The Companies Act 71 of 2008 has been assented to by the President and is now a law of the land. The President has yet to set a date on which the new Companies Act (the new Act) will come into operation, which may not be earlier than April 2010. According to the draft King III report it is expected that the new Act will become operative on 1 July 2010.
It was envisaged that the recent reform of South African company law would happen in two stages. Firstly, urgent interim changes were brought about by the Corporate Laws Amendment Act 2006, which came into effect during December 2007. Secondly, the new Act will repeal and replace the entire Companies Act of 1973 when it becomes operational.
This does not, however, mean that we need to forget everything that we have learnt about company law thus far and start from scratch. It was decided during the reform process to retain many provisions of the current law which were found to be "appropriate for the legal, economic and social context of South Africa as a constitutional democracy and open economy." The body of case law making up the common law applicable to companies will also remain intact. Many of the principles introduced in the Corporate Laws Amendment Act will be retained, such as the harmonisation between company law and the laws regulating the auditing profession, greater transparency and accountability requirements for certain companies, and the permitting of financial assistance.
The new Act will co-exist with the Close Corporations Act, provided that no new Close Corporations (CCs) will be incorporated and no further conversions from private companies to CC will be permitted after the new Act becomes operational. Existing CCs will continue to operate under the Close Corporations Act until such time as the members decide it is in their interest to convert into a company.
This issue will be the first of a series of newsletters where we will discuss the new Act and highlight some changes to our company law.
Senior Associate, Corporate and Commercial