|Vast changes to South Africa’s corporate laws|
|Thursday, 25 May 2006 02:00|
On 8 May 2006 the draft Corporate Laws Amendment Bill was tabled before Parliament and it promises to change the corporate landscape as we know it. Probably the most important change that is proposed, given the current political landscape faced by businesses, is the fact that companies may now provide financial assistance to persons who wish to acquire its shares.
“The proposed amendment will take away much of the headaches companies currently face in obtaining a BEE partner as there is no longer any need for innovative deals which need to be structured in order to circumvent the previous prohibition on financial assistance” says Rian Geldenhuys, a director at the commercial law firm, RGI Attorneys. “I think we should see many more companies entering into BEE deals once the amendments take effect as the choice of BEE companies will increase exponentially” says Rian. Therefore much of the criticism that BEE has not really been broad-based empowerment might disappear once the amendments take effect, even though there are various other ways in which a company may obtain BEE status without selling shares.
Other significant amendments include revised compliance requirements in respect of a company’s prospectus and greater clarity regarding directors’ power to dispose of the whole or greater part of the business or assets of the company. Guidelines are also proposed which would indicate what constitutes the “greater part” of the business or assets. In addition the provisions relating to auditors and the financial statements of public companies have been amended. Probably the most significant for auditors is that they may no longer provide non-auditing services (such as bookkeeping, accounting and tax advisory services) to companies if they are also the companies’ auditors.
As expected the draft Corporate Laws Amendment Bill does bring more clarity to the future of close corporations. The Bill tries to simplify the administration of close corporations and make it more cost effective. This is done by proposing that certain information may be disclosed electronically and by providing “for electronic certification of registration of certain documents” according to the draft Bill. Small business can therefore be more at ease about the future of the entity that they are currently using, because if the Bill is formalised, they will not need to comply with the onerous provisions of conducting a business through the medium of a company.