The Department of Trade and Industry published the Companies Amendment Bill, 2018 (hereinafter referred to as the “Bill”) on 21 September 2018 for public comment until 20 November 2018. The Bill proposes amendments to the Companies Act 71 of 2008 (hereinafter referred to as the “Act”) (the main amendments to be highlighted below), however currently there are no proposed amendments to the Companies Regulations, 2011. The main amendments proposed by the Bill are highlighted in the summary below.
Summary of Proposed Amendments in chronological order
Currently the effective date of an amendment to a company’s MOI is unclear. The Bill proposes that any amendment to a company’s MOI (other than a name change) will take effect ten business days after the receipt of the notice of amendment, including if the Companies and Intellectual Property Commission (hereinafter referred to as the “CIPC”) has either not endorsed the amendment or rejected the amendment with reasons by the expiry of the ten business day period.
Companies will have five business days to make available the companies securities register for inspection or to allow copies thereof to the person making such request in terms of the Act.
Any remuneration and benefits received by a prescribed officer (in addition to a director) will be required to be disclosed in the company’s audited financial statements and each individual director and/or prescribed officer must be named.
Directors of a public company will have to prepare a directors’ remuneration report, which must be approved by the board and presented to the shareholders at the annual general meeting (AGM) of the company.
A new offence is created for directors and prescribed offices who fail to accommodate or impede or interfere or frustrate a person’s right to inspect or copy a record as contemplated in that section.
Companies will be required to file a copy of their securities register with the CIPC annually, together with its latest annual financial statements when filing their annual returns.
The Bill proposes that where a company’s share capital structure contains errors, the company or any interested party may approach a court for an order validating the creation, allotment or issue of shares or an order confirming the terms thereof. The current Act does not make provisions for this (which was permitted under the old 1973 Act).
In terms of the current Act, financial assistance by a company to its own subsidiary company requires approval of the shareholders by a special resolution, the Bill proposes the removal of this requirement of a special resolution, which will be an exemption for such companies.
A share buy-back will not require approval by special resolution of the shareholders if it entails a pro-rata repurchase from all shareholders or transactions effected in the ordinary course on a stock exchange.
In terms of the Bill it will now be mandatory for every public company or state-owned company to appoint a social and ethics committee at each AGM. The Bill also provides for companies to apply for an exemption to the above if the company has another mechanism to perform the functions of the committee. The committee’s report will have to be presented to the shareholders at the company’s AGM.
Private companies which are required to be audited in terms of the Act or their MOI must appoint an auditor annually at a shareholders meeting (not necessarily at the AGM, which is the position currently). Furthermore, the disqualification period of a person who has had a close working relationship with a company (as contemplated in the Act) to be appointed as the auditor of that company is proposed to be reduced from 5 years to 2 years.
The Bill proposes limiting the scope of the Takeover Regulations so that they only apply to ‘affected transactions’ or ‘offers’ involving a private company or its securities, if the private company is required to have its annual financial statements audited under the Act or if its MOI so requires it to be subject to the Takeover Regulations.
Any outstanding amounts owed to a landlord by a company under business rescue for rent or services rendered, will be regarded in terms of the Bill as ‘post commencement financing’ (which enjoys preference over unsecured creditors). Furthermore, the landlord will have a voting interest in the business rescue proceedings to the extent of its claim.
Where a company has been ordered to change its name by the Companies Tribunal and fails to do so, the CIPC may be approached to substitute the company’s name with the registration number of the company as its name.
The proposed amendment sets out the responsibilities of the chairperson and executive director of the Companies Tribunal.
The Bill proposes giving the Companies Tribunal the power to adjudicate over matters referred to it by the B-BBEE Commission.
If you have any comments or suggestions with regard to the above proposed amendments, please contact our Corporate Commercial Department.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)