South Africa: The Draft Companies Amendment Bill

Last Updated: 24 October 2010
Article by Jan Bouwman

The draft Companies Amendment Bill ('Bill') has been released by the Department of Trade and Industry on its website, but as at the date hereof, the final version of the Bill has not been published in the Government Gazette.

The Bill proposes to effect various amendments to the new Companies Act 71 of 2008 ('new Act'). Many of these amendments are aimed at correcting drafting anomalies and errors. There are however some substantive amendments being proposed and some of the key changes in the Bill which will affect companies in practice are summarised below.


The new Act provides (i) that the Memorandum of Incorporation (MOI) of a company must be consistent with the new Act and (ii) that shareholder agreements must be consistent with the new Act and the MOI. Any provisions which are inconsistent are void to the extent of the inconsistency.

The new Act does provide for a transitional period of two years after the new Act comes into effect for companies to bring their MOI (in effect their existing articles of association and memorandum of association) in line with the new Act, but a similar provision in relation to shareholder agreements does not appear in the new Act.

The Bill now provides for a similar two year transitional period to bring shareholder agreements in line with the provisions of the new Act and the MOI. This is a useful amendment from a practical perspective as it is current practice in South Africa to regulate the relationship of shareholders in companies in shareholder agreements, and companies will have to make use of this dispensation during the two year transitional period.


The new Act provides that:

  • more than 50% of voting rights are required for the adoption of an ordinary resolution (this percentage can be adjusted upwards in the MOI); and
  • at least 75% of voting rights are required for the adoption of a special resolution (this percentage can be adjusted downwards in the MOI).

A margin of at least 10% must be kept between the percentage requirements for approval of ordinary and special resolutions.

The proposed amendment contained in the Bill will allow a company's MOI to adjust the percentage for special resolutions to a higher or lower percentage. This means that the MOI may determine the percentage requirement for special resolutions to be up to 100%. Due to the required 10% difference, this means that the percentage requirement for ordinary resolutions cannot be higher than 90%. It is important to note that these adjustments can be made in relation to specified matters, and therefore it creates an important new way in which the rights of minority shareholders can be protected.


The new Act requires foreign companies to register with CIPRO as branch companies if they "conduct business or non-profit activities" in South Africa, but the factors provided to determine whether they do so are extremely wide in ambit and could lead to many foreign companies which do not conduct continuous business in South Africa having to register as branch companies in South Africa.

The Bill proposes a much narrower test to determine which foreign companies should register, namely (i) where the company is a party to one or more employment contracts within South Africa or (ii) has engaged in activities which would lead to the conclusion that the company intends to conduct continual business or non-profit activities in South Africa for a minimum period of 6 months.


The new Act provides relief for shareholders where specified takeover activity is being proposed in relation to a company. Dissenting shareholders may (i) require a company to seek court approval for implementation of the proposed transaction if it was opposed by at least 15% of the votes excercised on the proposing resolution and (ii) (regardless of shareholding or votes against the resolution) apply to court for a review of the transaction if certain requirements are met.

The problem in this regard is that the new Act does not provide any limitation on the time within which a shareholder may challenge the proposed transaction, and this could clearly affect the implementation of transactions and lead to great uncertainty.

The Bill now provides such time limitations, namely that respectively five and 10 business days after the resolution was approved, shareholders must take the relevant steps to initiate court proceedings in the two instances set out above.


The new Act contains "debtor friendly" Business Rescue provisions, in terms of which a "practitioner" can be appointed to attempt to revive a financially ailing company. The new Act gives wide powers to the practitioner which include the power to cancel or suspend (in whole or in part) agreements to which the company is a party. This provision caused widespread concern that the business rescue practitioner could pick out agreements or parts of agreements that were favorable to the company, to the extreme prejudice of creditors.

The Bill makes the practitioner's power to cancel agreements subject to court overview and he/she will have to demonstrate that the cancellation is on terms that are just and reasonable in the circumstances. In addition, the business rescue practitioner's powers to suspend the company's obligations are limited (i) to the duration of the business rescue proceedings and (ii) in relation to agreements whereby security has been granted by the company.


Parliamentary hearings on the Bill are still to take place and will likely have the effect of delaying the targeted date of implementing the new Act by October 2010, although it is still possible that it will come into effect later this year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions