South Africa Companies Act: Remuneration Vote Now Binding

• Sections 30A and 30B of the Companies Act 71 of 2008, effective May 22, 2026, make remuneration policy and report votes statutory requirements for public and state-owned companies in South Africa.
• Companies must secure ordinary resolution approval for their forward-looking remuneration policies every three years, with material amendments also requiring shareholder consent.
• Annual remuneration reports must include extensive disclosures on executive and employee pay, requiring shareholder approval.
• A failed remuneration implementation report vote triggers specific governance consequences, including mandatory re-election or temporary removal of non-executive remuneration committee members.
• While the statutory approval threshold is 50% plus one, companies must still consider the 75% advisory threshold often expected by sophisticated shareholders, as demonstrated by the Old Mutual 2026 AGM.

A failed implementation report vote is no longer merely a reputational concern; it has become a significant governance event with direct accountability for non-executive directors.

A significant shift in corporate governance took effect on May 22, 2026, fundamentally altering how public and state-owned companies in South Africa manage executive remuneration. What was once largely a ceremonial vote at Annual General Meetings (AGMs) has now become a statutory requirement, with the implementation of Sections 30A and 30B of the Companies Act 71 of 2008. This legislative change elevates the South Africa Companies Act remuneration vote from a mere advisory gesture to a legally binding process.

This new framework mandates two distinct statutory votes: one on the company's forward-looking remuneration policy and another on its annual remuneration implementation report. The implications of a failed vote are no longer confined to reputational damage; instead, they trigger specific governance consequences, particularly for non-executive directors. This marks a departure from previous practices, signaling a more stringent era for public company remuneration governance ZA.

Under Section 30A of the Companies Act, every public company and state-owned company is now legally obliged to present its remuneration policy to shareholders for approval via an ordinary resolution. This policy, once approved, remains valid for a period of three years. Any material amendments to the policy within this timeframe also require fresh shareholder endorsement before they can be put into practice.

Should shareholders reject the remuneration policy, the immediate consequence is not the invalidation of existing contracts. Instead, the company must re-present a revised policy at its subsequent AGM or at a specially convened meeting for that purpose. During this interim period, the most recently approved policy remains in effect. However, this continuity should not be misinterpreted as an opportunity for complacency, as a rejected policy clearly signals that the company's remuneration strategy may be out of step with current market expectations and shareholder sentiment.

Section 30B introduces a more rigorous annual reporting obligation, requiring companies to table a comprehensive remuneration report for the preceding financial year. This report is structured into three essential parts: a background statement, a copy of the current remuneration policy, and a detailed implementation report. The implementation report is particularly critical, as it mandates extensive South Africa executive pay disclosure requirements.

Key disclosures include the total remuneration for each named director and prescribed officer, the remuneration of the highest-paid and lowest-paid employees, the average and median employee pay, and the ratio between the top 5% and bottom 5% of earners. The definition of “total remuneration” is broad, encompassing salary, benefits, employer contributions, and all short- and long-term incentives, such as options and awards. A failed remuneration report vote carries significant consequences: a single rejection requires the remuneration committee to explain its response to shareholder concerns at the next AGM, and non-executive directors who have served on the committee for at least 12 months must stand for re-election to the committee. A second consecutive rejection of the implementation report escalates the consequences, compelling those non-executive directors to step down from the committee for two years, even if they retain their positions on the main board.

The new statutory framework in South Africa has effectively incorporated the logic of Australia's 'two-strikes' rule, applying it to an ordinary resolution. This means the legal threshold for approval of both the remuneration policy and the implementation report is now 50% plus one vote. However, this statutory minimum coexists with the long-standing King IV remuneration advisory threshold of 75%, which continues to influence engagement practices among listed companies and on the JSE.

The Old Mutual 2026 AGM provides a clear illustration of this transitional dynamic, where both the remuneration policy and the implementation report successfully cleared the new statutory majority but failed to meet the traditional 75% advisory benchmark. Consequently, the company was still required to engage with shareholders under the older advisory framework, despite the new Companies Act 71 of 2008 sections 30A 30B being fully in force. This highlights that while the legal bar has been set, sophisticated investors often maintain higher expectations, meaning companies that solely focus on the 50% threshold may find themselves out of alignment with key shareholder sentiments.

Lawyers advising public and state-owned companies in South Africa must ensure their clients' remuneration policies and annual reports comply with the new statutory requirements of Sections 30A and 30B of the Companies Act, particularly regarding disclosure and the significant governance consequences for non-executive directors following failed votes.

Source: Original reporting based on recent legislative changes in South Africa