|Important changes to company law|
|Monday, 11 June 2007 02:00|
As many of you will know, there is currently draft legislation out, namely the Companies Bill, which will transform the corporate landscape as we know it. On 11 April 2007 the President signed a new law, which brings about certain changes which is contemplated in the Companies Bill. This new law, the Corporate Laws Amendment Act has not yet come into effect, but it is expected that the effective date will be published soon.
As mentioned above the Corporate Laws Amendment Act introduces new provisions which the Companies Bill contemplates. For instance the Corporate Laws Amendment Act introduces the concepts of widely held and limited interest companies, which will eventually replace the existing public and private companies respectively.
An important amendment is that the current relaxed prohibition which states that a company may not give financial assistance for the purchase of its shares will also change once the Act becomes effective. According to the new Act, a company may give financial assistance when the company’s board is satisfied that after the assistance is given, the company’s consolidated assets will be more than it’s consolidated liabilities (thus the company must be solvent) and that for the duration of that transaction, the company will be able to pay its debts as they become due in the ordinary course of business. Lastly the members of the company need to approve the terms of the financial assistance by a special resolution (thus more than 75%).
Another important change is brought about when directors want to dispose of the whole or substantial part of the business or assets of the business. In terms of the current section 228, the directors’ ability to dispose of the business or assets or a substantial part thereof is restricted by the fact that the members of the company must approve such a disposal by an ordinary resolution (thus more than 50%). The new Act will restrict the directors’ powers even more in order to prevent abuse and now requires that the members of the company must approve such a sale by a special resolution (thus more than 75%).
However the majority of the Corporate Law Amendment Act deals with the audit committee and financial reporting matters. The Act brings new changes for widely held companies, thus the old public companies, in the appointment of an audit committee and the information which must be reflected in financial statements as well as a variety of issues surrounding finances of these public companies. Public companies are cautioned to familiarise themselves with all these changes. For further information, kindly contact Rian Geldenhuys.
Should you wish to read news updates on the Companies Bill you may visit our website for additional articles.
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