The current Companies Act is more than 30 years old. There is an urgent need to reform South African company law in order to bring it in line with international best practice and to enhance transparency and good corporate governance. To achieve this two pieces of legislation are being proposed, the Corporate Laws Amendment Act and the Companies Bill. The Corporate Laws Amendment Act has been passed into law but has not taken effect yet. It is rumored that it will become effective in October 2007, but we have not received any formal confirmation on this. The Companies Bill will replace the current Companies Act and will probably take effect in 2010.
The Corporate Laws Amendment Act will introduce a new classification of companies, within the current framework of the Companies Act. The Act will introduce new and more stringent requirements in respect of financial statements, financial controls and the auditors in respect of widely held companies. In addition, the act introduces new amendments to section 38 (the general financial assistance prohibition provision) and to the ability of directors to dispose of the whole or substantially the whole of the assets of a company (section 228). Section 228 will be amended so as to require a 75% majority (special resolution) instead of the current requirement of more than 50% (ordinary resolution).
The Companies Bill will replace the current Companies Act and will be a complete revamp of company law in South Africa. It introduces new forms of companies, abolishes the current distinction between private and public companies and provides for new descriptions of companies. The way companies are formed and generally the way companies conduct their affairs will be changed completely. The Companies Bill also introduces new merger and amalgamation provisions and amends the provisions regulating mergers and acquisitions. The Companies Bill introduces more stringent requirements in respect of directors’ duties, financial reporting, auditors and corporate governance, but allows smaller companies more flexibility. The Companies Bill also reforms the liquidation process and replaces it with a more modern business rescue regime.
Our series of seminars will give you an indept understanding of how the major changes will impact on companies and the way they conduct business.
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