3 November 2016 by Corporate and Commercial Alert

The King is dead, long live the King

On 1 November 2016 the King IV Report on Corporate Governance for South Africa, 2016 was launched. The JSE soon thereafter published proposed amendments to its listings requirements as an update with a view to incorporating certain of the provisions of King IV.

From a structural and format perspective, King IV is significantly different to King III. The substantive principles, however, are broadly in line with its predecessor. Much has been made of King IV’s switch to an “apply and explain” philosophy as opposed to King III’s “apply or explain”. However, in substance essentially the same position is arrived at, given that King IV has reduced the 75 governance principles in King III, to 17 principles (one of which is applicable only to institutional investors). The newly stated principles are general and high-level in nature, the idea being that they are capable of application by any entity regardless of its nature and size. It is the granular practices which are implemented in applying the principles which will naturally differ depending on the entity.

As with King III, King IV applies to all entities, and accordingly employs the generic term “governing body” when referring to the primary governance structure within an entity (in the case of a company, its board).

The sector-specific supplements, as foreshadowed in the draft of King IV which was released earlier in the year for public comment, are included for the first time, and these will take some time to fully analyse and comment on.

What follows is a table containing a brief comparison of some of the material and practical aspects of King III and King IV.

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