Over the past two years SAMRO, through its Board of Directors and management, has communicated extensively by means of letters, information packs, group consultations and individual meetings with its members in respect of the changes necessitated by the introduction of the Companies Act, No. 71 of 2008 (“the Act”), which came into effect on 1 May 2011.

Members are thus aware that as a result of the coming into effect of the Act, SAMRO can no longer operate as a Limited Company (Limited by Guarantee) because that corporate form has been removed from the Act.

Following a period of elaborate consultations with experts in the fields of company and copyright laws as well as corporate governance, the Board reached a conclusion and recommended to members that SAMRO be converted to a primary cooperative. Central to the recommendation was the desire to preserve most of the services and benefits members of SAMRO had become accustomed to. It was the Board’s conviction that a conversion to a cooperative would enable SAMRO to continue paying the Non-Royalty Revenue (NRR) in the form and manner it had been paid to members over the last forty years; continue making contributions to the SAMRO Retirement Annuity Fund (SRAF) on behalf of members; and continue paying the premiums for the members’ SAMRO Funeral Benefit Scheme (SFBS). Furthermore the Board believed that the governance of the Cooperative could be aligned to SAMRO’s current governance framework. The Board was cognisant of some of the limitations of a cooperative form but believed that the benefits outweighed the limitations.

At the Extraordinary General Meeting (EGM) held on 30 November 2012, for the specific purpose of voting on the conversion, 60% of the votes cast were in favour of converting to a co-operative. If the abstentions were to be discounted the vote in favour of converting to a cooperative stood at 66%. Despite this majority support for converting to a cooperative by the members who were present in-person or by proxy, the resolution could not be passed as it fell short of the statutory 75% required to pass a special resolution at a meeting of members. That effectively meant that SAMRO would default to a Non Profit Company (NPC) on 1 May 2013.

During the process of communication and consultation with members, the advantages and disadvantages of each corporate form considered were detailed and explained. Notwithstanding that, The Board believes that it is important to reiterate and confirm the consequent changes that will come into effect on 1 May 2013 as a result of defaulting to a Non-Profit Company (NPC).

The first of the consequent changes is that the NRR distribution, which traditionally has been paid at the end of November or beginning of December of each year, can no longer be paid to members in its current form.  In future the monies that were available for this distribution will be set off against the expenses of the organisation.  This means that to an extent the NRR amount is equal to the total amount for expenses, there will not be any deduction of expenses from licence fees and the amount available for distributions will increase by the same value as the NRR. If however the NRR amount is less than the total amount for expenses, the difference of the two will be deducted from the licence fees thus reducing the amount available for distributions by the difference between the NRR and the expenses.

For purposes of illustration only and using the figures for the financial years ended June 2011 and 2012 NRR would have covered 37.52% and 42.85% of total expenses respectively. The differences of 62.48% and 57.15% would have had to be deducted from licence income in 2011 and 2012 respectively.

In an event that NRR exceeds expenses the surplus after meeting all expenses will form part of the non-distributable reserves of SAMRO. These reserves may be used for different programmes such as supporting the work of the SAMRO Foundation.

One of the consequences of a change in the treatment of NRR is that there will be no pre-allocation of a portion of the distributable NRR as was the case over the years.

The second of the consequent changes is that SAMRO will no longer make future contributions on behalf of its members to the SAMRO Retirement Annuity Fund (SRAF). This implies that SRAF will become a “closed fund” with members elected after 1 May 2013 not able to join the fund. For existing members of the fund there will not be future contributions but the fund will continue to exist and be administered as optimally as possible. The growth in members’ benefit will only be a function of the markets and the performance of the investment portfolio managers. No member will therefore forfeit or lose their SRAF benefit, subject to the proper functioning of the markets and the investment portfolio. The Trustees of SRAF will be considering the feasibility of individual members making direct contributions into the fund on their own. Once a decision has been taken, the fund administrators and its principal officer will communicate accordingly.

The third consequent change is that SAMRO will no longer pay the premiums for the SAMRO Funeral Benefit Scheme. As is the case with all short term insurance products and group schemes, once the premiums are not paid the cover lapses. This means that with effect from 1 May 2013, members will no longer have the funeral benefit and can no longer approach SAMRO for funeral expenses.

The Board and senior management of SAMRO remain committed to ensuring that SAMRO is focussed on ensuring that, within the confines of the law, members receive the best service possible and that membership of SAMRO is of significant value to its members.

The process of harmonising the current constitutive documents with the Act, including merging the various documents into a single Memorandum of Incorporation (MoI) will commence shortly after 1 May 2013 and a proposed MoI will be circulated to members for consideration, comment and eventual vote at the AGM.

Yours faithfully

Nicholas Motsatse

Chief Executive Officer