In July 2024, President Cyril Ramaphosa signed into law the First and Second Companies Amendment bills. The amendments came into effect on the 27th of December 2024. The changes affect certain sections of the Companies Amendment Act and the whole of the Companies Second Amendment Act.
The Companies Amendment Act of 2024 was developed with the aim to enhance transparency and make way for more disclosure by companies. Additionally, it aims to reduce red tape and make it easier to do business in South Africa. Lastly, the new Act aims to clarify certain technical provisions in the Companies Act.
In this article, we take you through the new changes and what it means for businesses in South Africa.
Companies Amendment Act of 2024
New remuneration provisions applicable to public and state-owned companies include:
- Public and state-owned companies have a duty to prepare a remuneration policy. This policy must be prepared once every three years or when there are material changes to the policy. Additionally, there must be a remuneration report each year at the annual general meeting (AGM) for approval by ordinary shareholder resolution. Lastly, remuneration disclosures including pay gap disclosures must be made in the implementation report which is part of the remuneration report.
- If the remuneration report is not approved at the AGM, the next AGM the remuneration committee must explain how concerns have been addressed and non-executive directors on the remuneration committee must stand for re-election as remuneration committee members.
- If the remuneration report is again not approved, in-scope non-executive directors must stand down from the committee for a period of two years. They can remain as directors on the board, provided they are successful in standing for re-election.
Application of takeover provisions in respect of private companies:
- – Takeover provisions will now apply to affected transactions involving a private company that has ten or more shareholders with a direct or indirect shareholding in the company, meets or exceeds a financial threshold of annual turnover or asset value to be determined by the Minister of Trade, Industry and Competition.
- A private company will be considered a regulated company for purposes of application of the takeover provisions. The TRP may exempt any particular transaction involving an in-scope private company.
- Third parties now have the right to access a company MOI, the records of the directors, the AFS and the register of disclosure of beneficial interests (where needed), directly from the company. This is an addition to the securities register and register of directors to which the third parties have access.
Refinements to the provisions relating to a company’s social and ethics committee (SEC) are:
- A company with a formal mechanism with its structures which substantially performs the functions of an SEC, is allowed to apply for an exemption from the requirement to have an SEC regardless of whether legislation is requiring it to have the formal mechanism.
- For public and state-owned companies, the majority of the SEC members must be non-executive directors who have not been involved in the day-to-day management within the previous three financial years.
- Public and state-owned companies must elect the SEC every year at the AGM and the SEC must provide its report to shareholders at the AGM.
- For other companies, the board must annually appoint the SEC, and the committee must present its report annually at the shareholder’s meet or by written solution.
- The SEC report should be prepared in the ‘prescribed’ manner and form.
Validation of Irregular Share Creation and Issues
- On receipt of an application, a court may validate an invalid share creation, allotment or issue if the court finds it just and equitable to do so. The shares are deemed valid after payment of all fees.
Effective Date of MOI Amendments
- Changes to the MOI (other than name change) will take effect 10 business days after receipt by the Companies and Intellectual Property Commission (CIPC) or at a later date specified in the Notice of Amendment.
Financial Assistance Exemption in Certain Instances
- A company that provides financial assistance to its subsidiary will be exempted from section 45 financial assistance provisions. This exemption does not apply to a foreign entity beneficiary that otherwise meets the subsidiary definition.
Relaxation of Share Repurchase Requirements
- All share repurchases will now require the passing of a special resolution by shareholders unless the repurchased shares are acquired as a result of a pro-rate offer made to all shareholders of a particular class or shareholders. Or transactions effected on a recognised stock exchange on which the shares are traded.
Companies Second Amendment Act of 2024
Extension of Director Liability Time Bar
- A court may, on good cause shown, extend the three-year period in which to bring proceedings under section 77 of the Companies Act. This is to recover any loss for which a director or prescribed officer may be held liable under the section.
- Extension of time bars to bring director delinquency and probation applications
- The period within which to make an application to declare a person a delinquent director or under probation to be a director has been extended to 60 months after the person stops being a director. A court may, on good cause shown, extend the period.
These are the amendments that have been put into law. Further than that, there was also a lift on the block exemption regulations for small, micro and medium-sized enterprises (SMMEs). To find out more information about this, visit SME South Africa’s article about block regulations.
Visit the SME South Africa events page to get your tickets to our exciting SME SA Funding Summit.
