The South African Companies Amendment Bill (“the Bill”) was published on 21 September 2018. This marks the first amendments to the Companies Act No 71 of 2008 (“Companies Act”), since it came into effect. Some of the proposed amendments will soften difficult regulatory requirements and strengthen checks and balances.
1. Amendments to Memorandum of Incorporation
The Bill proposes that the Companies and Intellectual Property Commission (“CIPC”) will have 10 business days after receipt of a notice of amendment of a company’s Memorandum of Incorporation (“MOI”) to endorse or reject the amendments. If after 10 business days, the CIPC has not given feedback, the MOI will be deemed effective. This will do away with delays and uncertainty in effecting amendments.
2. Remuneration disclosures
The Directors of a public company will be required to prepare a directors’ remuneration report for presentation to the shareholders at the annual general meeting. The report will need to contain a background statement; an overview of the remuneration policy of the company and implementation. It is proposed that remuneration and benefits received by ‘prescribed officers’ in addition to directors, must be disclosed in the audited annual financial statements of the company.
3. Share buy-backs
The Bill proposes that a share buy-back must be approved by a special resolution of shareholders if shares are to be bought back from a director, a prescribed officer or a person related to a director or a prescribed officer. A special shareholder resolution will also be required if the buy-back entails an acquisition other than a pro rata offer made to all shareholders or transactions effected in the ordinary course on a stock exchange.
4. Application of takeover regulations to private companies
Currently the takeover regulations only apply to private companies if more than 10% of its issued securities had been transferred, other than between related or inter-related persons, within a 24-month period prior to the date of the affected transaction. The Bill proposes that Takeover Regulation provisions will apply to a private company if, at the time of the affected transaction, the company is required by the Act or the Regulations to have its annual financial statements audited.
5. Subsidiary financial assistance
Currently any financial assistance granted by a company to its subsidiary must be authorised by the board and the shareholders by way of a special resolution. The Bill proposes that this requirement be done away with. However, a special resolution will still be required in instances where subsidiaries provide financial assistance to each other or to a holding company.
The Bill is open to public comment and it remains to be seen what proposed amendments will make it into the Companies Act.