A phrase such as “two strikes for directors” is likely to catch attention. It can also leave a misleading impression that any director who makes two mistakes is automatically disqualified from every company. That is not a useful description of South Africa’s remuneration reporting reforms.
The relevant mechanism sits in section 30B of the Companies Act. It links shareholder approval of remuneration reporting to the accountability of the directors responsible for remuneration matters. Understanding the scope of the provision is essential before applying it to a board, an annual general meeting or a private company.
What changed and when
Proclamation 313 of 2026 brought sections 5, 6 and 19 of the Companies Amendment Act 16 of 2024 into operation on publication on 22 May 2026. Section 6 introduces sections 30A and 30B into the principal Act.
The published amendment Act is the starting point for the legal requirements. The remuneration policy and reporting regime addresses public and state owned companies. It should not be casually described as applying to every private business with a director.
The statutory rules also need to be distinguished from governance codes and listing requirements. A recommendation in a governance code and a binding provision of the Companies Act do not derive their force from the same source.
What the two strikes concern
Section 30B provides for an annual remuneration report and shareholder approval by ordinary resolution. Following a failure to secure approval, the remuneration committee must explain at the next annual general meeting how shareholder concerns were addressed. Relevant directors who are not involved in day to day management must stand for election as committee members.
If approval fails at the next annual general meeting as well, the specified committee members face the further statutory consequences, including a two year restriction on serving on that committee. This is not a general seven year disqualification from all directorships.
The affected directors may continue as directors if they successfully stand for re-election at that meeting. Section 30B(6) excludes committee members who served for less than 12 months in the year under review from the specified election and restriction consequences. The precise application should be checked against the complete section, the committee arrangements and the company’s circumstances. Do not replace that exercise with a headline suggesting that all directors automatically lose their board seats after two negative votes.
CIPC’s implementation guidance also addresses meetings convened by valid notice before 22 May 2026, even where the meeting itself takes place later. Check that guidance when assessing the first meeting affected. The commencement date alone does not resolve every timing question.
Why remuneration committees should care before the AGM
Shareholder concerns rarely become easier to address when first heard from the floor at a meeting. A committee that treats the report as a compliance attachment may discover too late that investors have substantive questions about incentives, performance and fairness.
A useful preparation process begins by identifying what the report needs to explain. Are performance measures understandable? Does the narrative match the figures? Can the committee explain a payment that appears inconsistent with the company’s results?
For example, a shareholder may accept that a retention award has a legitimate purpose but still question why it was approved while staff costs were being cut. Repeating that the award was permitted by a policy may not answer the concern about judgement. A clear explanation should connect the decision to its actual rationale.
Make the information traceable
Responsibility for the report should be agreed early. Human resources, finance, the company secretary and the remuneration committee may each hold different parts of the information. Leaving reconciliation until the meeting pack is due increases the chance of inconsistencies.
Keep a record of the source of each figure, the period covered and the approvals supporting the payment. If a term has a technical meaning, explain it consistently. A shareholder should not need to guess whether two tables use the same measure of remuneration.
Corrections should be handled openly and promptly. If the company discovers a material error after circulating a report, obtain advice on the appropriate correction and communication. Quietly changing a file on a website can create a second problem about which version shareholders were asked to consider.
Treat a negative vote as information
A first rejection should prompt more than a new introduction to the same report. Record the concerns raised, distinguish recurring themes from isolated questions and decide how the company will respond. Keep evidence of engagement rather than relying on recollections months later.
Suppose shareholders object to a bonus measure because it rewards revenue without considering whether customers pay. The committee might review the measure, explain why it remains appropriate or introduce a more balanced approach. The important point is to address the actual concern and make the response intelligible.
Engagement does not require promising that every shareholder suggestion will be adopted. It requires a serious process that allows the committee to explain what it heard, what it considered and what it decided. That record becomes particularly important when the next meeting considers the report again.
Check meeting mechanics and eligibility
The voting and committee consequences should be reflected accurately in meeting preparation. Ask the company secretary and legal advisers to check the resolutions, notices, committee positions and any restrictions affecting participation or election.
Avoid assuming that a familiar AGM template remains suitable simply because it worked last year. The distinction between approving a policy, considering a report and electing committee members needs to remain clear in the documents and in the chair’s explanation.
Companies with unusual committee arrangements should obtain specific advice. Calling a body something other than a remuneration committee does not necessarily resolve obligations that refer to another committee responsible for remuneration matters. Substance and statutory wording both matter.
For private businesses, start with scope
A small private company owner who sees the headline should first establish whether the statutory regime applies. There is little value in building an unnecessary public company process while overlooking the duties and records that actually govern the business.
There may still be good reasons to improve remuneration oversight voluntarily. Clear approvals and a record of related interests help a business explain its decisions. Those sensible practices should be described as such, rather than falsely attributed to a statutory two strike rule that does not apply.
Better reporting begins with better decisions
The practical lesson is that remuneration accountability cannot be repaired solely through wording at the end of the year. Committees need reliable information, explainable decisions and a record of responding to shareholders.
The new mechanism gives that work legal significance. Its consequences deserve careful attention, but they should be explained accurately: this is a targeted remuneration governance framework, not a general rule that two mistakes automatically end a director’s career.
Related reading: Corporate & Commercial Law; Shareholder Agreements: The Five Clauses Disputes Usually Turn On; Starting a Company Together: What Your Shareholders Agreement Should Cover; Why Most Small-Business Contracts Fail at the Termination Clause.
