The President has proclaimed in the Government Gazette No. 51837 that certain sections of the Companies Amendment Act No. 16 of 2024 ("Amendment Act") and the entirety of the Companies Second Amendment Act No. 17 of 2024 ("Second Amendment Act") are now effective. The changes took effect upon the gazette's publication on 27 December 2024.
Certain of the key amendments from the Amendment Act (the others being more administrative) that are now in force include, inter alia, the following:
- Section 1: the definition of "securities" which limits the definition of "securities" to shares and debentures and now excludes the wording "or other instruments";
- Section 16: a notice of amendment to the MOI (the "Notice") will take effect 10 business days after receipt of the Notice, if CIPC, after the expiry of the 10 business days, has not endorsed the Notice or has failed to deliver a rejection of the Notice to the company with reasons, or at a later date as set out in the Notice;
- Section 45: the provisions of section 45 which relates to financial assistance no longer apply to the giving by a company of financial assistance to or for the benefit of its subsidiaries;
- Section 48: share buybacks are subject to a special resolution unless the shares are being acquired as a result of a pro-rata offer made by the company to all the company's shareholders or a particular class thereof, or the acquisition of shares is as a result of transactions effected on a recognised stock exchange;
- Section 61: public companies must include a presentation of the social and ethics committee ("SEC") report, the remuneration report and the appointment of an SEC at their annual general meetings;
- Section 72(7A): an SEC must comprise not less than 3 members provided that in the case of public and state-owned companies, the majority of the members must be non-executive directors and must have been non-executive directors during the previous 3 financial years, and in the case of any other company, the members must consist of not less than 3 directors or prescribed officers, at least 1 of whom must be a non-executive director and who must have been a non-executive director within the previous 3 financial years;
- Section 95: the definition of an employee share scheme has been amended to include the acquisition of shares by means of the purchase of shares in a company; and
- Section 135: any amounts due by a company under business rescue to the landlord in terms of a contract (i.e. generally a lease) where the landlord has paid for public utility services, rates and taxes, electricity and water, sanitation and sewer charges of the company during business rescue proceedings are now seen as post-commencement financing.
We note that two of the more substantive amendments from the Amendment Act are not yet in force namely, the amendments to sections 26 and 30 which provide non-beneficial interest holders with the right to inspect and copy certain company records including companies' annual financial statements (provided that the relevant company is above the prescribed public interest score), as well as the newly inserted sections 30A and 30B which oblige state-owned and public companies to prepare and present a remuneration policy and remuneration report for shareholder approval, as well as the so-called "two-strike" rule relating to barring of the non-executive Remco members following two successive failed votes on the remuneration report. For a detailed recap of these amendments, please refer to our previous newsflash here.
Other amendments not yet in force are:
- Section 38A, which allows a company or any person who holds an interest in a company to make an application to the court to make an order validating an invalid creation, allotment or issue of shares, after satisfying itself that it is just and equitable to do so; and
- Section 118, which grants the Takeover Regulation Panel jurisdiction over private companies that have 10 or more shareholders with direct or indirect shareholding in the company and meet or exceed the financial threshold of annual turnover or asset value.
In terms of the Companies Second Amendment Act, the time bar to declare a director delinquent has been extended from 24 to 60 months and, furthermore, the court now has the discretion to extend the period in respect of which proceedings to recover any loss, damages or costs may be commenced, which is currently within 3 years after the act or omission that gave rise to the liability.
A list of all the amendments that are now in force is available here.
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.
