The devil’s in the detail: CIPC issues a notice regarding individualised disclosure requirements in respect of director remuneration and benefits

The notice was published in response to a trend, observed by the CIPC, where “some companies are not disclosing directors’ or prescribed officers’ remuneration as required and prescribed by the Act”. Reacting to this trend, the notice included a prescribed order to the effect that it is incorrect to disclose remuneration as a single aggregated amount or as a single amount under each director without the names of the directors/prescribed officers and description of the payment/compensation. Further, where no remuneration was paid, a note is still required in the notes to the financial statements indicating that there were no payments made to the relevant directors.

Although the CIPC states that this level of disclosure is required in all audited (including voluntarily audited) annual financial statements, this aspect of the notice warrants further scrutiny. One could query the reference to companies that voluntarily have their annual financial statements audited, as section 30(4) of the Act applies the remuneration disclosure requirement to companies that are required “in terms of this Act” to be audited. It is unclear whether the fact that section 30(2)(b)(ii)(aa) of the Act refers to voluntary audits is sufficient to regard such an audit as one “in terms of the Act”.

This individualised disclosure requirement is in line with developments in many other jurisdictions, and probably represents the correct approach given the wording of the Act. It also reflects a practice already adopted by many South African companies, especially listed companies.

While the CIPC notice is not legally binding, there are two things to note in this regard. Firstly, this reflects the view of the regulator, and the CIPC will impose this standard when assessing annual financial statements filed together with annual returns. Secondly, this notice is in line with what the draft Companies Amendment Bill 2018 seeks to clarify – namely individualised disclosure for each director/prescribed officer.

It thus appears that the writing is on the wall, and all South African companies that have their annual financial statements audited would do well to disclose the remuneration and benefits of directors/prescribed officers on this basis.