‚ÄčAnti-corruption requirements

New companies act looks at limiting corruption

Accepting a bribe
Bribe.jpg

Anti-corruption requirements embedded in Companies Act Regulations

Few companies are aware that onerous anti-corruption requirements have been included in the Regulations to the new Companies Act. This is according to Steven Powell, a Director of ENS, and Head of its Forensic Services Division.  
Speaking at the 13th Annual Conference of the Compliance Institute Southern Africa, he said that Section 43 of the Regulations of the Act, which calls for the establishment of a social and ethics board committee, is the “most important anti-corruption weapon today, but it has largely passed under the radar of many companies’ awareness.”
Together with all the requirements of good corporate citizenship that social and ethics committees must monitor, is a further requirement to monitor a company’s implementation of the recommendations for preventing corruption published by the Organisation for Economic Cooperation and Development (OECD).  
These include not offering any undue pecuniary or other advantage to public officials or the employees of business partners; prohibiting facilitation payments and performing a thorough due diligence on all agents and intermediaries.  
“You can’t just appoint third parties without ensuring that they have no history of corruption.  This includes sub-contractors, consultants, and business partners.  And it doesn’t mean doing a quick check on Google; it means doing a thorough background check and amending their contracts to include anti-bribery clauses,” Powell said. 
The recommendations also call for companies to develop and adopt adequate internal controls, ethics and compliance programmes or measures for preventing and detecting bribery, bribe solicitation and extortion and to ensure that employees are aware of these.  
“These should be developed on the basis of a risk assessment addressing the company’s individual circumstances, in particular the bribery risks it faces.”
In addition, the committee must ensure companies adhere to UN Global compact principles, and Principle 10 is reducing corruption. 
“These are onerous requirements, and in our opinion many companies are not currently applying these principles despite the fact that doing so has become law,” said Powell.  “Many companies have not even established their social and ethics committees, though the deadline for doing so was the 1st of May this year.” 
The requirement to establish a social and ethics committee applies to every state owned company, every listed public company, and any other company that has in two of the previous 5 years scored more than 500 public interest points in relation to Regulation 26 (2) of the Act. 
“As one point is scored per average employee number, one point for every R1 million in third party liability, one point for every R 1 million in turnover and a point for every person with direct or indirect beneficial interest in the company’s issued securities, a large number of companies easily reach and surpass 500 points.”
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