Implementing the Companies Act in today’s digital world

Updated on 29 August 2016

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The way in which business is conducted globally has undergone radical change. One of the main reasons is the telecommunication revolution, particularly within the area of electronic communication. The new Companies Act 71 of 2008 (“Companies Act”) has modernised South African company law by addressing various aspects not adequately dealt with in the previous act, including the use of information in electronic form, electronic communications and technology.

The Companies Act now enables companies to use technology and electronic form of documents and communications to save businesses time and money in the following 5 ways :

1. Original documents

Where the Companies Act requires an original document, an unaltered electronically generated copy of a document may be substituted for the original. However, this does not apply to share certificates.

2. Notices

Notices in terms of the Companies Act, such as a notice of a shareholders meeting, may be given by electronic transmission, but only if the notice is transmitted directly to that person, and it is possible for the recipient to conveniently print such notice at a reasonable cost. It is therefore possible to give shareholders notice of a meeting by e-mail.

3. Meetings

Directors and shareholders can now participate in meetings through electronic communication such as Skype or video conferencing. This could save businessmen much time and effort in today’s fast paced lifestyle.

4. Document retention and access

The Companies Act requires companies to retain certain documents, records or statements such as a copy of its Memorandum of Incorporation and accounting records. It is sufficient if an electronic original or copy of the document is retained, as provided for in the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”).

According to the ECTA, a company will meet the requirement of the Act to retain information if the information is accessible “so as to be usable of subsequent reference”; it is in the format in which it was generated, sent or received, or in a format which can be demonstrated to represent accurately the information generated, sent or received; and the origin and destination of that data and the date and time it was sent or received can be determined.

It is furthermore possible to inspect a document filed under the Companies Act which is open for inspection, or a certificate from the Commission as to the contents of such a document filed and open for inspection, through an electronic medium approved by the Companies and Intellectual Property Commission. You are therefore able to view documents such as the company’s Memorandum of Incorporation, any rules made by the company, or a register of directors online through a portal on the internet or by receiving it on e-mail.

5. Electronic signatures

Where the Companies Act requires a document to be signed or initialed, such as a resolution or financial statements, the signatory may sign or initial by using an electronic signature as provided for in the ECTA.  It will be sufficient to merely use an electronic signature and not an advanced electronic signature, as the Companies Act provides that you may use an electronic signature “in any manner provided for in the ECTA”.

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