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South African Companies Amendment Bill 2018 published for public comment

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Cynthia Venter

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24 September 2018

The DTI has published proposed amendments to the SA Companies Act for public comment. Amendments include: changes to the definition of "securities"; a default effective date for a notice of amendment to a MOI; a court validation process for an irregular creation, allotment or issue of shares; a section 45 carve out for any financial assistance given to a company's subsidiaries; an extension of the ambit of the disclosure register (of beneficial holdings) to all companies, not only regulated companies; and the entrenchment of property owner's rights during business rescue proceedings.

Companies Amendment Bill published

On 21 September 2018, the Department of Trade and Industry (the DTI) published the Companies Amendment Bill 2018 (the Companies Amendment Bill) containing amendments to the South African Companies Act, 2008 (the SA Companies Act) for public comment. According to the "Memorandum on the Objects of the Companies Amendment Bill, 2018" (the Explanatory Memorandum), which was published simultaneously with the Companies Amendment Bill, the SA Companies Act was "destined for review after five years of implementation". Seven years down the road, we now have our first proposed amendments to the SA Companies Act which are aimed at keeping up with "current trends" and "closing loopholes...discovered during the implementation period".

Proposed amendments under the Companies Amendment Bill

The proposed amendments include:

  • a change to the definition of "securities" in section 1 of the SA Companies Act by substituting "or options in respect thereof" for "or other instruments";
  • providing a default effective date for a notice of amendment to a company's memorandum of incorporation  (MOI) of ten business days after receipt (by the Companies and Intellectual Property Commission) of the notice of amendment, unless otherwise endorsed or rejected by the Commission prior to the expiry of that ten business day period. This amendment does not apply to a notice of amendment changing the company's name which continues to take effect on the date set out in the amended registration certificate;
  • an obligation on companies to prepare a directors' remuneration report under a newly proposed section 30A, which report must be approved and signed on behalf of the board and thereafter presented to shareholders at the annual general meeting;
  • a new section 38A providing for a court validation process for an irregular creation, allotment or issue of shares, upon application by the company or an interested party;
  • a carve out from the financial assistance provisions under section 45 (to be re-headed "Financial assistance to directors and group of companies") of the SA Companies Act of any financial assistance provided by a company to its "own subsidiary";
  • excluding from the ambit of section 48 a pro rata share-buyback where the shareholders affected are also directors of the company at the time of buyback;
  • an extension of the obligation to establish and maintain a register of disclosures (of beneficial interest holdings) provided for in section 56 of the SA Companies Act to all companies, not only regulated companies;
  • providing that the Takeover Regulations apply to an affected transaction or offer involving a profit company or its securities, if a company is a private company that falls within the provisions of section 84(1)(c)(i) (i.e. a private company that is required in terms of the SA Companies Act or regulations to have its annual financial statements audited). The Takeover Regulations will continue to apply to a private company that has expressly provided for its application to it in its memorandum of incorporation;
  • the entrenchment of a property owner's (including landlord's) rights during business rescue proceedings by including in section 135 as post-commencement financing, any amounts due by a company under business rescue to a property owner in terms of a contract which the owner has paid to a third party during the business rescue proceedings. Post-commencement financing (including employment claims) will be paid ahead of any post-commencement financing obtained from a third party, irrespective of whether they are secured or not. Property owner's are also afforded a voting interest alongside creditors during business rescue proceedings;
  • amendments relating to the power of the Companies Tribunal (for example, a proposed new power to adjudicate cases referred to it by the B-BBEE Commission) and the alternative dispute resolution process that may be followed in respect of an application for relief, or complaint, in terms of the SA Companies Act.

The above is not an exhaustive list of the amendments proposed under the Companies Amendment Bill. You can view the full Companies Amendment Bill, together with the Explanatory Memorandum, through the link included in this newsflash.

Comment process

Interested persons may submit written comments on the proposed Companies Amendment Bill within 60  calendar days from date of publication (i.e. by no later than Tuesday, 20 November 2018) to the Director-General, Department of Trade and Industry by post, hand delivery or email (see cover page of Companies Amendment Bill link included below for further details).

What you can expect from us

This newsflash is intended to provide you with an overview of the proposed amendments under the Companies Amendment Bill which may be relevant to you. We will provide further analyses on certain of the amendments over the next couple weeks.

While the amendments feel light in touch and do not address certain sections we would have hoped it did, we welcome the DTI's initiative in proposing the Companies Amendment Bill at this time and we plan to engage with the DTI through the public comment process to share our views and experiences on the SA Companies Act and comment on particular aspects of the Companies Amendment Bill.

For queries on the amendments or the public comment or parliamentary process generally, please contact Lauren Tunstall, Cynthia Venter or Nikita Shaw.

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