Companies Amendment Acts effective
18 February 2025
Effective date proclaimed – changes to the Companies Act 71 of 2008
It was the night before Christmas … oh no … two days after …. while the rest of South Africa was on summer break the Department of Trade and Industry and Competition (DTIC) was quietly gazetting the effective date of some of the sections of the Companies Amendment Acts that we were all waiting for.
On 27 December 2024 some of the sections of the Companies Amendment Acts were officially proclaimed as effective.
The effective sections are detailed in a table for completeness with changes to the definition of ‘securities’ in section 1 as we as amendments to sections 16, 40, 45, 48, 61, 72 (subsections 5, 6A, 7A, 8A, 9A and 11), 90, 95, 135, 160, 167, 194 and 204.
Some of the interesting amendments now effective are:
- Section 90 - Private companies, personal liability companies and non-profit companies not requiring an AGM can appoint their auditor at a shareholders meeting. Another big change is the ‘cooling off period’ which has been changed from 5 years to 2 years. When a company wants to appoint an auditor they may not have provided prohibited services such as bookkeeping, accounting, maintained or prepared the annual financial statements for a period of 2 years before the appointment.
- Section 16(9)(b) – the Notice to change the MOI will be effective 10 business days after the CIPC has received the Notice, unless the CIPC has endorsed or rejected, with reasons, within those 10 days. Where a date is specified in the Notice, it must be after the 10 business days as set out in section 9(b)(i). This was amended to deal with delays to the effective date of the MOI, due to CIPC’s verification holdups.
- Section 61 – the Social and Ethics Committee (SEC) report and the remuneration report must be presented at the AGM when the SEC members must be appointed. Although this section is effective, section 72(12) setting out the requirements to prepare and present the SEC report has not yet been made effective.
- Section 72 was amended to include the SEC requirements in the Act. The section includes certain exemptions from establishing a SEC and minimum qualifications of the members (still to included in the Regulations). The SEC of public and state-owned companies must consist of at least three members, of whom the majority must be directors who are not involved in the day-to-day management of the business for the past three financial years. For other companies, there must a minimum of three members, one must be a director who is not involved in the day-to-day management of the company for the past three financial years.
- Section 45 – This section was often difficult to apply. An exclusion is now included stating that the provisions of this section do not apply to a company providing financial assistance to, or for the benefit of its subsidiaries.
The following sections are not yet effective:
- Section 1 - definitions relating to B-BBEE Act and B-BBEE Commission)
- Sections 25 and 26 – address and location of company records
- Sections 30(4)(a) and (4A) – directors remuneration disclosure
- Sections 30A and 30B – remuneration policy and report
- Section 33 – annual return filing
- Section 38 – validation of irregular creation, allotment or issuing of shares
- Section 72(12) – Social and Ethics Committee report
- Section 118 – Takeover panel application
- Section 166 – alternative dispute resolution
- Section 195 – functions of the Companies Tribunal
The effective date of these sections must still be decided on and will likely depend on additional information to be set out in the Regulations.
| Section | Amended wording | Comments |
Definitions S1 | ‘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; | Deletion of the reference to “other instruments”. |
Amendment MOI changes S16(9)(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 | Notice to change the MOI will be effective 10 business days after the CIPC has received the Notice, unless the CIPC has endorsed or rejected, with reasons, within those 10 days. Where a date is specified in the Notice, it must be after the 10 business days as set out in section 9(b)(i).
|
Consideration for shares S40(5), (6) and (6A) | 5(b)(ii) cause the issued shares to be transferred to a stakeholder, to be held in terms of a stakeholder agreement, and later transferred to the subscribing party in accordance with the stakeholder agreement. (6) Except to the extent that a stakeholder agreement contemplated in subsection (5)(b) provides otherwise… (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.’’ | Where shares will only be transferred at a later date it needs to be issued to a third party. The reference to a trust and third party has been changed to a stakeholder (previously “trust”) and stakeholder agreements (previously “trust agreement”).
|
| Financial assistance S45(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. | Section 45 has been changed to include an exclusion that the provisions of this section do not apply to a company providing financial assistance to, or for the benefit of its subsidiaries. |
Company or subsidiary acquiring company’s shares S48(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) | None |
Shareholders meetings S61 | Presentation of iv) a social and ethics committee report; and v) a remuneration report Appointment of (iii) social and ethics committee | The Companies Amendment Act 2024 includes the requirement for the social and ethics committee report and the remuneration report to be presented at the AGM and for the social and ethics committee members to be appointed at the AGM together with the appointment of the auditor and audit committee members. NOTE: (1) Private companies, personal liability companies and non-profit companies required to appoint a social and ethics committee can appoint the members annually by the board of the company (refer to Section 72(9A)) (2) For private companies, personal liability companies and non-profit companies that were required to appoint a social and ethics committee, said social and ethics committee must present it report annually at a shareholders meeting or with a resolution as contemplated in section 60(1) (refer to Section 72(12)(b)(ii)). |
Social and ethics committee S72 | (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; (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). (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. (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. (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). (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. (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. | Inclusion of the requirement to publish the intention to lodge an application for exemption.
Setting out instances where a SEC is not required.
The SEC of public and state-owned companies must consist of at least three members, of whom the majority must be directors who are not involved in the day-to-day management of the business for the past three financial years. For other companies, there must a minimum of three members of whom one must be a director who is not involved in the day-to-day management of the company for the past three financial years.
For public and state-owned companies the SEC report must be presented at the AGM. Committee members to be appointed at the AGM per section 61 above. For other companies the board must appoint the SEC members annually and the SEC must present its report annually at a shareholders meeting or by written resolution. |
Appointment of auditor S90 | ‘(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. 2(b)(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). | The Companies Amendment Act 2024 now allow for private companies, personal liability companies and non-profit companies not requiring an AGM to appoint their auditor at a shareholders meeting. The Companies Amendment Act 2024 also changed the 5-year cooling off period to 2 years – this is specific to where auditors provided certain prohibited services, such as bookkeeping, accounting, maintained or prepared the annual financial statements, and the company then wants to appoint the auditor as the registered auditor for the company. The change would mean that the auditor must not have provided any of these prohibited services, as described in section 90(2)(b) to the client for at least 2 years (and no longer 5 years) to be appointed as the auditor. |
Application and interpretation of chapter S95 | by means of the issue or purchase of shares in the company | None |
Post commencement finance S135 | (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). (3)(a) 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 | This section provides for inclusions in the preference of payments during business rescue. |
Disputes concerning reservation or registration of company names S160(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. | Where a company was required in terms of an administrative order to change its name but has not done so, the applicant in the case can request the Commission to substitute the name of the company with its registration number. |
Dispute resolution may result in consent order S167(1) | (a) If the Companies Tribunal has resolved, or assisted parties in resolving, a dispute in terms of this Part, the Tribunal may— | The changes removed the reference to an accredited entity. |
Appointment of tribunal S194(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. | The changes provide for more detail regarding the operation and governance of the Companies Tribunal
|
Functions of Financial Reporting Standards Council S204(1) | (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) (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. (3) ‘financial reporting pronouncements’ means standards, guidelines and circulars developed, adopted, issued, or prescribed by the Financial Reporting Standards Council. | The changes provide for pronouncements that may be issued by the Financial Reporting Standards Council |
Liability of directors and prescribed officers S77 | (7) In relation to the proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of this section— (a) the Prescription Act, 1969 (Act No. 68 of 1969) does not apply; (b) subject to paragraph (c), such proceedings may not be commenced more than three years after the act or omission that gave rise to that liability; and (c) the court may, on good cause shown, extend the period referred to in paragraph (b) regardless of whether— (i) such period has expired or not; or (ii) the act or omission that resulted in the loss, damages or costs contemplated in this section, occurred prior to the promulgation of the Companies Second Amendment Act, 2024 (Act No. 17 of 2024). | The Companies Second Amendment Act 2024 amendment empowers the courts, on good cause, to extend the time period beyond three years where a person may be held liable in terms of the section. |
Application to declare a director delinquent or under probation S162 | (2A)(a) The court may, on good cause shown, extend the period contemplated in subsection (2)(a) in respect of any of the circumstances contemplated in subsection (2)(b) regardless of whether— (i) such period has expired or not; or (ii) the circumstances occurred prior to the promulgation of the Companies Second Amendment Act, 2024 (Act No. 17 of 2024). 3(a) the person is a director of a company or, subject to subsection (3A), within the 60 months immediately preceding the application, was a director of a company; and’’; (3A)(a) The court may, on good cause shown, extend the period contemplated in subsection (3)(a) in respect of any of the circumstances contemplated in subsection (3)(b) regardless of whether— (i) such period has expired or not; or (ii) the circumstances occurred prior to the promulgation of the Companies Second Amendment Act, 2024 (Act No. 17 of 2024).’’ | The Companies Second Amendment Act 2024 extends the period to apply to declare a person delinquent or placed under probation to 5 years and empower the courts, on good cause, to extend that period in a specific case. This amendment appears to be retrospectively applicable, i.e. court will be empowered to extend the period even if the listed circumstance (to cause the director to be declared delinquent or under probation) was committed before the amendment.
|
Author:
Juanita Steenekamp, Senior Manager
Want to know more?