Lee’s Compliance Gazette Watch: Companies Amendments Newsletter – Part 1 (20 January 2025)

GREETINGS ALL

 

A very warm welcome to all our compliance colleges –most of you should now be back at work and ready to face the year.

The Legal Team has been back in the office for some two weeks now and has spent this time going through a month and a half’s worth of Gazette Notices and other publications – making sure that all recent regulatory changes and other legal developments have been noted, analyzed, and inserted onto The Legal Team portal.

 

The updates are voluminous, some important and others not so important.

As a result, we have decided to send these updates in batches which will be done, one day at a time, over the course of this week, in order to ensure that you are not overwhelmed, allowing you to take in and absorb these, at your own pace, prioritizing and noting what applies and what needs attention and immediate action and what can be looked at later when time allows.

 

That being said, as a heads up, below is an A – Z listing of the items that will be covered under our daily updates this week.

 

AGRICULTURE

• Agricultural Product Standards Act: Regulations: Meat analogues intended for sale in South Africa
• Agricultural Pests Act: Regulations: Amendment
• Marketing of Agricultural Products Act: Establishment of statutory measure: Dried Vine Fruit
• Marketing of Agricultural Products Act: Establishment of statutory measure: Export of Fresh Citrus Fruit
• Marketing of Agricultural Products Act: Establishment of Statutory Measure and Determination of Guideline Prices: Levies on Fresh Citrus Fruit Intended for Export
• Plant Health (Phytosanitary) Act 35 of 2024
• Marketing of Agricultural Products Act: Establishment of statutory measure and determination of levies on dried vine fruit
• Fertilizer, Farm Feeds, Agricultural Remedies and Stock Remedies Act: Application for Derogation for Restricted Use of Agricultural Remedies Identified as substance of concern: Comments invited
• Agricultural Product Standards Act: Classification and marking of meat intended for sale in South Africa
• Fertilizer, Farm Feeds, Agricultural Remedies and stock Remedies Act: Application for derogation for the restricted use of agricultural remedies identified as substances of concern containing glufosinate ammonium: Comments invited
• Fertilizer, Farm Feeds, Agricultural Remedies and Stock Remedies Act: Application for derogation for restricted use of agricultural remedy identified as substances of concern: Silent (L9545)
• Agricultural Product Standards Act: Regulations: Grading, packing and making of edible vegetable oils for sale in South Africa
• Agricultural Product Standards Act: Inspection fees for 2025 for inspections and sampling on poultry meat, processed meat products and certain raw processed meat products

AVIATION

• Air Traffic and Navigation Services Company Act: Air Traffic Service Charges
• Airports Company Act: Airport charges

CUSTOMS AND EXCISE

• Customs and Excise Act: Amendment of Part 1 of Schedule No. 1 (1/1/1939): Correction
• Customs and Excise Act: Amendment: Part 2 of Schedule No. 4
• Customs and Excise Act: Amendment to Part 2 of Schedule No. 4 (No. 4/2/404)
• Customs and Excise Act: Amendment to Part 1 of Schedule No. 3 (No. 3/1/758)
• Customs and Excise Act: Amendment to Part 4 of Schedule No. 5 (No. 5/4/126)
• Customs and Excise Act: Amendment to Part 1 of Schedule No. 1 (No. 1/1/1937)
• Customs and Excise Act: Amendment to Part 3 of Schedule No. 5 (No. 5/3/114)
• Customs and Excise Act: Amendment to Part 1 of Schedule No. 4 (No. 4/1/384)
• Customs and Excise Act: Amendment to Part 1 of Schedule No. 1 (No. 1/1/1938)

 

COMPANIES

• Companies Second Amendment: Commencement
• Companies Amendment Act: Commencement of certain sections
• Companies Act: Practice Note 63 0f 2024: Automation of Filing of Status Reports, Substantial Implementations and Terminations
• Companies Act: Practice Note 62 0f 2024: Academic Requirements for Business Rescue practitioner Licensing
• Companies Act: Rejection of BRP License Renewal Applications pending the Filing of Status Reports

COMPETITION

• Competition Act: Guidelines
• Competition Act: Fresh Produce Market Inquiry Final Report

EDUCATION

• National Qualifications Framework Act: Guidelines on implementation and transitional arrangements for pre-2009 qualifications

ENERGY

• National Nuclear Regulator Amendment Act 26 of 2024

ENVIRONMENTAL

• National Forests Act: Regulations: Amendments
• Marine Living Resources Act: Policy on the Allocation and Management of Rights to operate Fish Processing Establishments; and Policy for the Transfer of Commercial Fishing Rights: Extension of deadline for comments
• National Environmental Management Act: Regulations: Environmental Impact Assessment: Amendment

FINANCE AND TAX

• Financial Sector and Deposit Insurance Levies Act: Schedule: Amendment
• Global Minimum Tax Act 46 of 2024
• Revenue Laws Second Amendment Act 44 of 2024
• Tax Administration Laws Amendment Act 43 of 2024
• Financial Sector Regulation Act: Memorandum of understanding between Financial Sector Conduct Authority and Competition Commission
• Auditing Profession Act: Independent Regulatory Board for Auditors: Code of Professional conduct for registered auditors
• Financial Sector and Deposit Insurance Levies Act: Schedule: Amendment
• Global Minimum Tax Administration Act 47 of 2024

FOODSTUFFS

• Perishable Products Export Control Act: Regulations: Export of Perishable Products

IMMIGRATION

• Immigration Act: Lesotho Exemption Permit Holders: Minister’s Immigration Directive: Extension of validity of exemptions

LABOUR

• National Minimum Wage Act: Investigation into the National Minimum Wage

HEALTH AND SAFETY

• Compensation for Occupational Injuries and Diseases Act: Amendment of Schedule 4: Manner of calculating compensation
• Occupational Health and Safety Act: Incorporation of National Code of Practice

MEDICAL

• Medicines and Related Substances Act: Annual single exit price adjustment of medicines and scheduled substances for 2025
• Medicines and Related Substances Act: Exemption of medical devices and in-vitro diagnostics (IVDs) from provisions: Extension
• Health Professions Act: Regulations relating to Registration of Orientation and Mobility Practitioners
• Pharmacy Act: Guidance document for Continuing Professional Development
• Health Professions Act: Rules relating to continuing education and training for registered health practitioners: Amendment
• Dental Technicians Act: Regulations: Registration and training of student dental technicians and student dental technologists
• Health Professions Act: Regulations: Professional Board for Environmental Health Practitioners: Constitution
• Health Professions Act: Regulations: Constitution of Medical and Dental Professions Board

PROPERTY

• Deeds Registries Amendment Act 20 of 2024

SECURITY

• Private Security Industry Regulations Act and Security Officers Act: Regulations: Annual fee increase: Amendment

TRANSPORTATION

• Railway Safety Act 30 of 2024
• Economic Regulation of Transport Amendment Bill: Draft

 

COMPANIES AMENDMENT ACTS

 

Today’s newsletter focuses on the recent changes to the Companies Act, 2008.

 

True to form, during December, when all of us were somewhere on holiday, taking that well-earned break, the President brought into effect, certain amendments to the Companies Act 2008.

More particularly it was proclaimed in Government Gazette No. 51837 that certain sections of the Companies Amendment Act No. 16 of 2024 (“Amendment Act”) and the entirety of the Companies Second Amendment Act No. 17 of 2024 (“Second Amendment Act”) are now effective.

The changes took effect upon the gazette’s publication on 27 December 2024.

Background preceding the publication of the Government Gazette

On 26 July 2024, the President signed into law the First Companies Amendment Bill and the Second Companies Amendment Bill with effect from a date (or dates) to be fixed by the President by notice in the Government Gazette, which marked substantial reforms to the Companies Act 71 of 2008 (“Companies Act”).

The amendments stipulated in the First Companies Amendment Act and the Second Companies Amendment Act are part of the government’s effort to alleviate business constraints, ensure accountability for delinquent directors and officers, and address income inequality. The amendments also seek to balance the interests of directors and senior management with those of shareholders and employees.

AMENDMENTS NOT IN FORCE

Some of the more substantive amendments from the First Amendment Act are not yet in force namely,

• the amendments to sections 26 and 30 which provide non-beneficial interest holders with the right to inspect and copy certain company records including companies’ annual financial statements (provided that the relevant company is above the prescribed public interest score),

• the newly inserted sections 30A and 30B which oblige state-owned and public companies to prepare and present a remuneration policy and remuneration report for shareholder approval, as well as the so-called “two-strike” rule relating to barring of the non-executive Remco members following two successive failed votes on the remuneration report;

• Section 38A, which allows a company or any person who holds an interest in a company to make an application to the court to make an order validating an invalid creation, allotment, or issue of shares, after satisfying itself that it is just and equitable to do so; and

• Section 118, which grants the Takeover Regulation Panel jurisdiction over private companies that have 10 or more shareholders with direct or indirect shareholding in the company and meet or exceed the financial threshold of annual turnover or asset value.

QUICK OVERVIEW OF AMENDMENTS NOW IN FORCE

COMPANIES SECOND AMENDMENT ACT

In terms of the Companies Second Amendment Act, in accordance with the Government Gazette, all of the amendments stipulated in the Second Companies Amendment Act become operative on 27 December 2024.

The amendments consist of the following:

Amendment to the time barring provisions contained in section 77(7) of the Companies Act:

 

Previously, section 77 of the Companies Act provided that the commencement of proceedings to recover any loss, damages, or costs for which a person is or may be held liable in terms of section 77 of the Companies Act may not be commenced more than three years after the act or omission that give rise to that liability. Now, pursuant to the amendments, a Court is empowered, on good cause shown, to extend the time-barring period of three years for the recovery of losses, damages, or costs after the occurrence of an act or omission giving rise to liability under section 77.

The hard prescription period of three years which previously applied in section 77 (which deals with the company’s action for damages against directors who have caused loss to the company as a result of breach of their fiduciary duties), will now be capable of extension by a court on good cause shown.

Amendment to the period to apply to declare a director delinquent as contained in section 162 of the Companies Act:

In relation to delinquency, the period to apply to declare a director delinquent under section 162 is now extended from 24 to 60 months after such a person ceased to be a director, with the possibility of further extension at the discretion of the Court.

 

The hard prescription period of two years which was previously applied in section 162 (which relates to the bringing of a delinquency application against rogue directors) will now be extended to five years, which may further be extended by a court on good cause shown.

These amendments will be retrospective, and thus will also cover director misconduct that occurred prior to amendments taking effect.

 

COMPANIES FIRST AMENDMENT ACT

 

MOI Amendments

 

Following many years of uncertainty as to when exactly an amendment to a memorandum of incorporation (MOI) takes effect (there were constant debates around when “filing” takes place), the position now is that the amendment takes effect 10 business days from receipt of the amendments by the Companies and Intellectual Property Commission (CIPC), unless endorsed or rejected by CIPC earlier (section 16).

 

Shares issued for future consideration

Where shares are issued for future consideration, those shares must now be transferred to a so-called “stakeholder” (being an independent third party such as an attorney, notary public, or escrow agent) and dealt with in terms of a “stakeholder agreement” between the stakeholder and the company (section 40). As such, the concept of a “trust arrangement” in these circumstances has been done away with. This probably puts paid to any debate around whether this is a registrable trust as contemplated in the Trust Property Control Act, but apart from this, it is largely business as usual for future consideration subscriptions.

 

Financial Assistance

 

The requirements that need to be met before a company may give financial assistance to related or inter-related companies or corporations (shareholder special resolution; solvency and liquidity; fairness and reasonableness) no longer apply where the financial assistance is given by a holding company to a subsidiary (section 45).

However, it is important to note that financial assistance given by a company for the acquisition of shares in that company (or a related company) in terms of section 44 does not have the same carve-out, so just make sure whether your transaction traverses section 44 as well.

Also, “subsidiary” by definition, covers only South African subsidiaries.

 

Share Buy Backs

All share buy-backs now require a special resolution of the shareholders, unless they occur in terms of a pro-rata offer to all shareholders, or are undertaken on a stock exchange by a listed company. This is one of the most material amendments.

 

Previously, a repurchase by a company of more than 5% of a class of its shares, in a single transaction or integrated series of transactions, was subject to the requirements of sections 114 and 115, which respectively deal with schemes of arrangement and the general approval requirements for fundamental transactions.

This tortuous provision (contained in the previous section 48(8)) resulted in confusion around whether such a repurchase is, in fact, a scheme of arrangement, or is merely subject to the procedural requirements of a scheme of arrangement (namely the procuring of an independent expert’s report and the approval of shareholders by special resolution).

The significance of buy backs being regarded as schemes of arrangement is that they were, as a result, subject to takeover law if undertaken by a regulated company (a scheme of arrangement automatically qualifies as an affected transaction), which then introduced a significant layer of regulation in respect of the transaction. Nevertheless, such buy backs also triggered appraisal rights in terms of section 164.

By now doing away with the reference to sections 114 and 115, the amendments finally end the debate as to whether one-on-one contractual buybacks are “schemes of arrangement”. They are not, and will not trigger appraisal rights. They will also not require an expert’s report anymore.

 

Social and Ethics Committee

 

The key amendment here is that the members of the social and ethics committee (SEC) of a public company or state-owned company must now be elected by shareholders at the AGM, as opposed to being appointed by the board (section 72 and 61).

Furthermore, in the case of public and state-owned companies, the majority of the members of the SEC must be non-executive directors and must have been non-executive directors for at least the past three financial years.

 

Employee Share Schemes

 

An employee share scheme (ESOP) which involves a purchase of shares, and not only subscriptions or issues of shares, now falls within the statutory ESOP definition (section 95).

The significance of this is that such an ESOP will qualify for the carve outs in relation to:

• financial assistance under sections 44 and 45;
• share issuances to directors or prescribed officers under section 41; and the public offer (prospectus) rules.

That is, provided the ESOP complies with section 97 with regard to the appointment of a compliance officer.

Landlord’s Position in Business Rescue

 

The position of landlords will be ameliorated and strengthened in that their claims for the charges (utilities, rates, taxes, and the like) will be regarded as “post-commencement finance”.

These claims will rank behind employees’ claims, but above all pre-commencement claims whether secured or unsecured.

There is no transitional period, so this will impact business rescue processes that are well underway as it stands.

 

PROVISIONS NOT YET IN FORCE

 

Companies can rest assured that two of the most contentious amendments are not yet in force.

These are –

• the provisions allowing the public access to annual financial statements, including those of certain categories of private companies (section 26);

• the requirement for public companies to publish remuneration policies and reports for shareholder approval (sections 30A and 30B), coupled with the proposed “two strike” rule in respect of remuneration committee membership where the implementation report is voted down;

 

• the change to the definition of a “regulated company” (section 118), insofar as it relates to private companies. This has implications for whether the Takeover Regulations apply when certain transactions are concluded. The current definition therefore continues to apply, namely that a private company is a regulated company if more than 10% of its shares have been transferred within the previous 24 months (other than between related persons) or if that private company’s memorandum of incorporation opts that company into the Takeover Regulations;

• the new provision for an application to court, by any interested party, to retroactively regularise irregular share creations, issues or allotments, on good cause shown (section 38A). Presently, if there is an inadvertent error or irregularity in the creation and/or issuance of fresh shares (e.g. issuances in excess of authorised share capital; non-filing of MOI amendments increasing share capital; issuances without the required shareholder approval; etc) there is very little in the way of remedies available to a company to retroactively regularise the invalidity; and

• The only provision dealing with this is section 38(2) which allows ratification of share issues in excess of share capital, by shareholders within 60 business days of the issuance. However, in many cases the 60 business day period has long expired before the invalidity is discovered, rendering section 38(2) unavailable.

It remains to be seen when these amendments will come into effect.

 

Companies to take action

 

It is imperative that companies take note of the above amendments and adapt accordingly.

 

Companies should consider whether the amendments will necessitate changes to their memorandum of incorporation, and the introduction of new company policies such as a remuneration policy.

Moreover, companies should review their directors’ and officers’ liability policies to assess the potential increased liability risk.

 

AGM notices will also have to change, but given that the new sections 30A and 30B are on hold, the changes should actually not be too drastic.

Nevertheless, it is always a good idea to have some degree of readiness in respect of amendments not yet in force.

Therefore it will be important to closely monitor consequential changes to the regulations issued under the Companies Act to give effect to the remaining amendments stipulated in the First Companies Amendment Act which amendments will only commence on a date (or dates) to be fixed by the President by notice in a government gazette which is anticipated during 2025.

DETAILS OF THE AMENDMENTS IN FORCE

SECTION – 1 DEFINITIONS- SECURITIES

Section 1: the definition of “securities” which limits the definition of “securities” to shares and debentures now excludes the wording “or other instruments”;

Amended section reads:

“securities”, for the purposes of this Act, means any shares or debentures, irrespective of their form or title, issued or authorised to be issued by a profit company;

[Definition of “securities” substituted by s. 1 (1) (aa) of Act No. 3 of 2011 and by s. 1 (b) of Act No. 16 of 2024with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

SECTION 16- AMENDMENTS TO THE MOI

Amendments to the MOI take effect 10 business days after receipt of the Notice of Amendment by the Commission, unless endorsed or rejected with reasons by the Commission prior to the expiry of the 10-business day period.

The alternative of “or the date as set out in the Notice of Amendment” remains unaltered.

 

 Amended section reads:

(1)  A company’s Memorandum of Incorporation may be amended—

(a)in compliance with a court order in the manner contemplated in subsection (4);

(b)in the manner contemplated in section 36 (3) and (4); or

(c)at any other time if a special resolution to amend it—

(i)is proposed by—

(aa)the board of the company; or

(bb)shareholders entitled to exercise at least 10% of the voting rights that may be exercised on such a resolution; and

(ii)is adopted at a shareholders meeting, or in accordance with section 60, subject to subsection (3).

(2)  A company’s Memorandum of Incorporation may provide different requirements than those set out in subsection (1) (c) (i) with respect to proposals for amendments.

(3)  Despite subsection (1) (c) (ii), if a non-profit company has no voting members—

(a)the board of that company may amend its Memorandum of Incorporation in the manner contemplated in subsection (1) (c) (i) (aa); and

(b)the requirements of subsection (1) (c) (ii) do not apply to the company.

(4)  An amendment to a company’s Memorandum of Incorporation required by any court order—

(a)must be effected by a resolution of the company’s board; and

(b)does not require a special resolution as contemplated in subsection (1) (c) (ii).

(5)  An amendment contemplated in subsection (1) (c) may take the form of—

(a)a new Memorandum of Incorporation in substitution for the existing Memorandum; or

(b)one or more alterations to the existing Memorandum of Incorporation by—

(i)changing the name of the company;

(ii)deleting, altering or replacing any of its provisions;

(iii)inserting any new provisions into the Memorandum of Incorporation; or

(iv)making any combination of alterations contemplated in this paragraph.

(6)  If a profit company amends its Memorandum of Incorporation in such a manner that it no longer meets the criteria for its particular category of profit company, the company must also amend its name at the same time by altering the ending expression as appropriate to reflect the category of profit company into which it now falls.

(7)  Within the prescribed time after amending its Memorandum of Incorporation, a company must file a Notice of Amendment together with the prescribed fee, and—

(a)the provisions of section 13 (3) and (4) (a) and section 14, each read with the changes required by the context, apply to the filing of the Notice of Amendment; and

(b)if the amendment to a company’s Memorandum of Incorporation—

(i)has substituted a new Memorandum, as contemplated in subsection (5) (a), the provisions of section 13 (2) (b), read with the changes required by the context, apply to the filing of the Notice of Amendment; or

(ii)has altered the existing Memorandum, as contemplated in subsection (5) (b)—

(aa)the company must include a copy of the amendment with the Notice of Amendment; and

(bb)the Commission may require the company to file a full copy of its amended Memorandum of Incorporation within a reasonable time.

(8)  If a company’s amendment to its Memorandum of Incorporation includes a change of the company’s name—

(a)the provisions of section 14 (2) and (3), read with the changes required by the context, apply afresh to the company; and

(b)if the amended name of the company—

(i)is reserved in terms of section 12 for that company, the Commission must—

(aa)issue to the company an amended registration certificate; and

(bb)alter the name of the company on the companies register; or

(ii)is not reserved in terms of section 12 for that company, the Commission must take the steps set out in subparagraph (i), unless the name is—

(aa)the registered name of another company, registered external company, close corporation or co-operative; or

(bb)reserved in terms of section 12 for another person.

(9)  An amendment to a company’s Memorandum of Incorporation takes effect—

(a)in the case of an amendment that changes the name of the company, on the date set out in the amended registration certificate issued by the Commission in terms of subsection (8), read with section 14 (1) (b) (iii); or

(b)in any other case—

(i)10 business days after receipt of the Notice of Amendment by the Commission, unless endorsed or rejected with reasons by the Commission prior to the expiry of the 10 business days period; or

(ii)such later date, if any, as set out in the Notice of Amendment.

[Sub-s. (9) substituted by s. 11 (a) of Act No. 3 of 2011 and by s. 2 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

 

(10)  If an amendment to the Memorandum of Incorporation of a personal liability company has the effect of transforming that company into any other category of company, the company must give at least 10 business days advance notice of the filing of the notice of amendment to—

(a)any professional or industry regulatory authority that has jurisdiction over the business activities carried on by the company; and

(b)any person who—

(i)in its dealings with the company, may reasonably be considered to have acted in reliance upon the joint and several liability of any of the directors for the debts and liabilities of the company; or

(ii)may be adversely affected if the joint and several liability of any of the directors for the debts and liabilities of the company is terminated as a consequence of the amendment to the Memorandum of Incorporation.

[Sub-s. 10 inserted by s. 11 (b) of Act No. 3 of 2011.]

(11)  A person who receives, or is entitled to receive, a notice in terms of subsection

(10) may apply to a court in the prescribed manner and form for an order sufficient to protect the interests of that person.

[Sub-s. (11) inserted by s. 11 (b) of Act No. 3 of 2011.]

SECTION 40- PROVISIONS REGULATING SHARES ISSUED FOR FUTURE CONSIDERATION

 

The concept of creating a trust arrangement when shares are issued for future consideration has been done away with.

The proposed amendment to sections 40 (5) and (6) is to clarify the use of the word ‘trust’ in this section.

This section is an exception to the general rule that companies must issue paid up shares.

The amendment is to change the reference to this ‘third party’ to a ‘stakeholder,’ and the reference to a ‘trust’ or ‘trust agreement’ to a ‘stakeholder agreement’.

 

The new position is that those shares must be transferred to a so-called independent stakeholder (being an independent third party, who has no interest in the company or the subscribing party, and may be an attorney, notary public or escrow agent) under a written stakeholder agreement and later transferred to the subscribing party.

Amended section reads:

S 40 – CONSIDERATION FOR SHARES

 

(1)  The board of a company may issue authorised shares only—

(a)for adequate consideration to the company, as determined by the board;

(b)in terms of conversion rights associated with previously issued securities of the company; or

(c)as a capitalisation share as contemplated in section 47.

(2)  Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued.

(3)  A determination by the board of a company in terms of subsection (2) as to the adequacy of consideration for any shares may not be challenged on any basis other than in terms of section 76, read with section 77 (2).

(4)  Subject to subsections (5) to (7), when a company has received the consideration approved by its board for the issuance of any shares—

(a)those shares are fully paid; and

(b)the company must issue those shares and cause the name of the holder to be entered on the company’s securities register in accordance with Part E of this Chapter.

(5)  If the consideration for any shares that are issued or to be issued is in the form of an instrument such that the value of the consideration cannot be realised by the company until a date after the time the shares are to be issued, or is in the form of an agreement for future services, future benefits or future payment by the subscribing party—

(a)the consideration for those shares is regarded as having been received by the company at any time only to the extent—

(i)that the value of the consideration for any of those shares has been realised by the company; or

[Sub-para. (i) substituted by s. 28 (b) of Act No. 3 of 2011.]

(ii)that the subscribing party to the agreement has fulfilled its obligations in terms of the agreement; and

(b)upon receiving the instrument or entering into the agreement, the company must—

(i)issue the shares immediately; and

(ii)cause the issued shares to be transferred to a third party, to be held in trust and later transferred to the subscribing party in accordance with a trust agreement.

[Sub-s. (5) amended by s. 28 (a) of Act No. 3 of 2011.]

(6)  Except to the extent that a stakeholder agreement contemplated in subsection (5) (b) provides otherwise—

(a)voting rights, and appraisal rights set out in section 164, associated with shares that have been issued but are held in trust may not be exercised;

(b)any pre-emptive rights associated with shares that have been issued but are held in trust may be exercised only to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

(c) any distribution with respect to shares that have been issued but are held in trust—

(i)must be paid or credited by the company to the subscribing party to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement; and

(ii)may be credited against the remaining value at that time of any services still to be performed by the subscribing party, any future payment remaining due, or the benefits still to be received by the company; and

(d)shares that have been issued but are held in trust—

(i)may not be transferred by or at the direction of the subscribing party unless the company has expressly consented to the transfer in advance;

(ii)may be transferred to the subscribing party on a quarterly basis, to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

(iii)must be transferred to the subscribing party when the instrument has become negotiable by the company, or upon satisfaction of all of the subscribing party’s obligations in terms of the agreement; and

(iv)to the extent that the instrument is dishonoured after becoming negotiable, or that the subscribing party has failed to fulfil its obligations under the agreement, must be returned to the company and cancelled, on demand by the company.

 

[Sub-s. (6) amended by s. 9 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(6A)  For the purposes of subsections (5) and (6)—

(a)“stakeholder” means an independent third party, who has no interest in the company or the subscribing party, who may be in the form of an attorney, notary public or escrow agent; and

(b)“stakeholder agreement” means a written contract between the stakeholder and the company.

[Sub-s. (6A) inserted by s. 9 (c) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

 

(7)  A company may not make a demand contemplated in subsection (6) (d) (iv) unless—

(a)a negotiable instrument is dishonoured after becoming negotiable by the company; or

(b)in the case of an agreement, the subscribing party has failed to fulfil any obligation in terms of the agreement for a period of at least 40 business days after the date on which the obligation was due to be fulfilled.

SECTION 45 – FINANCIAL ASSISTANCE PROVISIONS CONTAINED IN SECTION 45 OF THE COMPANIES ACT:

The requirements that a company is required to meet before giving of financial assistance to or for the benefit of a company’s subsidiaries (as determined in accordance with section 3(1) of the Companies Act) have been removed, resulting in the reduction of administrative burdens for group companies.

Amended section reads:

SECTION 45- FINANCIAL ASSISTANCE

(1)  In this section, “financial assistance”—

(a)includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation; but

(b)does not include—

(i)lending money in the ordinary course of business by a company whose primary business is the lending of money;

(ii)an accountable advance to meet—

(aa)legal expenses in relation to a matter concerning the company; or

(bb)anticipated expenses to be incurred by the person on behalf of the company; or

(iii)an amount to defray the person’s expenses for removal at the company’s request.

(2)  Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member, subject to subsections (3) and (4).

(2A)  The provisions of this section do not apply to the giving by a company of financial assistance to or for the benefit of its subsidiaries.

[Sub-s. (2A) inserted by s. 10 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(3)  Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless—

(a)the particular provision of financial assistance is—

(i)pursuant to an employee share scheme that satisfies the requirements of section 97; or

(ii)pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

(b)the board is satisfied that—

(i)immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

(ii)the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

[Para. (b) substituted by s. 31 (a) of Act No. 3 of 2011.]

(4)  In addition to satisfying the requirements of subsection (3), the board must ensure that any conditions or restrictions respecting the granting of financial assistance set out in the company’s Memorandum of Incorporation have been satisfied.

(5)  If the board of a company adopts a resolution to do anything contemplated in subsection (2), the company must provide written notice of that resolution to all shareholders, unless every shareholder is also a director of the company, and to any trade union representing its employees—

(a)within 10 business days after the board adopts the resolution, if the total value of all loans, debts, obligations or assistance contemplated in that resolution, together with any previous such resolution during the financial year, exceeds one-tenth of 1% of the company’s net worth at the time of the resolution; or

(b)within 30 business days after the end of the financial year, in any other case.

(6)  A resolution by the board of a company to provide financial assistance contemplated in subsection (2), or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with—

(a)this section; or

(b)a prohibition, condition or requirement contemplated in subsection (4).

(7)  If a resolution or an agreement is void in terms of subsection (6) a director of the company is liable to the extent set out in section 77 (3) (e) (v) if the director—

(a)was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section or a prohibition, condition or requirement contemplated in subsection (4).

[

Sub-s. (7) amended by s. 31 (b) of Act No. 3 of 2011.]

SECTION 48 -SHARE BUY BACKS

Previously, there were certain onerous requirements that had to be complied with where a company bought back its own shares, including the requirement:

• to have in place a special resolution if the buy-back pertained to more than 5% of the issued shares of any particular class of the company’s shares and

• to comply with the independent expert report requirement stated in section 114.

Following this – in instances where a company wishes to acquire its own shares, it will no longer have to comply with the provisions of section 114 and 115.

 

Amended section reads:

(1)  This section does not apply to—

(a)the making of a demand, tendering of shares and payment by a company to a shareholder in terms of a shareholder’s appraisal rights set out in section 164; or

(b)the redemption by the company of any redeemable securities in accordance with the terms and conditions of those securities.

[Sub-s. (1) substituted by s. 32 (a) of Act No. 3 of 2011.]

(2)  Subject to subsections (3) and (8), and if the decision to do so satisfies the requirements of section 46—

(a)the board of a company may determine that the company will acquire a number of its own shares; and

[Para. (a) substituted by s. 32 (c) of Act No. 3 of 2011.]

(b)the board of a subsidiary company may determine that it will acquire shares of its holding company, but—

[Para. (b) substituted by s. 32 (c) of Act No. 3 of 2011.]

(i)not more than 10%, in aggregate, of the number of issued shares of any class of shares of a company may be held by, or for the benefit of, all of the subsidiaries of that company, taken together; and

(ii)no voting rights attached to those shares may be exercised while the shares are held by the subsidiary, and it remains a subsidiary of the company whose shares it holds.

[Sub-s. (2) amended by s. 32 (b) of Act No. 3 of 2011. Para. (b) substituted by s. 32 (c) of Act No. 3 of 2011.]

(3)  Despite any provision of any law, agreement, order or the Memorandum of Incorporation of a company, the company may not acquire its own shares, and a subsidiary of a company may not acquire shares of that company, if, as a result of that acquisition, there would no longer be any shares of the company in issue other than—

(a)shares held by one or more subsidiaries of the company; or

(b)convertible or redeemable shares.

(4)  An agreement with a company providing for the acquisition by the company of shares issued by it is enforceable against the company, subject to subsections (2) and (3).

(5)  If a company alleges that, as a result of the operation of subsection (2) or (3), it is unable to fulfil its obligations in terms of an agreement contemplated in subsection (4)—

(a)the company must apply to a court for an order in terms of paragraph (c);

(b)the company has the burden of proving that fulfilment of its obligations would put it in breach of subsections (2) or (3); and

(c)if the court is satisfied that the company is prevented from fulfilling its obligations pursuant to the agreement, the court may make an order that—

(i)is just and equitable, having regard to the financial circumstances of the company; and

(ii)ensures that the person to whom the company is required to make a payment in terms of the agreement is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

(6)  If a company acquires any shares contrary to section 46, or this section, the company must, not more than two years after the acquisition, apply to a court for an order reversing the acquisition, and the court may order—

(a)the person from whom the shares were acquired to return the amount paid by the company; and

(b)the company to issue to that person an equivalent number of shares of the same class as those acquired.

[Sub-s. (6) amended by s. 32 (d) of Act No. 3 of 2011.]

(7)  A director of a company is liable to the extent set out in section 77 (3) (e) (vii) if the director—

(a)was present at the meeting when the board approved an acquisition of shares contemplated in this section, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the acquisition of shares, despite knowing that the acquisition was contrary to this section or section 46.

(8)  A decision by the board of a company, contemplated in subsection (2) (a), must be approved by a special resolution of the shareholders of the company—

(a)if any shares are to be acquired by the company from—

(i)a director of the company;

(ii)a prescribed officer of the company; or

(iii)a person related to a director of the company or a prescribed officer; or

(b)if it entails the acquisition of shares in the company, other than shares acquired as a result of—

(i)a pro rata offer made by the company to all shareholders of the company or a particular class of shareholders of the company, notwithstanding that the pro rata offer made to all shareholders may also include shareholders who are one or more of the persons referred to in paragraph (a); or

(ii)transactions effected on a recognised stock exchange on which the shares of the company are traded, being a licenced exchange as contemplated in the Financial Markets Act, 2012 (Act No. 19 of 2012).

[Sub-s. (8) inserted by s. 32 (e) of Act No. 3 of 2011 and substituted by s. 11 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

SECTION 61 – SHAREHOLDER MEETINGS

This amendment includes

• the requirement that a public company is to provide a social and ethics committee report and remuneration report at an AGM.

• The requirement of the company to appoint a social and ethics committee at that AGM.

Amended section reads:

(1)  The board of a company, or any other person specified in the company’s Memorandum of Incorporation or rules, may call a shareholders meeting at any time.

(2)  Subject to section 60, a company must hold a shareholders meeting—

(a)at any time that the board is required by this Act or the Memorandum of Incorporation to refer a matter to shareholders for decision;

(b)whenever required in terms of section 70 (3) to fill a vacancy on the board; and

(c)when otherwise required—

(i)in terms of subsection (3) or (7); or

(ii)by the company’s Memorandum of Incorporation.

(3)  Subject to subsection (5) and (6), the board of a company, or any other person specified in the company’s Memorandum of Incorporation or rules, must call a shareholders meeting if one or more written and signed demands for such a meeting are delivered to the company, and—

(a)each such demand describes the specific purpose for which the meeting is proposed; and

(b)in aggregate, demands for substantially the same purpose are made and signed by the holders, as of the earliest time specified in any of those demands, of at least 10% of the voting rights entitled to be exercised in relation to the matter proposed to be considered at the meeting.

[Para. (b) substituted by s. 39 of Act No. 3 of 2011.]

(4)  A company’s Memorandum of Incorporation may specify a lower percentage in substitution for that set out in subsection (3) (b).

(5)  A company, or any shareholder of the company, may apply to a court for an order setting aside a demand made in terms of subsection (3) on the grounds that the demand is frivolous, calls for a meeting for no other purpose than to reconsider a matter that has already been decided by the shareholders, or is otherwise vexatious.

(6)  At any time before the start of a shareholders meeting contemplated in subsection (3)—

(a)a shareholder who submitted a demand for that meeting may withdraw that demand; and

(b)the company must cancel the meeting if, as a result of one or more demands being withdrawn, the voting rights of any remaining shareholders continuing to demand the meeting, in aggregate, fall below the minimum percentage of voting rights required to call a meeting.

(7)  A public company must convene an annual general meeting of its shareholders—

(a)initially, no more than 18 months after the company’s date of incorporation; and

(b)thereafter, once in every calendar year, but no more than 15 months after the date of the previous annual general meeting, or within an extended time allowed by the Companies Tribunal, on good cause shown.

(8)  A meeting convened in terms of subsection (7) must, at a minimum, provide for the following business to be transacted:

(a)Presentation of—

(i)the directors’ report;

(ii)audited financial statements for the immediately preceding financial year;

[Sub-para. (ii) amended by s. 12 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(iii)an audit committee report;

 

(iv)a social and ethics committee report; and

[Sub-para. (iv) added by s. 12 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

 

(v)a remuneration report;

[Sub-para. (v) added by s. 12 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(b)election of directors, to the extent required by this Act or the company’s Memorandum of Incorporation;

(c) appointment of—

(i)an auditor for the ensuing financial year;

[Sub-para. (i) amended by s. 12 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(ii)an audit committee; and

 

(iii)social and ethics committee.

 

[Sub-para. (iii) added by s. 12 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(9)  Except to the extent that the Memorandum of Incorporation of a company provides otherwise—

(a)the board of the company may determine the location for any shareholders meeting of the company; and

(b)a shareholders meeting of the company may be held in the Republic or in any foreign country.

(10)  Every shareholders meeting of a public company must be reasonably accessible within the Republic for electronic participation by shareholders in the manner contemplated in section 63 (2), irrespective of whether the meeting is held in the Republic or elsewhere.

(11)  If a company is unable to convene a meeting as required in terms of this section because it has no directors, or because all of its directors are incapacitated—

(a)any other person authorised by the company’s Memorandum of Incorporation may convene the meeting; or

(b)if no person has been authorised as contemplated in paragraph (a), the Companies Tribunal, on a request by any shareholder, may issue an administrative order for a shareholders meeting to be convened on a date, and subject to any terms, that the Tribunal considers appropriate in the circumstances.

(12)  If a company fails to convene a meeting for any reason other than as contemplated in subsection (11)—

(a)at a time required in accordance with its Memorandum of Incorporation;

(b)when required by shareholders in terms of subsection (3); or

(c)within the time required by subsection (7), a shareholder may apply to a court for an order requiring the company to convene a meeting on a date, and subject to any terms, that the court considers appropriate in the circumstances.

(13)  The company must compensate a shareholder who applies to the Companies Tribunal in terms of subsection (11), or to a court in terms of subsection (12), respectively, for the costs of those proceedings.

(14)  Any failure to hold a meeting as required by this section does not affect the existence of a company, or the validity of any action by the company.

SECTION 72 – BOARD COMMITTEES

Section 72- Deals with exemptions from having to appoint a social and ethics committee.

Section 72 (5) now requires that a company must (in the prescribed manner) publish its intention to lodge an application for such an exemption with the Tribunal.

The new section 72 (6A) introduces a new exemption to the requirement of having a social and ethics committee – namely that if the company is a subsidiary of another company that has a social and ethics committee, and such committee will perform the functions required by section 72 on behalf of the subsidiary company, then the subsidiary is not required to have such a committee.

The new sections 72 (7A), (8A), (9A) and (11) deal with the composition and workings of the social and ethics committee.

 

Amended section reads:

(1)  Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board of a company may—

(a)appoint any number of committees of directors; and

(b)delegate to any committee any of the authority of the board.

(2)  Except to the extent that the Memorandum of Incorporation of a company, or a resolution establishing a committee, provides otherwise, the committee—

(a)may include persons who are not directors of the company, but—

(i)any such person must not be ineligible or disqualified to be a director in terms of section 69; and

(ii)no such person has a vote on a matter to be decided by the committee;

(b)may consult with or receive advice from any person; and

(c)has the full authority of the board in respect of a matter referred to it.

(3)  The creation of a committee, delegation of any power to a committee, or action taken by a committee, does not alone satisfy or constitute compliance by a director with the required duty of a director to the company, as set out in section 76.

(4)  The Minister, by regulation, may prescribe—

(a)a category of companies that must each have a social and ethics committee, if it is desirable in the public interest, having regard to—

(i)annual turnover;

(ii)workforce size; or

(iii)the nature and extent of the activities of such companies;

(b)the functions to be performed by social and ethics committees required by this subsection; and

(c)rules governing the composition and conduct of social and ethics committees.

[Sub-s. (4) substituted by s. 47 (a) of Act No. 3 of 2011.]

(5)  A company that falls within the category of companies that are required in terms of this section and the regulations to appoint a social and ethics committee may apply to the Tribunal for an exemption from that requirement in the following manner:

(a)The company must publish the intention to lodge an application for exemption with the Tribunal in the prescribed manner; and

(b)apply to the Tribunal, in the prescribed manner and form, for an exemption from the requirement, and the Tribunal may grant such exemption if it is satisfied that—

(i)the company has a formal mechanism within its structures, which substantially performs the functions of the social and ethics committee in terms of this section and the regulations; or

(ii)it is not reasonably necessary, having regard to the nature and extent of the structures and activities of the company and the public interest, to require the company to have a social and ethics committee.

[Sub-s. (5) inserted by s. 47 (b) of Act No. 3 of 2011 and substituted by s. 13 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(6)  An exemption granted in terms of subsection (5) is valid for five years, or such shorter period as the Tribunal may determine at the time of granting the exemption, unless set aside by the Tribunal in terms of subsection (7).

[Sub-s. (6) inserted by s. 47 (b) of Act No. 3 of 2011.]

(6A)  A social and ethics committee is not required where—

(a)the company is a subsidiary of another company that has a social and ethics committee, and the existing social and ethics committee will perform the functions required by this section on behalf of the subsidiary company; or

(b)the company has been exempted by the Tribunal in terms of subsections (5) and (6).

[Sub-s. (6A) inserted by s. 13 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

	(6B)  The Minister may prescribe the minimum qualifications, skills and experience requirements for members of the social and ethics committee that he or she may consider necessary to ensure that any such committee comprises persons with adequate relevant knowledge and experience to equip the committee to perform its functions. (Pending amendment: Sub-s. (6B) to be inserted by s. 13 (b) of Act No. 16 of 2024 with effect from a date to be fixed by the President by Proclamation in the Gazette – date not fixed.)

(7)  The Commission, on its own initiative or on request by a shareholder, or a person who was granted standing by the Tribunal at the hearing of the exemption application, may apply to the Tribunal to set aside an exemption only on the grounds that the basis on which the exemption was granted no longer applies.

[Sub-s. (7) inserted by s. 47 (b) of Act No. 3 of 2011.]

(7A)  The social and ethics committee of a company must comprise not less than three members: Provided that—

(a)in the case of a public company and state-owned company, the majority of the members must be directors who are not involved in the day-to-day management of the business of the company and must not have been so involved at any time during the previous three financial years; and

(b)in the case of any other company, not being a public company or state-owned company, the members must consist of not less than three directors or prescribed officers, at least one of whom must be a director, who is not involved in the day-to-day management of the business of the company and must not have been so involved within the previous three financial years.

 

[Sub-s. (7A) inserted by s. 13 (c) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

 

(8)  A social and ethics committee of a company is entitled to—

(a)require from any director or prescribed officer of the company any information or explanation necessary for the performance of the committee’s functions;

(b)request from any employee of the company any information or explanation necessary for the performance of the committee’s functions;

(c) attend any general shareholders meeting;

 

(d)receive all notices of and other communications relating to any general shareholders meeting; and

 

(e)be heard at any general shareholders meeting contemplated in this paragraph on any part of the business of the meeting that concerns the committee’s functions.

[Sub-s. (8) inserted by s. 47 (b) of Act No. 3 of 2011.]

(8A)  A board of a company that is required to have a social and ethics committee that—

(a)exists on the effective date, must appoint the first members of the committee within 12 months after—

(i)the effective date; or

(ii)the determination by the Tribunal of the company’s application, if any, and the Tribunal has not granted the company an exemption; and

(b)is incorporated on or after the effective date, must constitute a social and ethics committee within 12 months after—

(i)its date of incorporation, in the case of a public company or state-owned company; or

(ii)in the case of any other company, not being a public company or state-owned company, the date the company first met the criteria determined in terms of subsection (4) (a).

[Sub-s. (8A) inserted by s. 13 (d) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(9)  A company must pay all the expenses reasonably incurred by its social and ethics committee, including, if the social and ethics committee considers it appropriate, the costs or the fees of any consultant or specialist engaged by the social and ethics committee in the performance of its functions.

[Sub-s. (9) inserted by s. 47 (b) of Act No. 3 of 2011.]

(9A)  Thereafter—

(a)at each annual general meeting of a public company or state-owned company, such company must elect a social and ethics committee; or

(b)a social and ethics committee must be appointed annually by the board of the company where such company is any other company, not being a public company or state-owned company, required to have a social and ethics committee.

 

[Sub-s. (9A) inserted by s. 13 (e) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(10)  Section 84 (6) and (7), read with the changes required by the context, apply with respect to a company that fails to appoint a social and ethics committee, as required by this section and the regulations.

[Sub-s. (10) inserted by s. 47 (b) of Act No. 3 of 2011.]

(11)  Where a vacancy arises in the social and ethics committee, the board must appoint a person within 40 days after the vacancy arises, to fill such vacancy.

 

[Sub-s. (11) inserted by s. 13 (f) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

 

	(12)  (a)  A social and ethics committee must prepare for shareholders a social and ethics committee report in the prescribed manner and form describing how the committee performed its functions in terms of this Act and the regulations.   (b)  The social and ethics committee must present its report—   (i)in the case of a public company or state-owned company, at its next annual general meeting; or   (ii)in the case of any other company, not being a public company or state-owned company, annually at a shareholders meeting or with a resolution as contemplated in section 60 (1).   (Pending amendment: Sub-s. (12) to be inserted by s. 13 (f) of Act No. 16 of 2024 with effect from a date to be fixed by the President by Proclamation in the Gazette – date not fixed.)

SEC 90 APPOINTMENT OF AN AUDITOR

 

The amendment makes it clear that a company which is required to have its annual financial statements audited must appoint an auditor at the shareholders meeting where the requirement first applies to the company, and thereafter annually.

Amended section reads:

 

(1)  Upon its incorporation, and each year at its annual general meeting, a public company or state-owned company must appoint an auditor.

(1A)  A company referred to in section 84 (1) (c) (i), or a company that is required only in terms of its Memorandum of Incorporation to have its annual financial statements audited as contemplated in sections 34 (2) and 84 (1) (c) (ii), must appoint an auditor at a shareholders meeting at which the requirement first applies to the company, and thereafter annually at the shareholders meeting.

[Sub-s. (1A) inserted by s. 55 of Act No. 3 of 2011 and substituted by s. 14 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(2)  To be appointed as an auditor of a company, whether as required by subsection (1) or as contemplated in section 34 (2), a person or firm—

(a)must be a registered auditor;

(b)in addition to the prohibition contemplated in section 84 (5), must not be—

(i)a director or prescribed officer of the company;

(ii)an employee or consultant of the company who was or has been engaged for more than one year in the maintenance of any of the company’s financial records or the preparation of any of its financial statements;

(iii)a director, officer or employee of a person appointed as company secretary in terms of Part B of this Chapter;

(iv)a person who, alone or with a partner or employees, habitually or regularly performs the duties of accountant or bookkeeper, or performs related secretarial work, for the company;

(v)a person who, at any time during the two financial years immediately preceding the date of appointment, was a person contemplated in any of subparagraphs (i) to (iv); or

 

[Sub-para. (v) substituted by s. 14 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(vi)a person related to a person contemplated in subparagraphs (i) to (v); and(c)must be acceptable to the company’s audit committee as being independent of the company, having regard to the matters enumerated in section 94 (8), in the case of a company that has appointed an audit committee, whether as required by section 94, or voluntarily as contemplated in section 34 (2).

(3)  If a company appoints a firm as an auditor, the individual determined by that firm, in terms of section 44 (1) of the Auditing Profession Act, to be responsible for performing the functions of auditor must satisfy the requirements of subsection (2).

(4)  If a company that is required to appoint an auditor does not do so when it registers the incorporation of the company, the directors of the company must appoint the first auditor of the company within 40 business days after the date of incorporation of the company.

(5)  The first auditor of a company holds office until the conclusion of the first annual general meeting of the company.

(6)  A retiring auditor may be automatically reappointed at an annual general meeting without any resolution being passed, unless—

(a)the retiring auditor is—

(i)no longer qualified for appointment;

(ii)no longer willing to accept the appointment, and has so notified the company; or

(iii)required to cease serving as auditor, in terms of section 92;

(b)an audit committee appointed by the company in terms of this Act objects to the reappointment; or

(c)the company has notice of an intended resolution to appoint some other person or persons in place of the retiring auditor.

(7)  If an annual general meeting of a company does not appoint or reappoint an auditor the directors must fill the vacancy in the office in terms of the procedure contemplated in section 91 within 40 business days after the date of the meeting.

 

SECTION 95- APPLICATION AND INTERPRETATION OF CHAPTER

This section is the introduction to chapter 4 – public offerings of company securities – and the amendment introduces the purchase of shares (in addition to the issue of shares and the grant of options) by which an employee share scheme can be established.

 

Amended section reads:

(1)  In this Chapter, unless the context indicates otherwise —

(a)“company”, in addition to the meaning set out in section 1, also includes a foreign company;

(b)“compliance officer” means a compliance officer appointed by a company in respect of its employee share scheme;

(c)“employee share scheme” means a scheme established by a company, whether by means of a trust or otherwise, for the purpose of offering participation therein solely to employees, officers and other persons closely involved in the business of the company or a subsidiary of the company, either—

(i)by means of the issue or purchase of shares in the company; or

 

[Sub-para. (i) substituted by s. 15 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(ii)by the grant of options for shares in the company;

[Para. (c) amended by s. 58 (a) of Act No. 3 of 2011.

 

(d)“expert” means—

(i)a geologist, engineer, architect, quantity surveyor, valuer, accountant or auditor; or

(ii)any person who professes—

(aa)to be a person referred to in subparagraph (i); or

(bb)to have extensive knowledge or experience, or to exercise special skill which gives or implies authority to a statement made by that person;

(e)“initial public offering” means an offer to the public of any securities of a company, if—

(i)no securities of that company have previously been the subject of an offer to the public; or

(ii)all of the securities of that company that had previously been the subject of an offer to the public have subsequently been re-acquired by the company;

(f)“letter of allocation” means any document conferring a right to subscribe for shares in terms of a rights offer;

(g)“offer”, in relation to securities, means an offer made in any way by any person with respect to the acquisition, for consideration, of any securities in a company;

(h)“offer to the public”—

(i)includes an offer of securities to be issued by a company to any section of the public, whether selected—

(aa)as holders of that company’s securities;

(bb)as clients of the person issuing the prospectus;

(cc)as the holders of any particular class of property; or

(dd)in any other manner; but

(ii)does not include—

(aa)an offer made in any of the circumstances contemplated in section 96; or

(bb)a secondary offer effected through an exchange;

(i)“primary offering” means an offer to the public, made by or on behalf of a company, of securities to be issued by that company, or by another company—

(i)within a group of companies of which the first company is a member; or

(ii)with which the first company proposes to be amalgamated or to merge.

[Para. (i) substituted by s. 58 (b) of Act No. 3 of 2011.]

(j)“promoter”, in relation to civil and criminal liability in respect of an untrue statement in a prospectus, means—

(i)a person who was a party to the preparation of the prospectus, or of the portion of it that contains the untrue statement; but

(ii)does not include any person acting in a professional capacity for persons engaged in procuring the formation of the company or preparing the prospectus;

(k)“registered prospectus” means a prospectus that complies with this Act and—

(i)in the case of listed securities, has been approved by the relevant exchange; or

(ii)otherwise, has been filed;

(l)“rights offer” means an offer, with or without a right to renounce in favour of other persons, made to any holders of a company’s securities for subscription of any securities of that company, or any other company within the same group of companies;

(m)“secondary offering” means an offer for sale to the public of any securities of a company or its subsidiary, made by or on behalf of a person other than that company or its subsidiary;

(n)“specified shares” means shares, including options on shares, offered to employees of a company in terms of an employee share scheme;

(o)“unit” means any right or interest in any securities; and

(p)“untrue statement” includes a statement that is misleading in the form and context in which it is made, subject to subsections (3) and (4).

(2)  For the purposes of this Chapter, a person is to be regarded, by or in respect of a company, as being a member of the public, despite that person being a shareholder of the company or a purchaser of goods from the company.

(3)  An untrue statement is regarded to have been included in a prospectus, written statement, or summary directing a person to either a prospectus or written statement, if it is contained in any report or memorandum—

(a)that appears on the face of the prospectus, written statement, or summary; or

(b)that is incorporated by reference within, or is attached to or accompanies, the prospectus, written statement or summary.

(4)  An omission from a prospectus or written statement of any matter that, in the context, is calculated to mislead by omission constitutes the making of an untrue statement in that prospectus or written statement, irrespective of whether this Act requires that matter to be included in the prospectus or written statement.

(5)  A provision of an agreement is void to the extent that it—

(a)requires an applicant for securities to waive compliance with a requirement of this Chapter; or

(b)purports to affect an applicant for securities with any notice of any agreement, document or matter not specifically referred to in a prospectus or written statement.

(6)  Nothing in this Chapter limits any liability that a person may incur under this Act apart from this Chapter, or under any other public regulation, or under the common law.

(7)  The Minister may make regulations—

(a)establishing general or specific requirements respecting the form and content of rights offers, letters of allocation and prospectuses;

(b)prescribing the manner and form to be followed in filing and publishing of rights offers, letters of allocation and prospectuses; and

(c)in respect of related or ancillary matters concerning the offering of company securities.

[Sub-s. (7) inserted by s. 58 (c) of Act No. 3 of 2011.]

SECTION 135.   POST-COMMENCEMENT FINANCE.

This amendment includes post-business rescue amounts due to a landlord as post commencement finance in business rescue proceedings

Amended section reads:

(1)  To the extent that any remuneration, reimbursement for expenses or other amount of money relating to employment becomes due and payable by a company to an employee during the company’s business rescue proceedings, but is not paid to the employee—

(a)the money is regarded to be post-commencement financing; and

(b)will be paid in the order of preference set out in subsection (3) (a).

(1A)  To the extent that any amounts due to the landlord, subject to a contract by the company which is placed in business rescue proceedings, are not paid to the landlord during business rescue proceedings, in respect of and not exceeding the aggregate for all public utility services, such as, the company’s share of rates and taxes, electricity, water, sanitation and sewer charges paid by the landlord to third parties during the business rescue period referred to in this section, is regarded as post-commencement financing and will be paid as contemplated in subsection (1).

 

[Sub-s. (1A) inserted by s. 17 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(2)  During its business rescue proceedings, the company may obtain financing other than as contemplated is subsection (1), and any such financing—

(a)may be secured to the lender by utilising any asset of the company to the extent that it is not otherwise encumbered; and

(b)will be paid in the order of preference set out in subsection (3) (b).

(3)  After payment of the practitioner’s remuneration and expenses referred to in section 143, post-commencement financing, and other claims arising out of the costs of the business rescue proceedings, all claims contemplated—

(a)in subsection (1) will be treated equally, but will have preference over—

(i)all claims contemplated in subsection (2), irrespective of whether or not they are secured; and

(ii)all unsecured claims against the company,

in subsection (1A) will rank below the claims contemplated in subsection (1), but ahead of all the secured and unsecured claims against the company; and

[Para. (a) substituted by s. 17 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(b)in subsection (2) will have preference in the order in which they were incurred over all unsecured claims against the company.

[Sub-s. (3) amended by s. 86 (a) of Act No. 3 of 2011 and by s. 17 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(4)  If business rescue proceedings are superseded by a liquidation order, the preference conferred in terms of this section will remain in force, except to the extent of any claims arising out of the costs of liquidation.

 

SECTION 160 – DISPUTES CONCERNING RESERVATION OR REGISTRATION OF COMPANY NAMES

This amendment gives new powers concerning compliance where a company fails to change its name as required.

Amended section reads:

(1)  A person to whom a notice is delivered in terms of this Act with respect to an application for reservation of a name, registration of a defensive name, application to transfer the reservation of a name or the registration of a defensive name, or the registration of a company’s name, or any other person with an interest in the name of a company, may apply to the Companies Tribunal in the prescribed manner and form for a determination whether the name, or the reservation, registration or use of the name, or the transfer of any such reservation or registration of a name, satisfies the requirements of this Act.

[Sub-s (1) substituted by s. 99 (a) of Act No. 3 of 2011.]

(2)  An application in terms of subsection (1) may be made—

(a)within three months after the date of a notice contemplated in subsection (1), if the applicant received such a notice; or

(b)on good cause shown at any time after the date of the reservation or registration of the name that is the subject of the application, in any other case.

(3)  After considering an application made in terms of subsection (1), and any submissions by the applicant and any other person with an interest in the name or proposed name that is the subject of the application, the Companies Tribunal—

(a)must make a determination whether that name, or the reservation, registration or use of the name, or the transfer of the reservation or registration of the name, satisfies the requirements of this Act; and

[Para. (a) substituted by s. 99 (b) of Act No. 3 of 2011.]

(b)may make an administrative order directing—

(i)the Commission to—

(aa)reserve a contested name, or register a particular defensive name that had been contested, for the applicant;

(bb)register a name or amended name that had been contested as the name of a company;

(Editorial Note: Wording as per original Government Gazette.)

(cc)cancel the reservation of a name, or the registration of a defensive name; or

(dd)transfer, or cancel the transfer of, the reservation of a name, or the registration of a defensive name; or

[Sub-para. (i) substituted by s. 99 (c) of Act No. 3 of 2011.]

(ii)a company to choose a new name, and to file a notice of an amendment to its Memorandum of Incorporation, within a period and on any conditions that the Tribunal considers just, equitable and expedient in the circumstances, including a condition exempting the company from the requirement to pay the prescribed fee for filing the notice of amendment contemplated in this paragraph.

(4)  Within 20 business days after receiving a notice or a decision issued by the Companies Tribunal in terms of this section, an incorporator of a company, a company, a person who received a notice in terms of section 12 (3) or 14 (3), an applicant under subsection (1) or and any other person with an interest in the name or proposed name that is the subject of the application, as the case may be, may apply to a court to review the notice or decision.

(5)  (a)  Where the Companies Tribunal has issued an administrative order in terms of subsection (3) (b) (ii), the administrative order must stipulate the date for compliance by the company.

(b)  Where the company fails to change its name within the determined period in terms of the administrative order of the Companies Tribunal, the applicant may approach the Commission, after the expiration of the determined period, to substitute the name of the respondent with its company’s registration number followed by “Inc”, “(Pty) Ltd”, “Limited” or “SOC Ltd”, as the case may be.

 

[Sub-s. (5) inserted by s. 18 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

167. DISPUTE RESOLUTION MAY RESULT IN CONSENT ORDER

This section gives the  Companies Tribunal the right if it has resolved, or assisted parties in resolving, a dispute to record the resolution of that dispute and to submit it to a court to be confirmed as a consent order, in terms of its rules.

Amended section reads:

(1)  If the Companies Tribunal has resolved, or assisted parties in resolving, a dispute in terms of this Part, the Tribunal may—

(a)record the resolution of that dispute in the form of an order; and

(b)if the parties to the dispute consent to that order, submit it to a court to be confirmed as a consent order, in terms of its rules.

[Sub-s. (1) amended by s. 20 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(2)  After hearing an application for a consent order, the court may—

(a)make the order as agreed and proposed in the application;

(b)indicate any changes that must be made to the draft order before it will be made an order of the court; or

(c)refuse to make the order.

(3)  A consent order confirmed in terms of subsection (2)—

(a)may include an award of damages; and

(b)does not preclude a person applying for an award of civil damages, unless the consent order includes an award of damages to that person.

(4)  A court hearing any proceedings concerning a dispute arising out of a consent order may order the proceedings closed to the public if it is the interest of the confidentiality of the parties to the consent order to do so.

194. APPOINTMENT OF COMPANIES TRIBUNAL.

This section deals with the appointment of the Companies Tribunal and the amendment deals with responsibilities of certain office bearers and for their remuneration.

 

Amended section reads:

(1)  The Minister must—

(a)appoint the chairperson and other members of the Companies Tribunal no later than the date on which this Act comes into operation; and

(b)appoint a person to fill any vacancy on the Tribunal.

(1A)  (a)  The chairperson of the Tribunal is the accounting authority of the Tribunal and is responsible for—

(i)the control and management of the Tribunal;

(ii)the effectiveness and efficiency of the Tribunal;

(iii)all the income and expenditure of the Tribunal;

(iv)all assets and the discharge of liabilities of the Tribunal; and

(v)the proper diligent implementation of the Public Finance Management Act, 1999 (Act No. 1 of 1999), with respect to the Tribunal.

(b)  In order to assist him or her with the functions contemplated in this subsection, the chairperson may appoint—

(i)a Chief Operating Officer for a period of five years, who may be reappointed for a further period of five years; and

(ii)one or more senior managers, under such terms and conditions as determined by the chairperson.

(c)  The Chief Operating Officer is responsible to perform as the Chief Operating Officer of the Tribunal, subject to—

(i)this Act and its regulations;

(ii)the Public Finance Management Act and its regulations; and

(iii)the policies and directions of the Tribunal.

(d)  The Chief Operating Officer is responsible for appointing such other employees as may be required for the proper functioning of the Tribunal: Provided that the chairperson, in consultation with the Minister, may determine the remuneration, allowances, employment benefits and other terms and conditions of employees appointed in terms of this paragraph.

(e)  The Minister must, in consultation with the Minister of Finance, determine the remuneration, allowances, benefits and conditions of appointment of—

(i)members of the Tribunal; and

(ii)the Chief Operating Officer.

 

[Sub-s. (1A) inserted by s. 21 of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(2)  A person may not be—

(a)appointed as chairperson or member of the Tribunal unless the person satisfies the requirements of section 205; or

(b)re-appointed to a second term as chairperson of the Tribunal.

(3)  The Tribunal must comprise—

(a)persons with suitable qualifications and experience in economics, law, commerce, industry or public affairs; and

(b)sufficient persons with legal training and experience to satisfy the requirements of section 195 (3) (a).

[Para. (b) substituted by s. 112 (a) of Act No. 3 of 2011.]

(4)  The Minister must designate a member of the Tribunal as deputy chairperson of the Tribunal.

(5)  The deputy chairperson performs the functions of chairperson whenever—

(a)the office of chairperson is vacant; or

(b)the chairperson is for any other reason temporarily unable to perform those functions.

(6)  Sections 206 and 207 apply to the chairperson and other members of the Tribunal.

(7)  The chairperson and each other member of the Tribunal serves for a term of five years and may, subject to subsection (2) (b), be reappointed for a second term.

[Sub-s. (7) inserted by s. 112 (b) of Act No. 3 of 2011.]

204. FUNCTIONS OF FINANCIAL REPORTING STANDARDS COUNCIL

This amendment allows financial reporting pronouncements to be issued by the Financial Reporting Standards Council and published in the Gazette, from time to time, in relation to international reporting standards which require adaptation for local circumstances.

Amended section reads:

(1)  The Financial Reporting Standards Council must—

(a)receive and consider any relevant information relating to the reliability of, and compliance with, financial reporting standards and adapt international reporting standards for local circumstances through the issue of financial reporting pronouncements and consider information from the Commission as contemplated in section 187 (3) (b);

[Para. (a) substituted by s. 23 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(b)advise the Minister on matters relating to financial reporting standards; and

(c ) consult with the Minister on the making of regulations establishing financial reporting standards, subject to the requirements set out in section 29 (5).

[Sub-s. (1) (previously s. 204) re-numbered by s. 23 (a) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(2)  For the purposes of this section, financial reporting pronouncements may be issued by the Financial Reporting Standards Council and published in the Gazette, from time to time, in relation to international reporting standards which require adaptation for local circumstances: Provided that such pronouncements are not in conflict with the International Financial Reporting Standards or the International Financial Reporting Standards for Small and Medium-sized Entities.

 

[Sub-s. (2) added by s. 23 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

(3)  “financial reporting pronouncements” means standards, guidelines and circulars developed, adopted, issued, or prescribed by the Financial Reporting Standards Council.

 

[Sub-s. (3) added by s. 23 (b) of Act No. 16 of 2024 with effect from 27 December, 2024: Proclamation No. 238 in Government Gazette 51837 of 27 December, 2024.]

End