The new Companies Act 71 of 2008 (the Act) was given presidential assent on 9 April 2009. Companies now find themselves in a 'hurry up and wait' situation, in anticipation of the next step, which is that the President must fix the date on which the Act will come into operation. The latest indication from the Department of Trade and Industry (the DTI) is that the Act will only come into operation in the latter half of 2010.
The delay can be attributed to a number of factors:
Firstly, the Minister of Trade and Industry can make regulations in respect of various matters including the forms required to be used for purposes of the Act as well as matters relating to the functions of the Take-over Regulation Panel. The DTI is in the process of preparing these regulations, which will have to be published for public comment before they are finalised.
Secondly, in terms of the Act, a number of new institutions must be established, such as the Companies Tribunal, and some existing institutions must be transformed. For example, CIPRO must be transformed into the Companies and Intellectual Property Commission and the Securities Regulation Panel must be changed to the Takeover Regulation Panel.
Furthermore, it is also possible and likely that certain amendments will be made to the Act in order to address certain obvious inconsistencies and to streamline the transition process.
Anyone that manages or advises companies would be wise to use this time to prepare for the transition and acquaint themselves with the provisions of the Act.
The Act moves away from memoranda and articles of association of companies and introduces the concept of a memorandum of incorporation (MOI). All companies will, at no charge, be able to replace their existing memoranda and articles of association with a MOI within the first two years of the Act coming into operation. A number of undesirable consequences could result for companies that fail to effect these changes after the two year period has elapsed.
All companies may also need to revise their shareholder agreements as the Act allows shareholders to enter into agreements with each other concerning any matter relating to the company, provided that the agreement is consistent with the Act.
Companies should consider adopting incidental rules relating to the governance of a company as contemplated in the Act. The tax consequences arising from any changes to the MOI and share capital structure of a company will need to be considered.
It is also likely that some of the JSE listing requirements will have to be amended before the Act comes into force.
Cliffe Dekker Hofmeyr is fully conversant with the changes to the Act and positioned to offer its clients a comprehensive strategy to prepare for the coming into operation of the Act, tailored to a client's specific needs.
Tessa Brewis, Senior Associate and
Peter Kituri, Candidate Attorney
Corporate and Commercial