Copyright Review Commission Report - ICT Law and Regulation ...

TERMS OF REFERENCESNO’SREQUIREMENTS19. Assess if all collecting societies complywith the general rules of corporategovernance in terms of relevantlegislation and the Copyright Regulations2006 that regulates the administration ofthe needle time royalty. CRC shouldassess, advise and makerecommendations.THE CRC HIGH LEVEL RESPONSESThe CRC noted the fact that SARRAL’s collapse was preceded by the corporategovernance failure. The highlights of this failure include the breakdowns or significantweaknesses in: The internal controls. For three consecutive years (2003, 2004 & 2005) the entityreceived a qualified audit report for the failure to verify receipts from theSABC andmembers’ distributions. Conflict between internal rules and the constitutive document and the fact that themanaging director was also the chairman of the organisation. The out-dated constitutive documents which were also in conflict with theCompanies Act of 1973. The change in accounting policies which were adopted in breach of its contractualobligations to its members.It is clear that the internal control and the audit functions were not overseen by aneffective audit committee.With regard to SAMRO, the following gaps were identified within their corporategovernance structure: Constitutive documents are out-dated and are in conflict with the Companies Act. There are no independent directors. An internal audit function is not in place. The disclosure of the executive directors’ remuneration is limited (in contraventionof the Companies Act of 2008 and the King III), The members’ rights are disempowered by these out-dated constitutive documents. There is a lack of transparency with regard to the categorisation of membership.The CRC recommends that the regulation of the collecting societies include theadherence to the good principles of corporate governance.REFERENCES TO CRC REPORTChapter 7- 217 -