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COMPANIES TRIBUNAL OF SOUTH AFRICA

Case/File Number:     CT010Dec2015

In the ex parte application of:

LINKS GOLF CLUB (RF) LIMITED                                                                   Applicant

(Registration Number: 2006/017924/06)

in respect of:

application  for  an  exemption  from  the  requirement  to  appoint  a  social  and  ethics committee

Presiding Member                                            :           Khashane La M. Manamela (Mr.)

Date of Decision                                               :           29 January 2016

DECISION (Reasons and an Order)

Khashane La M. Manamela

Introduction

[1] The applicant seeks an exemption from the requirement (in terms of section 72(5)(b)[1] of the Companies Act 71 of 2008 (the Companies Act), read with regulation 43(2)[2] of the Companies Regulations, 2011 (Company Regulations))[3] to appoint a social and ethics committee (an SEC).

[2] I previously made a determination and order refusing  similar  relief  to  the applicant on 04 May 2015 in another application.[4] Other than procedural concerns,[5] I found that application to be parsimonious in terms of submissions or facts relating to the nature and extent of the applicant’s activities.[6] However, despite the fact that the applicant evidently took almost 7 months in reapplying,[7] most of the problems in that application, persist in this application, in one form or another. I deal with some of the problems next and make use of subheadings to highlight the issues under the heading Procedural Concerns.

Procedural Concerns

Deposition or commissioning of the supporting affidavit

[3] In the First Links Golf Club, the statement in support of the application was not signed before a commissioner of oaths.[8] In this application the statement is commissioned.[9] However, the commissioner of oaths is one Mr. Andrew Barton. Not only is he the company secretary of the applicant, he actually signed the application.[10] Regulation 7 of the Regulations Governing the Administering of an Oath or Affirmation[11] reads as follows:

“A commissioner of oaths shall not administer an oath or affirmation relating to matter in which he has interest.”

[4] Mr. Barton clearly has an interest in this application. Therefore, his involvement as a commissioner of oaths casts the authenticity of the deposition in a bad light. However, I will move to other aspects of this application.

Authority to bring the application

[5] It is not clear whether the applicant relies on a resolution dated 18 May 2015 as authority to bring this application. This is the same resolution which authorised the launch of the First Links Golf Club.[12] However, the document (evincing authority to bring the application) attached to the present application states that “Following a previous board decision to submit an application to exempt the company from having a social and ethics  committee  it  was  resolved  that…”  In  my  view,  the  underlining  part  of  the

quotation  denotes  the  existence  of  another  resolution.  However,  there  is  no  further submission in this regard. But, I will again move on.

Limited documentary proof

[6] Further, although the name of the company is followed by the expression “RF” indicating the existence of restriction or prohibition regarding amendment of some provision or provisions of the applicant’s Memorandum of Incorporation or MOI.[13] Although, there is a copy of the MOI included in the papers, it is not signed and does not appear to have been filed with the relevant authorities as required by the Companies Act.[14] In advancing this aspect, the applicant submits that it was established for a limited purpose.[15] Also, there is no document supporting the submission that the applicant’s public interest score reached exceeded 500 points significantly due to its membership comprising homeowners.[16]

[7] However, although in no way discounting the materiality of the aforesaid concerns, I will condone them as technical irregularities[17] and move on to deal with the substantive aspects of this application.

Merits

[8] The applicant premised its application on section 72(5)(b) of the Companies Act.[18] However, elsewhere in the application, it is submitted that “sufficient mechanisms are in place in the company’s existing structures to substantially deal with matters relating to a social and ethics committee”.[19] This sounds like there is reliance on section 72(5)(a) of the Companies Act[20], tentative as the submission appears to be. Be that as it may, there is strong reliance on section 72(5)(b). Accordingly a determination will only be made in terms of the latter provision. To determine the requirements for the exemption sought by the applicant, it is necessary to have a look at the nature and extent of the activities of the applicant. The applicant’s submissions in this regard can be summarised as follows:

[8.1] the applicant’s purpose is management of a golf club and its related facilities for the benefit of the applicant’s members and it is therefore ring- fenced;

[8.2] the applicant was set up as a public company due to previous legislative requirements regarding the number of its members, but has not been converted to a private company due to financial constraints;

[8.3] the applicant has 495 owners of properties (the owner members);

[8.4] the applicant has approximately 50 employees;

[8.5] the applicant’s assets and income are used to advance its objectives for the benefit of its members under guidance of the board of directors, which serves without remuneration;

[8.6] its total revenue for the year ended 30 September 2015 was R14.7 million, but there is nil operating profit;

[8.7] the applicant is involved in a number of community activities in the St Francis Bay area.

[9] Although there is a slight improvement, the submissions are still very limited. However, the emphasis is on the fact that the applicant was formed for purposes of managing a golf club for its members. According to the applicant’s MOI, albeit against the misgivings expressed above,[21] confirms the current limited scope of activities of the applicant. For purposes of the determination to be made herein, the applicant’s activities ought to be considered against the purpose and functions of an SEC are stated in regulation 43(5) of the Companies Regulations. Regulation 43(5) reads as follows in the material part:

“A social and ethics committee has the following functions:

(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) …

…

(cc) the Employment Equity Act; and

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

(ii)   good corporate citizenship…

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

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

(v)  ) labour and employment …

(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.”

[10] In terms of regulation 43(5) an SEC monitors the activities of the particular company against the law and prevailing codes of best practice;[22] draw matters thereon to the attention of the board of directors[23] and report to the shareholders at annual general meetings.[24] Accordingly, in determining the nature and extent of the company’s activities, regard ought to be had to what an SEC’s purpose is. Although, every matter turns on its facts, full and further discussion on the regulation and section 72(5)(b) of the Companies Act can be accessed in previous decisions of this Tribunal, some of which I have the privilege of being involved in available from the Tribunal’s website.[25]

Determination or Finding

[11] Against the backdrop of what is stated above, especially the nature and size of the applicant’s activities, it is my view that, it is not reasonably necessary in the public interest for the applicant to appoint an SEC. I accept that applicant’s activities are limited to the management of the golf club for its members. Therefore, an exemption will be granted for a period of 5 (five) years.

Order

[12] In the result:

a)        the applicant is exempted from the requirement to appoint a social and ethics committee for a period of 5 (five) years from date hereof.

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Khashane La M. Manamela (Mr.)

Member, Companies Tribunal

29 January 2016

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