Trade, Industry and Competition Minister Ebrahim Patel has outlined the key elements of two Bills currently being tabled in Parliament, related to corporate legislation.

The matters being amended relate to ease of doing business, transparency on beneficial ownership and remuneration policies, as well as steps to implement the recommendations of the Zondo Commission of Inquiry into State Capture.

Patel told Parliament on August 29 that company law should be clear, user-friendly and consistent, with well-established principles and not be over-burdensome on business.

This is important to attract investors and for the efficient and effective conduct of the domestic economy and job creation.

A number of amendments seek to advance this objective, through providing legal certainty where these do not currently apply, providing greater flexibility to companies in certain circumstances, or removing unnecessary provisions in the Act, Patel explained.

The Bills provide for greater transparency on the beneficial owners of companies and on remuneration policies within companies.

The Bills propose 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.

“Excessive remuneration particularly at the highest levels of a company is a matter of great concern in society, and has been the subject of policy consideration in a number of important foreign jurisdictions.

“The proposals before Parliament are for disclosure of remuneration policies to shareholders and the approval by shareholders of the remuneration report of a board. The Bill sets out consequences for non-approval by shareholders of the remuneration policies of a company,” Patel said.

The first Bill, entitled the ‘Companies Amendment Bill, 2023’ addresses these and other administrative matters. It has been the subject of extensive public consultation, having started in 2018 with the publication of an original draft Bill, followed by a further publication of a revised draft Bill in 2021, as well as a two-year period of engagement between business, labour and government.

This amendment Bill has benefitted from substantial work done by the Specialist Committee on Company Law, a statutory body chaired by Professor Michael Katz.

The Bill covers the period within which a notice of amendment of a company’s Memorandum of Incorporation takes effect, empowering the courts to regularise an allotment or issuing of shares that is technically invalid, where good reason exists, as well as provisions dealing with share buy-backs, financial assistance from a holding company to its subsidiary, appointment of auditors and reducing the types of companies subject to the mandate of the Takeover Regulation Panel’s (TRP's) jurisdiction.

It also provides for a number of changes that would remove administrative burdens from small- and medium-sized businesses, such as the requirement to file annual financial statements with the Companies and Intellectual Property Commission and filings with the TRP.

The second Bill, entitled ‘Companies Second Amendment Bill, 2023’ provides for action that can be taken to declare directors delinquent, with a proposal to extend the current time bar of two years to five years, or such longer period that a competent court may decide.

The time bar proposal emanates from the Zondo Commission’s recommendations relating to directors of companies implicated in State capture.

It also provides 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. 

The two Bills amend the Companies Act of 2008, which law firm DML said, if passed, will be the first substantive amendment to the Companies Act since it came into force in 2011. The firm said in July last year it remained unclear when the legislation would be finalised.