The shareholders of a company appoint directors to manage the company affairs. These directors have a statutory duty towards the company and must always act in the best interest of the company.
How many directors must a company have?
All Public and Non-Profit companies must have at least 3 directors. Other companies only need one director. A company’s MOI can dictate that a company must have more directors than the minimum required by the Companies Act.
How is a director appointed?
A vote in favour of a specific appointment of more than 50% of the company’s ordinary shareholders is needed to appoint a director. A company’s Memorandum of Incorporation (MOI) may also provide for the direct appointment and/or removal of one or more directors by any person who is named in the MOI or determined in the MOI.
A person that is elected as a director must first accept such an appointment before the appointment becomes valid.
Who can not act as a director?
Only natural persons can act as a director. Unlike in a Trust where a legal entity can act as a trustee. Directors cannot be a minor or have the legal status of a minor. The court can declare a person as a delinquent director and such a person can no longer act as a director of any company. Unless very specific requirements are met the following people are also not able to act as a director of a company:
- If you are an unrehabilitated insolvent
- If you are prohibited in terms of any public regulation
- If you have been removed from an office of trust on the grounds of misconduct involving dishonesty
- If you have been convicted and imprisoned, without the option of a fine (or a fine higher than the prescribed amount), for theft, fraud, forgery, perjury or an offence involving fraud, misrepresentation or dishonesty in connection with the promotion, formation or management of a company or in terms of the Companies Act.
How can a director be removed?
An ordinary share holder resolution of more than 50% of the votes in favour of the removal of a director is needed to remove a director. Before such a decision can be taken the director in question must be provided with the opportunity to state his case of why he should not be removed.
If a company has more than two directors and a director or shareholder has alleged that a director has become ineligible to act as a director in terms of Section 69, excluding Section 69(8)(a), or he is incapacitated to act as a director and is unlikely to regain that capacity within a reasonable time, or the director has been negligent or derelict in performing his duties as a director, then the remaining members of the Board of directors must make a determination as to the removal of the director. The director to be removed must be provided with the opportunity to state his case of why he should not be removed.
If a company has less than 3 directors, then the removal of such a director where the above circumstances exist can not be done by the Board of Directors. In such an instance an application must be made to the Companies Tribunal to make a determination.
How is a change of directors recorded?
Any change must be recorded at CIPC since the directors of a company is Public Record. To do this an account is needed at CIPC and the relevant funds must be paid to CIPC. It is a requirement of directors to know their roles and responsibilities in accordance with the Companies Act. PPHC Global will guide you to better understand what is required from you as a director of the company. We’ve got this!