The Companies Act 71 of 2008 has, for the past seven years, been functioning without any major amendment thereto. In September 2018 however an amendment Bill has been published for public comment. Some of the proposed changes are certainly welcome with certain existing laborious practices slated for simplification and certain processes clarified.
The most notable proposed amendments affecting the day to day running of your business and your business structure are set out below:
1. Amendments to the Memorandum of Incorporation (“MOI”)
In terms of the amendment Bill, the Companies and Intellectual Property Commission (“CIPC”) will have to endorse or reject a submitted MOI within 10 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.
2. Remuneration report: Directors’ remuneration
The newly proposed section 30A of the Bill 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 thereof must be in line with section 30A(2) and it is further opined that the King IV (2016) will also have bearing on the proposed content.
3. Share capital matters: Court validation
The existing Companies 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 any affected party to approach a competent court to validate or correct the share issuance or erroneous allotment.
4. Intra-group financial assistance
The proposed amendment will do away with the often arduous regulatory burden of having the decision to provide financial assistance to a subsidiary company be approved by the board and shareholders. Only the board will have to approve such financial assistance.
5. Public and state owned companies must have social and ethics committees
The discretionary appointment of social and ethics committees by public and state-owned companies at the annual general meeting has been made mandatory by the amendment Bill.
6. The appointment of an auditor
The proposed amendment to section 90 of the Companies Act further ensures that the auditor of a company will be an independent person from the company he or she audits. The amendment 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 (which includes but is not limited to director, prescribed officer, employee, consultant etc.) for a period of two financial years immediately preceding the appointment.
7. Private companies to become subject to the Takeover Regulations as a “regulated company”
For a private company to be subject to the takeover regulations contemplated in the Companies Act when embarking on affected transactions, the requirements to be met for the takeover regulations to apply are proposed to be limited to the following instances:
- 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.
In all other instances, the takeover regulations will not apply.
8. Employee share schemes extended
The ambit of employee share schemes will no longer be limited to share issuances to employees, but will now include the purchase and sale of shares by and to employees of a company, thereby also affecting the operation of section 41, 44 and 45 of the Companies Act regarding the requirement of special resolutions by shareholders.
