The Companies Amendment Bill has raised many questions in the South Africa market as its passing becomes increasingly imminent. The proposed changes and amendments of The Bill will have a significant impact on remuneration reporting and remuneration (reward) governance for many firms, both public and private. As a result reward and governance professionals will have a greater burden in terms of having the required tools, data and processes to satisfy both the reporting and governance requirements.
FAQs |
Deloitte perspective |
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What is the purpose of the Bill? |
The bill is created with three objectives in mind:
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When will the Bill come into effect? |
The passing of the Bill is imminent. It is currently awaiting the president’s signature to be passed into law after the conclusion of the consultation process. |
To whom does the Bill apply? |
The Bill applies to public and state-owned entities. |
When do the applicable companies need to implement the requirements as per the Bill? |
The implementation of the Bill by companies will happen overtime, in alignment with when the next fiscal year is for each company, mostly likely from 1 Jan 2025. |
How does one reconcile the Bill and other governance rules and legislation such as King IV and JSE listing requirements? |
The Bill will be passed into law to set the minimum standards of remuneration reporting and governance. Unlike the alignment of the JSE Listings Requirement with King IV, there has been no known alignment between the Bill and other governance rules and laws. The JSE Listing Requirements often have a higher standard than the Companies Act which means there would be a ‘hybrid’ approach for complying with both. |
Are regulations going to be introduced to provide further clarity on some grey areas in the Bill? |
No known guidelines are in the pipeline as of now. However, this would be critical to address grey areas such as:
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Are there any pitfalls reward and governance professionals need to be aware of? |
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Globally, many countries and regions are trending towards greater pay transparency. The need for increased pay transparency is to address pay inequity and ensure a fair and better alignment between pay and performance, which is caused by several historical and socio-economic factors. A significant development in the global market recently was the implementation of The EU Pay Transparency Directive (The Directive) which came into force in June 2023 for all member states. The Directive sets out pay transparency requirements such as disclosing the gender pay gap and the pay ratio between the highest paid individual’s salary and the average total compensation.
From a governance viewpoint, shareholder oversight and rights are also brought into focus. The “two-strike” rule will be introduced by The Bill, which can have a few unintended consequences. The rule can be open to abuse or cause the business (shareholders) to incur costs as seen in some cases in Australia where the “two-strike” rule applies. The costs of replacing a Board and the change in committee members can have a negative impact on a company’s share price. Drawing on further global similarities, The Bill states that any report that is not passed by a majority vote, will need to be presented and voted for at the next AGM.
What are the implications?
“What does this mean for me?”- the answer to this question depends on your role. The Bill’s proposed changes and amendments will have practical implications, particularly for Remuneration Committee Chairs and Members, Remuneration Teams and Company Secretaries.
Tips on navigating the new reality
Having established what The Bill proposes to change and/or amend, and how this will impact various key stakeholders the questions is: What now? Gleaning insights from across Deloitte globally and marrying that with deep local expertise, we provide a quick guide on how to navigate the new reality:
For more on this, you can reach out to our Pay Transparency & Rewards team.