Page 34 - Q&A

Can a director have a proxy?

March 2020
“I serve as a director on the boards of a number of private companies.
Unfortunately, for health reasons I won’t be able to attend upcoming board
meetings at some of the companies. Can I appoint a proxy to represent me and
exercise my voting rights?”
Commercial The manner in which meetings of a board of directors of a company must
be conducted and the voting procedure relevant to such meetings are
regulated in terms of the Companies Act 71 of 2008 (“Companies Act”) and
the memorandum of incorporation of the company (“MOI”).
In terms of the Companies Act directors can attend meetings by electronic
means. A challenge however arises when a director is unable to personally
attend a meeting or is not in a position to participate in the meeting through
electronic means.

Given that the Companies Act requires a majority of the directors to be present
before a vote may be called at a meeting, the entire voting process can be
frustrated and decision making can be delayed if the majority of directors are
not present and able to participate in the meeting.

The Companies Act allow shareholders of a company to appoint proxies and
delegate certain duties to proxies such as attending shareholder meetings and
voting on their behalf at such meetings. A proxy is therefore a representative or
agent who is legally authorised to act on behalf of another party.
Unfortunately, the Companies Act does not afford directors of a company the
same right to appoint a proxy to represent them at a meeting of the board
of directors. The fiduciary duties of a director towards a company include the
duty to attend meetings of the board of directors as well as a duty to vote on
matters before the board. The aforementioned duties cannot be delegated by
a director or assigned to a third party such as a proxy.

But directors are not left entirely without a remedy. The Companies Act enables
a director to appoint an alternate director. An alternate director is a person that
is elected and appointed to serve, as the occasion requires, as a member of
the board of the company in substitution for a particular elected or appointed
director of that company. An alternate director therefore acts in the absence of
the director for which they are appointed as alternative.

An important distinction can be drawn between a proxy and an alternate
director. The alternate director does not serve in a representative capacity,
but serves as if he/she is appointed as a director of the company. The alternate
director accordingly needs to act in the best interest of the company and is
subject to all of the fiduciary duties towards the company as contemplated in
the Companies Act.

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