Trade Unions Rights Under the Companies Act, 2008

The Companies Act has provided for significant rights to be given to Trade Unions under certain circumstances. An example of this would be detailed in Section 20(4) where the Act empowers any trade union to approach the High Court for an order restraining an employer from doing anything inconsistent with the Companies Act.

Section 45(5) of the Companies Act deals with Loans and Financial Assistance granted to Directors. In the past such loans were authorised in a simple resolution. However, the Act now requires that a notice of the resolution be provided to the employee’s Trade Union.

Notice of the above resolution must be provided to any trade union within 10 business days after the board adopts the resolution, only if the total value of all loans, debts, obligations or assistance contemplated in that resolution, exceeds one tenth of 1% of the Company’s net worth at the time of the resolution. Should this not be the case then the notice becomes due for submission to the trade union within 30 business days after the end of the financial year.

Due to the sensitive nature of such a resolution and the obligation placed on the Company to ensure that this submission is made, it is imperative that directors make sure that the relevant resolution meets with the requirements of Section 45(3) of the Companies Act as well as the Company’s unique Memorandum of Incorporation.

Section 45(3) of the Act details the following requirements for the resolution:

3) Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless —

a)     the particular provision of financial assistance is —

i)       pursuant to an employee share scheme that satisfies the requirements of section 97; or

ii)      pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

b)     the board is satisfied that-

i)       immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

ii)      the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.


Further information on the practical implications of Section 45 and the drafting of such authorisation documentation can be found in our Co-Sec Blog: https://www.mdacc.co.za/index.php/common-and-recurring-practical-questions-under-the-companies-act-2008-2/

Should you have any queries relating to the above or require any assistance in this regard please do not hesitate to contact either Dave or Alexis. 

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