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Is a company secretary permitted to be a company director of any company?

Chapter 3 – Question 26

Written by Dr. Adv. Leigh Hefer & Jayne Hunter-Rhys. COMPANY SECRETARY’S HANDBOOK (2021). Published by Genesis Corporate Services.

  1. Yes. There is no provision in the Act which prohibits a company secretary of being a company director of that company as well.
  2. However, Recommended Practices 6 to 13 of Principle 7 of the King IV Code on Corporate Governance™ focuses on the composition of the board of directors. Principle 7 recommends that the board of directors should comprise of the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.
  3. In terms of nomination, election and the appointment of members to the board of directors, Recommended Practices 4 to 18 of Principle 7 recommends that:
    • 3.1 the nomination of candidates for election as members of the board of directors should be approved by the board of directors as a whole;
    • 3.2 the processes for nomination, election and ultimately, the appointment of members to the board of directors should be formal and transparent;
    • 3.3 before nominating a candidate for election, the board of directors should consider the following:
      • 3.3.1 the collective knowledge, skills and experience required by the board of directors;
      • 3.3.2 the diversity of the board of directors;
      • 3.3.3 whether the candidate meets the appropriate fit and proper criteria;
    • 3.4 nomination for re-election of an incumbent of the board of directors should be considered by the board of directors on the basis of that member’s performance, including attendance at meetings of the board of directors and its committees;
    • 3.5 a candidate for election as a non-executive member of the board of directors should be requested to provide the board of directors with details of professional commitments and a statement which confirms that the candidate has sufficient time available to fulfil the responsibilities as member of the board of directors.
  4. In terms of independence and conflicts, Recommended Practices 25 to 26 of Principle 7 recommends that:
    • 4.1 subject to legal provisions, each member of the board of directors should submit to the board of directors a declaration of all financial, economic and other interests held by the member and related parties at least annually, or whenever there are significant changes;
    • 4.2 at the beginning of each meeting of the board of directors or its committees, all members should be required to declare whether any of them has any conflict of interest in respect of a matter on the agenda. Any such conflicts should be proactively managed as determined by the board of directors and subject to legal provisions.
  5. Section 87 deals with the appointment of a juristic person or a partnership to be company secretary and in this case the board of directors must in its assessment consider the individual(s) who performs the company secretary role as well as the directors and shareholders of that juristic person.
  6. A company secretary who is not a company director of that company should therefore avoid acting as a director.
  7. Since section 1 defines a director as a member of the board of a company as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated, the company secretary may incur liability if he acted as a director, notwithstanding that he was not formally appointed as a company director.
    Source: Sections 1, 66, 87 of Companies Act 71 of 2008; Recommended Practices 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 25, 26 of Principle 7: Composition of the Board of Directors – The King IV Code on Corporate Governance™. © The Institute of Directors in Southern Africa (IoDSA)

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