The new Companies Act 2008 came into effect on 1 May 2011! There were delays and problems with the implementation, but it finally commenced. The Act has huge implications for virtually every business in South Africa. It has created a whole new regime for the regulation of companies in South Africa. Here’s a heads up on some of the practical implications of this Act.
What is the timeline?
There are a few things to bear in mind:
- There are Companies regulations for the Companies Act. This makes it possible to consider all the implications of the Act and implement it.
- The Companies Amendment Bill 40 of 2010 quickly became a thing of the past with the enactment of the Companies Amendment Act 3 of 2011 and its consolidation with the Companies Act. This process should always happen relatively quickly, because without a consolidated Act it would have been difficult to find out what the Companies Act actually says.
When do you need to act?
Now is the time to act. The Companies Act has been in force for five years. There is no time to lose.
The practical implications
- There are new liability rules for directors.
- It creates new rules for the incorporation, registration, organisation and management of companies in South Africa. It will apply if you want to register, administer or wind-up a company. We offer a seminar, webinar, workshop, or executive briefing on What Regulates Companies.
- There is a new process to register a company. (companies can now be registered electronically)
- It defines the relationships between companies and their respective shareholders (or members) and directors.
- On 1 May 2011 the “Memorandum and Articles of Association” were renamed the Memorandum of Incorporation (MOI or Memorandum). It is the same document, it just got a new name. From 1 May 2013 every pre-existing company (a company that existed before 1 May 2011) has needed to amend its Memorandum to bring it in line (harmony) with the new Companies Act. We can prepare the documents you need to do this and help you with the process. If you’d like us to help you amend a memorandum quickly and easily, just email us your details and we will contact you.
- From 1 May 2011 it has also no longer been possible to register a new close corporation or CC. CC’s will slowly become extinct and every CC has to be converted into a company ‘Pty Ltd’. The conversion of close corporations to companies is governed by the Companies Act and Companies Regulations. Every CC has to convert eventually. We can prepare the documents you need to do this and help you with the process. If you’d like us to help you convert a CC to a Pty quickly and easily, just email us your details.
- After 1 May 2013 shareholder agreements (or shareholders agreements) went from “hero to zero“. If there is a conflict between the shareholder agreement and any other document that regulates the company, the other document will prevail. Between 1 May 2011 to 1 May 2013 the order of importance of documents was Shareholder Agreement (if signed before 1 May 2011), Memorandum, Companies Act. After 1 May 2013, the order of importance changed to Companies Act, Memorandum, and lastly Shareholder Agreement. We can review your old shareholders agreement.
- If you need a new shareholders agreement, it is no longer possible (from 1 May 2011) to adopt a shareholders agreement that prevails over the Memorandum and Companies Act. You need to amend the memorandum before adopting a shareholders agreement.