The Companies Act that was promulgated five years ago offers a treasure chest of opportunities to those involved in the management of companies or that advise companies, says law firm ENS Africa director Professor Michael Katz.

However, he told delegates at Chartered Secretaries Southern Africa's Premier Corporate Governance conference that the Act was not being used to its full possible extent, particularly by employees in corporate companies.

“The participation of employees in the governance of companies is a matter of company law, not labour relations. This is a burning issue.

“Decisions that are taken by boards have as much, if not more, impact on employees than they have on shareholders. The disposal of a major asset, a takeover – these things are vital in the lives of employees. The Act has achieved the involvement of employees admirably, but unions and management haven’t gone for it at all,” he noted.

Katz said that there were five instances where employees could participate in the governance of a company.

“Perhaps the biggest area where employees are given the right to participate in company governance, is Section 165.2C, which is our statutory derivative action. If there is no effective mechanism, the best substantive law goes to waste,” he noted, adding that Section 165 gave employees the right to sue “allegedly delinquent boards and management for breach of their duties”.

“What’s been really interesting to me, is that we have seen little activism, hardly a reported case on the derivative action, which is a significant tool,” Katz said, noting that unions could save themselves some anxiety by, instead of marching, just lodging derivative action.

Meanwhile, he highlighted that the biggest innovation in the Act, was Section 37, which he believed was infinite in its affording opportunities to structure instruments within shares, hybrids or otherwise, as it allowed companies to attach rights to its shares.

“This means that the economic pie of a company and how you participate in dividends and capital, can be done in anyway a company likes. The control climate, how it participates in votes, in the appointment of directors, in the majority of passing of resolutions does not need pro rata participation,” he explained.

He added that Section 37 was also a tripwire for regulating companies, as another company could hold 80% capital share in a different venture, but this did not necessarily mean that it had the majority rule.

“When you leave behind that 20%, just make sure what rights you get from that 80%. You may get minimal voting rights and minimal participation in capital,” he said.