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6.3.3. SAMPRA should be given one year to rectify all areas of non-compliance.6.3.4. The CRC recommends that the legislation be amended to allow for one collecting society per set of rights withregard to all music rights governed by the Copyright Act of 1978 (performance, needletime and mechanicalrights). Currently, only the needletime collecting societies are supervised by the Registrar. Due to the recentcollapse of SARRAL and inadequate protection of its members, the CRC believes it appropriate to regulate allrelevant collecting societies. Due to administration problems (consistently voiced by users and interestedparties) associated with the multiple collecting societies and the international trends for both developed anddeveloping countries, the CRC believes that ‘one society one right’ is the answer for the current situation. Aspart of this change, it proposes that all collecting societies be mixed (e.g. a collecting society for needletimeshould cater for both performers and record companies) and existing societies should be given a period of twoyears to merge, failing which an appropriate process should be used to appoint the mixed collection societies.The suggested merger of collecting organisations is as follows: For mechanical rights, it is suggested that NORM’s and SAMRO’s mechanical rights units merge to formone collecting society for mechanical rights; For needletime, SAMPRA should merge with SAMRO’s needletime unit to form one collecting society forneedletime; and SAMRO should remain with performance rights.7 LEVEL OF CORPORATE GOVERNANCE COMPLIANCE BY COLLECTINGSOCIETIES7.1 BACKGROUND: COLLAPSE OF SARRAL7.1.1. SARRAL was a collecting society looking after the mechanical rights of composers. SARRAL’s objective wasthe protection, reinforcement and enhancement of composers’ rights. The court ordered the liquidation ofSARRAL almost three years ago due to insolvency. A significant number of music composers and artists losthuge amounts of monies between 2003 and 2008 due to legal costs, reduced collections and other increasedcosts arising as result of legal disputes.7.1.2. The following facts should be kept in mind:7.1.2.1. SARRAL’s change of business model or accounting policies (between 2003 and 2004) resulted in abreach of contract with members. An extract from SARRAL’s standard member's contract is as follows: “Inconsideration therefore SARRAL shall be entitled to retain a commission of 7,5% of the gross total ofroyalties collected.” The consequences of the change in business model or accounting policies were thatthe members only received between 50% and 60% of the collections instead of 92,5% (100% minus 7,5%)as per their agreements with SARRAL. Without altering the members’ contracts, SARRAL unilaterallydecided not to honour the agreements (See Appendix 5 for a copy of SARRAL’s contract with one of itsmembers).7.1.2.2. According to the external auditors, they could not verify receipts from the SABC and distributions to themembers for the three consecutive financial periods of 2003, 2004 and 2005. (See Appendix 6 for copies- 46 -
of the audit reports for the respective periods.) The amounts involved are significant and warranted aformal investigation. Based on the investigations carried out, the members were never provided withsatisfactory answers as to what happened to the money.7.1.3. The CRC believes that sound corporate governance would have been able to deal with the above-mentionedsources of the problems. Examples of where corporate governance failed SARRAL are listed in Table 2:Table 2: Examples Where Corporate Governance Failed SARRALCorporate Governance GapsKing II RequirementsPotential Implications of Non-AdherenceThe constitutive documents (theMemorandum and Articles ofAssociations) were badly wordedand contradictory.a.For example: Section 48 of theArticles of the Association says, “TheBoard shall pay and defray theexpenses and liabilities of thecompany, incurred in the exercise orenforcement of the rights vested inor controlled by the company, out ofthe money received by company.”The extract from Rule 17: “The boardof directors may from time to timedetermine the rates of commission. Itwill charge any member or nonmember.”King II is silent on the matter.Due to this ambiguity, the directorsthought that they could apply any ofthe two principles, depending on thecircumstances.For about 40 years, they applied a‘commission-based principle’ andwhen they noticed a deterioration ofthe financial position of the company,the other principle was adopted.Both cannot be done. It is either a‘recovery of expenses’ or‘commission-based’.b.The constitutive documents (theMemorandum and the Articles of theAssociation) were in conflict with theCompanies Act of 1973 (amended).According to the Articles ofAssociation, the quorum for theSpecial Resolutions was threemembers and the simple majoritywas required for Special Resolution.The directors were not prohibitedfrom voting and all directors were themembers.According to Section 56 and 62 ofthe Companies Act of 1973 (asamended), for a Special Resolutionto be effective at least 75% of themembers present should vote infavour of it. The quorum for theSpecial Resolution is one-fourth ofthe total membership.The directors (three membersconstituted a quorum) could pass aSpecial Resolution without theparticipation of any of the ordinarymembers.- 47 -
Page 2 and 3: TABLE OF CONTENTSLIST OF ABBREVIATI
Page 4 and 5: 11.8 RECOMMENDATIONS ..............
Page 6 and 7: LIST OF TABLESTable 1: Cases of Non
Page 8 and 9: NORMOSPsPOSAPPLPPL (India)ProLitter
Page 10 and 11: These problems are addressed in the
Page 12 and 13: xxi.The report considers developmen
Page 14 and 15: 1.3.8. Determine whether all money
Page 16 and 17: 1.4.9. The CRC derived considerable
Page 18 and 19: 2.3 SUBMISSION BY THE DEPARTMENT OF
Page 20 and 21: Aspects of Intellectual Property Ri
Page 22 and 23: (1) Subject to the provisions of th
Page 24 and 25: Copyright Tribunal or an arbitrator
Page 26 and 27: society, the South African Recordin
Page 28 and 29: 3.2.14. With the liquidation of SAR
Page 30 and 31: the final rate or rates to be appli
Page 32 and 33: (a)that payment is to be made to th
Page 34 and 35: information as to their use to enab
Page 36 and 37: The WCT and WPPT oblige members to
Page 38 and 39: Once the handset technology changed
Page 40 and 41: 4.3.16. In 2009, in what was coined
Page 42 and 43: 4.4.6. In exchange for the above li
Page 44 and 45: operators are licensed by NORM to p
Page 46 and 47: 5.2 FUNCTIONING OF COLLECTING SOCIE
Page 48 and 49: the grant of licences. Article 17 o
Page 50 and 51: 6.1.3. The CRC’s assessment of th
Page 54 and 55: Corporate Governance GapsKing II Re
Page 56 and 57: King IIIPrincipleKing IIIRequiremen
Page 58 and 59: King IIIPrincipleKing IIIRequiremen
Page 60 and 61: 8 COLLECTION OF MUSIC ROYALTIES8.1
Page 62 and 63: 8.1.4.2. Needletime royalties are n
Page 64 and 65: 8.1.7.4. For the past five years, V
Page 66 and 67: PRS (UK)SPRE (FRANCE)SUISA(SWITZERL
Page 68 and 69: DetailsPerformance RightsSound Reco
Page 70 and 71: 8.2.7 Comparative Study Performed b
Page 72 and 73: y a collecting society. A rights ho
Page 74 and 75: agency, its rights being derived fr
Page 76 and 77: Mr Robinson said DALRO assumed the
Page 78 and 79: 10.1.6. The distribution to publish
Page 80 and 81: 10.4.4. Most of the other collectin
Page 82 and 83: 10.6.3.4. South African English-lis
Page 84 and 85: 10.10 CONTRACTUAL RELATIONSHIPS BET
Page 86 and 87: 10.12.2. The Regulations should rec
Page 88 and 89: licence that the licensee comply wi
Page 90 and 91: 11.4.6. The details of ICASA’s ta
Page 92 and 93: RecommendationsTimelines for Recomm
Page 94 and 95: enterprises. There was a suggestion
Page 96 and 97: Copyright as it relates to copyrigh
Page 98 and 99: 13.4 DEPARTMENT OF ARTS AND CULTURE
Page 100 and 101: Table 28: Comparative Study’s Key
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KEY ITEMS BRAZIL FRANCE INDIA NORWA
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KEY ITEMS BRAZIL FRANCE INDIA NORWA
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about 30%, which is the highest amo
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15.1.3. The Copyright Tribunal’s
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15.1.20. Local music content requir
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for the selected artists. The outco
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King III Report by Institute of Dir
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Paranagua Pedro, “Strategies to I
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Copyright Amendment Act of 1984Copy
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APPENDIX 1(B): SUMMARY OF ORAL REPR
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Due to the fact that the existing c
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Mr BrottelProtection of copyright m
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1.1.3. LIST OF ENTITIES VISITED AND
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In the 2009 Annual Report of ABRAMU
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The implementation of this law led
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ecordings. In respect of audio-visu
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In 1995, ECAD distributed 72% of it
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niches in the market to ensure fair
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Proprietary rights allow authors to
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International royalty distribution
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3.2. Relevant LegislationsThe prese
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IPRS uses the standard tariffs in r
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Ad-hoc workshops on copyright are c
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meaningful living out of their crea
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4.1.3. LICENSING AND LEGAL REGIMESI
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Ballet teachers; Teachers in the fi
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It was founded in 1928 by the Norwe
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6.2. STRUCTURE OF COLLECTING SOCIET
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6.5. COLLECTION OF MUSIC ROYALTIEST
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1957, when the Managing Director of
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16.4.14 SWISSPERFORM: CHF4 millionI
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Cross-border licensing of digital r
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algorithm could be used to determin
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Collecting societies in the UK all
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APPENDIX 3: RECOMMENDATIONS BY MITT
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1.PREAMBLEThe Music Industry Task T
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The environment in which the music
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3.1.3 IMPLEMENTATION AND ACCESSION
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In this regard, the Minister should
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3.5.6 OMBUDSMANThe music industry s
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RECOMMENDATION 23:The MITT recommen
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The MITT further recommends that DA
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APPENDIX 4A: EXTRACTS FROM COPYRIGH
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(f)(g)doing, in relation to an adap
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(i)requiring notice of any intended
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(b)any organization claiming to be
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PERFORMERS’ PROTECTION ACTNO. 11
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the parties may agree to refer the
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ANNEXURE 5: COPY OF SARRAL’S CONT
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ANNEXURE 6: SARRAL’S AUDIT REPORT
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TERMS OF REFERENCESNO’SREQUIREMEN
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