Nov 05, 2010
Generating praise and concernBack
© Reuse this
He says that most companies will find it easier to work through and comply with the new Act, as opposed to the current Act, as much of the red tape has been removed.
Public hearings for the Draft Companies Amendment Bill 2010 will take place in Parliament on November 9 and 10, and November 17. The Department of Trade and Industry indicated that the new Companies Act will be effective from April 1, 2011.
One of the improvements includes the alterations to the existing share capital regime, which will replace par value shares with ordinary shares. However, the process and regulations governing the conversion of par value shares into ordinary shares are yet to be finalised. Share premium accounts, which were not mentioned in the draft regulations, will have to be done away with if par value shares are no longer in use, he says. He believes that this will bring the country in line with most other jurisdictions.
The Act prescribes the composition of a Financial Reporting Standards Council, which will consist of experts on the financial reporting environment and which Erasmus believes will be bene- ficial. Financial reporting standards have been removed from the Companies Act and will be published in the regulations, which will be published in consultation with the Financial Reporting Standards Council.
He believes that the Act will support foreign investment as it allows foreign companies that want to operate in the country, to be domesticated and then to comply with the provisions of the Companies Act. The Act also allows for electronic participation in meetings, specifically shareholder meetings for public and State-owned companies and records can be stored electronically. He believes that this assists in bringing corporate law into the twenty-first century.
Although the new Act currently allows six months for financial statements to be prepared after the financial year-end, the Department of Trade and Industry (DTI) has indicated that it may change this period to a year, he says. Further, only one director needs to sign the financial statements (currently, two directors need to sign) and a copy need not be sent to every shareholder. Rather, shareholders must receive a summary of the annual financial statements and then have access to the full set of financial statements, which may be kept electronically.
Key provisions of the Act will be effective immediately, parti-cularly relating to issues such as shareholder rights and director liability. In most other instances, if there is a clash between the Act and the company's memorandum and articles, the memorandum and articles will prevail for a period of two years. This allows a company two years within which to amend its memorandum and articles and to bring it in line with the Act. Once the new memorandum of incorporation is filed with the Companies Intellectual Properties Commission, the grace period is up.
Concerns and Clarification
One example relates to the auditing requirement. The current Act requires all companies to be audited, while the new Act allows certain companies to have their statements independently reviewed, rather than undergo a full audit. The transitional arrangements in this respect are unclear. “If a company’s financial year-end is February or March, and it has not fulfilled the audit requirement under the current Act before April, would it still be required to undergo an audit once the new Act is effective, even if that particular company is only required in terms of the new Act to have its statements independently reviewed?” he questions.
He hopes that the DTI will clarify the transitional arrangements and specify exactly when the Act’s requirements will apply and when a company would be in breach of the Act. He suggests that companies familiarise themselves with the Act, but not make significant changes until the promulgation of the Companies Amendment Bill and the Regulations.
Edited by: Brindaveni Naidoo© Reuse this Comment Guidelines (150 word limit)
Other Economy News
International consulting engineering company Royal HaskoningDHV (RHDHV) has appointed Salani Sithole as South African MD, effective March 1. Sithole has been with the company for six years and, prior to joining RHDHV, held various positions in engineering consulting,...
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
This Week's Magazine
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.
The 2015 Sanlam/Business Partners Entrepreneur of the Year (EOY) competition was launched earlier this month in Johannesburg, with the main focus on creating and inspiring entrepreneurs to create jobs and boost the economy.
In a recent letter to the editor that I sent to Engineering News (Concerns regarding South African portion of Square Kilometre Array) and in a follow-up article elaborating further (We must start preparations to build our own synchrotron light source), I stated my...