President Motlanthe signs Companies Bill into law

Published: 16 April 2009
The President of the Republic of South Africa, Kgalema Motlanthe, has signed the Companies Bill into law. The Bill, which now officially becomes the Companies Act, No. 71 of 2008, has been published in the Government Gazette, No. 32121 (Notice No.421) of 9 April 2009. According to the Deputy Director-General of the Consumer and Corporate Regulation Division (CCRD) of the Department of Trade and Industry (the dti), Zodwa Ntuli, President Motlanthe’s signing of the Companies Bill into an Act could not have come at a more opportune time, given the current economic situation. While government has implemented various strategies to deal with the challenges of the global economic downturn, the effects of this crisis are likely to persist for more years to come. “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. 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,” says Ntuli. One of the key challenges facing small to medium enterprises in South Africa is that of the cost of doing business. The new Act lends a helping hand to Small and Medium Enterprises (SMEs) by reducing the regulatory burden placed on them. While the new Act still requires all companies, both large or small, to prepare annual financial statements, this is largely intended to encourage sound financial management, as well as promote the sustainability of companies of all sizes. However, some enterprises will be exempted from having their financial statements audited or reviewed, depending on their size, workforce and nature of their activities. Further, the Act introduces an approach that increases the focus on substance over procedural complexities, in relation to the registration and maintenance of companies. It offers a simplified 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. The new Act promotes shareholder activism and empowerment, especially in relation to minority shareholders, some of whom may be 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. In addition to this, more comprehensive corporate governance principles, to promote the effective functioning of companies, will henceforth be compulsory in terms of 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. The country will also see a more effective and robust investigative approach to company complaints and the resolution thereof. the dti will embark on a country-wide education and awareness campaign to ensure that the public and businesses are fully conversant with the new Act. We are happy that this Bill has now become law,” Ntuli concluded. For more information, contact Sidwell Medupe on telephone: (012) 394 1650 / 073 522 6801 or via e-mail: MSMedupe@thedti.gov.za Issued by: Communication and Marketing Unit, the dti Chief Director: Lillian Mofokeng Mobile: + 27 (0)82 888 8362 E-mail: lmofokeng@thedti.gov.za