King Committee III
The King Code of Corporate Governance Principles and the King Report on Governance (King III), were unveiled at the Sandton Convention Centre, Sandton, Johannesburg, in September 2009. King III came into effect on 1 March 2010 – until then King II applied. The new Code and Report also falls in line with the Companies Act no 71 of 2008, which became effective on 1 May 2011.
Like its 56 commonwealth peers, King III has been written in accordance to, the comply or explain principle based approach of governance, but specifically the apply or explain regime. This regime is currently unique in the Netherlands and now in South Africa. Whilst this approach remains a hotly debated issue globally, the King III Committee continues to believe it should be a non-legislative code on principles and practices.
When the King Code of Governance for South Africa 2009 and the King Report on Governance for South Africa 2009 (collectively referred to as King III) were released in September 2009, the basis for the Companies Act references in King III was the version of the Companies Act before the Amendment Bill.
Subsequent to the release of King III, amendments were made to the Companies Act and the final Companies Act, 2008 (the Act) and related Companies Regulations (the Regulations) were issued and became effective on 1 April 2011.
In order to address the possible amendment to King III to align it with the Amendment Act, the King Committee established a working group to consider how the Act affects the content of King III and to make recommendations. It was agreed that amendments to King III as a result of the Amendment Act be limited to those that are deemed absolutely necessary to rectify direct conflicts. Where there are inconsistencies between King III and the Act in that King III recommends practices that go beyond what is envisaged in the Act, these will remain intact in King III as best practice. Similarly, where the Act now expands on certain matters that are incorporated in King III through mere reference, these would not be expanded on in King III, but the linkage would rather be clarified, if necessary. Therefore, amendments to King III are only made where King III could, in light of the legislative changes, be regarded as misleading or directly in conflict with the legislative provision.
It needs to be noted that while attempts have been made towards the alignment of King III with the Companies Act, in so far as it is possible, King III is aspirational and may recommend practices that go beyond legislation; the legislation constituting the minimum standard in place. The responsibility is on the user of King III to ensure that King III is not relied upon to also ensure legislative compliance.