Lize de la Harpe, Senior Legal Advisor: Regulatory Unit at Sanlam Corporate

A draft King V Code on Corporate Governance was circulated by the Institute of Directors in South Africa in February of this year for public consultation. The final version was adopted on 31 October 2025. The reasons for the new version include important updates with respect to local and national developments in corporate governance (including legislation) as well as to streamline the content and presentation of King V to support the interpretation and application thereof.

King V does not substantially deviate from the content or core principles of King IV and is applicable to all organisations regardless of their form of incorporation, including retirement funds and life insurers.

The King V Disclosure Framework is an inextricable part of giving effect to King V. The disclosure regime operates on an “apply and explain” basis. King V also includes a disclosure template which details both the form and content for disclosure on the application of the principles and the explanation of the practices.

Governance principles

Corporate governance, for the purposes of King V, is defined as the exercise of ethical and effective leadership by the governing body towards the achievement of the governance outcomes for the organisation within its economic, social and environmental context.

The governance outcomes ultimately set the criteria against which the governing body and the stakeholders of an organisation should assess the quality of governance in that organisation. As such, King V is outcomes-based, meaning that the governance of an organisation is judged primarily on its consequences.

Each of the principles in King V relates to a domain or subject area of corporate governance – the principles are universally applicable across all types and sizes of organisations in various sectors. It is up to each business to adapt and scale these practices to suit the organisational setting having regard to factors such as the size of the business, the nature and complexity of the business model of the organisation and the ownership structure of the organisation.

The governance principles have been reduced from 17 (as set out in King IV) to 13, being:

PRINCIPLE 1: The governing body leads ethically and effectively as the focal point of corporate governance in the organisation. Members of the governing body should cultivate and exemplify characteristics such as ethics, competence, responsibility, fairness and transparency. The governing body should ensure that the evaluation of its performance includes measurement of these criteria.

PRINCIPLE 2: The governing body governs the ethics of the organisation in a way that enables an ethical culture and responsible corporate citizenship. The governing body should consider and approve the policies, programmes and codes that give effect to its strategic direction on organisational ethics and continuously monitor the implementation of these policies.

PRINCIPLE 3: The governing body ensures that the organisation’s purpose, strategy and business model support performance that creates sustainable value within the organisation’s economic, social and environmental context. The governing body should adopt an organisational strategy that is representative of integrated thinking and takes account of the factors which significantly affect, or reasonably may be expected to affect, the organisation’s ability to create value over time.

PRINCIPLE 4: The governing body ensures that external reports issued by the organisation enable stakeholders to make informed assessments of how the organisation creates, preserves and erodes value within its economic, social and environmental context over the short, medium and long term. The governing body should also exercise ongoing oversight and monitoring of such external reporting.

PRINCIPLE 5: The governing body ensures that its composition is balanced with respect to the mix of competencies, diversity and independence that enables it to discharge its obligations objectively and effectively. The governing body should comprise a majority of non-executive members, most of whom should be independent. Members who have served for longer than nine years will not be regarded as independent. The governing body should appoint an independent non-executive member as its chairperson.

PRINCIPLE 5: The governing body ensures that its composition is balanced with respect to the mix of competencies, diversity and independence that enables it to discharge its obligations objectively and effectively. The governing body should comprise a majority of non-executive members, most of whom should be independent. Members who have served for longer than nine years will not be regarded as independent. The governing body should appoint an independent non-executive member as its chairperson.

PRINCIPLE 6: The governing body ensures that arrangements for delegation to committees and individuals within its own structures promote the objective and effective discharge of its obligations. Committees should have written terms of reference that are approved and reviewed by the governing body. Each committee should have a minimum of three members and collectively the members should possess the necessary competencies to execute effectively on the responsibilities and functions of the committee.

PRINCIPLE 7: The governing body ensures that the appointment and delegation to management promote operational effectiveness and that the respective roles and decision-making powers of the governing body and management are clearly defined. The CEO should be responsible for leading the implementation and execution of the approved strategy, policies and operational planning, and should serve as the primary link between management and the governing body.

PRINCIPLE 8: The governing body governs risk and compliance to enable the organisation to expand its opportunities and set and achieve its strategic objectives. The governing body should provide the strategic direction and be accountable for an effective organisation-wide risk management system.

PRINCIPLE 9: The governing body governs compliance with applicable laws and adopted policies, non-binding rules, codes and standards in a way that promotes ethics and responsible corporate citizenship. The governing body should consider and approve the policies, frameworks and standards that give effect to its strategic direction on compliance.

PRINCIPLE 10: The governing body governs data, information and technology in a way that enables the organisation to sustain and optimise its strategy and objectives. The governing body should consider and approve the policies, standards and frameworks that give effect to its direction on the management and control of data and information governance and continuously monitor the implementation thereof.

PRINCIPLE 11: The governing body ensures that the organisation remunerates fairly, responsibly and transparently. For companies, the criteria to be applied to determine the fees of the non-executive directors of the board should be outlined in a non-executive director fee policy suitable for submission to shareholders for their consideration when voting on the fees for directors’ services in accordance with Companies Act.

PRINCIPLE 12: The governing body ensures that assurance functions and services promote an effective internal control environment and safeguard the integrity of external reports issued by the organisation. The governing body should satisfy itself that a combined assurance model is developed that incorporates and optimises the assurance-related activities of line management, specialist functions and assurance service providers so that, taken as a whole, these promote an effective internal control environment and safeguard the integrity of external reports issued by the organisation.

PRINCIPLE 13: The governing body adopts a stakeholder-inclusive approach in the execution of its duties in the long-term best interests of the organisation within its economic, social and environmental context. The governing body should consider and approve policies and planning that give effect to its strategic direction on stakeholder relationships. The governing body of the organisation that owns a controlling interest in other organisation(s) should provide the strategic direction and be accountable for the arrangements that formalise the relationships and exercise of authority within the group. To ensure that each subsidiary organisation within the group is recognised as a separate juristic entity to whom its governing body members owe fiduciary duties, the adoption of the group governance framework should also be considered and approved by the governing bodies of the subsidiary organisations.

Conclusion

Corporate governance is no longer a mere compliance exercise – King V makes it clear that an organisation cannot claim to have sound governance simply based on the implementation of the recommended practices. The governance of an organisation will be judged primarily on its consequences.

King V applies to financial years beginning on 1 January 2026 and business are encouraged to review and adopt the revised code timeously.

ENDS