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
Broad-based black economic empowerment (BEE) ownership transactions that have gone wrong are often exciting fodder for emotive news articles. But BEE ownership transactions are fundamentally the same as any other ownership transaction and shareholder selection process that would be undertaken in the ordinary course. However, a lack of understanding of the regulatory framework often creates … Continue reading
By Thabang Dikgale and Stephen Kennedy-Good on Posted in General
The number of liquidations and sequestrations will, unfortunately, increase due to the COVID-19 pandemic. Preference shareholders with unsecured loans and third party unsecured creditors must be aware of the ranking of unsecured creditors’ claims in the liquidation process. This note specifically focuses on the unsecured loan given by a preference shareholder and not the ranking … Continue reading
By Raphael Chitambira and Stephen Kennedy-Good on Posted in General
A director of a company who has a personal financial interest, or knows that a related person has a personal financial interest, in a matter to be considered at a board meeting must disclose that interest and any other material information relating to the matter before it is discussed at the board meeting (section 75 … Continue reading
Voluntary business rescue applications filed with CIPC during 24 March to 30 April 2020 will be processed by CIPC to reflect the dates on which they were filed. These applications do not have to be resubmitted. Similarly, the appointment of business rescue practitioners that were filed with CIPC during 24 March to 30 April 2020 … Continue reading
The CIPC has granted an extension for the filing of annual returns (due to the lockdown), but the process now includes the completion of a compliance checklist, to prove compliance with the Companies Act. Annual returns All companies (including external companies) and close corporations are required to file their annual returns with the Companies and … Continue reading
Since the passing of the Companies Act 2008 in May 2011 it is no longer possible to register a close corporation (CC). However, the Companies Act allows a CC that existed prior to 1 May 2011 to continue to exist or to convert to a private company. Business owners often opt to convert their CCs … Continue reading
By Stephen Kennedy-Good and Yishika Moodley on Posted in General
Services recommencement The Companies and Intellectual Property Commission (CIPC) has announced that it will be recommencing services on Wednesday, 6 May 2020. Those services will however be done with reduced staff, and therefore delays are inevitable. Business rescue proceedings In regard to business rescue proceedings, the CIPC has stated that any filings made between 24 March … Continue reading
By Stephen Kennedy-Good and Akhona Boloko on Posted in General
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
By Stephen Kennedy-Good and Ally Chalwin-Milton on Posted in General
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
By Stephen Kennedy-Good and Ally Chalwin-Milton on Posted in General
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
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
Like many other changes being experienced by companies as a result of COVID-19, the requirement for an on-site visit as part of the BEE verification process prescribed by the South Africa National Accreditation System (SANAS) has been amended to take into account COVID-19. Prior to COVID-19, SANAS required BEE verification agents to verify and evaluate … Continue reading
By Stephen Kennedy-Good and Ally Chalwin-Milton on Posted in General
Despite the nationwide 21 day lockdown, it is expected that social distancing measures, restrictions on travel and the ban on major public gatherings will continue well beyond these three weeks. In a time of uncertainty, and with the advent of self-isolation, panic buying and remote working, companies throughout the country are having to rethink their … Continue reading
By Stephen Kennedy-Good, Dale Cridlan, Mpho Duiker and Ally Chalwin-Milton on Posted in General
01 I Methods of incorporation A business presence can be established in South Africa, one can either incorporate a South African entity or incorporate a foreign offshore entity, as a so called ‘branch’ or ‘external company’. 02 I Applicable legislation Both forms of business enterprise are regulated by the Companies Act 2008. However, in the … Continue reading
Section 13(1)(d) of the Prescription Act 1969 delays prescription where there is a debt between partners arising out of the partnership relationship. The legal relationship of partnership arises from a contract between two or more persons who each agree to make a contribution (whether in money, property or service) to a venture to be carried on … Continue reading
The Supreme Court of Appeal made important findings regarding the powers of the Companies Commission to investigate a complaint. Where the complaint relates to the inaccuracy of the company records as to who was a director, the failure to ensure that the record was maintained accurately constitutes either an ongoing act or omission under section 219(1)(a) … Continue reading
Under the business judgment rule, a director or officer may be excused from conduct which has adverse circumstances for the company if their judgment, albeit poor judgment, was exercised in good faith and in the interests of the company. In an action in Delaware, USA, the CEO was denied this assistance by the court because, … Continue reading
An application for business rescue does not terminate the office of provisional liquidators nor does it result in the assets and management of the company in liquidation re-vesting in the directors of the company. Where a company had been liquidated, an application was made for business rescue in GCC Engineering v Lawrence Maroos. Although section 131(6) … Continue reading
Currently section 26 of the Companies Act 2008 provides only for holders of securities and beneficial interests in securities to have access to the notices and minutes of annual meetings, written communications sent generally to any class of security holders, resolutions adopted at a shareholders meeting and any documents made available in relation to such … Continue reading
In the first proposed amendments to the Companies Act 2008 since coming into force in 2011, it is proposed that the Companies Tribunal be given the power to adjudicate matters referred to it by the BEE Commission. This amendment would enable the BEE Commission to refer matters to the Tribunal, particularly where complaints and reported … Continue reading
The Companies Amendment Bill released on 21 September 2018 for public comment, proposes a raft of amendments to the Companies Act. Section 45 presently provides that any financial assistance granted by a holding company to its subsidiary must be authorised by the board and the shareholders by way of a special resolution. If not the … Continue reading
The amendments proposed in the Companies Amendment Bill 2018 have caught the attention of financiers and attorneys in so far as the provision of financial assistance (e.g. providing a loan, guaranteeing a loan, and securing any debt or obligation), to ‘its own subsidiary’ is concerned. The Amendment Bill proposes to amend section 45 by removing … Continue reading
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