Legal position of the FDC, its board, chief executive officer, company secretary, MEC for Tourism, Environmental and Economic Affairs, and MEC for Finance and Expenditure : Part 1

• Published date: 01 January 2003
• Pages: 1-144
• Author: UFS Legal Department, FDC and the Faculty of Law
• DOI: 10.10520/EJC74016
• Date: 01 January 2003

FOREWORD

Development corporations operate in an ever-changing and com-

plex legal environment. Recent times have witnessed important

new legislative developments with a profound effect on the legal

environment within which such entities function. The most import-

ant of these laws are the Public Finance Management Act and the

Treasury Regulations that were promulgated in terms thereof.

Apart form this, a Protocol on Corporate Governance in the Public

Sector has been published for comment and will in due course also

form part of an already considerable array of legislative instru-

ments that apply to development corporations.

This report hopes to meet the need to inform the Board and em-

ployees of Free State Development Corporation and its stake-

holders, most notably the MEC for Tourism, Environmental and

Economic Affairs, the MEC for Finance and Expenditure, the Pro-

vincial Treasury and the Auditor-General, on the new legislative

framework. It is also hoped that it may be of some use to other

similar institutions in the Republic.

The authors

Bloemfontein

November 2002

PAR T 1

LEGAL POSITION OF THE FDC, ITS BOARD,CHIEF

EXECUTIVE OFFICER, COMPANY SECRETARY,

MEC FOR TOURISM,ENVIRONMENTAL AND

ECONOMIC AFFAIRS AND MEC FOR FINANCE

AND EXPENDITURE

1. Introduction

The purpose of this document is to set out the implications for the

Free State Development Corporation (hereafter referred to as the

“FDC”) of the following legislation:

•Constitution of the Republic of South Africa, 108 of 1996;

•Free State Development Corporation Act (FDCA), 6 of 1995;

•Companies Act, 61 of 1973;

•Public Finance Management Act (PFMA), 1 of 1999 and regu-

lations and

•Draft Protocol on Corporate Governance in the Public Sector.1

•Other related legislation where applicable.

Apart from its founding act (the FDCA), the two main acts appli-

cable to the FDC are the Companies Act and the PFMA.The Free

State Development Corporation Amendment Act 9 of 1999 amend-

ed the FDCA 6 of 1995 to provide that the provisions of the Com-

panies Act apply to the FDC, including Table B of Schedule 1.2The

FDCA further provides that the FDC has a share capital of R100.3

This has certain implications for the FDC, in that the FDC is

henceforth subject to company law in general, i.e. the Companies

Act and the common law applicable to companies.

The PFMA is applicable to the FDC,4because it is a public entity and

more specifically, a provincial government business enterprise.5To

give further content to the principles of the PFMA, treasury regula-

tions were published in the Government Gazette on 25 May 2002.6

Part 9 of the regulations specifically deals with public entities.

The Draft Protocol on Corporate Governance has been published

for public comment in Government Gazette No 23366, 30 April

2002, and is not yet in force. The Protocol seeks to give practical

effect in the public sector to the recommendations of the King Re-

ports regarding corporate governance. It is the Government’s in-

tent that the principles of the Protocol should apply to all public en-

tities and their subsidiaries.7

1

1Government Notice 637 of 2002, Government Gazette No. 23366, 30

April 2002.

2Section 2(2).

3Section 2A.

4Section 3 read with Schedule 3D, Part C, Free State, Item 4.

5See the heading of Schedule 3.

6Attached as Part IV is a summary of these regulations relevant to FDC.

7In terms of paragraphs 4.4.1 and 4.4.2, the Protocol applies to all pu-

blic entities listed in Schedules 2 and 3(B) and (D) to the PFMA, as

well as any unlisted public entities that are subsidiaries of a public en-

tity, whether listed or not.