Every board decision must be grounded in authority. The Companies Act, the company’s Memorandum of Incorporation and any sector-specific law or listing requirement establish the powers available to the board and the approvals required before the company may proceed. King V adds a principles-based governance standard that influences how those powers should be exercised and explained.
Board authority under the Companies Act
Section 66 of the Companies Act places the management of a company’s business and affairs under the direction of its board. Subject to the Act and the Memorandum of Incorporation, the board may exercise the company’s powers and perform its functions. This creates a broad mandate, but not an unlimited one.
Shareholders retain powers that the Act or the Memorandum of Incorporation reserves for them. These may include electing and removing directors, amending the Memorandum of Incorporation and approving specified transactions. Ownership does not give shareholders an automatic right to manage the company’s affairs. That responsibility remains with the board.
The distinction becomes important in companies with a controlling shareholder, investor-appointed directors or a detailed shareholder agreement. A director may owe contractual or commercial obligations outside the boardroom, but the powers of office must still be exercised on behalf of the company.
The Memorandum of Incorporation
The Memorandum of Incorporation adapts the statutory framework to the company. It may regulate board composition, appointment rights, voting thresholds, shareholder protections and the allocation of authority. It also provides the reference point against which company rules and shareholder agreements must be tested.
The document should not be treated as an incorporation record that can be forgotten once the company begins trading. A business may admit new investors, establish committees or create different classes of shares while leaving its constitutional arrangements unchanged. The resulting gaps often emerge only when a transaction or dispute requires the company to establish who held authority.
Boards should work from the company’s actual Memorandum of Incorporation rather than from assumptions about standard practice. The document should be reviewed after significant changes in ownership, funding, strategy or regulation.
King V
King V was released on 31 October 2025 and replaced King IV in its entirety. It applies to financial years beginning on or after 1 January 2026. It remains a voluntary, principles-based code rather than legislation, although listed and regulated organisations may face additional requirements connected to its use.
The Code retains an outcomes-based approach and reduces the number of principles from the earlier code. Its emphasis falls on ethical and effective leadership, responsible corporate citizenship, strategy, performance, reporting and the governance of risk, technology and information.
Proportionality remains important. A smaller company can apply the governance principles without reproducing the structures of a listed group. The board should still be able to explain how its arrangements support the intended governance outcomes.
Governance disclosure
King V is accompanied by a dedicated disclosure framework. An organisation that claims application of the Code should describe the practices through which it has applied the principles during the reporting period. A standard statement that the company follows King V will provide little insight into its actual governance.
The disclosure should correspond with the company’s board charter, committee mandates, delegation framework and published reports. Where a recommended practice has not been followed, the explanation should identify the reason and any alternative practice used to support the relevant principle.
Boards should approve governance disclosure through a considered internal process. The company secretary, legal, risk, compliance and assurance functions may contribute, but responsibility for the account given in the company’s name remains with the board.
A framework suited to the company
The legal and governance framework should operate as one system. The Companies Act establishes the statutory base. The Memorandum of Incorporation reflects the company’s chosen structure. Sector legislation and listing requirements add obligations linked to its activities or status. King V provides a wider standard for responsible leadership and accountability.
A board should be able to trace the authority for every material decision, identify the approvals required and confirm that its charters and delegations remain current. Governance then becomes part of the company’s decision-making capacity rather than a separate layer of administration.
Download 'The South African Boardroom' Booklet here:
