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COMPANIES TRIBUNAL REPUBLIC OF SOUTH AFRICA

Case Number CT013May2014

 

 

In the Ex Parte Application of;

 

ATLANTIS MINING (SA) (PTY) LTD      Applicant

(Registration number 2007/008507/07)

 

in respect of;

AN APPLICATION FOR AN EXEMPTION FROM THE REQUIREMENT TO APPOINT A SOCIAL AND ETHICS COMMITTEE

 

 

Presiding Member of the Tribunal: Lucia Glass

 

 

DECISION (Reasons and Order)

 

 

INTRODUCTION

 

1.       The applicant applies for an exemption from the requirement to appoint a social and ethics committee on the basis that the applicant has only 2 directors, the managing director represents the majority shareholder of the company and both directors are involved with the effective running of all facets of the company operations.

 

2.       The requirement is imposed by section 72 (4) of the Companies Act 71 of 2008 (the Act) and expanded in regulation 43 of the Companies Regulations.(the Regulations)

 

PRELIMINARY ISSUES

 

3.       The deponent to the applicant's affidavit is Mark James Johnstone who is managing director of the applicant. There is no special resolution by the applicant appointing him to act on behalf of the company.

 

4.       It is submitted that it is not reasonably necessary to have a social and ethics committee, having regard to the fact that specific measures are in place in order to

 ensure legal compliance with regards to all sectors of its industry. He does not state what exact measures are in place.

 

5.       It is not stated whether in terms of regulation 43 of the Regulations to the Act, the Applicant has scored, and is expected to score, above 500 points in terms of Regulation 26 (2) and whether it is accordingly required to appoint a social and ethics committee in terms of regulation 43 of the Act.

 

FACTS

 

6.       In a nutshell the applicant avers that the applicant has only 2 directors, both of whom are hands on in running the operations of the company, thereby fully involved in all matters cost related and otherwise, which I may interpret as its nature and extent and is one where it is not reasonably necessary to appoint a social and ethics committee. The Deponent submits that its reasons are as follows:

 

(a)    the applicant has two directors, being the deponent and Mohamed Eqbal Abdool Gaffar who is the Financial Director of the applicant,

(b)    that deponent's family trust (The Debmar Trust) is the majority (70%) shareholder of the company,

(c)    that another Trust (the Hazumi Trust) has a 15% shareholding in the company and is represented by the Financial Director,

(d)    as there are only 2 directors of the applicant, these 2 directors are completely involved in all the running and operations of the company.

 

7.       The applicant does not state whether it has employees.

 

THE APPLICABLE LAW

 

I will state the applicable Sections of the Act in full, and the applicable Regulations;

 

8.       Exemption from this regulation in accordance with Section 72 (5) & (6) of the Act: Section 72 (5) reads as follows:

 

(a)     "the company is required in terms of other legislation to have and does have, some form of formal mechanism within its structures that substantially performs the function that would otherwise be performed by the social and ethics committee, in terms of this section and the regulations or (emphasis added)

(b)    it is not reasonably necessary for the public interest to require the company to have a social and ethics committee having regard to the nature and extent of the activities of the company." (emphasis added)

 

9.        With reference to the applicability of a Social Ethics Committee Regulation 43 (1) and to whom it applies the Regulation reads as follows:

 

(a)    “Every state owned company;

(b)    Every listed public company; and

(c)    any other company that has in any two of the previous five years, scored above 500  point in terms of regulation 26 (2)”.

 

10.   The calculation of the public interest score is in terms of Regulation 26(2) of the Regulations, which must be calculated at the end of each financial year, calculated as the sum of the following:

 

(a)    "A number of points equal to the average number of employees of the company during the financial year;

(b)    One point for every R1 million (or portion thereof) in third party liability of the company, at the financial year end;

(c)    One point for every R1 million (or portion thereof) in turnover during the financial year; and

(d)    One point for every individual who, at the end of the financial year, is known by the company –

(i)       In the case of a profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities;"

 

11.   Regulation 43 (2) provides for the situations to which the exemption of the appointment of a Social and Ethics Committee applies and reads as follows:

 

" A company to which this regulation applies must appoint a social and ethics committee unless-

 

(a)    It is a subsidiary of another company that has a social and ethics committee, and the social and ethics committee of that other company will perform the functions required by this regulation on behalf of that subsidiary company; or (emphasis added)

(b)    It has been exempted by the Tribunal in accordance with Section 72 (5)and (6)." (emphasis added)

 

12.   The functions of the Committee are set out in Regulation 43 (5) which reads:

 

"(a) To monitor the company's activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to matters relating to -

(i)      social and economic development, including the company's standing in terms of the goals and purposes of—

(aa) the 10 principles set out in the United Nations Global Compact as follows:

 

Human Rights

 

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

 

Principle 2: make sure that they are not complicit in human rights abuses.

 

Labour

 

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

 

Principle 4: the elimination of all forms of forced and compulsory labour;

 

Principle 5: the effective abolition of child labour; and

 

Principle 6: the elimination of discrimination in respect of employment and occupation.

 

Environment

 

Principle 7: Businesses should support a precautionary approach to environmental challenges;

 

Principle 8: undertake initiatives to promote greater environmental responsibility; and

 

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

 

Anti-Corruption

 

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery."

 

and

 

(bb) the OECD recommendations regarding corruption; (cc) the Employment Equity Act; and

(dd) the Broad-Based Black Economic Empowerment Act;

 

(ii)        good corporate citizenship, including the company's—

 

(aa) promotion of equality, prevention of unfair discrimination, and reduction of corruption; (bb) contribution to development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed; and

(cc) record of sponsorship, donations and charitable giving;

 

(iii)      the environment, health and public safety, including the impact of the company's activities and of its products or services;

(iv)       consumer relationships, including the company's advertising, public relations and compliance with consumer protection laws; and

(v)         labour and employment, including—

(aa) the company's standing in terms of the International Labour Organization Protocol on decent work and working conditions;

and

(bb) the company's employment relationships, and its contribution toward the educational development of its employees;

(b)         to draw matters within its mandate to the attention of the Board as occasion requires; and

(c)         to report, through one of its members, to the shareholders at the company's annual general meeting on the matters within its mandate."

 

APPLICATION OF THE LAW TO THE FACTS

 

13.   The Tribunal is to decide, whether in terms of Section 72 (5) (b), it is reasonably necessary (emphasis added) for the public interest to require the company to have a social and ethics committee having regard to the nature and extent of the activities of the company. (emphasis added)

 

14.   Once the nature and extent of the activities are established, then it is to be established whether it is necessary to appoint a committee in relation to the functions it is to perform in terms of Regulation 43 (5).

 

15.   The Tribunal is to weigh up whether by the applicant's very nature and extent, there is a need of an appointment of a Social and Ethics Committee and in doing so it is to look at the 'nature' of the company. In this instance the deponent avers that the applicant company;

 

(a)    has only 2 directors, the deponent and one other director, Mohamed Eqbal Abdool Gaffar who is the Financial Director of the applicant,

(b)    that the deponent's family trust (The Debmar Trust) is the majority (70%) shareholder of the applicant company,

(c)    that another Trust (the Hazumi Trust) has a 15% shareholding in the applicant company and is represented by the Financial Director,

(d)    as there are only 2 directors of the applicant, these 2 directors are completely involved in all the running and operations of the company.

 

16.   The question to be asked is whether, by this very nature of the company, (emphasis added) it is reasonably necessary for the public interest to require the company to appoint a social and ethics committee. It is my view that the nature of the company has been addressed sufficiently and that the applicant has made out a case that it is not reasonably necessary in this instance to appoint a social and ethics committee.

 

17.    Having said this, the Applicant does not furnish any information in respect of Regulation 43 of the Act, ie whether it is listed in the JSE and whether it scored more than 500 Public Interest Score in any of the two previous five years scored in terms of Regulation 26 (2). Based only on the information provided, there is no need to apply for an exemption.

 

18.   After analysing the functions of a Social and Ethics Committee, as stipulated above and after examining the nature and extent of the applicant, as stated above, and the reasons for the exemption as stated above, and the possible reasons for not having to appoint a Social and Ethics Committee, I come to the conclusion that the applicant does not require a social and Ethics committee.

 

Findings

 

19.   After considering all the facts, I conclude that it is not reasonably necessary in the public interest to require the applicant to appoint a social and ethics committee having regard to the nature and extent of the activities of the company. However should the applicant have scored more than 500 public interest scores and has not divulged this information then the applicant has to re apply for exemption on that basis.

 

Order

 

I accordingly grant the relief sought, the applicant is granted exemption from appointing a Social and Ethics Committee in accordance with the Section 72 (5) (b), of the Act for a period of 3 years.

 

 

LUCIA GLASS

 

MEMBER OF THE COMPANIES TRIBUNAL OF SOUTH AFRICA

 

Dated 22.11.14

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