Companies First Amendment Bill, 2023 And Second Amendment Bill, 2023.
The Companies First Amendment and Second Amendment Bill were tabled in Parliament on the 28 August 2023, and have been published.
[The initial draft of the Companies Amendment Bill was published in 2018, followed by a revised draft Bill in 2021, both of which have undergone extensive public consultation and engagement].
The First Amendment Bill seeks to, inter alia:
- Remove certain obstacles to legitimate business activity
- Facilitate greater equity between directors and senior management on the one hand, and shareholders and workers on the other hand – among other things by ensuring greater transparency regarding the disclosure of senior executive remuneration and its ‘reasonableness’. The Bill proposes that shareholders be advised at annual general meetings of remuneration policies, the remuneration of specified top executives and the gap between the earnings of the top and bottom 5% of earners in a company
- Address various policy matters affecting social and ethics committees
- Provide for greater disclosure of the ultimate owner of shares in a business, as part of the broader efforts to combat corruption and money-laundering
The 2023 Bills differ to the first and second draft Company Amendment BIlls (published in 2018 and 2021). Certain provisions contained in the October 2021 draft have been withdrawn, as these issues have since been addressed in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (no.22 of 2022), [hereinafter referred to as ‘the GLAAA’]. More specifically, these amendments relate to beneficial interests in shares and the concept of “beneficial ownership”.
In addition, on the 24th May 2023 the Minister of Trade, Industry and Competition published Regulations pursuant to the amendments that were made to the Companies Act in terms of the GLAAA – and these Regulations largely reinforce the new provisions in the Companies Act relating to beneficial interests in shares. Regulation 30(9) provides for access to the public to view copies of a company’s annual returns filed with CIPC, and Regulation 30(10) allows CIPC to provide electronic access to view copies of the documents filed together with the annual return (such as the securities register of a company) to such persons and on such conditions as may be determined by CIPC, after consultation with the Minister and the Financial Intelligence Centre.
The Second Amendment Bill seeks to:
- Expand upon action that can be taken to declare directors delinquent. Section 162(2) of the Companies Act makes provision for an application to court for an order declaring a person delinquent or under probation (see chapter titled ‘Probation and Delinquency’ for more detail). The Bill proposes to extend the time bar set out in Section 162(2). Currently, a company, a shareholder, a director, company secretary, a prescribed officer of a company, or a registered trade union (that represents employees of a company), may apply to a court for an order declaring a person delinquent or under probation if that person is a director of the company, or has been a director of the company within the previous 2 years. The Bill proposes to extend this time period to where the person was a director within the previous 5 years. The proposed amendment is based on a recommendation made by the Zondo Commission of Enquiry into State Capture, and on the basis of it being the general public interest to extend the time period. In addition, the proposed legislation should be expressed to be retrospective. Thus, the proposal is that the legislation should state that the court, on good cause shown, may extend the time bar even though the conduct in question was committed during the period before the extension.
- Provide for courts to increase the time bar in relation to claims for damages applicable to directors for breaching their fiduciary duties and duties of care, skill and diligence as well as certain statutory duties in terms of Section 77. Currently Section 77(7) of the Act provides that proceedings to recover loss, damages or costs in these circumstances are to be instituted within 3 years after the act or omission that gave rise to the liability. The Bill proposes to allow the Court to extend this time frame, on good cause shown.
PAYE Monthly Payroll Submission to be automated by 2025.
The planned solution will resemble a framework where employees’ tax, provisional tax as well as assessment processes for employers and non-business individuals is a fully automated tax assessment with underlying data being acquired more frequently. Withholding and payment processes to SARS of tax due, primarily through “own device”, will take place using progressive, integrated, real-time, interactive Individual Taxpayer Accounts.
We will keep you posted in this regard.
Draft National State Enterprises Bill.
Pravin Gordhan, the Minister of Public Enterprises, has unveiled a sweeping plan to overhaul the governance and management of state-owned companies, which he said have been plagued by corruption, inefficiency and poor performance.
The plan, which was announced in his statement on Wednesday, aims to restore the financial viability and strategic relevance of the entities, which collectively have more than R1 trillion in assets and employ over 300 000 people.
Gordhan said the plan was the most comprehensive reform of state-owned companies since the 1990s, when the government embarked on a process of restructuring and privatisation of some of the entities. He said the current situation was unsustainable and posed a serious risk to the fiscal outlook and the economy.
The plan includes the following measures:
- A new board appointment framework that will ensure greater transparency, accountability and independence of board members, who will be selected based on merit and suitability
- A review of the mandates and business models of state-owned companies, which will assess their alignment with the national development plan and their contribution to economic growth and transformation
- A rationalisation of the state-owned companies portfolio, which will consider options such as mergers, closures, partial privatisation or strategic partnerships with private sector investors
- A strengthening of the oversight and monitoring role of the Department of Public Enterprises, which will establish a dedicated unit to coordinate and support the implementation of the reform plan
- A revision of the funding and guarantee framework for state-owned companies, which will ensure greater fiscal discipline and prudence, as well as a clear distinction between commercial and developmental objectives
Gordhan said the reform plan was informed by international best practices and consultations with various stakeholders, including labour unions, business organisations, civil society groups and development partners. He said the plan would be implemented in a phased manner over the next three years, with regular progress reports to Parliament and the public.
He said the reform plan was not only aimed at addressing the current challenges facing state-owned companies, but also at unlocking their potential to play a more active and strategic role in driving economic growth, development and transformation. He said state-owned companies could be engines of innovation, investment and job creation, if they were well-governed, well-managed and well-aligned with the national interest.
We will keep you informed of developments in this regard.
CIPC Clamping Down On Reckless Conduct and Non-Compliance.
“One of the many purposes of the Companies Act, 71 of 2008 is to provide for a predictable and effective environment for the efficient regulation of companies and other juristic persons, as described in section 7 of the Act.
Part of the governance process of any company is to understand the consequences attached to decisions made, not in line with the Companies Act requirements and the impact of such decisions and consequences. It is clear from a perspective as Regulator of the Act, that many entities, is not aware of the dire impact of their decisions, or simply do not regard such consequences as relevant. The legislator provided in Chapter 9 of the Act, for certain offences and penalties, where a person (natural and juristic) is a party to reckless conduct, providing false statements, and is generally non- compliant to the Act. For the purposes of this article, it is important to highlight the content of section 214(1) of the Act, which states as follows:
“214(1) A person is guilty of an offence if the person –
- (a) is party to the falsification of any accounting records of a company;
- (b) with a fraudulent purpose, knowingly provided false or misleading information in any circumstances in which this Act requires the person to provide information or give notice to another person;
- (c) was knowingly a party to an act or omission by a company calculated to defraud a creditor or employee of the company, or a holder of the company’s securities, or with another fraudulent purpose; or
- (d) is a party to the preparation, approval, dissemination or publication of a prospectus or a written statement contemplated in section 101, that contains am ‘untrue statement’ as defined and described in section 95.”
Companies are urged to take governance and legislative compliance seriously – ignorance is not an excuse in law, and parties found guilty of any offence in terms of the Act, will be prosecuted and punished to the fullest extent of the law.”
Should you require advice in this regard please do not hesitate to contact us.
Sincerely,