Corporate Governance and The Prescribed Officer

Corporate Governance and The Prescribed Officer

Written on 03/01/2019
MJ Minter Inc


Corporate governance is under scrutiny like never before in South Africa. While most people believe that it is only appointed directors of a company who can be held personally liable, the Companies Act provides for a wider definition and includes Prescribed Officers.

A Prescribed Officer is a title created by the 2008 Companies Act and is anyone who fulfils the role of a director but who is operating (intentionally or otherwise) under a different designation.

Regulation 38 states that, despite not being a director of a particular company, a person is a “prescribed officer” of the company for all purposes of the Act, if that person:

  • Exercises general executive control over the management of the whole, or a significant portion, of the business and activities of the company, or
  • Regularly participates to a material degree in the exercise of general effective control over, and management of the whole, or a significant portion, of the business and activities of the company.

The Regulation applies to such a person irrespective of any particular title given by the company to:

  • An office held by that person in the company, or
  • A function performed by the person for the company.

A company secretary, may, for example, fall within the definition of a prescribed officer in terms of the Act, even though he may not be a director appointed to the Board of the company.

Prescribed officers are bound by the same codified duties and liabilities of directors which are referred to in numerous sections of the Act.

It is very important that the board is able to identify who the prescribed officers are. Equally important is that the prescribed officers know who they are, and that they understand their responsibilities in terms of the Act.

Not doing so puts both the board and the prescribed officer at risk of non-compliance with the Act, which in turn could lead to activities that may result in personal liability.