By way of a notice in the Government Gazette of 27 December 2024 the President caused certain sections of the Companies Amendment Act (Act No. 16 of 2024) and the Companies Second Amendment Act (Act No. 17 of 2024) to come into effect.
The following important sections are now law: -
1. Companies Amendment Act, 2024 (Act No. 16 of 2024)
1.1 Section 16 - 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.
1.2 Section 40 - 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’.
1.3 Section 45 - The amendment provides that the financial assistance provisions of section 45 do not apply where a company gives financial assistance to or for the benefit of its subsidiaries.
1.4 Section 48 - 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. The proposed amendment to section 48(8), requires a special resolution of shareholders (and nothing else), if a company intends to acquire shares from a director of the company (or any person/s related to such director) or if the acquisition is not as a result of –
1.4.1 a pro rata offer made to all the shareholders of the company or holders of a particular class of shares; or
1.4.2 a transaction effected on a recognised stock exchange on which the shares are traded.
1.5 Section 61 – The introduction for public companies to provide a social and ethics committee report and remuneration report at an AGM. It must now also appoint a social and ethics committee at that AGM.
1.6 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.
1.7 Section 90 – The amendment makes it clear that a company which is required to have it's annual financial statements audited must appoint an auditor at the shareholders meeting where the requirement first applies to the company, and thereafter annually.
1.8 Section 95 - 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.
1.9 Section 135 – This amendment includes post-business rescue amounts due to a landlord as post commencement finance in business rescue proceedings
1.10 Section 160 – Gives new powers concerning compliance where a company fails to change its name as required.
1.11 Section 194 – This section deals with the appointment of the Companies Tribunal and the amendment deals with responsibilities of certain office bearers and for their remuneration.
1.12 Section 204 – This section now provides for the issue of financial reporting requirements by the Financial Reporting Standards Council.
2. Companies Second Amendment Act (Act No. 17 of 2024)
Sections 77 and 162 – Applications to declare a director delinquent or under probation.
The Second Amendment Act extends the time periods within which a court may declare a director delinquent or under probation (section 162) and the prescription period for claims against directors for loss or damages (section 77(7)).
3. What significant items were not brought into effect ON 27 December 2024 under the Companies Amendment Act, 2024?
These include: -
3.1 Disclosure of company records
3.1.1 Section 25 – The CIPC to publish each company’s notice which indicates where its records are available for inspection.
3.1.2 Section 26 – The number of a company’s records or documents which may be accessed by a third party is to be increased and includes the MOI, the record of the company’s directors, the annual financial statements (mentioned in section 24 (3)(c)(ii)), the securities register and the register of beneficial ownership. Companies with a public interest score below a certain threshold are exempt from the requirement of disclosing their annual financial statements mentioned above.
3.1.3 Section 30 – Currently the annual financial statements of a company, where the financial statements must be audited, must disclose the remuneration of each director and each prescribed officer. This section proposes that these directors or prescribed officers must be named. Please note that section 30 (5) requires that the remuneration to be disclosed for a director of a company includes renumeration for services as a director of other companies in the same group and otherwise in connection with the carrying on of the affairs of the company or any other company within the same group of companies.
3.2 Section 30 A and 30 B - duty to prepare and present the company’s remuneration policy.
These two sections will require all public and state-owned companies to prepare and present a remuneration policy for shareholders’ approval. The renumeration policy, together with a background statement and an implementation report, must be presented for approval at the annual general meeting of all public and state - owned companies. The section describes what information the implementation report should contain and then also the consequences if this report is not approved by ordinary resolution at an annual general meeting and the next meeting. The term “remuneration” is widely defined.
3.3 Section 38A - validation of the irregular creation, allotment or issuing of shares.
Section 38 states that the board may resolve to issue shares within the classes in accordance with section 36 if the shares have been authorised by the company’s MOI. If shares are issued but not authorised in terms of section 36 or in excess of the number of authorised shares of any particular class, the share issue must be retroactively authorised in terms of section 36 within 60 business days after the date of issue, failing which the share issue will be a nullity and any entry into the securities register will be void.
The proposed amendment of section 38A provides that on application by the company or any party holding an interest, a court may validate the creation, allotment or issue of shares if it is satisfied that it is just and equitable to do so. This proposed change is useful to companies and shareholders which find themselves in circumstances where retroactive authorisation has not occurred within the prescribed 60 business days period.
This bulletin was written by partner Samantha van Breda, Counsel Michael van Vuren and candidate attorney Temia Naidoo.
