Brave New World: Virtual Boardrooms In Cyberspace

March 19, 2019

One of the innovations brought in by our “new” Companies Act is that company meetings may now be held via electronic communication, opening the door for companies to use cyber services such as email, online messaging, voice and video conferencing (easy with services like Skype, SightSpeed, iChat etc) to replace traditional “face-to-face all in one place” boardroom meetings.

 

The result – directors and shareholders in different cities and countries around the world no longer have to travel to attend meetings – they can legally be “held” online from your various locations.   Not only does this offer up huge savings in time and travel costs, but it means that urgent meetings can (subject to notice and other requirements as below) be held at short notice, and decisions taken and recorded online.

Even if a ‘meeting’ (physical or online) isn’t actually held, decisions can be “adopted by written consent of a majority of the directors” via electronic communication (subject, again, to notice and other requirements).


Follow the formal requirements

  • Make sure that the Companies Act’s requirements in regard to proper notice, conduct and minuting of meetings are complied with, Comply with the requirements of ECTA (the Electronic Communications and Transactions Act) in regard to identification of originator, accessibility, storage, retrieval etc, Electronic meetings can be held unless your MOI (Memorandum of Incorporation) specifically provides otherwise, but if you want to avoid any uncertainty draw your MOI to allow them in clear terms, The “electronic communication facility” employed must “ordinarily [enable] all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting” – in which event they are all as “present” at the meeting as if they were physically all in one location.


Shareholders

Shareholders’ meetings can likewise take place via electronic communication subject to similar requirements to those applying to board meetings. In fact meetings of public company shareholders “must be reasonably accessible within the Republic for electronic participation by shareholders ….. irrespective of whether the meeting is held in the Republic or elsewhere”.

Property Transactions With Trusts – A Risk To Reme…

Don’t sell property to, nor buy property from, a trust – until, that is, you have written proof that the person representing the trust is properly authorised to do so.

The reason is that all land sale agreements must by law be in writing and signed by both parties i.e. the buyer and seller themselves, “or by their agents acting on their written authority”. And, as a recent High Court judgment has confirmed –

  1. A trustee of a trust is not an agent of that trust, and his/her power to bind the trust is dependent upon the authority of the co-trustees
  2. Any agreement signed by an unauthorised trustee is void and therefore unenforceable
  3. The trust cannot subsequently ratify the agreement. Because it is void ab initio (i.e. from the outset) and therefore never had any legal validity, there is nothing to be ratified.

The loser in that particular case was the seller of a farm, whose attempt to force a family trust to take transfer failed, despite the fact that the trust had taken occupation and complied with the terms of sale agreement (including payment of the purchase price).

Compulsory Retirement: When Is It Age Discriminati…

Age discrimination is an automatically unfair labour practice. So if a dismissal is based on an employee reaching retirement age, the employer is going to have to prove that the employee has reached the employer’s “normal” or “agreed” retirement age. In practice it must convince the court of two things –

  1. That it does in fact have a retirement policy in place, and
  2. What that policy is.

In an illustrative case recently before the LAC (Labour Appeal Court), the facts were these –

  • A Group Financial Director was informed when he turned 60 (the company’s retirement age) that his employer wanted him to stay on, and that “the normal notice period will apply in the event that we would like you to go on retirement”.
  • Two years later he was given notice to retire. This amounted, the parties agreed, to a dismissal based on the employee’s age.
  • He took the matter to the Labour Court claiming to be entitled to work until 65.
  • The Labour Court awarded him maximum compensation of 24 months’ remuneration, holding that the dismissal was automatically unfair.

The LAC disagreed, finding instead that the employee had “tacitly agreed to work beyond the normal retirement age and left it to the [employer] to determine the retirement age or date on notice to the [employee]”. There was, held the Court, nothing unfair or unlawful in that.


Employers: take advice

Avoid doubt and costly dispute (the cost to you could be high – our courts take a particularly dim view of “automatically unfair” labour practices). Take advice on steps to secure and clarify both your position and that of your employees. For example –

  • Have a clear retirement policy in place,
  • Stipulate a compulsory retirement age upfront in all new employment contracts,
  • If your existing employment contracts don’t stipulate a retirement age, negotiate one now (it must be negotiated – you cannot unilaterally impose a new term like this on employees),
  • Either specify upfront a procedure to be followed if an employee is asked to stay on after reaching retirement age, or take advice at the time on a new agreement to avoid uncertainty and the potential for litigation.


Employees: your rights

 

Don’t take any form of discrimination lying down – our law protects you from unfair discrimination, direct or indirect, “on any arbitrary ground, including, but not limited to race, gender, sex, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, political opinion, culture, language, marital status or family responsibility.”

Company Deregistration: New Procedures

CIPC (the Companies and Intellectual Property Commission) has published new procedures for deregistration of companies and close corporations. You can apply to voluntarily deregister your corporate if either –

  • It has ceased to carry on business, or
  • It either has no assets, or inadequate assets for it to be liquidated.

There are no forms to complete, just a letter on your company letterhead confirming its status and enclosing either –

  • A tax clearance certificate, or
  • A written confirmation from SARS that there is no tax liability outstanding.


Don’t try to do it without professional assistance

There are several other formalities to be complied with, and also consequences to deregistration that you need to be prepared for including –

  • Loss of CIPC protections for your corporate’s name
  • Although the company will no longer exist as a legal entity, its debts survive (albeit unenforceable against the company itself). As a result there is – (i) Continuing liability under any personal suretyships you may have signed, and Continuing personal liability for any directors, “prescribed officers” (broadly, senior managers with “general executive control”) and (ii) shareholders who may have become liable for any company debt “in respect of any act or omission that took place before the company was removed from the register”.