Our Deputy Chairperson, Praveena Sukraj-Eli, wrote this article to inform us all of this important information.
On 14 September 2011 a workshop was held at Council’s Offices. The primary focus of the workshop was to discuss “King 3” and the implications of the new Company's Act for NGOs, the directors and members of their boards and various committees, and their senior employees.
From the 1st of May 2011 companies, previously referred to as Section 21 Companies or as an association not for gain, must be referred to as a “not for profit company” The letters (NPC) must follow the name of the company. Further, all NPC’s must prepare a Memorandum of Incorporation. This clearly impacts the SANCB’s constitution as a memorandum of incorporation must be prepared. Merely having a constitution will be non-compliant with the Company's Act. All NPC’s have 24 months (as of 1 May 2011) within which to consolidate this document.
It is vital that all members on all committees extending from the NMC to the NEC and all sub-committees, including all staff involved in finance administration and management are advised that they no longer have limited liability. Such persons can be held jointly and severally liable for the debts of the NPC unless s/he meets the requirements of the “business judgment rule.”
The “business judgment rule” is a defence which may be raised if the following requirements are met:
1. Firstly, there must have been no conflict of interest, and if there was a conflict of interest, such conflict must have been disclosed.
2. Secondly, they must ensure that they are properly informed. They cannot blindly rely on reports and information provided by others. Hence, they can delegate however, they cannot abdicate.
3. Thirdly, they must have acted reasonably in the circumstances.
All directors of NPCs must enter into an agreement with the company outlining their duties. Furthermore, directors may no longer only be prosecuted by the state, but may also be sued by private individuals, companies and by way of class action.
For more information and to download the executive guide, click here.