Kgalema Motlanthe, President of South Africa, has signed the Companies Bill into law, which promises to reduce the regulatory burden on companies, particularly small- and medium-sized enterprises (SMEs).
The Bill, which now officially becomes the Companies Act, No. 71 of 2008, was published in the Government Gazette as of April 9, 2009. Commenting on the new legislation, Zodwa Ntuli, Deputy Director-General of the Consumer and Corporate Regulation Division (CCRD) of the Department of Trade and Industry said: “The new Act brings about a lasting mechanism to facilitate the rescuing of businesses that are in financial distress. It is aimed at ensuring that companies are saved before they reach a stage of insolvency and ultimate liquidation."
Ntuli added: "Both companies and workers will be empowered to initiate business rescue plans, where there are apparent signs of distress. This will ensure the efficient running of companies, while strengthening means of sustaining jobs in the economy. We want to promote efficiency and economic growth, retain efficient resources and save jobs."
The government claims that the 2008 Companies Act lends a helping hand to SMEs by reducing the regulatory burden placed on them. While all companies will be required to prepare annual financial statements under the legislation, this is largely intended to encourage sound financial management. However, some enterprises will be exempted from having their financial statements audited or reviewed, depending on their size, workforce and nature of their activities.
The legislation also simplifies the framework on compliance issues, in respect of the structure, registration and maintenance of companies, so as to reduce the need for intermediaries, and save businesses time and money in the process.
In addition, the 2008 Act promotes shareholder activism, especially in relation to minority shareholders and foreign investors. In this regard, the required support for the calling of a shareholders meeting has now been reduced to 10%. The new Act also makes provision for an audit committee to be appointed by shareholders of a company, which entrenches the role of shareholders and the level of independence that should be maintained between audit committees and boards of companies. Further, more comprehensive corporate governance principles, to promote the effective functioning of companies, will be compulsory under the new Act.
“This Act will go a long way in promoting sound corporate governance, transparency, and access to information, amongst other regulatory oversight improvements," argued Ntuli.
"The country will also see a more effective and robust investigative approach to company complaints and the resolution thereof," he concluded.
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