TRANSITIONAL ARRANGEMENTS : MEMORANDUM OF INCORPORATION AND SHAREHOLDERS’ AGREEMENTS
The new Companies Act, 2008 (“New Act”), which took effect on 1 May 2011 (“effective date”), repeals the existing Companies Act, 1973. Pre-existing companies will continue to exist after the effective date as a company, as if it had been incorporated and registered in terms of the New Act, with the same name and registration number previously assigned to it...
LOANS, GUARANTEES OR OTHER FINANCIAL ASSISTANCE TO RELATED OR INTER-RELATED COMPANIES
Under the Companies Act, 2008 (“New Act”) intra-group loans, guarantees and other financial assistance in our view require approval of shareholders by special resolution...
EXTERNAL COMPANIES: REGULATION IN TERMS OF THE COMPANIES ACT, 1973 AND THE COMPANIES ACT, 2008
In relation to external companies, the main change that will be brought about by the Companies Act, 2008 (“the New Act”), will be the extent of the regulation of external companies. This will be significantly diminished in terms of the New Act.
The new Companies Act proposes an approach to partly paid-up shares that is somewhat different to its 1973 predecessor. Consider a scenario in which the founding shareholders of a new BEE company agree to subscribe for shares in the company at a predetermined subscription price. All of the shareholders except one pay the full subscription price on the date agreed for the subscription. One of the shareholders (X) only pays half of the subscription price on the subscription date but the company purports to allot and issue to that shareholder its agreed percentage of shares...
NEW COMPANIES ACT 2008: DIRECTORS’ INDEMNIFICATION AND INSURANCE
Section 247(1) of the Current Act generally prohibits a company from indemnifying (i.e. providing an undertaking to pay or reimburse) or exempting (i.e. waiving claims against) its own directors or officers from any liability which would apply to such director or officer as a result of any negligence, default or breach of duty or trust by that director or officer...
ISSUE OF PAR VALUE SHARES AND CONVERSION TO NO PAR VALUE SHARES
Under the new Companies Act, 2008 (“New Act”) a company will not be allowed to create new par value shares. However, the draft Regulations, if promulgated in their current form, allows a company that has issued par value shares before the effective date of the New Act to issue further par value shares of the same class from the unissued shares of that class, after the effective date of the New Act...
GETTING TO GRIPS WITH THE NEW COMPANIES ACT
The new Companies Act, ushers in a new era of company law and when it eventually comes into effect, it will, as can be expected, give rise to a fair amount of confusion about the implications for existing companies. To some degree, this confusion should be resolved when the draft Companies Amendment Bill, 2010 (“the Bill”) is promulgated but many areas of uncertainty remain. Bearing this in mind, directors should be aware of certain major changes introduced in the new Act as they get to grips with its provisions...
DIRECTORS’ DUTIES IN A VASTLY DIFFERENT CORPORATE LANDSCAPE
Extensive codifications of corporate governance principles and common law precepts under the new Companies Act 71 of 2008 serves to highlight the markedly different corporate landscape in which South African companies are now required to do business. In Da Silva v CH Chemicals (Pty) Ltd (2009) 1 All SA 216 (SCA), the Supreme Court of Appeal was required to pronounce on whether the exploitation of various corporate opportunities constituted a breach of fiduciary duties contemplated by both common law and the Companies Act of 1973. The alleged breach occurred after the resignation of the appellant as managing director to establish and head a distribution agency in competition with the respondent...