Key amendments to the Companies Acts, 2024

The effective date of MOI amendments

Section 16(9)

Amendments to the MOI take effect either 10 business days after receipt of the Notice of Amendment by CIPC (unless endorsed sooner or rejected by CIPC) or such later date specified in the Notice of Amendment.

Consider the timing of transactions involving amendments to an MOI. Build in requisite time in transactional agreements where amendments to the MOI are required.

Third-party access to information

Section 26

• Third parties have the right to access directly from a company, the company's MOI, rules, the record of directors contemplated in section 24(3)(b), the annual financial statements (AFS) and the register of disclosure of beneficial interests (where this is required). This is in addition to the securities and director's registers, to which they already have access.
• Third parties cannot have access to the AFS of private, personal liability and non-profit companies with a public interest score below a certain threshold (less than 100 for internally prepared AFS and less than 350 for independently prepared AFS).

• Have systems in place to comply with obligations to disclose requested information and to guarantee that only lawfully requested information is disclosed as per the Companies Act.

AFS and the filing of AFS with annual returns

Section 30(4)

• Each director and prescribed officer must be named in the AFS remuneration details.
• Public, state-owned or other profit or non-profit companies whose public interest score exceeds the specified thresholds (100/350) must include a copy of their latest AFS (approved by the board) in their annual return.

• Companies that have not yet named their directors or prescribed officers in their AFS must correct this.

Dirctorse and POs’ remuneration

Sections 30A and 30B

• All public and state-owned companies must present a remuneration policy (valid for three years) for shareholder approval at the AGM by ordinary resolution and if not approved, the policy must be presented at the next AGM or shareholders' meeting called for that purpose.
• Any material amendments to the policy can only be implemented after approval by ordinary resolution at a special shareholders' meeting or the AGM.
• All public and state-owned companies must present a remuneration report for shareholder approval at the AGM by ordinary resolution. The implementation report (forming part of the remuneration report) must include various details, including pay gap disclosures. The presentation of the remuneration report must form part of the minimum business to be transacted at the AGM.
• If the remuneration report is not approved at the AGM, the remuneration committee must at the next AGM, explain how shareholder concerns have been addressed and non-executive directors on the remuneration committee (serving 12 months or more) must stand for re-election as remuneration committee members.
• If the remuneration report is again not approved, there are further consequences, including in-scope non-executive directors becoming i ineligible to serve on the committee for a period of two years. They can remain as directors on the board, provided they successfully stand for re-election.

(For the detail of the consequences of non-approval of the remuneration report, see sections 30B(4),(5) and (6).)

• Start preparing early for pay gap disclosure requirements and partake in active shareholder engagement ahead of the AGM.
• Review the structure of remuneration policies and remuneration reports to cater for the new requirements, particularly around remuneration disclosures in remuneration reports.
• Update AGM notices to reflect the presentation and approval of the remuneration policy and remuneration report as ordinary resolutions and re-election/conditional re-election of directors as needed.
• Consider director rotation provisions and nomination committee terms.

Courts can rectify invalid share creations and issues

Section 38A

If a relevant court receives an application made by the company or a party who holds an interest in the company, the court may validate an invalid creation, allotment or issue of shares, should the court find it is just and equitable to do so.

Intra-group financial assistance exemption

Section 45(2A)

The financial assistance requirements in section 45 of the Companies Act do not apply to a company providing financial assistance to, or for the benefit of its subsidiaries, as defined in the Companies Act. This exemption does not apply to a beneficiary that otherwise meets the definition of a subsidiary but is a foreign entity.

• Review MOIs to assess whether there are provisions that allow for the passing of special resolutions where a company provides financial assistance to its subsidiaries. If these provisions were included to reflect the position of the Companies Act, they should be removed. If, however, the provisions are a commercial requirement, they should be retained. The provisions should not be removed where they relate to financial assistance to a foreign entity which would otherwise meet the definition of a subsidiary (in which case, the exemption does not apply).

Requirements for share repurchases

Section 48(8)

• The requirements of sections 114 and 115 of the Companies Act no longer apply to share repurchases of over 5%.
• Shareholders must pass a special resolution for all share repurchases unless the repurchased shares are acquired through (i) a pro-rata offer made to all shareholders or a particular class of shareholders; or (ii) transactions effected on a recognised stock exchange (being a licensed exchange in terms of the Financial Markets Act, 2012) on which the shares are traded.

• Review MOIs to assess whether there are provisions reflecting compliance with the previously stated provision. If so, these provisions should be removed or updated to refer to the new position unless there is a commercial reason for the provision.

Social & Ethics Committee (SEC)

Sections 72 and 61

• If a company has a formal mechanism within its structures which performs the functions of an SEC, it can apply for an exemption from the requirement to have an SEC, irrespective of whether there is a legislative requirement to have the formal mechanism. The company must publish an intention to lodge an exemption application in the prescribed manner.
• The Minister may prescribe minimum qualifications, skills and experience requirements for SEC members.
• For public and state-owned companies, the majority of 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. The SEC must present its SEC report to shareholders at each AGM. The presentation of the SEC report must form part of the minimum business to be transacted at the AGM.
• For other companies, the board must appoint the SEC annually and present its SEC report annually at a shareholders' meeting or by written resolution.
• The SEC must prepare the SEC report in the prescribed manner and form, describing how the committee performed its functions.

* The amendments relating to the SEC are less extensive than they appear given the existing provisions in the Companies Regulations. Until deleted or updated, the provisions in the Companies Regulations remain in force and should be read together with the new provisions (once effective). However, if there are any conflicts or inconsistencies, the new provisions (once effective) in the Companies Act will prevail.

• Consider the revised composition requirements of the SEC and update template notices to cater for the election of the SEC and presentation of the SEC report.
• Review SEC policies, terms of reference and charters to align with the new requirements where needed.
• Review and update the structure and content of the SEC reports to align with the prescribed manner and form (once prescribed).
• Review and update MOIs to the extent SEC provisions are dealt with.

Appointment of auditors/auditor disqualification periods

Section 90

• Auditors of private companies required to be audited in terms of the Companies Act or its MOI can be appointed at a shareholders' meeting rather than the AGM (as previously indicated).
• The disqualification period for auditor appointments has been shortened from five to two financial years under section 90(2)(b)(v).

• Review MOIs to assess whether there are provisions reflecting compliance with the previously stated provision and if so, these provisions should be removed or updated to refer to the new position.

Employee Share Schemes

Section 95(1)(c)

• The definition of "employee share scheme" in section 95(1)(c) now includes share purchase (in addition to share issuance and share option grants).

If companies were previously unable to register their schemes because it was a purchase scheme, they should revisit the scheme and consider whether to register.

Application of the takeover provisions in respect of private companies

Section 118(1)(c)(i)

• The takeover provisions in the Companies Act and Companies Regulations now apply to affected transactions or offers involving a private company or its securities if the private company: (i) has ten or more shareholders with a direct or indirect shareholding in the company; and (ii) meets or exceeds the financial threshold of annual turnover or asset value to be determined by the Minister (in consultation with the Takeover Regulation Panel). In this case, a private company will be considered a regulated company for purposes of applying the takeover provisions. The TRP may exempt particular transactions affecting an in-scope private company.

• Private companies involved in existing or future affected transactions should assess if they will be subject to takeover provisions.
• In-scope private companies planning any affected transactions should prepare for the potential impact of complying with takeover-related obligations (such as timing and costs) or prepare to request an exemption from the TRP where appropriate.
• In-scope private companies involved in pending transactions at the time the amendments take effect should assess the impact of the takeover provisions on their transaction and whether a TRP exemption is needed.

Director liability: Proceedings to recover loss/Relaxation of time bars

Section 77(7)

• The Prescription Act, 1969 does not apply to proceedings to recover loss under section 77(7). A court may, on good cause shown, extend the period (three years), regardless of whether the period has expired.

Director delinquency and probation applications / Relaxation of time bars

Sections 162(2) and 162(3)

• The application time to declare a person a delinquent director or under probation has been extended to 60 months after that person ceases to be a director. A court may, on good cause shown, further extend such period.

Definition of securities

Section 1

• The definition of securities has been limited to shares and debentures (ie "or other instruments" has been deleted).

Other

Sections 25, 40, 135, 160, 166, 167, 194,195 and 204

• CIPC must publish the notice filed by a company regarding the location of its records in the prescribed manner.
• Business rescue provisions have been revised concerning aspects of post-commencement financing.
• Amendments made to the Companies Tribunal include the issue of administrative orders, the Company Tribunal's composition; alternative dispute resolution processes and the powers of the Companies Tribunal to conciliate, arbitrate and adjudicate administrative matters.
• The Financial Reporting Standards Council is empowered to issue financial reporting pronouncements relating to international reporting standards that require adaptation for local circumstances.

• Corporate agreements with alternative dispute resolution mechanisms such as referring disputes to the Companies Tribunal, should be reviewed to assess their continued suitability given the amendments.