No transitional period

Unlike with the King V Report on Corporate Governance, which gave everyone a breather by providing that it would apply only for financial years starting in 2026, the Companies Act amendments simply came into immediate force and effect and are applicable to public and state-owned companies. Of course, a number of public companies had already posted their notice to shareholders of their annual general meeting (AGM), leaving no time to, in the first instance, prepare the required remuneration reports, let alone include notice thereof to their shareholders.

In this regard, there is a strong presumption at common law which would arguably apply, namely that a new law applies only prospectively and does not interfere with or disrupt existing rights and entitlements. This principle also encapsulates additional burdens or obligations imposed by a new law, in circumstances where a course of action is already underway.

Therefore, where a company had already posted its AGM notice, it acquired the right and entitlement to complete its business at the AGM so dated in the notice, in accordance with that notice and in accordance with the law prevailing at that time (i.e., the time of distribution of the AGM notice).

However, outside of that scenario (i.e., where the AGM had already been called), the new law applies, and therefore companies will have some work to do to ensure that their 2026 AGM notices and reports incorporate sections 30A and 30B.

Interaction with the JSE Listings Requirements

Sections 5.7(k) and 11.38(a)(ii) of the Johannesburg Stock Exchange (JSE) Listings Requirements impose obligations on a listed company to table its remuneration policy and implementation report for separate non-binding advisory votes by shareholders at its AGM. If 25% or more of the votes exercised were cast against the advisory vote, and engagement with shareholders and a report back at the next AGM were required. The new provisions in the Companies Act propose a binding vote by shareholders on these matters, with a threshold of 50% + 1 (by way of ordinary resolution) – meaning that you would need 50% of the votes exercised to be cast against the resolution in order for it to fail and for shareholder engagement to ensue.

The JSE has issued a letter indicating that due to the fact that a company’s compliance with the provisions of the Companies Act amendments will amount to compliance with the JSE Listings Requirements, there is no need for the non-binding advisory vote, with the effect that the new “dissent threshold” is 50%, not 25% – every cloud has a silver lining, as they say.

However, the exception in this regard is foreign issuers, as the Companies Act does not apply to them. Thus, foreign issuers must still follow the non-binding advisory vote in the JSE Listings Requirements.

Pure holding companies with no employees

Section 30B refers to various disclosures regarding the highest and lowest paid employees, and the ratio between their respective total remuneration. It is a common feature, however, that the public company in question is purely a holding company with very few, if any, employees – the personnel are all employed by the operational subsidiaries. It is a fundamental and time-honoured principle in company law that entities in a group are separate juristic persons with their own assets and liabilities – that goes for employees as well. While this may be legally technically correct, the question of course is whether a holding company will get away with publishing a remuneration implementation report that takes advantage of this and makes very limited disclosure. Ultimately, it is entirely up to the shareholders to take a view and vote on the report as they deem fit.

Consequences of non-compliance: The ‘two-strike’ rule

Section 30B(2) requires companies to prepare an annual remuneration report in respect of the previous financial year for presentation and approval by way of ordinary resolution at the AGM. Section 30B(4) outlines the consequences if such remuneration report is not approved. For a step-by-step visual summary of the process and consequences, please refer to our section 30B decision tree here. For present purposes, the consequences are briefly as follows:

• the remuneration committee of the company (committee) must, at the next AGM, present an explanation on the manner in which the shareholders’ concerns have been taken into account, and subject to section 30B(6) (where the members have served for less than 12 months in the year under review), the non-executive directors who serve on the committee (this will typically be the whole committee, given the principle in King V that all members of the committee must be non-executive) must stand for re-election as members of the committee at the AGM at which the explanation is presented; and
• if at that next AGM the remuneration report in respect of the previous financial year is also not approved by ordinary resolution of shareholders:
• the non-executive directors on the committee may continue to serve as directors, provided that they successfully stand for re-election at that AGM; and
• they will not be eligible to serve on the committee for a period of two years thereafter.

The rule regarding stepping down as directors (strike two) could be particularly problematic if the company’s desire is to retain those directors on the board (just not as remuneration committee members). When distributing that subsequent AGM notice, the company will not know whether those directors will be required to step down for re-election at that very AGM. It would therefore have to give consideration to including a “conditional” resolution in its AGM notice for their re-election, which can fall away or be withdrawn if all goes well on the remuneration vote.

Lastly, it appears that the only consequence of failed resolutions is that this will affect the company’s directors’ eligibility to serve on the board or the remuneration committee. No additional consequences of non-compliance are prescribed.