Legal Matters – The new Companies Act for South Africa is to be implemented shortly
Did you know that the new Companies Act is to be implemented shortly? It was passed into law on the 09th April 2009 and it was widely held that it was going to come into effect on the 01st July 2010. The new deadline appears to be 01st October 2010.
The new act aims to increase Corporate efficiency, transparency, disclosure and accountability, as well as introducing new Company structures designed to simplify the existing regime and increase the flexibility of corporate administration. The old rules did not really cater for small businesses but the new act does. The old act has been completely overhauled and updated and the changes will have far reaching implications for companies, close corporations, directors, shareholders and members.
Most of us will be affected in one way or another by these changes and if you are a Director and/or Shareholder of a Company or a member of a Close Corporation, it is essential that you understand the new rules and also familiarise yourself with the transitional measures that will be put into place.
Briefly, some of the new provisions and the transitional measures of the new Act are:
- Close Corporations can still be incorporated until the new Act comes into operation (October 2010) after which no new Close Corporations will be incorporated.
- Existing Close Corporations can choose to either convert to a Company or continue to exist until deregistration or dissolution in terms of the Close Corporations Act.
- Close Corporations that continue as such will have to compile financial statements that will be subject to the same provisions and requirements that the Minister regulates in the case of Companies with regards to accounting standards and audit/reviews.
- Existing Companies will have a period of 2 years within which to re-write and register a Memorandum of Incorporation (MOI) to replace the existing Memorandum And Articles of Association. The same grace period however does not apply to shareholders agreements and so from day one you will need to have a new and updated shareholders agreement in place.
- A Company Tribunal has been introduced (similar to the Ombudsman) that will be able to deal with many disputes, mainly to do with interpretational issues. This will be your first port of call for dispute resolution, although the High Court will remain the primary forum for dispute resolutions, the interpretation and enforcement of the Companies Act and its regulations.
- A Public Company is required to implement a reporting process for whistleblowers and has additional transparency and accountability requirements.
- Shares will no longer have a par or nominal value.
- The standard of Directors conduct has been substantially increased and the definitions of Directors is very wide. It is clear that, taking the new provisions into account, don't take on a position as Director unless you are suitably skilled and you take all the necessary precautions otherwise you could incur personal liability.
These are just a few of the new provisions that one would need to take cognisance of. Please call us if you require any further information or you would like us to assist you with the restructuring of your portfolios and also to guide you through these transitional measures.
Courtesy: Anthony Whatmore
For further information please contact:
Anthony Whatmore Attorneys & Conveyancers
Tel: +27 (31) 563 7111