAL EXAMPLES - DRC

THANK YOUTHANK YOU

Carina WesselsCarina Wessels LLB (UP), Advanced Labour Law (UP), LLM (UNISA), LLB (UP), Advanced Labour Law (UP), LLM (UNISA),

PMD (GIBS), ACISPMD (GIBS), ACIS Assistant Group SecretaryAssistant Group Secretary

De Beers GroupDe Beers Groupcarina.wessels@debeersgroup.comcarina.wessels@debeersgroup.com