COMPANIES AMENDMENT BILL 2021
19 October 2021
On the 1st of October 2021, the Companies Amendment Bill, 2021 (the “Bill”) was published for public comment by the Department of Trade, Industry and Competition (“DTIC”). The Bill is the second draft of the Companies Amendment Bill which was published in September 2018 for public comment. Some of the proposed changes are certainly welcome as they appear to amount to the clarification and simplification of existing practices.
The DTIC has requested interested parties to submit their comments in relation to the Bill by no later than the 31st of October 2021.
This article sets out an overview of the most pertinent proposed amendments:
- Amendments to the Memorandum of Incorporation (“MOI”)
In terms of the Bill, the Companies and Intellectual Property Commission (“CIPC”) will be required to endorse or reject an MOI submitted to CIPC for registration within 10 business days after receipt of the notice of amendment. Should CIPC fail to revert within such period, the MOI will be deemed to have been endorsed by CIPC and, consequently effective.
- Remuneration report: Directors’ remuneration
The newly proposed section 30A of the Bill requires public and state-owned companies to prepare a remuneration report, which is required to include, amongst other, the following information:
- their remuneration policy;
- an implementation report with details of the remuneration received by directors and prescribed officers;
- the total remuneration and benefits (including bonuses, incentives, fund contributions, share options and awards) of the highest remunerated employee;
- the total remuneration (as aforesaid) of the employee with the lowest remuneration in the company; and
- the average remuneration of all employees and the remuneration gap reflecting the ratio between the total remuneration of the highest paid employees positioned amongst the top 5% of remuneration earners in the applicable company and the remuneration of the lowest paid employees positioned amongst the bottom 5% of remuneration earners of the applicable company.
Section 30A further requires that the remuneration report and the policy and implementation report be approved by shareholders of the applicable Company at a duly convened AGM. Each of the policy and implementation report are required to be approved separately by way of an ordinary resolution of shareholders.
- Share capital matters: Court validation
The Bill makes provision for an affected party to approach a court in order to validate or correct an incorrect share issuance or incorrect allotment. This addresses the shortcoming in the existing Companies Act which does not provide for instances where the share register must be corrected due to incorrect or irregular issuances or allotments of shares.
- Intra-group financial assistance
The Bill will do away with the regulatory burden of requiring a decision to render financial assistance to a subsidiary company approved by both the board of directors and shareholders of an applicable company such that only the board is required to approve the rendering of such financial assistance.
- Public and state-owned companies must have social and ethics committees
The optional appointment of a social and ethics committees by public companies, state-owned companies and any other company that has, in two of the previous five years, scored a public interest score in excess of 500 points has been made compulsory by the Bill.
- The appointment of an auditor
The proposed amendment to section 90 of the Companies Act provides clarity in relation to the independence of a company’s auditor by stating expressly that the applicable auditor may not have been in a close working relationship with the company (which includes but is not limited to director, prescribed officer, employee, consultant etc.) for a period of two financial years immediately preceding the appointment.
- Limitation of scope of application of the takeover regulation provisions to private companies
The requirements for a private company to be subject to the takeover regulations have been limited to instances where the private company is comprised of ten or more shareholders with a direct or indirect shareholding in the company in companies which meet or exceeds the financial, annual turnover or asset value thresholds to be determined by the Minister of Trade and Industry.
In all other instances, the takeover regulations will not apply.
- Public access to securities register of companies
The Bill requires companies to file a copy of their securities register as well as aregister of disclosure of beneficial interests, in conjunction with their annual returns to CIPC on an annual basis. This is a far-reaching proposed amendment as third parties do not presently have public access to a company’s securities register unless requested and obtained from a Company in accordance with a prescribed process.
- Special resolution not required in terms of a pro-rata share-buyback
The Bill brings about an amendment to section 48 of the Companies Act in that a special resolution of shareholders will no longer be required where a company implements a share-buyback by means of an offer made pro-rata to all its shareholders