Companies Act changes: What corporate SA needs to know
FIN24 / 14 OCTOBER 2018 - 08.08 / CARIN SMITH
The deadline for submitting comments on the proposed SA Companies Amendment Bill has been extended to December 14, 2018.
The bill, published in September this year, proposes substantial changes to the SA Companies Act, which became law in 2011.
Image - FIN24
Comments may be submitted to the SA Department of Trade and Industry.
Stephen Kennedy-Good, a director at Norton Rose Fulbright, told Fin24 that corporate SA should especially be aware of how some of these proposed changes will affect them.
Wider pay disclosure
It is proposed that remuneration and other benefits received by "prescribed officers", in addition to directors, must be disclosed.
"The net is cast wider. Each individual must be named. Shareholders and stakeholders want to know. This is a good thing for greater transparency," said Kennedy-Good.
The directors of a public company will also have to prepare a directors’s remuneration report for presentation to shareholders at the annual general meeting.
Subsidiary assistance Currently any financial assistance granted by a company to its subsidiary must be authorised by the board and the shareholders by way of a special resolution.
The proposed bill "sensibly", in Kennedy-Good's view, proposes that the special resolution requirement should not apply where a company gives financial assistance to its own subsidiary.
"Where you have a responsible board of directors that governs well, I think this proposal will be a good change as it addresses day-to-day needs of companies," he told Fin24. "Rogue boards of directors could, however, abuse this, but shareholders could maybe build a relevant provision into the founding document."
Kennedy-Good pointed out that the proposed change would not apply to "brother or sister companies" in a broader group structure.
Share buyback From time to time, corporates enter into arrangements whereby they buy back their own shares from shareholders. It is a mechanism to exit a shareholder or to reduce a particular shareholder’s interest.
Kennedy-Good explained that the bill proposes that a share buyback must be approved by a special resolution of shareholders if shares are to be bought back from a director, a prescribed officer or a person related to a director or a prescribed officer.
A special shareholder resolution will also be required if the buyback entails an acquisition other than an equal offer made to all shareholders or transactions effected in the ordinary course on a stock exchange.
In his view, these changes will bring about additional protection to shareholders, as 75% of shareholders will need to vote in favour of the deal for it to go ahead.
The Companies Act obliges certain companies to set up a social and ethics committee.
"In terms of the proposed bill, it (will be) mandatory for a public company or a state-owned company to appoint a social and ethics committee at each annual general meeting," said Kennedy-Good.
It does allow companies to apply to the Companies Tribunal for an exemption if the company has another suitable mechanism within its structures.
In Kennedy-Good’s view, these committees will get more "bite" under the proposed changes and, where they fail to comply with the act, they can even be held liable to a fine and possibly be prosecuted.
The Bill seeks to give the Companies Tribunal the power to adjudicate cases referred to it by the B-BBEE Commission.
Kennedy-Good said this is an effort by the B-BBEE Commission to forge strategic partnerships with various regulators to ensure compliance with SA's empowerment laws.
PJ Veldhuizen, managing director at Gillan and Veldhuizen, suggested that, if members of a company or those affected by the proposals do not wish to comment individually, but are part of organised business such as a chamber, a union or association, they consult with a commercial attorney who can inform them of the ramifications of the changes and perhaps suggest additional amendments that might impact the way in which they do business.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER