Introduction to the changes in the Companies Act
On the 1st of May 2011, the new Companies Amendment Act came into effect. This major piece of legislation affects many professions including CEO’s, Directors, Stakeholders, Shareholders, Managers, Bankers, Lawyers, Closed Corporation members and many more. It is important to be aware of the changes that have been implemented in this new legislation. We will cover some of the main changes in this article.
To give you a brief background, on 9 November 2010, the Companies Amendment Bill (B40 – 2010 – Download here) was tabled in Parliament which proposed the amendment of the Companies Act, No 71 of 2008 in order to correct various legal issues as well as errors and grammar. This Bill was later approved by the Trade & Industry Portfolio committee on 10 March 2011.
On the 19th of April 2011, President Jacob Zuma signed off the Companies Amendment Act of 2010 which has now brought South Africa up to speed or even beyond international trends as we were previously working from legislation passed in 1973.
Companies Act changes in brief
“The new Companies Act is a major piece of legislation and reform, which has a number of features to it [and] will certainly improve the environment for business operation in South Africa,” – Trade & Industry Minister, Rob Davies.
Some of the changes include:
- Less administration or red tape when registering a business.
- Reduced financial reporting requirements for small businesses.
- Enhanced protection for minority shareholders ( particularly BEE shareholders)
- Introduction of a business rescue scheme
- Provisions have been made for the early turnaround of businesses in financial trouble.
- This will prevent companies going into major judicial management and also help to save jobs.
- Creditors will be held at bay while stakeholders can work to rescue the company.
- Combats business identity hijacking by improving enforcement’s power to detect this
- An end to the registration of close corporations (cc’s)
No more closed corporations (cc’s)?
A significant change for small business owners was the ceasing of Close Corporations. From the 1st of May 2011, the new Act does not allow registration of Close Corporations. If you have already applied for a CC prior to 1 May 2011, then you will still receive your registration certificate. All previously registered CCs can opt to covert to the new corporate regime of the Companies Act 2008 but will otherwise remain operational.
In many ways the new legislation makes like easier for everyone and is a positive change for South Africa. If you would like to find out more about details of specific changes and how it affects your business, feel free to contact Dirmeik Consulting to setup a consultation. If you were planning to register a CC, we can also advise on the most suitable option for you and your business. Contact Brett on 021 421 4444.