LESSONS FROM ADMINISTERING COMPANIES IN THE REST OF AFRICA Chartered Secretaries Southern Africa

1. LESSONS FROM ADMINISTERING COMPANIES IN THE REST OF AFRICAChartered Secretaries Southern Africa Corporate GovernanceConference10 September 2009 Sandton Convention Centre Carina Wessels

2. OVERVIEW • Perspective and scope • Key lessons and recommendations • Health and safety • Language • Shareholder / director conflicts • Multiple jurisdictions • Examples

3. PERSPECTIVE AND SCOPE

4. HEALTH AND SAFETY LESSON: Significant additional risk to health and safety – employees to be sufficiently prepared • RECOMMENDATIONS: • Training and documentation to prepare employees • Subscription to pre-warning system • Up-to-date yellow card, prophylaxes, medical pack and special medicine • Subscription to 24-hour monitoring service • Appointment of local protocol officers • Implementation and testing of appropriate evacuation protocol • Policies, procedures and monitoring of malaria and other serious illnesses

5. Total Non Expatriates = 86 : 76.7% Total Expatriates = 21 : 80.8%

6. LANGUAGE LESSON: Difficult to obtain legislation and documentation in English • RECOMMENDATIONS: • Affiliations with established companies • Use of reputable legal firm • RISKS: • Cost (Fairly small operations USD60 000 – USD80 000 / annum) • Incorrect translations

7. LANGUAGE LESSON: Informed decision to be made regarding the company secretary’s language proficiency • RECOMMENDATIONS: • Local assistant / compliance administrator proficient in local language • “Neutral director” to act as translator at board meetings • RISKS: • Translating director unable to participate effectively • External translator involved before, during and after board meeting – confidentiality • Cost (Fairly small operations USD60 000 – USD80 000 / annum) • Time • “Cultural” subtleties

8. SHAREHOLDER / DIRECTOR CONFLICTS • LESSON: Increased difficulty in guiding board where individuals are in constant conflict as to their varied roles • Government = host = decide on licences = partner / shareholder = director / often chairman • Botswana: • Director of subsidiary (not wholly owned) may, subject to company constitution and prior agreement by shareholders, act in best interests of holding company, even if not in subsidiary company’s interests • Director of joint venture may, subject to company constitution, act in best interests of shareholder/s, even if not in the company’s interests

9. SHAREHOLDER / DIRECTOR CONFLICTS • RECOMMENDATIONS: • Strong and resolute chairman / deputy chairman and company secretary • Continuous “education” process by company secretary (diplomacy) • Board charter and code of ethics • Clearly defined reserved powers, which are effectively enforced • Clearly defined delegation to the board • Equal number of directors’ and shareholders’ meetings • Fair and reasonable directors’ fees • RISKS: • Constant conflict • Conflicts of interest impacting good governance

10. MULTIPLE JURISDICTIONS LESSON: Ensure sufficient understanding of requirements and full compliance in ALL jurisdictions (even in deemed “under-regulated” jurisdictions) • RECOMMENDATIONS: • Reputable local agent • RISKS: • Penalties (i.e. British Virgin Islands: USD10 000 / incident) • Deregistration

11. MULTIPLE JURISDICTIONS • LESSON: Ensure management and control do not lead to tax residency • Income Tax Act 58 of 1962: Company shall be a resident of RSA if it has its place of effective management in the RSA • SARS’s “effective management” test looks at the level below the board of directors and focuses on the place where policy is executed and implemented • Only one level of management i.e. the board, “effective management” must ipso facto be exercised by the board • Multiple locations – where business operations are actually carried out or conducted or place with the strongest economic nexus

12. MULTIPLE JURISDICTIONS • RECOMMENDATIONS: • Ensure key management and commercial decisions necessary for the conduct of the business are made outside RSA (and any other affected areas) • Prepare and communicate detailed policy and procedure regarding do’s and don’ts – where to sign documents, where policies and strategies emanate from • No board or committee meetings should take place in RSA in person or via teleconference with the chairman located RSA • RISKS: • Having a majority of RSA directors or executives working under the same roof, even if board meetings etc occur elsewhere • Mere fact that a non South African company is responsible for the management and administration of another non South African company, does not circumvent the effective management rules

13. PRACTICAL EXAMPLES - ANGOLA • Company Law, Law 1/04, of 13 February 2004 • General assembly = all shareholders • Minutes of annual general assembly = to be handwritten in minute book • Secretary is responsible for preparing the minutes of the general assembly and is also a signatory to the minutes – no other mention of Secretary • Board of directors only required in joint stock companies and must be of an unequal number • Corporate entity may be a director, but must designate an individual to represent it – severally liable for individual’s actions • Directors shall meet once per month, unless amended in articles • Luanda – traffic impact on working hours and general operations not to be underestimated

14. PRACTICAL EXAMPLES - BOTSWANA • Companies Act, 2003 • Mandatory appointment of one or more Secretaries for all companies other than closed companies • Prescribed qualifications for public and non-exempt private Company Secretaries: • Qualified auditor • Member of the Botswana Institute of Accountants • Member of the Southern African Institute of Chartered Secretaries and Administrators • Legal practitioner • Member of a professional association of Company Secretaries approved by the Minister

15. PRACTICAL EXAMPLES - DRC • Companies Act = Code de Commerce (portions dating from 1887) • Organisation for Harmonisation of Business Law in Africa (OHADA) membership pending • Board of directors = board of managers • Shareholders = associates • No mention of a Company Secretary and duties to be performed • Severe tax penalties: avoid holding company purely holding an interest in a subsidiary / joint venture • Associates meeting minutes (French version) to be notarised • Kinshasa - not permitted to take any photographs – will be arrested!

16. THANK YOUCarina WesselsLLB (UP), Advanced Labour Law (UP), LLM (UNISA), PMD (GIBS), ACISAssistant Group SecretaryDe Beers Groupcarina.wessels@debeersgroup.com