Our Opinions



During April 2016 a question was posed on our LinkedIn group “Applying King III”.  The question was:


How in depth should directors’ declarations be? What should be declared in terms of related parties financial interests?


Subsequent comments focussed on related parties’ interests that should be included.


Reviewing King III, the Companies Act and the JSE Regulations, it seemed that there were three issues at stake:

  1. Directors’ ownership of company shares,
  2. Directors’ dealings in company shares, and
  3. Financial interests that may lead to conflicts of interest.


1. Directors’ ownership of company shares

Relevant legislation: Companies Act Section 56, JSE Regulations Section 3.83.

Issue: Disclosure of shares held by directors.

Inclusiveness: Parties included are spouses if married in community of property, minor children, if the directors has been contractually beneficiated, holding company relationship or control voting or decision making.

Remarks: Inclusiveness is narrowly defined.  Note that beneficial interest is not a “related party”.  It seems as if many familial relationships are intentionally excluded (e.g. Out of community marriages, customary unions, parents, grandparents and grandchildren are excluded).  Step children and adopted children relationships are not clear.


2. Directors’ dealing in company shares

Relevant legislation: JSE Regulations Section 3.63

Issue: Disclosure of dealing in company shares

Inclusiveness: Includes spouses (also customary unions), all children below 18 (step, adopted and illegitimate children included), trusts and companies that are 35%+ controlled (including “Letter of wishes” trusts).

Remarks: Inclusiveness widely defined as set out above.  Note that parents, grandparents and grandchildren are excluded.


3. Financial interests that may lead to conflicts in interest

Relevant legislation: Companies Act Section 75, Companies Act Section 2, JSE Regulations Section 3.60, King Report Chapter 2 Para 40.6

Issue: Director has a financial interest in a matter before the board

Inclusiveness: Companies Act Section 2 defines related party as including spouse (married or living together) as well as persons within 2 degrees of consanguinity (natural, adopted or affinity).   This includes grandparents, parents, siblings, step-siblings, grandchildren, step children and adopted children.  Juristic relationships require control or joint control with related party.

Remarks: Interesting to note that a control relationship is required for juristic parties, and not the 35%+ required by JSE regulations for share dealings.


4. Overall remarks

Relevant legislation doesn’t necessarily set any benchmarks – it represents the minimum compliance level.  Companies are able to determine their own levels of compliance, keeping the administrative burden, cost of compliance as well as reputation management in mind.

It would be interesting to find out how various listed companies manage their directors’ declarations.

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