Tag archives: Companies Act

Close Corporations and derivative actions

This Supreme Court of Appeal judgment confirms that the common law derivative action is available to members of close corporations. The common law derivative action was abolished in section 165(1) of the Companies Act and replaced with a statutory derivative action for companies. Sections 49 and 50 of the Close Corporation Act do not exclude … Continue reading

Exclusion of Subsidiary Companies from financial assistance limits

This blog was co-authored by: Tshegofatso Rammutla, Associate; Darragh Meaker, Associate Designate and Devan Falconer, Candidate Attorney. The proposal in the Companies Amendment Bill of 2021 published for public comment on 1 October 2021 for the exclusion of subsidiary companies from the limiting provisions relating to inter-group financial assistance should be enthusiastically supported. Section 45 … Continue reading

Companies Amendment Bill 2021 blog series – Amending the Memorandum of Incorporation

This blog was co-authored by Stacy Smit, candidate attorney The Companies Amendment Bill, 2021 published on 1 October 2021 for public comment proposes amendments to section 16 of the Companies Act of 2008 and provides clarity as to when a change to a company’s Memorandum of Incorporation (MOI) will take effect. Section 16 of the … Continue reading

Companies Amendment Bill Blog Series – Access to more Information

This blog was co-authored by: Preshanta Poonan, candidate attorney The Companies Amendment Bill, 2021 published on 1 October 2021 for public comment proposes amendments to section 26 of the Companies Act of 2008 which outlines the requirements for a company to make documents accessible for inspection to third parties aligned with the provisions of the … Continue reading

Companies Amendment Bill, 2021 – Directors’ Remuneration and Beneficial Ownership

This blog was co-authored by: Hishaam Khan, candidate attorney As we continue to unpack the proposed amendments of the Companies Amendment Bill, 2021 in this series we consider directors’ remuneration and beneficial ownership. Director’s remuneration Remuneration of directors continues to be in focus. The Bill proposes to introduce various disclosure and reporting requirements in respect … Continue reading

Companies Amendment Bill 2021 comments – Appointing a Social and Ethics Committee

This blog was co-authored by: Uzair Bulbulia, candidate attorney On 1 October 2021, the Ministry of Trade, Industry and Competition published the Companies Amendment Bill, 2021 for public comment. The Bill proposes amendments to the requirements for a company to establish a Social and Ethics Committee (SEC) in terms of section 72 of the Companies … Continue reading

Companies Amendment Bill 2021 comments – blog 1 of a series

This blog was co-authored by Uzair Bulbulia, candidate attorney On 1 October 2021, the Ministry of Trade, Industry and Competition published the Companies Amendment Bill, 2021 (2021 Bill) for public comment. The 2021 Bill seeks to amend the Companies Act, 2008 and is a revision of the bill that was published for public comment in … Continue reading

D & O insurance and reflective loss claims

At common law when a wrong is done to a company only the company can sue for the damage caused to it. That does not mean that the shareholders of the company may not consequentially suffer any loss (what is known as a reflective loss). Any negative impact the wrongdoing has on the company is … Continue reading

External companies cannot have prescribed officers

An external company is not a company as defined in the Companies Act, and it cannot therefore have prescribed officers with the obligations and liabilities imposed by the Act. Prescribed officers are employees or other persons who, although they are not directors, exercise executive control over a significant part of a company’s business or participate … Continue reading

Directors’ responsibilities and risk taking

Businesses across the country are facing serious headwinds. South African law requires that directors must exercise their powers in the best interests of the company, and with the degree of care, skill and diligence that may be reasonably expected of a person carrying out those functions. Directors can be held personally liable, and are now … Continue reading

Managing a company and COVID-19: South African directors and their duties

Limiting risk in a pandemic The effects of COVID-19 on the economy has led to many companies facing the possibility of being declared financially distressed. The mounting pressure on directors to appropriately fulfil their duties in response to this crisis will continue into the foreseeable future. Risk advisory: Practical considerations and steps for directors While … Continue reading

Director’s duties, the business judgment rule, and COVID-19

Where a director has taken reasonable steps to become informed of a matter and has made, or supported, a decision in relation to that matter (which they rationally believed was in the best interests of the company), then that director cannot be seen to have breached their fiduciary duties if the decision later turns out … Continue reading

Directors beware: The CIPC has not temporarily softened the solvency and liquidity test

The content of a recent Companies and Intellectual Property Commission (CIPC) practice note in which the CIPC committed not to exercise its powers relating to temporarily insolvent companies must not be confused with the solvency and liquidity test. The board of a company is still obliged to fully apply the solvency and liquidity test wherever … Continue reading

The South African Companies Amendment Bill 2018

The long awaited South African Companies Amendment Bill (Bill) was published on 21 September 2018 for comment. Substantial changes to the South African Companies Act 2008 (Companies Act), which became law in 2011, have been proposed. Comments may be submitted to the SA Department of Trade and Industry by 20 November 2018, and we encourage business to consider … Continue reading

Deregistered corporation comes back to life retrospectively on reinstatement

A corporation which is deregistered under the Companies Act 2008 is automatically and retrospectively re-vested with its rights when it is reinstated (under section 82(4)). In ZNK Investments CC v Luckytso Transport and Construction CC, a sale in execution of a deregistered close corporation had taken place whilst it was deregistered. It was held that the … Continue reading

Economic and social consequences of liquidation relevant to business rescue

The Supreme Court of Appeal has aligned itself with a statement by the high court that where the liquidation of a company will occasion significant collateral damage both economically and socially and destroy wealth and livelihoods, the Companies Act recognises that business rescue is the better option. Adverse socio-economic consequences like job losses should be … Continue reading

Prove liquidation claims in three months

If a company goes into liquidation claims must be lodged and proved within three months as from the conclusion of the second meeting of creditors of the insolvent company. The case of Wishart v Billiton is a reminder that although the Companies Act 1973 was largely repealed, the provisions relating to winding-up of companies remain … Continue reading

Is anti-competitive behaviour insurable?

The August 2016 first-of-its-kind judgment against South African Airways in favour of Nationwide Airlines, for damages arising from conduct that was held to be an anti-competitive exclusionary act preventing Nationwide from entering into or expanding within the travel market, raises the interesting question whether the loss is insurable by the company and the directors. SAA … Continue reading

Business rescue after liquidation

If prospects of success of business rescue exist a court will allow business rescue to commence even if the company is in final liquidation. In Richter v Absa Bank Limited, the Supreme Court of Appeal pointed out that business rescue protects interests of a wider group of people than liquidation and interpreted the Companies Act … Continue reading
LexBlog