The Companies Amendment Bill of 2023 (the Bill) introduced in Parliament on 28 August 2023, proposing modifications to some operational aspects of companies in South Africa.
The Bill focuses on two main areas:
- Making business easier by simplifying company law so it’s easy to understand and follow. This will help both local businesses and attract foreign investors, which can lead to more job opportunities. The changes also include better organization and clearing up unclear parts.
- Promoting fairness and transparency by balancing the power between top company officials and everyday workers and shareholders. There’s also a push to make top officials’ pay more transparent and reasonable. This will help the public discuss and understand pay differences. Plus, the Bill adds more details about companies’ roles in social and ethical matters.
The Bill is in its early stages, it is expected to be passed into law in the near future. This leaves us with an opportunity to understand and provide feedback on the changes proposed.
Overall, the Bill demonstrates a comprehensive effort to streamline corporate governance, enhance transparency, and ensure accountability within the business environment. The Bill proposes amending various sections as summarised below.
Par. 1: Definition and Regulations
The bill seeks to amend the definition of ‘securities’ and to include the treasury regulations (applicable for government).
Par. 16: Amending Memorandum of Incorporation (MOI)
Certain amendments to the MOI to take effect 10 business days (currently it is immediate effect) after the Notice of Amendment is received by the CIPC, unless endorsed or rejected with reasons by the Commissioner.
Par. 25: Location of company records
CIPC to publish the location of the company’s records in line with prescribed location notices for records not accessible at the registered office or moved between locations.
Par. 26: Access to company records
Additional records that may be accessed to include beneficial ownership register and less time for a company (10 instead of 14 days) provided to comply with an access request.
The right to inspect and copy information contained in the annual financial statements and meetings will not apply to a private, non-profit, or personal liability company whose public interest score is under 100 and whose annual financial statement is internally prepared; or whose public interest score is under 350 and whose annual financial statement is independently prepared.
Par. 30, and new section 30A: Financial Statements & Remuneration
A public company or state-owned company must prepare and present the remuneration policy and report for directors and prescribed officers for approval by ordinary resolution, at the annual general meeting.
30A further provides the contents for the remuneration policy and report.
Par. 33: Annual return
An annual return must include a copy of the latest annual financial statements approved by the board for a public company, state-owned company or other profit or non-profit company whose public interest score exceeds sections 30(2) or (7) limits and therefore need to be audited.
Par. 38A-40: Share Management & Validity
A court may validate shares where the creation, allotment or issuing of those shares is deemed invalid.
The bill also proposes guidelines on the transfer of certain issued shares to stakeholders under a ‘stakeholder agreement’.
Par 45: Financial assistance
Financial assistance for a subsidiary no longer requires a special resolution.
Par 48: Share buy-back
Circumstances in which pro rata share-buyback requires a special resolution if the shares are purchased from a director or a prescribed officer of the entity.
Par. 61, 72: Social and Ethics Committee Regulations
Par. 61 provides that the social and ethics committee report and the remuneration report should be discussed during the to shareholders meetings. This meeting must also provide for the election of the social and ethics committee.
Changes proposed to the social and ethics committee’s roles, including reporting mandates, composition, and responsibilities.
Conditions are provided under which companies might be exempt from forming such a committee. The manner of applying for an exemption from the requirement to have such a committee will also be amended.
Par. 77. Liability of directors and prescribed officers
Providing for a maximum 3-year timeframe for initiating proceedings associated with losses, damages, or costs from certain actions or omissions. The court may, on good cause shown extend this period.
Par. 90: Auditor Appointments & Limitations
The bill provides for the annual appointment of auditors in the shareholders’ meeting.
It also establishes a 2-year cooldown period before individuals in specific roles, such as past directors, prescribed officer, company secretary, accountant, bookkeeper, related secretarial work, and certain employees or consultants may be appointed as auditors.
Par. 95: Public offerings:
Revised employee share scheme definition, for the purposes of public offerings, to also references purchase of shares.
structuring the Tribunal to make it more efficient. Voluntary dispute resolution options will be limited to referral to the Companies Tribunal, followed by arbitration if that mediation fails.
Par. 118: Application of Takeover Regulations
Revised threshold for when approval of fundamental transaction, regulation of affected transactions and offers, and takeover regulations apply to a private company.
Par. 135: Post-commencement finance, entities under business rescue
In business rescue proceedings certain amounts due to a landlord will be regarded as post-commencement financing.
Par. 160: Disputes concerning reservation or registration of company names
The Commission may, at the request of the applicant substitute a name where a company failed to change its name within the determined period of an administrative order.
A company, a shareholder, director, company secretary or prescribed officer of a company, a registered trade union that represents employees of the company or another representative of the employees of a company may apply to a court for an order declaring a person delinquent or under probation if the person is a director of that company or within the 60 months immediately preceding the application, was a director of that company and the relevant section 162 circumstances apply.
Par. 162: Application to declare director delinquent or under probation
The CIPC or the Takeover Regulation Panel may apply to a court for an order declaring a person delinquent or under probation if the person is a director of a company or within the 60 months immediately preceding the application, was a director of a company and the relevant section 162 circumstances apply.
Par. 166-167: Dispute Resolution & Tribunal Adjustments
The proposed changes focus on streamlining voluntary dispute resolution methods and re
Par. 194-195: Appointment and functions of Companies Tribunal
Revision of Tribunal structure, the responsibilities of the chairperson and the appointment, term, and responsibilities of a chief operating officer.
Tribunal may conciliate, mediate, arbitrate or adjudicate on any administrative matters affecting a person in terms of the Companies Act as may be referred to it as prescribed by the B-BBEE Commission in terms of the Broad-Based Black Economic Empowerment Act.
Par. 204: Functions of Financial Reporting Standards Council
The Financial Reporting Standards Council may consider relevant information regarding financial reporting standards reliability and compliance and adapt international reporting standards for local circumstances through the issue of financial reporting pronouncements.
The Bill was issued in two parts. You can read the first Amendment Bill here and the Second Amendment Bill here.
To have your opinion heard provide your comments to technical@myciba.org no later than 22 September 2023.
Public hearings have been scheduled for 17, 18 and 20 October 2023. Read more on the processes here.
