Authors: Zaakira Haffejee – Associate & Kate Foster – Candidate Attorney
*Supervised by: Jeff Buckland – Director, Head of Corporate & Chairman of the Management Board
Following a review of the Companies Act 71 of 2008 (Act), the Department of Trade, Industry and Competition published the Companies Amendment Bill, 2021 (Bill) for public comment on 1 October 2021 and interested parties had until 31 October 2021 to respond.
The Bill adopts a transparency-driven approach proposing some significant amendments to the current regime and seeking to bring about a host of long-overdue changes to the Act, which came into effect a decade ago. These amendments have certain purported policy objectives but have been met with mixed reactions, as some have commented that the amendments fall short of the promised objectives.
Importantly, the amendments aim to address three prime categories of policy objectives:
Improve the ease of doing business by removing hinderances or onerous provisions.
An important objective in this domain is to eliminate excessive administrative and regulatory burdens on affected parties. These are particularly necessary in the context of small and medium business enterprises, on the basis that they are costly and, in many cases, constitute a barrier to entry. The Bill seeks to eliminate these burdens by making provision for, among other things, limited jurisdiction of the Takeover Regulations Panel, exemptions for the requirement to appoint a social and ethics committee, and limitations to access to company records for small and medium businesses that fall below a certain threshold.
Achieve equity between directors and senior management on the one hand, and shareholders and workers on the other hand, as well as high levels of inequalities in society.
The Bill aims to facilitate greater transparency and accountability on remuneration gaps in public and state-owned companies to address inequality in South Africa by requiring improved disclosure of remuneration and wage differentials. The issue of disclosure has become a critical theme in global corporate governance debates and the emphasis towards greater disclosure coincides with the principles of King IV, with a specific focus on transparency and accountability as a cornerstone for ethical governance.
Support global efforts to combat money laundering and terrorism.
The Bill further offers a game-changing overhaul of corporate ownership transparency by addressing true beneficial ownership of companies and requiring the disclosure of true shareholders. The concealment of beneficial interest holdings creates a platform for potential money-laundering as well as funding of terrorism and other criminal activities.
The proposed changes introduced by the Bill include:
To change the definition of securities.
To provide for the definition of true owner.
To provide for the preparation, presentation and voting on companies’ remuneration policy and directors’ remuneration implementation report.
To provide for the filing of the annual financial statements, the filing of the copy of the company’s securities register and the copy of the register of disclosure of beneficial ownership with the Companies and Intellectual Property Commission.
To differentiate where the right to gain access to companies’ records may be limited.
To clarify when a notice of amendment of a Memorandum of Incorporation (MoI) takes effect.
To empower the court to validate the irregular creation, allotment or issue of shares.
To clarify certain aspects relating to partly paid shares.
To exclude subsidiary companies from certain of the requirements relating to inter-group financial assistance.
To provide for instances where a special resolution is required for the acquisition of shares by the company.
To extend the definition of an employee share scheme to include situations where there are purchases of shares of a company.
To provide for the circumstances under which a private company will be a regulated company in the context of affected transactions.
To provide for circumstances where a company is unable to identify the persons who hold a beneficial interest in its securities.
To deal with the composition of the social and ethics committee and the publication of the application for exemption from the requirement to appoint a social and ethics committee.
To provide for the presentation and approval of the social and ethics committee report at the annual general meeting or other meetings of shareholders.
To ensure the differentiation of duties between the chairperson of the Tribunal and its chief operation officer.
The major technical amendments that affected parties should take note of include:
Section 26 – Access to company records
Section 30 and 30A - Annual financial statements and the duty to prepare and present the company’s remuneration policy and the remuneration report
Section 56 - Beneficial interest in securities
Section 118 - Application of Part B, Part C and the Takeover Regulations to private companies
Section 135 - Post-commencement financing and ranking of claims during business rescue proceedings
Over the coming weeks, Lawtons Africa will be discussing each of these significant, proposed amendments and their anticipated impact on affected parties in greater detail. Be sure to keep an eye on our social media pages for more information.
Lawtons Africa is a South African law firm. With roots that grew out of seeds sown in down-town Johannesburg in 1892, our history features various changes and different names. Our team of lawyers, including directors, consultants, associates and candidate attorneys is highly qualified, market-recognised and skilled. For further information, visit www.lawtonsafrica.com
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