Companies must comply with all applicable laws
King III is absolute – the company MUST comply with all applicable laws
King III Chapter 6: “Compliance with laws, rules, codes and standards”
This chapter consists of only 4 principles focusing mostly on board responsibility.
Further details in the code provide for the management of compliance.
Compliance with legislation and applicable regulations
The board should ensure that:
> The company complies with applicable laws and regulations;
> The board understands “the context of the law, and how other applicable laws interact with it”;
> The appointed directors have a general knowledge and practical regard for the requirements and impact of the applicable laws and regulations on the company;
> The risk of non-compliance is managed according to the company’s risk management approach;
> The board receives “assurance on the effectiveness of the controls around compliance”; and
> Management implement an “effective compliance framework and processes”.
To accomplish this, the board should:
> Monitor the company’s compliance;
> Regularly discuss compliance; and
> Ensure that appropriate director training is available and updates are received.
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Application of voluntary rules, codes and standards
The board should ensure that:
> The company considers applying other rules, codes and standards; and that
> The appointed directors have a general knowledge and practical regard for the requirements and impact of the selected rules, codes and standards on the company.
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Compliance should be considered within an ethical context
“Exceptions permitted in law, shortcomings and proposed changes expected should be handled ethically.”
“Compliance with applicable laws should be understood not only in terms of the obligations that they create, but also for the rights and protection that they afford.”
The act of compliance should also be incorporated in the company’s code of conduct.
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Disclosure
The state of the company’s compliance should be made available to stakeholders in the integrated report:
> How the board established an “effective compliance framework and processes” and
> The details of any “material or often repeated instances” of non-compliance by the company or board.
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Compliance Management
The company should consider investing in a compliance function, managed by a compliance officer.
The compliance function positioning within the organisational structure “should be a reflection of the company’s decision on how compliance is to be integrated with its ethics and risk management”
Responsibilities include:
> Implementing the legal compliance policy; and
> Educating, training, communicating and utilizing key performance indicators
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Governance instruments
The application of chapter 6 necessitates the existence of the following governance instruments:
> Compliance framework (and processes)
> Legal compliance policy
> Code of conduct
> Associated charters
Pertinent theory and governance instruments all wrapped in a tailored, low-impact initiation process
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Implementing governance can be simple
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NOTE: The comments in this page are to be read within the context of the candor legal notices which can be found at this web site. The Institute of Directors in Southern Africa’s ownership of the copyright in the publications “King Report on Governance for South Africa 2009” and “King Code of Governance for South Africa 2009” is hereby acknowledged.
