Companies Act Amendments Incoming

On 25 July 2024, the President signed some important changes to the Companies Act in the form of the Companies Amendment Act (Act No. 16 of 2024) and the Companies Second Amendment Act (Act No. 17 of 2024). Although these Acts have been signed into law, their commencement dates are still to be announced. We don’t yet know when they will become effective, but it is important for companies to become aware of them at this stage already to plan ahead for the upcoming changes. Although some of the changes will affect mainly public and state-owned companies, there are several very important changes that will affect all private companies as well.

It is crucial for all companies to take account of these changes and the impact they may have on upcoming transactions.

What’s Changing?

Some of the major changes will include:

Relaxed Share Buy Back Requirements:

Substantially simplifying the compliance requirements which a company must comply with when buying back its own shares from a shareholder in certain cases. While shareholder approval by special resolution will still be required in some instances, the requirements to comply with the onerous provisions of sections 114 and 115 (which include obtaining a report from an independent expert on the transaction) will be removed for simple share buybacks. This has the potential to make share buybacks a more attractive means of structuring corporate transactions.

Takeover Regulations for Private Companies:

Changing the test for when a private company will be seen as a regulated company and therefore subject to the Takeover Regulations and certain other important requirements regulating corporate transactions under the Companies Act. At present, they apply to a private company where the percentage of the issued securities of that company that have been transferred, other than between related or inter-related persons, within the preceding 24 months exceeds 10%. Once the change becomes effective it will apply where a private company has 10 or more shareholders with a direct or indirect shareholding in the company and meets a financial threshold of annual turnover or asset value to be determined by the Minister.

Company Records:

Providing greater public access to company records. This includes that any person will have the right to inspect and copy any annual financial statements which the company was required by the Act to prepare (if the company meets a certain public interest score) for the past 7 years as well as the beneficial interests register of the company.

MOI Amendments:

Changes to the effective date for amendments to a memorandum of incorporation filed with the CIPC. Amendments (other than name changes) will now take effect 10 business days after the notice of amendment is received by the CIPC unless a later date is specified in the notice or unless the CIPC rejects the notice with reasons within that period.

Financial Assistance:

Excluding financial assistance that a company gives to a subsidiary from the approval requirements under section 45 of the Act. This means that a company will be able to provide financial assistance to a subsidiary of that company without needing to obtain approval by means of a special resolution from its shareholders.

Extended Periods for Claims Against Directors:

Changing the period for claiming against directors personally for certain breaches of their duties. Ordinarily, claims could not be brought more than 3 years after the act or omission that gave rise to the liability. After this change takes effect, a Court will be able to extend the period for which a director may be personally liable if there is good reason to do so.

Delinquency/Probation:

Extending the relevant periods within which a director can be declared delinquent or under probation. Currently, interested parties can apply to a Court to have a director declared delinquent even if he/she stopped being a director in the last 24 months. That period will be extended to 60 months and can be extended further by a Court. The effect will be to increase the window in which directors can be declared delinquent. Such a declaration prevents them from holding directorships and could expose them to personal
liability.

Public/State-Owned Companies:

A number of other changes are introduced which affect primarily public and state-owned companies including duties to prepare and present certain remuneration policies and reports to shareholders for approval, changes regarding social and ethics committee compositions and including a remuneration report and a social and ethics committee report in the requirements for public company annual general meetings.

Please reach out and contact us at any time if you would like further clarity or to discuss any of these new incoming changes or if you are planning any transactions that may be affected by such changes. This communication is for informational purposes only and does not constitute legal advice.

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