The new Companies Act, originally ear-marked to be implemented on 1 April 2011 is now officially due for 1 May 2011. According to Trade and Industry Minister Rob Davies, it is a world class, path-breaking piece of legislation.
Also due on 1 May is the merger of the Companies and Intellectual Property Registration Office (Cipro) and the Office of the Company and Intellectual Property Enforcement into one body the Companies and Intellectual Property Commission (CIPC)
The CIPC will be responsible for registering companies, promoting awareness of company and intellectual property law, and ensuring that compliance with financial reporting standards is met, amongst other related duties.
A lot of concern has been raised around what exactly the Companies Act entails and how it will affect business in South Africa. Davies said that some of the concerns were hugely hyperbolic and had anticipated Armageddon when no such thing is going to happen. The Companies Act of 2008 replaces the Companies Act of 1973 which has been widely debated and criticised for inconsistencies, unintended consequences and drafting errors.
So lets get into the nitty-gritty of the Act:
It aims to make directors more liable for losses suffered by the company where that director has acted or failed to act against unauthorised or unlawful actions and situations.
The business rescue scheme has been labeled a world-class innovation. Before, when a company came into financial distress it would need to go under judicial management or be placed under an order or liquidation. Now, workers and management of that company may initiate a rescue process. Creditors would be held at bay while the company is put back on its feet.
Registering a new company will become a lot less laborious in that only a single registration document will be required. Companies will also be able to trade with a company number and no name.
‘Closed corporations’ will cease to exist. New ones anyway, existing CCs will continue to operate as before but no new CCs will be registered.
? A big one for the little guys, but not as good news for auditing firms, small and medium size companies will now no longer be required to produce audited financial statements.
Shareholders may appoint an audit committee with the aim of entrenching the role of shareholders and the level of independence that should be maintained between audit committees and boards of companies.
The act is also seeks to promote shareholder activisim. Minority shareholders (marshalling only 10% of total shares in issue) will now be able to call a general meeting.
There has been much concern over the Companies Act of 2008 and how beneficial it really is to business owners and companies. Davies has however iterated that the new direction is “very much” to the benefit of all companies operating in South Africa.