The Companies Amendment Bill was published on 21 September 2018 for comment. The Bill proposes amendments to the Companies Act No. 71 of 2008.
The Bill proposes a solution to the question of when amendments to a company’s Memorandum of Incorporation (MOI) take effect. The Bill proposes a default position if the Companies and Intellectual Property Commission (CIPC) does not respond timeously. It proposes that amendments will take effect 10 business days after receipt of the notice of amendment if CIPC has not endorsed the notice of amendment or has failed to reject the amendment with reasons timeously. If CIPC fails to timeously respond, it is then prohibited from ever doing so. The Bill is silent on what the effective date would be if a notice of amendment is rejected with reasons.
The Bill proposes enhanced transparency through remuneration reports. In addition to directors, remuneration and benefits received by “Prescribed Officers” (executives in a position to influence company management) must also be disclosed. In seeking to align the Companies Act with King IV, directors of public companies have to prepare a directors’ remuneration report for presentation to shareholders at an AGM.
A court, upon application by an interested person or the company, is granted the power to order that shares created, allotted or issued invalidly or in an unauthorised manner be validly authorized if it is “just and equitable” to do so. The Bill is, however, silent about whether existing shareholders have a say on whether to admit a shareholder. The Bill does not address the period between a court application and a resultant court order (i.e. does the admitted shareholder have the right to vote on shareholder resolutions?).
The Bill proposes that, where companies grant financial assistance or loans to their own subsidiaries, they are no longer required to secure the authorisation of a special resolution of shareholders. This will benefit companies who engage in cash-sweeping and/or have inter-group loan agreements. The proposed wording of this section does, however, raise some technical questions, which will hopefully be clarified.
The Bill requires that a share buyback must be approved by a special resolution of shareholders if shares are being bought back from a director, a prescribed officer or a person related to a director or a prescribed officer. A special resolution of shareholders will also be required if the buyback entails an acquisition, except for a pro rata offer made to all shareholders or transactions effected in the ordinary course on a stock exchange.
The Bill proposes that any person who has had a close relationship to a company in the last two years cannot act as auditor to that company. This is a change from the five financial year period currently stipulated in the Act.
Comments may be submitted to DRamabulana@thedti.gov.za at the Department of Trade and Industry by 20 November 2018.
For more information, please contact Andreas Tsangarakis: AndreasT@stbb.co.za.