This article uses two case law examples (New Zealand and South Africa), to illustrate how a questionnaire could be developed in practice as a method to identify a breach of ethics with reference to King IV, the FMA handbook and the NZX code. These two cases use terminology as found in relevant corporate governance codes and illustrate how to interpret those terminologies correctly, i.e. in terms of honesty and integrity. Relevant literature is reviewed in reference to the two case law examples. To interpret a corporate governance term properly, reference should also be made to appropriate legislation, e.g., the Companies Act when drafting a questionnaire. To understand corporate governance codes a holistic view should be adopted by the board of directors when drafting a corporate governance questionnaire. Such a questionnaire could provide the necessary insight as a method to prevent unethical business behaviour in future.
Reinsurance treaties and binder agreements regulate penalty calculations in the event the insurer and underwriting manager is unprofitable and/or profitable. The formulae and different premium terminologies are investigated to calculate loss ratios and whether there is an overlap in sliding scale penalty calculations/formulae relevant to loss ratios of treaties and binder agreements. Treaties and binder agreements generally use sliding scale penalties to calculate reinsurance commission or sharing in the insurer’s profits by an underwriting manager and is in conflict with the Conventional Penalties Act 15 of 1962 of South Africa. The Conventional Penalties Act 15 of 1962 must guide reinsurers and insurers in their profit calculations formulae to prevent any form of sliding scale penalties relevant to loss ratios. It is therefore suggested that a standard template of profit calculations and terminologies should be used in binder agreements to prevent different calculations of loss ratios in the short term insurance landscape. This will guide the Financial Conduct Authority Services (previously the Financial Services Board) to understand loss ratios of affordable short term financial products when compared to loss ratios of other short term financial products in South Africa.
Keywords: Reinsurance commission; loss ratio; risk premium; penalties; underwriting manager
In the matter between Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd 2013 NSWSC 235 (25 Mar 2013) the Supreme Court of New South Wales had to decide on the legal difficulty arising from unpaid dividends. The Court was required to decide whether a shareholder has a right to a predetermined annual dividend. The principles applied by the Supreme Court entailed estoppel (common law), minority oppression (company law) and contractual law principles. Although the principles of estoppel were relevant, these fall outside the ambit of this article concerning unpaid dividends. The Supreme Court cited approximately 40 cases and considered 5000 pages of documentary evidence pertaining to the contractual right to a predetermined dividend. Although the latter seems applicable and relevant to the South African corporate law environment, South African case law does not support it. Besides a contractual right, this article also investigates the Oxford Legal Group case in establishing at least an implied right (based on the doctrine of proper purpose) to claim an undeclared dividend or unauthorised dividend that is contrary to the board of directors discretion not to authorise any dividends. Both these cases argue when and why a court should interfere in company resolutions in striking a better balance between a right to a dividend and a company's discretionary power not to recommend or declare a dividend.
1954 1 All ER 749 (CA), the court remarked that there is no accountancy principle that fixes or limits the calculation of the value of shares. Also see Donaldson Investments v Anglo-Transvaal Collieries 1979 3 SA 713 (W) 731H-732B.
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