New companies act comes into force

2011-05-04 00:00

ON April 20 President Jacob Zuma signed the Companies Amendment Act, 2011, and on May 1 the proclamation that brings into legal force the Companies Act of 2008.

The old act dates from 1973 and it had been continually amended, so the legislature felt it was time to revamp the entire act.

The new act has been drafted by a Canadian, resulting in a number of North American influences, both stylistic and conceptual.

The new act was due to come into operation at the beginning of April, but was postponed at the last moment.

One of the perceived reasons for the delay was the apparent unreadiness of Cipro to cope with its changed role under the act — despite its protestations to the contrary. We are now led to believe that Cipro, which has changed its name to the Companies and Intellectual Property Commission (CIPC), is in fact ready.

Although the new act has now come into effect in its entirety, there are a number of transitional provisions. These include the deemed resignation of ineligible directors and a requirement that a minimum number of directors be appointed.

The memorandum and articles of a company will be contained in one document — the “Memorandum of Incorporation [MOI]”.

Going forward, any shareholders’ agreement must be consistent with the new act and the MOI, although the transitional provisions do include a two-year moratorium.

Major changes include:

•The introduction of concepts such as business rescue, fundamental transactions, alterable and unalterable provisions and appraisal rights

•The abolition of the creation of new par value shares

•The codification of directors’ duties

•Increased focus on the solvency and liquidity of a company

•Changes to financial assistance provisions, shareholders’ remedies, the role of trade unions, employee share schemes, schemes of arrangement and take-over regulations

In the forthcoming months we deal with each of the above in more detail.

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