A set of long-anticipated changes to South Africa's company law has quietly come into force, handing shareholders sharper teeth on executive pay and putting directors on notice with a new "two-strike" rule.
Sections 30A and 30B of the Companies Amendment Act — signed into law in 2024 by President Cyril Ramaphosa — have now taken effect, tightening the rules around executive remuneration at listed and state-owned companies. Among other things, the provisions force firms to disclose how much top executives earn relative to their lowest-paid workers.
How the two-strike rule bites
Under the new Section 30B(2), companies must prepare an annual remuneration report and put it to an ordinary resolution at the AGM. If shareholders reject it, the remuneration committee must come back the following year with an explanation that addresses their concerns. Reject it a second time, and the non-executive directors on that committee — while still able to serve as directors if re-elected — become ineligible to sit on the remuneration committee for two years.
Lawyers at Cliffe Dekker Hofmeyr warn the mechanism creates practical headaches. Because a company sending out its AGM notice will not yet know the outcome of the remuneration vote, it may have to table "conditional" resolutions for director re-election that fall away if the pay vote passes. Beyond losing the committee seat, there are no further legal penalties — but, the firm notes, it remains "a damaging indictment".
The JSE softens the blow
There is some relief for listed companies. The JSE has confirmed that, because complying with the Act now satisfies its own rules, firms no longer need a separate non-binding advisory vote on pay. Crucially, that lifts the "dissent threshold" from 25% to 50% plus one, meaning a majority of votes cast must oppose a resolution for it to fail. Foreign issuers, to whom the Companies Act does not apply, must still follow the older advisory-vote regime.
For boards and investors alike, the message from Business Bagel's vantage point is clear: shareholder votes on executive pay now carry real, lasting consequences.
Compiled by Business Bagel from reporting by BusinessTech, with legal analysis from Cliffe Dekker Hofmeyr.
