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Deadline to set up social and ethics committee looms

It has almost been a year since the new Companies Act (no 71 of 2008) has been in force. Although the entire Companies Act is not yet in force in respect of all companies some provisions do supersede the old dispensation whilst others are yet to become effective.

One such newly introduced change will become effective on 1 May 2012.

On 1 May 2012 every state owned company, listed public company and other companies that have, in any two of the previous five years, had a public interest score of 500, must have appointed a social and ethics committee . A company's public interest score is calculated by reference to the average number of employees, its third party liability, its turnover and number of beneficiaries (such as shareholders).

The social and ethics committee must comprise of not less than three directors or prescribed officers, of which at least one must be a director that is not involved in the day-to-day management.

The social and ethics committee must monitor the company's activities, taking into account relevant legislation and prevailing codes of best practice which relates to social and economic development, good corporate citizenship, the environment, health and public safety, consumer relationships and labour and employment.

There are only two methods in terms of which the mentioned companies can avoid having to appoint such a social land ethics committee. Firstly it may be that the company is a subsidiary of another company that has in fact appointed a social and ethics committee and that social and ethics committee will also perform the functions required on behalf of that subsidiary company. Secondly companies can avoid appoint a social and ethics committee if the Tribunal has exempted it from appointing one.
Companies that have not yet appointed a social land ethics committee or applied for exemption are urged to comply with the new Companies Act.

© Trade Law Chambers 2012

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