Results 1 to 4 of 4

Thread: Excluding non-executive directors

  1. #1
    Bronze Member Beancounter's Avatar
    Join Date
    Oct 2011
    Location
    Pretoria
    Posts
    118
    Thanks
    19
    Thanked 29 Times in 24 Posts

    Excluding non-executive directors

    The board wants to a declare a dividend and claims that the one non-executive director does not want any part in financial decisions and therefore his signature on the resolution is not necessary.

    Section 46 of the Companies Act however is very clear on the declaration of dividends and that the board (meaning each director) should sign the resolution. Further, the new Act does not distinguish between executive, non-executive or independent directors so they have their fiduciary duty to consider.

    I was told that the following could be a solution:
    1) The board passes a special resolution that the non-executive director will not be required to sign off on resolutions for dividends
    2) The non-executive director still has to be informed of the resolution passed
    3) The non-executive director can voice his disagreement with the resolution for the record and then be absolved from any liability in terms of the Act

    Is that allowed?

  2. #2
    Gold Member
    Join Date
    Mar 2012
    Location
    Vanderbijlpark
    Posts
    886
    Thanks
    83
    Thanked 381 Times in 298 Posts
    I don't know about that

    How could you possibly avoid, contravene, or bypass a provision of the Act by simply adopting a special resolution?

    So your paras (1) and (3) simply fall away.

    A decision to pay dividends requires an ordinary resolution (simple majority at a quorate directors meeting).

    The Act does not require that each director sign the resolution. That would only be possible if the decision was unanimous, anyway.

    The Act only requires that the company meet solvency requirements, and that is all. It can even pay the dividend out of capital!

    And you are right, a director is a director is a director.

  3. #3
    Silver Member Greig Whitton's Avatar
    Join Date
    Mar 2014
    Location
    Cape Town
    Posts
    316
    Thanks
    32
    Thanked 99 Times in 81 Posts
    Quote Originally Posted by Beancounter View Post
    Section 46 of the Companies Act however is very clear on the declaration of dividends and that the board (meaning each director) should sign the resolution.
    Section 46 says nothing of the sort. What it actually says is that the distribution of dividends must be authorised by board resolution (assuming that there is no legal obligation to distribute the dividend, in which case a board resolution isn't needed at all).

    Authorising a resolution is not synonymous with signing it. Per section 73(8) of the Companies Act:

    "Any minutes of a meeting, or a resolution, signed by the chair of the meeting, or by the chair of the next meeting of the board, is evidence of the proceedings of that meeting, or adoption of that resolution, as the case may be."

    So the non-executive director can simply abstain from voting on financial decisions and not worry about having to sign anything.

    If he wants to avoid any possibility of liability, then, per section 46(6), he must not be present at the meeting when the resolution is put to the board (which is fine since, per section 73(5b), only a majority of directors must be present at board meetings before a vote may be called - unanimous attendance is not required).

    To the best of my knowledge, there is no way a director can be present at a meeting when a dividend resolution is put to vote and NOT be liable if they know that the distribution is contrary to the requirements of the Companies Act and fail to vote against it.

    Founder of Evergrow - Helping South African business owners grow their business without the growing pains

  4. Thanks given for this post:

    Beancounter (13-Jun-14)

  5. #4
    Bronze Member Beancounter's Avatar
    Join Date
    Oct 2011
    Location
    Pretoria
    Posts
    118
    Thanks
    19
    Thanked 29 Times in 24 Posts
    I'll go with your point Greig, thanks!

Similar Threads

  1. Non-executive directors underpaid in SA
    By Blurock in forum Business Finance Forum
    Replies: 18
    Last Post: 24-Jul-14, 06:18 AM
  2. Replies: 1
    Last Post: 06-Apr-13, 08:01 AM
  3. Now you can see what your Mayor and his/her executive earn
    By wynn in forum South African Politics Forum
    Replies: 3
    Last Post: 06-Apr-12, 10:45 AM
  4. Replies: 0
    Last Post: 13-Mar-12, 10:39 AM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •