Potential Companies Act amendments

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By Lauren Kelso

Topics Commercial & Corporate Law

01 Oct 2018

On Friday, 21 September 2018 the Department of Trade and Industry published the draft Companies Amendment Bill 2018 for comment. Comments close on 20 November 2018.

Some highlights of the proposed amendments are:

• Amendment of Memorandum of Incorporation | An amendment would take effect ten days from filing, if the filing has not been endorsed or rejected by CIPC.

• Disclosure of Remuneration and Benefits | The requirement to disclose the remuneration and benefits received by a director would apply to prescribed officers, and it would be a requirement that each individual is named.

• Remuneration Report | In line with King IV, public companies would be required to prepare a remuneration report with details of the remuneration and benefits awarded to individual directors, for approval by the Board and presentation at the AGM.

• Annual Returns

(i) A company would have to submit a copy of its Annual Financial Statements (“AFS”) irrespective of whether it is required to have its AFS audited; and

(ii) A company would be required to file a copy of its securities register with the CIPC each year along with its Annual Return.

• Court Order | The power of a court to make an order validating an irregular creation, allotment or issue of shares would be restored.

• Financial Assistance | The restrictions on financial assistance would not apply to the giving by a company of financial assistance to or for the benefit of its subsidiary.

• Share Buy Backs | A Board decision for a company to acquire its own shares would require approval by a shareholder special resolution:

(i) where the shares are to be acquired by a director, prescribed officer or person related to either a director or a prescribed officer;

(ii) but not where the acquisition is by way of:

– a pro rata offer to all shareholders; or

– a transaction in the ordinary course on a recognised stock exchange.

• Social and Ethics Committee | In addition to the requirements in the current Regulations, all public and state-owned companies would be required to appoint a Social and Ethics Committee, which must meet specified composition criteria. The Social and Ethics Committee would be required to prepare a formal report which must be externally assured, for presentation to the shareholders at a shareholders meeting.

• Auditor Requirements

(i) A company which is required to have its Annual Financial Statements audited, would have to appoint an auditor annually, at a shareholders meeting (not necessarily the AGM); and

(ii) The disqualification period for auditors would be reduced from five years to two years.

• Takeover Regulations | The application of the takeover provisions (Parts B and C of Chapter 5 of the Act and the Takeover Regulations) would be limited by the removal of the requirement that more than 10% of the shares in the company must have been transferred in the preceding 24 months, which would be replaced with a new requirement that the private company must be one which is required to be audited at the time of the relevant affected transaction.