The Companies Act of 2008 (“the Act”) requires that directors live in an era of transparency and accountability, and they can face severe consequences if they cannot show they have applied their minds when situations go awry. Thus, it is important they have a record of how they reached the decisions they made. At the same time, most senior staff have extensive travel commitments and it can frequently be difficult to get all the directors together in one place for a meeting.
The Act makes provision for this. Directors may hold meetings using electronic communication – in other words they could use Skype or any other such technology to hold a meeting. As long as they can all communicate concurrently without an intermediary, the meeting is as if they were all in one room.
Moreover, if an urgent situation arises and it is not possible to hold a full director’s meeting, an electronic communication can be held. Thus, directors could pass a resolution by email or make a decision by similar means.
Obviously, there are some hurdles to cross. Notice must be given of such meetings – it is worth ensuring you comply with the requirements of notice for meetings. The Electronic Communications and Transactions Act must be complied with – emails, for example, must be identifiable as coming from the relevant director, they must be stored so they can be proven not to be altered, and they must be retrievable. Such meetings cannot be prohibited by the Memorandum of Incorporation (the MOI). As most companies are now in the process of converting their current constitutional documents to the MOI, it is worth ensuring that this is allowed in the MOI.
Similarly, shareholders may make use of electronic communications at their meetings, subject to fulfilling statutory requirements – more or less the same as directors’ meetings. In fact, for public companies, the Act requires that the meeting be “reasonably accessible within South Africa for electronic participation by shareholders”.
Technology can be used to ensure correct communications and transparent decision-making in a business. It is worth seeing how you can apply these principles to your business.
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