Turnaround Professional Body Governance Structures

Jan van der Walt (CEO: TMA-SA) August 2009 Turnaround Professional Body Governance Structures The Turnaround Governance Board of TMA-SA and its Standards and Academic Subcommittees The premier professional community dedicated to corporate renewal and turnaround management

The turnaround industry in South Africa and the need for certification

Turnaround professional body

3. Turnaround professional body governance structures

4. Turnaround professional qualifications

TMA-SA Presentations on Turnaround Certification

Turnaround Professional Body:

Overview

Turnaround Governance Board

Standards Subcommittee

Academic Subcommittee

The TGB as regulator of business rescue practitioners

Role of Services SETA

Overview OVERVIEW Turnaround Governance Board Academic Subcommittee Standards Subcommittee

Preparing body of knowledge

Preparing, administering and scoring certification examinations

Continuing education and recertification programmes

Applications

Establishing and maintaining ethical and other professional standards

Investigating any allegation that standards were violated

Disciplinary measures

Define and administer standards of education, experience and professional conduct

Review and approve the format of all application and reference forms used

Determine whether an applicant has met standards for certification

Grant waivers or modifications

Hear and resolve complaints relating to failure to maintain standards of professional performance

Decide all requests for reconsideration of denials of or revocations of certification

Review and approve or deny continuing professional education credit requests that fall outside normal established parameters

Annually review certified members who fail to meet requirements

Turnaround Governance Board and its Subcommittees:

Overview

The Turnaround Governance Board fulfils an oversight role over the functions of its subcommittees

Functions of the Turnaround Governance Board (TGB)

Define and administer standards of education, experience and professional conduct

Review and approve the format of all application and reference forms used

Determine whether an applicant has met standards for certification

Grant waivers or modifications of specific certification requirements for good causes

Hear and resolve complaints relating to a certified member's failure to maintain standards of professional performance

Decide all requests for reconsideration of denials of or revocations of certification

Review and approve or deny continuing professional education credit requests that fall outside normal established parameters

Annually review certified members who fail to meet requirements

TURNAROUND GOVERNANCE BOARD

Turnaround Governance Board membership requirements

The board may not exceed fifteen (15) members

Each TGB member shall be elected to a one, two, or three year term

In order to demonstrate independence from potential undue influence, the TGB will not contain current TMA-SA's board members except for:

A transition period to establish the Turnaround Governance Board and the certification programme

The CEO of the TGB, who will assume the role of the Certification Director on the TMA-SA's Board of Directors

A firm may not have more than one representative on the TGB, with the exception a transition measure and with the approval of TMA

The TGB will consist of established leaders and respected individuals in the turnaround and business rescue fields such as turnaround professionals, workout lenders from banks, attorneys, and judges

Additionally, other stakeholders in turnaround certification may also form part of the TGB as representatives from other constituencies

All turnaround practitioners and advisors who are initial TGB members must agree to become certified as soon as feasible

Half of the Turnaround Governance Board requires stringent requirements for board membership

At least 50% plus one member of the Turnaround Governance Board will be TMA-SA members complying with the following requirements:

Two case studies of companies or organisations for which the prospective Board member has been engaged and has successfully completed turnarounds

Three letters of recommendations from clients other than the two cases

Three letters from others in the industry with which the prospective Board member has had direct dealing, such as bankers, attorneys, government officials, and so forth

Such letters of recommendation should comment on the proposed Board member’s qualifications, skills and integrity

A bachelor’s degree from an accredited university or at least ten (10) years of experience in executive or senior management, interim management, consulting, loan workout/restructuring, or in the legal or accounting professions or as a Business Rescue Practitioner

A minimum of five (5) years of experience as listed above, three (3) years of which must be in turnaround, two (2) years of which must be with regard to companies suffering financial distress or in a financial crisis

The experience requirement is the largest hurdle

Member in good standing of TMA-SA

Appointment of the Turnaround Governance Board

The Board of TMA-SA appoints only the initial Turnaround Governance Board and its officers

After the initial terms have elapsed, the Turnaround Governance Board become self-perpetuating by appointing for the next year, its:

Chairperson (which will be a TMA-SA member)

Deputy Chairpersons

New board members

provided 50% plus one of board members are TMA-SA members complying with the criteria previously discussed

The Turnaround Governance Board appoints its Standards and Academic Subcommittees

Turnaround Governance Board nominations

Chairperson nominee: Professor Mervyn King (Brait, King III, etc.)

Deputy Chairperson 1 appointment : David Harding (Corporate Renewal Solutions and present TMA-SA Board member):

He is the most experienced TMA-SA member

Note it is proposed that a TMA-SA veteran be the Deputy Chairperson 1 for the initial Board.

Deputy Chairperson 2 nominees : Themba September (Ingerop, ABASA), or Patrick Daly (Daly Maqubela Oliphant, ex-ABASA, King III Business Rescue Task Force, LSSA):

Note it is proposed that a senior ex-ABASA member be the second Deputy Chairperson, and that ABASA members going forward into the TGB provide their preference for the Deputy Chairperson 2 position

Nominations: Group 1 of the TGB representing TMA-SA members not in Group 2 and non-TMA-SA members, and representing at most 50% of the TGB

Nominee : Themba September (Ingerop, ex-ABASA) or Patrick Daly (Daly Maqubela Oliphant, ex-ABASA, King III Business Rescue Task Force, LSSA) depending on who is not elected as Deputy Chairperson

Nominee : Ntombi Langa-Royds (Nthake Consultants and Corporate Renewal Solutions, 2009 Chair of TMA-SA)

Appointment : Professor Anneli Loubser (UNISA, King III Business Rescue Task Force, doctoral student in law, present TMA-SA Board member, a statutory position on the TGB as Chair of the Academic Subcommittee in terms of certification by-laws)

Nominee : Judge Ralph Zulman (King III Business Rescue Task Force)

Nominee : Danile Nyalunga (Head of Workout and Restructuring, IDC)

Nominees : A nominees from organised labour is awaited

Nominations: Group 2 of the TGB representing TMA-SA members complying with prescribed requirements, and together with the Chairperson, representing 50% plus one of the TGB

CEO : Jan van der Walt (Corporate Renewal Solutions, King III Business Rescue Task Force, ex-ABASA, doctoral student in business with a research interest in business rescue, presently on the TMA-SA Board; in 2009 on TMA-SA Board as Certification Director in terms of certification by-laws, member of the Academic Subcommittee and Chair of the Standards Subcommittee)

Secretary : Philip Reynolds (Deloitte, SAICA), presently on the TMA-SA Board as Secretary)

Nominee : Karl Gribnitz (Gandalf Trust, presently on the TMA-SA Board)

Nominee : Gert Holtzhauzen (Nedbank, Banking Association of SA, past Chair of TMA-SA)

Nominee : John Sherrat (JWS Advisors, experienced corporate turnaround manager who established a certification programme with Services SETA before)

Nominees : One of Alistair Moffat or Lindsay Robertson (both from FRM Strategies), with the other as Alternate Director (permission for Alternates are still to be obtained)

Most Chapter 6 business rescue stakeholders are represented by present Turnaround Governance Board nominations

Boards of directors : Professor Mervyn King also represents the Institute of Directors

Affected persons:

Shareholders : Professor Mervyn King also represents the Institute of Directors

Creditors : Secured creditors are represented by Gert Holtzhauzen of Nedbank (and the Banking Association). Unsecured creditors are not represented

Employees/trade unions : Provision is made for a representative of organised labour

Business Rescue Practitioners : a number of nominees will qualify as Business Rescue Practitioners in terms of the programme's certification designations

Overview

The Standards Subcommittee is responsible for applications, standards and disciplinary action

Functions of the Standards Committee:

Reviewing, approving, rejecting or deferring the applications of all applicants for certification, and reviewing inquiries and appeals regarding certification, in accordance with such rules and regulations relating to granting and maintaining certification as the TGB may adopt

Establishing and maintaining ethical and other professional standards for certified turnaround professional

Investigating confidentially any allegation that a certified turnaround professional has violated the standards so established

Implementing confidentially appropriate disciplinary measures against turnaround professionals found to have violated those standards

STANDARDS SUBCOMMITTEE

Appointment of the Standards Subcommittee

The Turnaround Governance Board appoints the Standards Subcommittee

Final approval of the Standards Subcommittee must be obtained from TMA International’s Certification Oversight Committee

At least 50% of the members of the Standards Subcommittee will be TMA-SA members, and will comply with the criteria applicable to TGB TMA-SA members

Ideally, no term limits are imposed on members of the Standards Subcommittee

Members’ tenure is designed to be lengthy so that the history of the program and the institutional knowledge obtained remains with the committee

The committee should be populated with professionals similar to the Turnaround Governance Board, however the number of members required is determined by TMA-SA

All turnaround practitioners and advisors serving on any subcommittee shall strive to hold the Certified Turnaround Professional designation (“CTP”)

Standards Subcommittee nominations

Chair : Jan van der Walt (in terms of the certification by-laws the CEO of the TGB will be the Chair of the Standards Subcommittee):

Appointed by the TMA-SA Board on 19 March 2009

Philip Reynolds (Deloitte, presently a TMA-SA Board member):

Appointed by the TMA-SA Board on 19 March 2009 – note that technically, in terms of the by-laws, the TGB should endorse this appointment)

Nominee : Dale Pudney (Dale Pudney & Associates, presently a TMA-SA Board member)

Nominee : Garrath Rosslee (One World Consulting, ex-TMA-SA Board member):

With his HR background, Garrath is ideal for this position

Nominee : Jill Oliphant (Daly Maqubela Oliphant, ex-ABASA, LSSA):

She has accepted nomination John Evans (RS Advisors, ABASA, SAICA):

He has accepted the nomination, but since he will be overseas for some time he suggested that another member be nominated

Nominee : Riza Moosa (Deneys Reitz Attorneys:

He has not yet accepted his nomination.

Standards Subcommittee nominations - 2

Ideally, membership of this subcommittee should represent a spread of:

The Turnaround Management Association - Southern Africa

Banking Association

Law Society of South Africa

South African Institute of Chartered Accountants

Overview

The Academic Subcommittee is responsible for the body of knowledge, exams and continuing education

Functions of the Academic Committee:

Preparing for approval by the Standards Subcommittee a South African body of knowledge required for certification, customised from the body of knowledge of TMA

Preparing, administering and scoring South African certification examinations, with reference to the examinations of TMA

Administering the continuing education and recertification programmes

ACADEMIC SUBCOMMITTEE

Appointment and functioning of the Academic Subcommittee

The Turnaround Governance Board appoints the Chairperson of the Academic Subcommittee

The Chairperson of the Academic Subcommittee, with the Turnaround Governance Board, is responsible for recruiting subject matter expert contributors to the development of a body of knowledge applicable for the turnaround and corporate renewal practices within South Africa

These subject matter experts will serve as the Academic Subcommittee, and must have extensive knowledge of South Africa legal, managerial, and accounting and financial regulations

Individuals’ names, titles, contact information and bios must be provided to TMA International’s Certification Oversight Committee. In addition, TMA-SA must provide the name, contact information, and credentials of the chairpersons of the Academic Subcommittee to TMA International’s Director of Certification for approval by TMA International’s Certification Oversight Committee prior to final appointment

TMA International’s Certification Oversight Committee must be notified if there is a change of Chair of the Academic Subcommittee, and the name, contact information, and credentials of the new individual must be provided

Academic Subcommittee nominations

Chairperson:

Professor Anneli Loubser (UNISA, King III Business Rescue Task Force, doctoral student in law, present TMA-SA Board member, a statutory position on the TGB as Chair of the Academic Subcommittee in terms of certification by-laws)

Appointed by the TMA-SA Board on 19 March 2009 – note that technically, in terms of the by-laws, the TGB should make this appointment)

Law:

Professor Anneli Loubser

Nominee : Professor David Burdette (Nottingham Trent University, ex-ABASA, King III Business Rescue Task Force, ex-TMA-SA Board member)

Nominee: Lawrence Ngobeni (The Insolvency Firm, ex-ABASA, King III Business Rescue Task Force, doctoral student in law)

Turnaround Management:

Nominee: Professor Marius Pretorius (Associate Professor in Strategy, Leadership and Turnaround in the Department of Business Management, University of Pretoria)

Nominee: Frans van Heerden (Associate director of and lecturer at Wits Business School)

Academic Subcommittee nominations

Finance and Accounting:

Nominee: Professor Ebo Oost (UP)

Nominee: Christiaan Lamprecht (USB)

General:

Nominee: Professor Neil Harvey ( Seidman College of Business, Grand Valley State University in Michigan, founder member of TMA-SA). He and Frans van Heerden have convened and lectured at the Managing a Turnaround and Corporate Renewable programme at Wits Business School from 2002 to date

Jan van der Walt (in terms of the certification by-laws the CEO of the TGB will be a member of the Academic Subcommittee)

Overview

Turnaround as profession

Turnaround is a profession since it complies with its four requirements (Professor Rakesh Khurana of Harvard Business School):

Body of knowledge provided under a license agreement from TMA International, and customised by the Academic Subcommittee for South African conditions and requirements

Certification system – exams the Standards Subcommittee enforcing admission criteria

Enforceable Code of Ethics - disciplinary action by the Standards Subcommittee if the Code of Ethics or provisions of Chapter 6 of the Companies Act are transgressed

A commitment to use its specialised knowledge for the public good

TGB AS REGULATOR

The Turnaround Governance Board as the regulatory authority of the practice of persons as Business Rescue Practitioners

Section 138(1): A person may be appointed as the practitioner of a company only if the person:

(a) is a member in good standing of a profession subject to regulation by a regulatory authority prescribed by the Minister in terms of subsection (2)

Section 138(2): The Minister may designate one person or association within the Republic to regulate the practice of persons as practitioners in terms of this Act

The Turnaround Governance Board will apply to the Minister to be appointed as the regulatory authority on the following grounds:

Turnaround, through TMA-SA and itsTurnaround Governance Board (TGB) and its Standards Subcommittee and its Academic Subcommittee, is a profession:

With the practice of persons as business rescue practitioners the formal sector business rescue application thereof within the legal framework provided by Chapter 6

Section 138(2)(a): The Turnaround Governance Board is committed to achieving the purposes of Chapter 6

TGB AS REGULATOR

Regulatory authority (continued 2)

Section 138(2)(b): TMA-SA functions predominantly to promote sound principles and good practice of business turnaround and rescue through providing networking, knowledge about turnaround and business rescue and the turnaround and business rescue industries, education about turnaround and business rescue, and promotion of the turnaround and business rescue industries and the services of its members

Section 138(2)(c): TMA-SA has sufficient human, financial and operational resources, and adequate administrative procedures and safeguards, to enable it to function efficiently and to effectively carry out its functions in terms of Chapter 6

Section 138(3)(a): TMA-SA will accept reasonable conditions imposed by the Minister in terms of subsection 182(2) with respect to the carrying out of its functions and powers in terms of Chapter 6

TGB AS REGULATOR

Section 138(3)(b)(i): TMA-SA will administer the Minister's regulations prescribing minimum qualifications for admission of a person to the practice of a Business Rescue Practitioner :

Proposed designations qualifying as admission to be Business Rescue Practitioners follow in the next presentation

Section 138(3)(b)(ii): TMA-SA will administer the Minister's regulations prescribing procedures to be followed by the Turnaround Governance Board in carrying out its functions and powers in terms of Chapter 6:

Will maintain a register of individuals admitted to be Business Rescue Practitioners

Will craft Practice Notes for Business Rescue Practitioners with reference to Chapter 6 provisions and best practice overseas

TGB AS REGULATOR

The Standards Subcommittee will hear complaints regarding a Business Rescue Practitioner's alleged lack of compliance with the Code of Ethics and with provisions as set out in section 138 (qualifications of practitioners) and section 139 (removal and replacement of practitioner) of the Companies Act No. 71 of 2009 , and will take disciplinary action if these are transgressed

Section 143(6): The Turnaround Governance Board will administer the Minister's regulations prescribing a tariff of fees and expenses that a Business Rescue Practitioner is entitled to charge as an amount to the company for the remuneration and expenses of the Business Rescue Practitioner as per section 143(1)

TGB AS REGULATOR The Turnaround Governance Board needs the support of Services Seta to become the regulator of business rescue practitioners.