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IN THE COMPANIES TRIBUNAL OF SOUTH AFRICA

Case No: CT006JAN2018

In ex parte application:

COCA-COLA SABCO (PTY) LTD          

(Registration No. 1995/010764/07)                                                       

Presiding Member of the Companies Tribunal: ISHARA BODASING

Date of Decision: 09 FEBRUARY 2018

DECISION

1.    INTRODUCTION

1.1  Applicant is Coca-Cola SABCO (Pty) Ltd., a company duly incorporated in accordance with the company laws of South Africa, with registration number 1995/010764/07, and having its registered address at 159 Harrower Road, Kensington, Port Elizabeth, Eastern Cape.

1.2 Applicant is wholly owned by Coca-Cola Beverages Africa (Pty) Ltd. (“CCBA”) and is the majority shareholder of Coca-Cola Fortune (Pty) Ltd. (“CCF”)

1.3  In January 2018 Applicant applied to the Companies Tribunal for an exemption from appointing a Social and Ethics Committee (“SEC”) in terms of section 72(5)(b), alternatively section 72(5)(a) of the Companies Act 71 of 2008 (“the Act”) read with Regulation 43 of the Companies Regulations[1] (“the Regulations”).

1.4 The founding affidavit in the CTR142 form is properly deposed to by Mr Ian Robert Vos, a Director of the Applicant, duly authorised to do so on its behalf as per Board Resolution dated 10 January 2018.

2.    BACKGROUND

2.1 Applicant is an investment holding company that derives income from its investments in, and loans to, CCF and its subsidiaries. Therefore, most of Applicant’s assets are in the form of investments and loans. The revenue streams are derived from interest on loans to CCF and its subsidiaries, as well as dividends.

2.2 Applicant currently has a staff component of about 84 (eighty four), being 5% of the total number of employees employed by CCBA.

2.3 Applicant’s Public Interest Score (“PIS”) for the year ending 31 December 2016 was 1173 (one thousand one hundred and seventy three), and for the year ending 31 December 2017, it was 565 (five hundred and sixty five). However Applicant does not give a detailed breakdown of the actual PIS.

2.4 Applicant submits that, due to the restrictive nature of its business, and its limited interaction with the public, it is not reasonably necessary in the public interest for it to establish and SEC.

3.    ISSUES

3.1 Since the Applicant has, in the previous two years, had a PIS exceeding 500 (five hundred) points, it is required to appoint an SEC, which it has not yet done. However, its subsidiary, CCF has done so.

3.2 According to the deponent, Applicant is not a trading company and accordingly has no interaction with the general public in the ordinary course of its business. He goes on to submit that the nature of Applicant’s business in limited in scope to the activities of CCF and its subsidiaries.

3.3 Applicant submits that, due to the restrictive nature of its business, and its limited interaction with the public, it is not reasonably necessary in the public interest for it to establish and SEC.

3.4  In the alternative, Applicant applies for an exemption on the basis that its subsidiary, CCF has appointed an SEC in compliance with the Act and supporting Regulations. Applicant submits that the terms of reference of its subsidiary’s SEC could be extended to apply to Applicant’s business.

4.    APPLICABLE LAW

4.1 Section 72 of the Act stipulates:

“(4) The Minister, by regulation, may prescribe –

(a)  a category of companies that must each have a social and ethics committee, if it is desirable in the public interest, having regard to—

i.        annual turnover

ii.        workforce size; or

iii.        the nature and extent of the activities of such companies;

(b)  the functions to be performed by social and ethics committees required by this subsection; and

(c)  rules governing the composition and conduct of social and ethics committees.

(5) A company that falls within a category of companies that are required in terms of this section and the regulations to appoint a social and ethics committee may apply to the Tribunal in the prescribed manner and form for an exemption from that requirement, and the Tribunal may grant such an exemption if it is satisfied that—

(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

(b)  It is not reasonably necessary in 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.

(6) An exemption granted in terms of subsection (5) is valid for five years, or such shorter period as the Tribunal may determine at the time of granting the exemption, unless set aside by the Tribunal in terms of subsection (7).

(7) The Commission, on its own initiative or on request by a shareholder, or a person who was granted standing by the Tribunal at the hearing of the exemption application, may apply to the Tribunal to set aside an exemption only on the grounds that the basis on which the exemption was granted no longer applies.”

4.2 The Companies Regulations provide in Regulation 43(1) that a SEC must be appointed by:

(a)  State owned companies;

(b)  Listed public companies;

(c)  Any other company with a PIS above 500 in any two of the previous five (financial) years.

4.3 Regulation 43(2) states that:

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

(b)          it has been exempted by the Tribunal in accordance with section 72 (5) and (6). 

4.4 Regulation 43(5) defines the functions of the SEC as:

(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 Principles; 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 Organisation 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.”

4.5 The PIS is calculated in terms of  Regulation 26(2) as follows—

(a)  a number of points equal to the average number of employees of the company during the financial year (‘employee’ has the meaning set out in the Labour Relations Act 66 of 1995 [Regulation 26(1)(a)];

(b)  one point for every R1 million (or portion thereof) in third party liability of the company held by creditors 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 the profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities; or

(ii)  in the case of non profit company, to be a member of the company, or a member of an association that is a member of the company.

4.6 If a company is required to appoint an SEC, it may apply for a ruling by the Tribunal for an exemption, under the provision of section 72(5) of the Companies Act.

4.7  In terms of Regulation 142(3), an application to this forum for a ruling must be made by filing:

(a) an Application form CTR 142; and

(b) a supporting affidavit setting out the facts on which the application is based.

5.    EVALUATION

5.1 Applicant argued that in terms of section 72(5) (b) it is not necessary in the public interest to require the company to have an SEC. It argues that since its activities are not covered by Regulation 43(5), it would not be necessary in the public interest to require it to have an SEC. I disagree with this argument. In support of this, I refer to the dictum of my learned brother, Dr Chiktay in the AB INBEV AFRICA case:

The Social and Ethics Committee as envisaged by the Act do not only relate primarily to employment matters, health and safety matters and customer relationships. The fact that the applicant does not deal with customers does not mean that there is a public interest that justifies it not having a Social and Ethics Committee.[2]

5.2 Applicant currently has 84 employees, which is a fair number.

5.3 Applicant attached the SEC terms of reference purportedly for CCF, which is neither signed not dated, and is under the title of Coca-Cola Beverages South Africa (Pty) Ltd. By Applicant’s own version, there is nothing in the mandate of this SEC that binds or even includes the Applicant. There is also no evidence that a process is underway to include Applicant in the terms of reference.

6.    FINDINGS

6.1  I find that Applicant has to establish an SEC and it is not exempted from doing so in terms of section 72(5)(b) of the Act.

6.2 I find further that Applicant is not exempt in terms of 72(5)(a) of the Act. However, an application for exemption may be reconsidered if the SEC terms of reference of CCF are extended to apply to Applicant’s business.

7.    ORDER

7.1 The application for an order for the exemption from the requirement to appoint the SEC is therefore conditionally refused.

7.2 The applicant must establish a Social and Ethics Committee within 12 months of receiving this decision. 



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ADV. ISHARA BODASING

 

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