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IN THE COMPANIES TRIBUNAL OF THE REPUBLIC OF SOUTH AFRICA

Case Number: CT007SEP2018

In the matter of:

Phuthuma Nathi Investments 2 (RF) LTD                                                           Applicant

Registration Number 2006/036320/06

 

APPLICATION FOR EXEMPTION FROM THE REQUIREMENT TO

APPOINT A SOCIAL AND ETHICS COMMITTEE

 

DECISION

INTRODUCTION:

[1] The Applicant is Phuthuma Nathi Investments 2 (RF) Ltd, with registration number 2006/036320/06, duly represented herein by one of its directors Peter Orde Goldhawk.

[2] The Applicant seeks an exemption from the requirements to appoint a Social and Ethics (SEC) in terms of sections 72(5) of the Companies Act 71 of 2008 (“The Companies Act”) read with regulation 43(2)(b) of the Regulations to the Companies Act.

[3] Applicant duly filed form CTR142 and an affidavit with the Tribunal, in this regard, on 13 September 2018. Applicant submitted that the company falls within the category of companies required by the Companies Act to appoint a social and ethics committee. The company is described as a dormant investment-holding company which holds shares in Multichoice South Africa Holdings Proprietary Limited (registration number 2006/015293/07). The company does not trade in shares, nor does it conduct any trading activity.

[4] By virtue of the fact that as at the end of its 2018 financial year, more than 500 individuals held and continue to hold beneficial interests in the company in securities, the company is required in terms of S.72(4) ,read with Regulation 26(2)(d), to have a social and ethics committee.

[5] The Applicant has submitted that it is not in the public interest to require the company to have a Social and Ethics committee as such committee would not fulfill any function in relation to the company. The Applicant further relies on the fact that the same application for exemption was granted by the Tribunal, under case number CTR 005-06-2012, which exemption has now lapsed.

 

Application of the Law

[6] This is an application in terms of S.72 of the Companies Act, which provides that:

(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 the social and ethics committee required by this subsection; and

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

[7] Subsection 5 provides the opportunity to apply for exemption for those companies that are required to have Social and Ethics Committees in terms of subsection (4) as follows:

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 exemption if it is satisfied that-

(a) the company is required in terms of other legislation to have, and does have , some other 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.

[8] Subsection 6 provides for the duration of an exemption granted in terms of the section above, and stipulates that such exemption shall be valid for five years, or such shorter period as the Tribunal may determine at the time of granting the exemption.

[9] Regulation 43(1) gives effect to section 72(4) of the Companies Act and provides as follows:

This regulation applies to:

(a) every state owned company;

(b) every listed company; and

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

[10] Regulation 26(2) provides for the manner in which ‘public interest score must be calculated by every company at the end of each financial year, and that it must be calculated as the sum of:

(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 rand (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; or

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

[11] Regulation 43(2) requires a company that falls within the aforementioned section 43(1), to appoint a social and ethics committee unless it has been exempted by the Tribunal in accordance with Section 72(5) and (6).

[12] Regulation 43 (5) provides for the functions of a Social and Ethic committee and these include the monitoring of; social and economic development, good corporate citizenship, the environment, health and public safety, consumer relationships and labour and employment.

 

EVALUATION

[13] The Applicant is a company that is required to appoint a social and ethics committee in terms of Regulation 43(1). The applicant submitted that it applies for an exemption from having a Social and Ethics committee due to the reasons outlined above.

[14] The Applicant submitted that the exemption is based on S.72(5)(b) of the Companies Act in that 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.

[15] The Social and Ethics committee is a statutory  committee established to monitor and ensure that companies act in a responsible manner and contribute to the economic and social development of communities in which they operate.

[16] The applicant has clearly shown that its business activities are of a unique nature and that there is no need to have a Social and Ethics committee in the absence of any external and internal stakeholders in the company, save for the individuals who hold beneficial interests in the company’s securities. The company does not operate within and is not exposed to any particular community, has no employees and is a dormant investment-holding company, holding shares in another company. It is apparent that no stakeholder will be prejudiced from the absence of a Social and Ethics committee within the company. It would be futile for the applicant to constitute such a committee as the functions of the committee are not relevant and applicable to the applicant company. I take note of the fact that the Tribunal has previously granted an exemption under the same circumstances presented in this application.

FINDINGS

[17] The Tribunal is satisfied that the Applicant has shown that 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 its activities.

 

ORDER:

1. The application for an order for exemption from the requirement to appoint a social and ethics committee is granted.

2. The exemption shall be effective for a period of five (5) years from date hereof.

 

 

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B. Zulu

Member: Companies Tribunal

20 September 2018

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