NEW COMPANIES ACT 2008
The former Companies Act, 69 of 1973 as amended has been substituted by the Companies Act, 71 of 2008 which came into law on 1 May 2011. The Act was subsequently amended by the Companies Amendment Act and the Regulations were published during 2011. In general, the Companies Act deals with the registration of companies which includes amending the memorandum of the incorporation, alterations to the memorandum, legal status of the company, validity of company actions, pre-incorporation contracts and in particular reckless trading provisions which are much stronger than the provisions of the 1973 Act.
In particular there is a greater onus on the shareholders of the company to establish transparency in all its dealings and there are very rigid provisions in the Act relating to accountability and the integrity of companies.
One of the most important emphases in the new Companies Act deals with governance and the consequences of bad governance and in particular the standards of directors’ conduct, their liability of directors and prescribed officers. It is of vital importance that anybody who is anticipating becoming a director or shareholder of a company or anyone who is presently a shareholder or director of a company seeks legal advice clarifying the changes to the Act and the emphasis of governance otherwise there may be onerous consequences which every businessman should avoid at all costs. We urge our clients to seek advice on these matters. As previously set out in this webpage there are major changes regarding the law attempting to rescue businesses as opposed to liquidating them and the Act sets out how the business rescue procedures initiated and such matters as moratorium on legal procedures against the company, protection of property interests and pre-commencement finance. The Act makes provision for the appointment of practitioners who will take control of the business whilst subject to the business rescue provisions.