1.2 THE NEW ACT
Company Law is governed by a number of things one of which is statute which is the Companies Act 2008 as amended which became law on the 1st April 2011 plus amendments later on. Prior to this there was the 1973 act which was around for some nearly 40 years and was amended from time to time making it bulky. The Act governs much of what we do with companies, how to administer them, the rules for directors and what they are allowed to do or not do. There are other acts like the Income Tax act and POPIA that we should also be concerned with as some of what we do will take direction from these acts. There are a number of instances where you have to have knowledge of what is in these acts. i.e. income tax plays a very important role in regard to companies and you should have knowledge of income tax aspects like contributed tax capital and dividends which will affect the way you carry out your company secretarial work and certainly the way dividends are handled.
Company Law is also governed by what we call common law, these are legal cases that have been tried in court in regard to principles of law and in many instances, we would look to common law to decide on a particular issue. There is the court case on where the registered office should be, i.e. the auditor’s office or the physical address and it was held that it should be the place of business - Sibakhulu Construction which in today's times is not very practical.
We also have what we call the King code which is now up to King IV. We call this aspirational law as it is strongly suggested that large corporate companies adhere to King. This is very important in regard to listed and larger companies and will rarely come into play in the small company environment.
The New Companies Act 2008 follows the 1973 Act which was in existence from 1973 right through until 2011. The new Act has been modernised and has introduced a whole series of new concepts. Company Law has gone through an arduous reform process which has resulted in the new 2008 act. Despite this there are a number of issues in the new act which need to be tidied up. Two issues that come to mind are the interpretation of a buy back in a smaller company and the fact that a smaller company has to make application to the takeover regulation panel under certain conditions which is a ridiculous undertaking. I will suggest a way around this. The latest amendments have not dealt with this properly and there could still be some issues.
The new Act is more reader friendly and it is written in modern English, but unfortunately does contain some unfamiliar words for South African lawyers. It has been reduced dramatically in size.
It should also be noted that in terms of company secretarial practice that common secretarial practice is important as this indicates the way things are done in practice and have been handed down over the years. This also needs to be taken into account as not every aspect is defined by law or regulation or is readily available.
There are a number of schedules that have been attached to the Act;
Schedule 1 deals with non-profit companies,
Schedule 2 governs the conversion of close corporations and
Schedule 3 contains various amendments that harmonise with other statutes. The bulk of these amendments relate to the close corporations Act 1984.
Schedule 4 contains a list of 15 other statues which the CIPC must also administer, these include the Close Corporations Act of 1984, the Copyright Act of 978, the Patent Act of 1978, and the Trademarks Act of 1993.
Schedule 5 is headed Transitional Arrangements and strives to make the transition from the old to the new act as smooth as possible. There are a number of consequences that the transitional arrangements created which we should be aware of, even today. At this time transitional arrangement are long gone.
It is also important to understand that the Minister had the power to prescribe certain things in regard to regulations etc. There are over a hundred matters in respect of which the Act empowers the minister to make or prescribe regulations ranging from the functions of regulatory agencies to procedural and technical matters. All regulations must be expressly mandated by a specific provision or reference within the Act or necessary to provide sufficient or additional detail to ensure that any provisions of the Act can be properly implemented and administered.
There is a lot more to the new companies act which we will deal with through this course!