Companies Act might change

2018-12-12 06:01
Tracy Liebenberg

Tracy Liebenberg

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Question:

Over the years I have come to understand what the Companies Act 71 of 2008 requires of me to manage my business legally and effectively. With talk of more amendments on the way, what should I know?

Answer:

The Companies Act 71 of 2008 has, for the past seven years, been functioning without major amendment.

In September an amendment bill was published for public comment. Some of the proposed changes are welcome with certain existing laborious practices slated for simplification and certain processes clarified.

The most notable proposed amendments follow.

In terms of the amendment bill, the Companies and Intellectual Property Commission (“CIPC”) will have to endorse or reject a submitted MOI within ten business days after receipt of the notice of amendment. After such period, if the CIPC has not reverted, the MOI will be deemed effective. This will help speed up MOI submissions and approvals.

Directors’ remuneration

The newly proposed section 30A requires the preparation of a remuneration report by public companies detailing the directors’ annual remuneration to be considered by the share­holders at the annual general meeting. The detail must be in line with section 30A(2) and the King IV (2016) will have bearing on the proposed content.

Court validation

The act does not provide for instances where the share register must be corrected due to erroneous or irregular issuances or allotments. The proposed amendment will empower affected parties to approach a court to validate or correct the share issuance or erroneous allotment.

Intra-group financial assistance

The proposed amendment will do away with the burden of having the decision to provide financial assistance to a subsidiary company approved by the board and shareholders. Only the board will have to approve such financial assistance.

Social, ethics committees

The discretionary appointment of social and ethics committees by public and state-owned companies has been made mandatory.

Appointment of an auditor

The proposed amendment ensures that the auditor of a company will be an independent person. It diminishes the appointment provision in the existing act to one where the auditor may not have been in a close working relationship with the company for two financial years immediately preceding the appointment.

Private companies subject to takeover regulations as a “regulated company”

The requirements for the takeover regulations are:

  • if the company is required to be audited by reason of its Public Interest score; or
  • if the company elects to comply with the “extended accountability and trans­parency” requirements in chapter 3 of the Companies Act in its MOI.

Takeover regulations will not apply.

Employee share schemes

The ambit of employee share schemes will not be limited to share issuances to employees, but will include the purchase and sale of shares by and to employees of a company, also affecting the operation of section 41, 44 and 45 of the act regarding the requirement of special resolutions by shareholders.

Tracy Liebenberg, senior associate, Phatshoane Henney Attorneys

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