South Africa: New Companies Act Regulations Finally Published!

Last Updated: 25 January 2010
Article by Stephen Kennedy-Good

The long-awaited regulations to the new Companies Act of 2008 were released by the Department of Trade and Industry at the end of December 2009 for public comment. The regulations add content to the new Act and deal with provisions relating to prescribed officers, business rescue, administrative fines, par value shares and the like. The format of the various types of Memoranda of Incorporation for different companies has also been published.

The new Act partially codifies the existing common law duties of directors and provides that a director could be held liable for damages or costs sustained by the company in accordance with the principles of common law or the law of delict relating to breach of fiduciary duties as well as certain statutory obligations. Although this in itself may not be cause for concern, the Act states that a "director" includes a "prescribed officer". The draft regulations provide that a prescribed officer includes a host of individuals even if not an appointed director. For all purposes of the Act a person is a prescribed officer if that individual has general executive authority over the company, is responsible for financial management or the legal affairs of the company, has managerial authority over the company's operations or otherwise exercises control over the management and administration of the business of the company. The result is that chief executive officers, chief financial officers, chief operating officers and head in-house legal counsel will be grouped with directors for the purposes of the Act, with the consequences that follow from holding that office. Steps will need to be taken by companies to manage this new risk and current insurance policies will need to be amended to indemnify all prescribed officers.

As far as business rescue proceedings are concerned, there has been some debate as to who will be qualified to take up an appointment as a business rescue practitioner to turn financially stressed businesses around. The draft regulations provide that an attorney, liquidator or person with a recognised degree in law, commerce or business management, will qualify for appointment, provided that person has been practising in their field for at least 10 years. In limited instances, the appointee need only have five years experience. A practitioner can charge up to R2000 per hour and will be entitled to recoup out-of-pocket expenses incurred in that role. The Business Rescue Practice Regulatory Board, which is yet to be established, will be the watchdog responsible for accrediting persons who meet the prescribed qualifications for admission as business rescue practitioners. It will be interesting to see how this new profession develops in view of the anticipated income that may be earned compared to other professions.

The regulations have now clarified that the administrative fines for failure to comply with the Act will be based on the annual turnover of the guilty company, provided that the fine does not exceed the greater of 10% of the company's turnover during which the failure occurred or a maximum of R1 million. The regulations specify that the method for determining the turnover of a company for the purpose of fines will be the same as that used in our Competition Act. Although these fines may appear to be harsh, the decision whether to impose a fine ultimately rests with the courts and the Companies Commission will not be entitled to impose fines randomly.

A fundamental change is the abandonment of the concept of par value shares. The new Act provides that a share does not have a nominal or par value and that a pre-existing company may not authorise any new par value shares after coming into force. The regulations state that every share of a pre-existing company must be converted to a share having no par value within five years of the effective date. Such a conversion must be proposed by the board, distributed to the shareholders and be approved by special resolution. Shareholders may take some comfort in the fact that it is prescribed that rights associated with such shares must be preserved or, alternatively, the company will be required to compensate its shareholders for the loss of any such rights.

The regulations contain the format of the Memoranda of Incorporation of the different types of companies envisaged in the Act, being profit and non-profit entities. Profit companies include state-owned, private, public and personal liability companies. But companies will not be compelled to make use of these prescribed forms and are free to compile their own document provided that the document is consistent with the Act. No other statutory forms that will be used for the ongoing administration of companies have yet been published for comment.

It is mooted that the new law will come into effect in July 2010, but whether this will materialise is yet to be seen. Public comment on the regulations may be submitted to the department before the beginning of March 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”

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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.