In terms of section 66 of the Companies Act (Act 71 of 2008) (the Act), the business and affairs of the company must be managed by and under the direction of its board, which has the authority to exercise all the powers and perform all the functions of the company, except to the extent that the Act or the company’s Memorandum of Incorporation (MOI) provides otherwise.
By definition “board” means the board of directors of the company. The Act does not define chair or chairperson of the board meeting, but from the context it is safe to assume that the chair must be one of the members of the board. In other words the chair must be a director.
In terms of section 73(8):
“Any minutes of a meeting, or a resolution, signed by the chair of the meeting, or by the chair of the next meeting of the board, is evidence of the proceedings of that meeting, or adoption of that resolution, as the case may be.” (Author’s italics)
It must be borne in mind that signature of the minutes of a meeting, or a resolution of a company by the chairperson of the meeting constitutes no more than rebuttable evidence of the proceedings of the meeting. Section 73(8) does not provide for the secretary of a company to sign the minutes or resolution of a meeting, but it is submitted that the MOI of a company may imbue the company secretary with that authority. To impose such a function on a company secretary in the MOI should not legally be unacceptable. One of the duties imposed on a company secretary in terms of section 88(2)(b) is to ensure that minutes of all shareholders’ meetings, board meetings and the meetings of any committees of the directors, or of the company’s audit committee, are properly recorded in accordance with the Act.
Should the MOI of a company make provision for its company secretary to sign the minutes or resolution of its directors’ meetings, such signature would also constitute no more than rebuttable evidence of the proceedings of the meeting. In terms of section 86 of the Act, it is mandatory only for public and state owned companies, however, to appoint company secretaries, which means many private companies will not have company secretaries.
There is the risk to a third party relying on a resolution signed by the chairperson of a counter party that such resolution is void for the reason that the meeting was never held. Such third party may theoretically be able to rely on the provisions of section 20(7) of the Act reading as follows:
“20(7) A person dealing with a company in good faith, other than a director, prescribed officer or shareholder of the company, is entitled to presume that the company, in making any decision in the exercise of its powers, has complied with all of the formal and procedural requirements in terms of this Act, its Memorandum of Incorporation and any rules of the company unless, in the circumstances, the person knew or reasonably ought to have known of any failure by the company to comply with any such requirement.”
However, the requirements that the person dealing with a company must do so in good faith and that he should not be aware of the non-compliance of the formal and procedural requirements in terms of the Act, are often absent in that such person is often aware or should be aware that such meeting never took place, because the resolution was pre-prepared by him or on his behalf.
The better solution may be to apply section 74 which provides for the adoption of a resolution by written consent of the majority of the directors. Section 74 reads as follows:
“74(1) Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a decision that could be voted on at a meeting of the board of that company may instead be adopted by written consent of a majority of the directors, given in person, or by electronic communication, provided that each director has received notice of the matter to be decided.
“(2) A decision made in the manner contemplated in this section is of the same effect as if it had been approved by voting at a meeting.”
A pre-prepared written resolution would serve both as a notice of the matter to be decided and would constitute the necessary written consent to the adoption thereof if signed be the majority of the directors of a company
In conclusion, it is not a good practice to accept a board resolution signed by the chairperson of the meeting or signed by the company secretary tasked in the MOI with that function. The better practice is to require a resolution consented to by the majority of directors in terms of the provisions of section 74 of the Act.
