To amend the Companies Act, 2008, so as to effect certain legal-technical and grammatical amendments in order to ensure the proper application and administration of the principal Act subsequent to its commencement; to correct certain errors resulting in inconsistency and ambiguity in the principal Act; to establish a proper foundation for certain necessary regulations; to continue the mechanisms established under section 335 of the Companies Act, 1973, which allow for the transfer of registration of foreign companies to the jurisdiction of the Republic; and to provide for matters connected therewith.
Part 1 5 1. Substitution of section 86 of Act 71 of 2008 52.
Amendment of Title of Part A of Chapter 6 of Act 71 of 2008 77. Substitution for section 138 of Act 71 of 2008 85.
Amendment of section 212 of Act 71 of 2008 112.
by the substitution for the deï¬nition of ''member'' of the following a close corporation, has the meaning set out in section 1 of the Close Corporations Act, 1984 (Act No.
by the substitution for the deï¬nition of ''securities'' of the following deï¬nition: '''securities' [has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No.
''(a) [falls within the meaning of 'state-owned enterprise' in terms] is listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act, 1999 (Act No. 1 of 1999); or''.
''(c) unless the Memorandum of Incorporation of the company provides otherwise, [a person] when applying the test in respect of a distribution contemplated in paragraph (a) of the deï¬nition of 'distribution' in section 1, a person is not to [be regarded] include as a liability any amount that would be required, if the company were to be liquidated at the time of the distribution, to satisfy the preferential rights upon liquidation of shareholders whose preferential rights upon liquidation are superior to the preferential rights upon liquidation of those receiving the distribution.''.
Amendment of section 5 of Act 71 of 2008 3.
the provisions of both this Act and the listing requirements apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and to the extent that it is impossible to apply and comply with one of the inconsistent provisions without contravening the second, the provisions of this Act prevail, except to the extent that this Act expressly provides otherwise.''.
''(7) An unaltered electronically or mechanically generated reproduction of any document, other than a share certiï¬cate, may be substituted for the original for any purpose for which the original could be used in terms of this Act, if that reproduction satisï¬es any applicable prescribed requirements as to the form or manner of reproduction.'
regulations contemplated in section 30(7). [(d)] (e) Chapter 4 - Public offerings of company securities.
[(f)] (g) Sections 146(d), and 152(3)(c) - Rights of shareholders to approve a business rescue plan, except to the extent that the non-proï¬t company is itself a shareholder of a proï¬t company that is engaged in business rescue proceedings.
a name registered for the use of a person, other than the company itself or a person controlling the company, as a defensive name in terms of section 12(9), or as a business name in terms of the Business Names Act, 1960 (Act No.
a registered trade mark belonging to a person other than the company, or a mark in respect of which an application has been ï¬led in the Republic for registration as a trade mark or a well-known trademark as contemplated in section 35 of the Trade Marks Act, 1993 (Act No.
''(ii) The expression ''Proprietary Limited'' or its abbreviation, ''[(Pty) Ltd] Pty'', in the case of a private company.'
''(10) The registration of a defensive name may be transferred to another person by notice in the prescribed manner and form and upon payment of the prescribed fee.''.
''(5) Subject to subsections (6) and (7), a foreign company may apply in the prescribed manner and form, accompanied by the prescribed application fee, to transfer its registration to the Republic from the foreign jurisdiction in which it is registered, and thereafter exists as a company in terms of this Act as if it had been originally so incorporated and registered.
''(5A) Any failure to ratify the rules of a company does not affect the validity of anything done in terms of those rules during the period that they had an interim effect as provided in subsection (4)(c)(i).'
the date, if any, set out in the Notice of Amendment.'
''(4) One or more shareholders, directors or prescribed officers of a company, or a trade union representing employees of the company, may [take proceedings] apply to the High Court for an appropriate order to restrain the company from doing anything inconsistent with this Act.'
declare that the company is to be deemed not to be a juristic person in respect of any right, obligation or liability of the company or of a shareholder of the company or, in the case of a non-proï¬t company, a member of the company, or of another person speciï¬ed in the declaration; and make any further order the court considers appropriate to give effect to a declaration contemplated in paragraph (a).''.
is a party to one or more employment contracts within the Republic; or subject to subsection (2A), is engaging in a course of conduct, or has engaged in a course or pattern of activities within the Republic over a period of at least six months, such as would lead a person to reasonably conclude that the company intended to continually engage in business or non-proï¬t activities within the Republic.
a securities register or its equivalent, as required by section 50, in the case of a proï¬t company, or a member's register in the case of a non-proï¬t company that has members; and the records required in terms of section 85, if that section applies to the company.''.
in accordance with the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000).'
to otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person of the rights set out in this section or section 31.''.
''(i) [do not] fail in a material way to comply with the requirements of subsection (1); or''.
''(2A) Except to the extent required by any other law or agreement, a private company is exempt from the requirements in this section to have its annual ï¬nancial statements audited or independently reviewed, and from the requirements of subsection (3)(d), if every person who is a holder of, or has a beneï¬cial interest in, any securities issued by the company is also a director of the company.'
''(8) Despite section 1 of the Auditing Profession Act, an independent review of a company's annual ï¬nancial statements required by this section does not constitute an audit within the meaning of that Act.''.
Section 32 of the principal Act is hereby amended by the deletion of subsection (6).
''(1) All of the shares of any particular class authorised by a company have preferences, rights, limitations and other terms that are identical to those of other shares of the same class [, except to the extent that the company's Memorandum of Incorporation provides otherwise].'
acquires the rights associated with any particular securities of a company when that person's name is entered in the company's securities register as a person to whom those securities have been issued or transferred; and ceases to have the rights associated with any particular securities of a company when the transfer to another person, re-acquisition by the company, or surrender to the company of those securities has been entered in the company's securities register.''.
Amendment of section 38 of Act 71 of 2008 24.
''(2) [To] Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide ï¬nancial assistance by way of a loan, guarantee, the provision of security or otherwise to any person for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, subject to subsections (3) and (4).''; and by the substitution in subsection (6) for the words preceding paragraph (a) of the following words: ''If a resolution or an agreement [has been declared] is void in terms of subsection (5) [read with section 218(1),] a director of the company is liable to the extent set out in section 77(3)(e)(iv) if the director-''.
Amendment of section 45 of Act 71 of 2008 28.
by the substitution in subsection (7) for the words preceding paragraph (a) of the following words: ''If a resolution or agreement [has been declared] is void in terms of subsection (6) [read with section 218(1),] a director of the company is liable to the extent set out in section 77(3)(e)(v) if the director-''.
Amendment of section 48 of Act 71 of 2008 29.
must be approved by a special resolution of the shareholders of the company if any shares are to be acquired by the company from a director or prescribed officer of the company, or a person related to a director or prescribed officer of the company; and is subject to the requirements of sections 114 and 115 if, considered alone, or together with other transactions in an integrated series of transactions, it involves the acquisition by the company of more than 5% of the issued shares of any particular class of the company's shares.''.
''(5) A court may not order the name of a transferee contemplated in this section to be removed from [a] an uncertiï¬cated securities register, unless that person was a party to or had knowledge of a fraud or illegality as contemplated in subsection (4).''.
''(b) the identity of each person with a beneï¬cial interest in the securities so held, the number and class of securities held for each such person with a beneï¬cial interest, and the extent of each such beneï¬cial interest.'
by the insertion after subsection (7) of the following subsections: ''(8) Subsections (9) to (11) do not apply in respect of securities that are subject to the rules of a central securities depository.
''(1) In this Part, 'shareholder' [means] has the meaning set out in section 1, but also includes a person who is entitled to exercise any voting rights in relation to a company, irrespective of the form, title or nature of the securities to which those voting rights are attached.'
''(7) For greater certainty, this section applies to the exercise of authority within a company in respect of any matter arising in terms of this Act or a company's Memorandum of Incorporation, irrespective of whether any such particular matter is expressly addressed in this Part.''.
''(a) a shareholder of that company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder;''.
Amendment of section 61 of Act 71 of 2008 36.
is present at the meeting; and votes to waive the required minimum notice of the meeting.'
waive notice of the meeting; or in the case of a material defect in the manner and form of giving notice, ratify the defective notice.'
''(4) [Any person present and entitled to exercise voting rights must on a show of hands have only one vote, irrespective of the number of shares he or she holds or represents] At a meeting of shareholders, voting may either be by show of hands, or by polling.
[On a poll at any meeting of a company, any member including his or her proxy, must be entitled to exercise all the voting rights attached to the shares held or represented by that person] If voting is by show of hands, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder and entitled to exercise voting rights has one vote, irrespective of the number of voting rights that person would otherwise be entitled to exercise.'
''(6) If voting on a particular matter is by polling, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder, has the number of votes determined in accordance with the voting rights associated with the securities held by that shareholder.
at least ï¬ve persons having the right to vote on that matter, either as a shareholder or a proxy representing a shareholder; or a person who is, or persons who together are, entitled, as a shareholder or proxy representing a shareholder, to exercise at least 10% of the voting rights entitled to be voted on that matter.''.
Amendment of section 64 of Act 71 of 2008 39.
by the substitution in subsections (8) and (10) for the closing phrase of the following: ''provided that there must at all times be a margin of at least 10 percentage points between the [requirements] highest established requirement for approval of an ordinary resolution on any matter, and the lowest established requirement for approval of a special resolution [,] on any matter.'
''(1) Subject to subsection (3), each director of a proï¬t company, other than the ï¬rst director or a director contemplated in section 66(4)(a)(i) or (ii), must be elected by the persons entitled to exercise voting rights in such an election, to serve for an indeï¬nite term, or for a term as set out in the Memorandum of Incorporation.'
''(3) Unless the Memorandum of Incorporation of a proï¬t company provides otherwise, the board may appoint a person who satisï¬es the requirements for election as a director to ï¬ll any vacancy and serve as a director of the company on a temporary basis until the vacancy has been ï¬lled by election in terms of subsection (2), and during that period any person so appointed has all of the powers, functions and duties, and is subject to all of the liabilities, of any other director of the company.''.
rules governing the composition and conduct of social and ethics committees.'
''related person'', when used in reference to a director, has the meaning set out in section 1, but also includes a second company of which the director or a related person is also a director, or a close corporation of which the director or a related person is a member.'
has been declared to be valid by a court in terms of subsection (8).
Amendment of section 78 of Act 71 of 2008 47.
''(3) [A] Subject to subsection (3A), a company may not directly or indirectly pay any ï¬ne that may be imposed on a director of the company, or on a director of a related company, [who has been] as a consequence of that director having been convicted of an offence in terms of any national legislation.'
a single individual is the sole shareholder and sole director of that company; or two or more related individuals are the only shareholders of that company, and there are no directors of the company other than one or more of those individuals.'
the shareholders have adopted a special resolution approving such an application and transfer of registration; and the company has satisï¬ed the prescribed requirements for doing so.
''(1) A company is dissolved as of the date its name is removed from the companies register unless the reason for the removal is that the company's registration has been transferred to a foreign jurisdiction, as contemplated in section 82(5).''.
if the company is required by this Act or the regulations to have its annual ï¬nancial statements audited every year; or otherwise, only to the extent that the company's Memorandum of Incorporation so requires, as contemplated in section 34(2).'
''If the board of a [public company or state-owned] company fails to make an appointment [contemplated in subsection (4) in accordance with] as required by this Part-''.
in accordance with subsection (1), if the requirement to have its annual ï¬nancial statements audited applies to that company when it is incorporated; or at the annual general meeting at which the requirement ï¬rst applies to the company, and each annual general meeting thereafter.''.
''(6) Section 89, read with the changes required by the context, applies with respect to an auditor of a company, but a reference in that section to ''company secretary'' must be regarded as referring to the company's auditor.''.
Amendment of section 94 of Act 71 of 2008 54.
''(9) Nothing in this section precludes the appointment by a [public] company at its annual general meeting of an auditor other than one nominated by the audit committee, but if such an auditor is appointed, the appointment is valid only if the audit committee is satisï¬ed that the proposed auditor is independent of the company.''.
a member; or [(bb)](ii) with [whom] which the ï¬rst company proposes to be amalgamated or to merge[; or] [(cc) into which the ï¬rst company proposes to be amalgamated].'
Amendment of section 97 of Act 71 of 2008 56.
Amendment of section 98 of Act 71 of 2008 57.
''(c) the court, on an application in terms of paragraph (b)(ii), may make any order that is just and equitable in the circumstances [,] including, but not limited to, an order-''.
Amendment of section 101 of Act 71 of 2008 59.
by the substitution in subsection (2) for paragraph (b) of the following paragraph: ''(b) [to] the use of that person's name in the prospectus.''.
[(ii)] (b) to indemnify any person against liability under section 104(6).''.
every director of the company concerned and, if the offeror is a company, every director of that company, is liable to the extent set out in section 77(3)(e)(vii), if the allotment or acceptance is declared void under paragraph (a).''.
Amendment of section 112 of Act 71 of 2008 65.
''(4) Any part of the undertaking or assets of a company to be disposed of, as contemplated in this section, must be given its fair market value, as calculated in the prescribed manner, as at the date of the proposal, [in accordance with the ï¬nancial reporting standards] which date must be determined in the prescribed manner.
A resolution contemplated in subsection (2)(a) is effective only to the extent that it authorises [or ratiï¬es] a speciï¬c transaction.''.
Amendment of section 114 of Act 71 of 2008 66.
''(4) Section 48 applies to a proposed arrangement contemplated in this section to the extent that the arrangement would result in any re-acquisition by a company of any of its previously issued securities.''.
the Panel has issued a compliance certiï¬cate in respect of the transaction, in terms of section 119(4)(b), or exempted the transaction in terms of section 119(6).'
''(4A) In subsection (4), 'act in concert' has the meaning set out in section 117(1)(b).'
''(i) the percentage of the issued securities of that company that have been transferred, other than by transfer between or among related or [interrelated] inter-related persons, within the period of 24 months immediately before the date of a particular affected transaction or offer exceeds the percentage prescribed in terms of subsection (2); or''.
Amendment of section 119 of Act 71 of 2008 70.
''To the extent necessary to ensure compliance with this Part, Part C and the Takeover Regulations, and to fulï¬l the purposes contemplated in subsection (1), a compliance [order] notice contemplated in subsection (4)[(b)](c) may, among other things-''.
Amendment of section 121 of Act 71 of 2008 71.
''(i) issued a [clearance notice] compliance certiï¬cate with respect to the transaction; or''.
''The requirements set out in subsection (1) apply to a person irrespective of whether-''.
Amendment of section 123 of Act 71 of 2008 73.
''Within one business day after the date of [a completed] an acquisition contemplated in subsection (2), the person or persons in whom the prescribed percentage, or more, of the voting [securities] rights beneï¬cially vests must give notice in the prescribed manner to the holders of the remaining securities, including in that notice-''.
Amendment of section 124 of Act 71 of 2008 74.
''(6) An instrument of transfer contemplated in subsection (5) is not required for any securities for which a [securities] share warrant is for the time being outstanding.''.
[that] a person acting alone, or two or more persons acting in concert, make an offer for any securities of a regulated company that has more than one class of issued securities, which, if accepted, could result in [the] a person, [together with any] or a number of related or inter-related [person or person acting in concert with any of them,] persons holding securities of the company entitling the person or persons to exercise more than the prescribed percentage of the general voting rights [of] associated with all issued securities of the company, that person or those persons acting in concert must make a comparable offer [must be made for] to acquire securities of each class of issued securities of that company.'
include a speciï¬c statement setting out the extent to which the person or persons referred to above will be free to acquire further securities in the company without making a general offer, if the offer succeeds to the extent contemplated above.''.
''(2) For the purpose of subsection (1)[(f)](g), an employee of a company is not related to that company solely as a result of being a member of a trade union that holds [shares] securities of that company.''.
Amendment of section 129 of Act 71 of 2008 78.
''(7) If the board of a company has reasonable grounds to believe that the company is ï¬nancially distressed, but the board has not adopted a resolution contemplated in this section, the board must deliver a written notice to each affected person, setting out the criteria referred to in section 128(1)[(e)](f) that are applicable to the company, and its reasons for not adopting a resolution contemplated in this section.''.
''(c) a court makes an order placing a company under supervision during the course of liquidation proceedings, or proceedings to enforce a security interest, as contemplated in section 131(7) [a court makes an order placing a company under supervision].''.
Amendment of section 133 of Act 71 of 2008 80.
''(c) as a set-off against any claim made by the company in any legal proceedings, irrespective of whether those proceedings commenced before or after the business rescue proceedings began;''.
''(c) despite any provision of an agreement to the contrary, no person may exercise any right in respect of any property in the lawful possession of the company, irrespective of whether the property is owned by the company, except to the extent that the practitioner consents in writing.''.
Amendment of section 135 of Act 71 of 2008 82.
Amendment of section 136 of Act 71 of 2008 83.
apply urgently to a court to entirely, partially or conditionally cancel, on any terms that are just and reasonable in the circumstances, any agreement to which the company is a party.''; and an agreement to which section 35A or 35B of the Insolvency Act, 1936 (Act No.
any court, arbitration or administrative proceedings, including pending enforcement proceedings, involving the company;''.
Amendment of section 143 of Act 71 of 2008 87.
''(b) [that] the remuneration provided for in the agreement is egregiously unreasonable having regard to the ï¬nancial circumstances of the company.''.
Amendment of section 144 of Act 71 of 2008 88.
''(f) vote with creditors on a motion to approve a proposed business plan, to the extent that the employee is a creditor, as contemplated in subsection [(1)](2); and''.
Amendment of section 151 of Act 71 of 2008 89.
''(1) [The] Within 10 business days after publishing a business rescue plan in terms of section 150, the practitioner must convene and preside over a meeting of creditors and any other holders of a voting interest, called for the purpose of considering the [proposed rescue] plan [within 10 business days after the publication of that plan in terms of section 150].''.
Amendment of section 152 of Act 71 of 2008 90.
''(b) if the business rescue plan was approved by the shareholders of the company, as contemplated in subsection (3)(c), the practitioner may amend the company's Memorandum of Incorporation to authorise, and determine the preferences, rights, limitations and other terms of, any securities that are not otherwise authorised, but are contemplated to be issued in terms of the business rescue plan, despite any provision of section 16, 36 or 37 to the contrary.''.
Amendment of section 153 of Act 71 of 2008 91.
Amendment of section 159 of Act 71 of 2008 92.
''A public company [and] or a state-owned company must directly or indirectly-''.
Amendment of section 160 of Act 71 of 2008 93.
''(i) the person has been a director of more than one company, or a managing member of more than one close corporation, irrespective of whether concurrently, sequentially or at unrelated times; and''.
Section 163 of the principal Act is hereby amended by the deletion of subsection (4).
''(c) the company, by a subsequent special resolution, revokes the adopted resolution that gave rise to the shareholder's rights under this section.'
that shareholder must comply with the requirements of subsection 13(a); and the company must comply with the requirements of subsection 13(b).'
Amendment of section 168 of Act 71 of 2008 100.
alleging that a person has acted in a manner inconsistent with this Act, or that the complainant's rights under this Act, or under a company's Memorandum of Incorporation or rules, have been infringed.''.
[(ii)] (b) the provision of this Act that has been contravened; [(iii)] (c) details of the nature and extent of the non-compliance; [(iv)] (d) any steps that are required to be taken and the period within which those steps must be taken; and [(v)] (e) any penalty that may be imposed in terms of this Act if those steps are not taken.'
but may not do both in respect of any particular compliance notice.''.
Amendment of section 172 of Act 71 of 2008 102.
Amendment of section 175 of Act 71 of 2008 103.
''(f) the degree to which the respondent has co-operated with the Commission or Panel, as the case may be, and [a] the court; and''.
Amendment of section 200 of Act 71 of 2008 107.
on terms and conditions determined by the Panel.'
each member of the Panel, and each member of the Takeover Special Committee.''.
Amendment of section 202 of Act 71 of 2008 108.
each of whom must be designated from time to time by the Panel from among those of its members appointed by the Minister in terms of section 197(1)(d).''.
a prospectus, or a written statement contemplated in section 101, that containedan 'untrue statement'as deï¬ned and described in section 95.'
''(1) Nothing in this Act renders void an agreement, resolution or provision of an agreement, resolution, Memorandum of Incorporation or rules of a company that is prohibited, [void,] voidable or that may be declared unlawful in terms of this Act, unless a court [declares] has made a declaration to that effect regarding that agreement, resolution or provision [to be void].''.
by the substitution in sub-item (4)(b) for the expression ''external non-proï¬t companies'' of the expression ''registered external non-proï¬t companies''.
[either a new] a Memorandum of Incorporation [, or an amendment to the company's Memorandum of Incorporation] consistent with the requirements of this Act [, in either case]; and the prescribed ï¬ling fee.''.
Amendment of Schedule 3 to Act 71 of 2008 116.
whose name, immediately before the effective date, satisï¬ed the requirements of section 49 of the previous Act is not required to change its name to comply with section 11(3)(c) solely on the ground that any part of its name was in an official language other than English; and may continue to use a translated name that, immediately before the effective date, was registered and otherwise met the requirements of section 50(2) of the previous Act.
Despite the repeal of the previous Act, section 49(5) to (7) of the previous Act continues to apply to a pre-existing company that was, immediately before the effective date, engaged in any circumstances contemplated in those provisions.
inconsistent with this Act; but consistent with [that company's Memorandum of Incorporation] a provision that prevails over this Act in terms of paragraph (a).''.
''(3) A document that, before the effective date, had been served or ï¬led in accordance with the previous Act must be regarded as having been satisfactorily served or ï¬led for any comparable purpose of this Act.''.
by the substitution in sub-item (4) for the expression ''subitem (2)'' of the expression ''sub-items (1) and (2)''; and by the substitution in sub-item (5) for the expression ''subitems (2) and (3)'' of the expression ''sub-items (1) to (3)''.
This Act is called the Companies Amendment Act, 2010, and comes into operation on the date on which the principal Act comes into operation in terms of section 225 of that Act.
1.3 Development of regulations started in July 2009 and the ï¬rst draft for public comment was published in December 2009. Targeted consultations took place with various stakeholders in order to enrich the regulations. During such consultation process, it became apparent that there were sections containing technical errors, incorrect referencing, omissions and grammatical errors.
1.4 Furthermore, it became apparent that some of the regulations would be ultra vires for lack of empowering provisions in the Act empowering the Minister to issue them in order to achieve the objectives of the Act.
1.5 As a result of the aforementioned, some of the policies and principles of the Act are adversely affected. In addition, some of the policies are expressed in language that creates undesirable doubt about the intent, and an equally undesirable degree of uncertainty as to their meaning and effect.
1.6 Considering the nature of the errors, it is probable that in its present form, the Companies Act, 2008, will result in doubt and uncertainty that could lead to litigation. That uncertainty, and the cost of resolving it through costly legal disputes, may act as a drag on the South African economy in a manner fundamentally inimical to the goals of the Act itself.
The Bill seeks to correct errors and ambiguities that could adversely affect the operation of the principal Act. These errors could lead to unintended consequences contrary to policy or may result in uncertainty.
The deï¬nitions clariï¬ed and inserted include the following: ''accounting records'', ''acquiring party'', ''asset'', ''creditor'', ''holding company'', ''inter-related'', ''liability'', ''Memorandum of Incorporation'', ''securities'' and ''special resolution''.
Following intensive debate, it was decided that the ''severity'' of impact of non-inclusion of domestication should be looked at. An investigation at the number of domestication of foreign companies at CIPRO revealed that only 10 or less companies are domesticated per year. Even if the number of domestication per year is very low, the risk that it poses to potential investors in the country is very high.
Section 23 of the principal Act provides for the registration of external companies. Submissions made were that in its current form, it may potentially scare international investors. It compels external companies who are not involved in business activities within the country to register as companies when involved in listed activities in the Act.
It was argued that section 23(6) provides that an external company can still be involved in those listed activities but the Commission may from the commencement of that activity, and give such external company an opportunity to explain why it should not register as a company.
It was nevertheless agreed that section 23 could be improved. In terms of clause 14 of the Bill, an external company must be regarded as conducting business if it is engaged in the activities listed therein, including being a party to employment contracts within the Republic.
Section 38 of the principal Act is being amended so as to ensure certainty by providing a time limit of 60 days within which issuance of shares may be retroactively authorised.
Clause 24 of the Bill proposes that if a company issues shares, such issuance may be retroactively authorised within 60 days after the date on which they were issued.
Section 48(2) of the principal Act provides that a company may acquire its own shares if the decision to do so satisï¬es the requirements of section 46 of the principal Act.
The principal Act does not provide a mechanism through which such a decision could be subjected to a scrutiny by shareholders. It also creates an opportunity for evasion and is not in harmony with sections 46 and 114.
Clause 29 of the Bill proposes that a decision of the company to acquire a number of its shares must be approved by a special resolution of shareholders if any such shares are to be acquired from a director, officer or a person related to a director or such officer of the company.
Section 82 of the principal Act makes provision for the dissolution of companies and their removal from register. No criteria and procedural requirements that must be met by the company before deregistration were outlined in the principal Act. Such criteria and procedural requirements must be prescribed by the Minister. The principal Act did not, however, give the Minister such powers.
The Bill therefore seeks to insert the powers of the Minister to prescribe criteria and procedural requirements that must be satisï¬ed by a company before it may be de-registered.
Section 95 of the principal Act seeks to regulate public offerings of Company Securities. It intends to regulate and prescribe the general and speciï¬c requirements in respect of the form, content of rights offers, letters of allocation and prospectuses. It does not, however, make provision as to how the regulation of the public offerings of company securities shall be effected. In this regard, it was decided that a provision giving the power to regulate public offerings of company's securities must be inserted.
Section 136(2) of the principal Act gives a business rescue practitioner powers to cancel or suspend agreements to which the company is a party at the commencement of the business rescue proceedings.
Certain stakeholders raised concern about these powers. It was submitted that the business rescue practitioner has an unfettered discretion in the cancellation of contracts. It was therefore agreed that during business rescue proceedings, the business rescue practitioner must submit to court all contracts, including security contracts that he or she intends to cancel for conï¬rmation of his or her intentions.
Clause 83 of the Bill proposes a mechanism to subject powers of a business rescue practitioner to judicial scrutiny. It proposes that during business rescue proceedings, a business rescue practitioner must approach the court by way of an application for the cancellation or otherwise of any agreement. It seeks to prevent arbitrary cancellation of security or retroactive repudiation of contracts.
Section 138 of the principal Act provides that a person may be appointed as practitioner if conditions listed in the section are satisï¬ed.
Clause 84 of the Bill seeks to establish a regulatory authority. Regulation of business rescue practitioners should not be left to associations for self-regulation. Regulation of business rescue practitioners should therefore be vested in an organ of state.
The Companies and Intellectual Property Commission will therefore be a suitable organ entrusted with the regulation of business rescue practitioners. It also allows the Minister to make regulations regulating standards and procedures to be followed by the Commission in carrying out its licensing functions.
Section 214 of the principal Act creates offences for false statements, reckless conduct and conduct which result in non-compliance with the Act. Section 99 of the principal Act prohibits certain conduct but did not prescribe or create an offence in case where a person engages in such prohibited conduct.
The Bill seeks to create an offence where a person engages in activities prohibited by section 99 of the principal Act.
Section 218 of the principal Act provides that nothing in the Act renders an agreement, resolution or provision thereof that is prohibited void or voidable unless a court declares it void.
This approach seems to be impracticable and create an uncertainty as to what is void and what is voidable. It will therefore be necessary to clarify the intention behind this provision.
Clause 113 of the Bill seeks to clarify rules distinguishing void and avoidable provisions, resolution or agreement. In terms of the Bill a provision will be void or of no force or effect only after a court of law has so ordered.
Similarly, a provision will be voidable or subject to being declared void only after the court of law has so ordered.
Schedule 5: item 13(c) of the principal Act provides that despite the repeal of the previous Act, the Commission may for a period of three years after the effective date exercise any power of the Minister.
This schedule did not provide for the exercise of powers of the Minister under the previous Act.
Clause 118 of the Bill seeks to give powers, that the previous Act gave to the Minister, to the Commissioner. This facilitates proper enforcement of conduct and activities that occurred before the repeal of the previous Act.
The Bill has been published in the Gazette for public comment and further consultations took place with stakeholders on various matters that they raised.
Department of National Treasury, Department of Public Enterprises, Rand Water Board, Business Unity South Africa (BUSA) and its affiliates, COSATU on Chapter 6 and section 23, Banking Association of South Africa (BASA), De Loitte and Touche, Webber Wentzel, University of Cape Town, University of Stellenbosch, Davis team, King Committee on Governance, Integritas, SAICA, Ernst & Young and individual (Johan Erasmus) in the employ of De Loitte and Touche and some of stakeholders that commented on the Companies Regulations, 2010. The Standing Advisory Committee in Company Law (SACCL) has submitted comments on a rectiï¬cation process too and their comments were taken into account.
6.1 The State Law Advisers and the Department of Trade and Industry are of the opinion that the Bill must be dealt with in accordance with the procedure established by section 75 of the Constitution since it contains no provision to which the procedure set out in sections 74 or 76 of the Constitution applies.