21 April 2011
The new Companies Act, signed into law by President Jacob Zuma on Wednesday, constitutes a major piece of reform that will significantly improve South Africa’s business environment, says Trade and Industry Minister Rob Davies.
Following Zuma’s signing, the Companies Amendment Act of 2010 will come into effect on 1 May 2011. The Companies Regulations and all other relevant documents will be published and also come into force on 1 May.
According to Davies, business as a whole will reap the benefits of the Act, which “has a number of features to it [and] will certainly improve the environment for business operation in South Africa.
Less red tape, business rescue scheme
“There is a reduction, particularly on the regulatory burden on small, medium and micro enterprises,” Davies said.
“The requirement for financial reporting for small companies has been reduced considerably, in that they do not have to produce audited financial statements, but will need to have financial reporting at an appropriate low level.”
The major innovation is the introduction of a business rescue scheme, which means that instead of companies going into major judicial management as they do now – which is almost invariably a route to an eventual bankruptcy – a rescue process will be initiated.
“Creditors can be held at bay while stakeholders work to rescue the company, which is a major and very important innovation,” Davies said.
The new Act does not allow registration of Close Corporations (CCs), and therefore none will be registered when the Act comes into legal force. However, CCs that are already in the system will remain active indefinitely, unless they choose to convert into the new corporate regime of the Companies Act of 2008.
“The Act does not apply retrospectively, and those registrants/people who have already applied for CCs before May 2011 will still receive their certificates,” Davies said.
The signing of the Companies Amendment Act means that the Companies and Intellectual Property Commission (CIPC), which was launched by the minister earlier this week, will be open for business on 1 May.
The commission will ensure that the regulatory framework for enterprises promotes growth, employment, innovation, stability, good governance, confidence and international competitiveness.
The Act also gives the commission powers to investigate companies and to ensure that they comply with the legislation. This includes seizing documents and addressing the burning issue of corporate identity hijacking.