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 Certain provisions contained in the October 2021 draft have been withdrawn, as these issues have since been addressed in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act (no.22 of 2022),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.
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