Archive for the 'Companies Act' Category

Companies Act 2008: What happens after 30 April?

As the transitional period for all pre-existing companies has come to a close, the question for many business owners remains: What happens if my Memorandum of Incorporation (MOI) wasn’t registered by 30 April?

It is important to remember what the intention of the transitional period was. In terms of this arrangement the legislator granted companies a two-year period during which they had to ensure that their initial founding documents were in agreement with the provisions of the Companies Act of 2008. Business owners could, inter alia, register their MOI with the Companies and Intellectual Properties Commission (CIPC) free of charge.

Although it was highly anticipated that the grace period would be extended we were surprised to see, as 30 April 2013 approached, that no extension was granted.

In this article we would like to address questions you might still have concerning your company’s MOI.

What happens after 30 April if I haven’t yet registered an MOI?

Firstly, it is important to bear in mind that it is not compulsory for a pre-existing company to convert its initial founding documents to an MOI. Pre-existing companies that have not registered an MOI with the CIPC will continue to be governed by their old memorandum and articles of association until such time as these initial founding documents are converted to an MOI. The government will not arbitrarily assign an MOI to your company if you haven’t done so by 30 April.

It is, however, important to note that the company will only be governed by the initial founding documents to the extent that the provisions of these documents are consistent with the 2008 Act. All provisions that are inconsistent with the 2008 Act, will be deemed void and the provisions of the Act will prevail.

In essence your founding documents might:

  • contain void provisions; and/or
  • contain unnecessary information and requirements.

While an MOI could have been registered with the CIPC at no cost during the transitional period, a charge of R250 applies for all registrations that are done after 30 April.

What are the implications of not having an MOI, for the audit requirements of my company?

In terms of the provisions of the 2008 Act, with certain exceptions companies might, based on their Public Interest Score, qualify for alternatives to an audit, i.e. either an independent review or, in very limited circumstances, a compilation.

However, if a company’s Articles of Association specify that an auditor shall be appointed, that company, governed by its Memorandum and Articles of Association, shall appoint an auditor and an audit shall be performed for the company in terms of the requirements of Chapter 3 of the 2008 Act. In essence, this is a statutory audit with much more stringent requirements. The most significant of these requirements is Section 90(2)(b)(iv) which stipulates that, in the case of a statutory audit, no accounting or secretarial services shall be performed by the appointed auditor.

Accordingly, in order to avoid the application of certain requirements of Chapter 3, either of the following has to be performed:

  1. Registration of the new MOI with the CIPC in terms of the 2008 ActThis will ensure that the company is allowed to use alternatives to an audit, based on its Public Interest Score.Should the company elect to have an audit performed even if it is not required in terms of the Act, based on its Public Interest Score, such audit will be deemed a voluntary audit.In the case of a voluntary audit the requirements of the 2008 Act are far less onerous and the most significant provisions of Chapter 3 will not be applicable.

    OR

  2. Amendment of the Articles of Association (the deemed MOI) by means of a special resolution registered with the CIPC.It is advised that in both the following circumstances a special resolution be passed by the shareholders in order to remove the requirement regarding the appointment of an auditor, from its Articles of Association:
  • All companies that are still in the process of formalising their MOI before the expiration of the transition period; and
  • Companies of which the old Memorandum and Articles of Association will be deemed the MOI after the transition period.It is also important to note that either option (i) or (ii) above should be performed before your company can exercise any of the following options:
  • Voluntary audit (i.e. not statutory in terms of Chapter 3);
  • Independent review; or
  • Compilation (in the case of owner-managed businesses).

What are the risks for me as a director for not putting in place an MOI?

As mentioned earlier, you are allowed to use your old Memorandum and Articles of Association, so there are no implicit risks for you as a director of a company following this route. Note, however, that in this case you are using a MOI (in terms of the old Act) and that you may not be certain which of its provisions apply and which are deemed void.

Theoretically, there is also no risk for third party claims against a company for not having an MOI. However, because the directors might not always know what their responsibilities are, due to the fact that certain provisions are stipulated in the act and not in the deemed MOI (old memorandum and articles), they might incur liability in instances of non-compliance.

We therefore do not recommend that companies use their old memorandum and articles but urge them the get their MOI in place in terms of the 2008 Act as soon as possible. Ultimately, saving the cost is not just worth the risk for both you and your company.

During the last few months we have assisted numerous clients to successfully register their MOI with the CIPC.

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Should you require assistance in this regard you are most welcome to contact Christa Swart, our corporate governance department (pty@asl.co.za) or your relationship director.

 

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Annual returns of companies and close corporations

Clients are reminded of the requirements relating to the submission of annual returns, and the new procedure for re-instatements that must be followed as from 1 November 2012.

An annual return is a summary of the most relevant information pertaining to a company and close corporation. By lodging annual returns companies and close corporations ensure that the Companies and Intellectual Property Commission (CIPC) is in possession of the latest information. It also confirms that the entity is still in business or will be doing business in the near future.

All companies (including external companies) and close corporations are required by law to lodge their annual returns with CIPC within a certain period of time every year. An annual return is a statutory return in terms of the Companies and Close Corporations Acts and therefore MUST be complied with.

To submit an annual return the following forms need to be completed:
·    CoR30.1 (Annual Return) and;
·    CoR30.2 (Financial Accountability Supplement)

Completion of these forms requires the disclosure to the CIPC of certain information about the entity. This information varies, from details such as the number of persons employed, to the particulars of the person primarily responsible for recording day-to-day financial transactions and maintaining the financial records of the business. To submit annual returns on behalf of our clients we require them to provide the necessary information to us, should we not already have access to this information.

Failure to file an annual return within the prescribed time period will result in the CIPC assuming that the company or close corporation is not doing business or is not intending to do business in the near future, and is therefore inactive. This will lead to deregistration of the entity, which has the legal effect that the juristic personality is withdrawn and the entity ceases to exist.  In this event the property of the entity becomes “ownerless” and might be vested in the state unless the entity is re-instated.

It should be noted, however, that the CIPC will no longer re-instate a company or close corporation based solely on a statement that it is in business, or will be in business in the near future. Re-instatements are reserved for entities which can prove that they were in business at the time of deregistration, or have outstanding assets and/or liabilities which must be transferred or liquidated.

The CIPC’s Practice Note 6 of 2012, issued in accordance with the regulations under the Companies Act, 2008, details the requirements for a re-instatement application, effective as from 1 November 2012. Regardless of the cause or date of deregistration, an application must be submitted on an original signed form CoR40.5, and must be accompanied by the following documentation:

1.    Certified ID copy of the applicant  (director/member);
2.    Certified ID copy of the customer filing the application;
3.    Deed search (reflecting ownership, or not, of immovable property);
4.    Letters from National Treasury and the Department of Public Works, indicating these such departments have no objection to re-instatement, if it has immovable property;
5.    Advertisement in a local newspaper giving 21 days’ notice of  proposed application for re-instatement;
6.    Affidavit indicating the reasons for the non-filing of annual returns, if deregistration was due to non-compliance in relation to annual returns;
7.    Affidavit indicating the reason for the original request for deregistration, if the company or close corporation itself applied for         deregistration; and
8.    Sufficient documentary proof indicating that the company or close corporation was in business or that it had any outstanding assets or liabilities (e.g. property, intellectual property rights) at the time of deregistration.

On successful processing of the re-instatement application, all outstanding annual returns must be filed in order to complete the process.

It is clear from the above overview that the new system will be more administratively demanding and may lead to an additional fee in order to comply with the relevant legislation.

You are welcome to contact Marisa Viljoen on 021 840 1600 or marisa@asl.co.za should you require more clarity in this regard.

Your company and its Memorandum of Incorporation (MOI) as required by the Companies Act no. 71, 2008

In terms of the new Companies Act (No. 71, 2008), all companies are required to replace their current Memorandum and Articles of Association (initial founding documents) with a single document, the Memorandum of Incorporation or MOI. This MOI has to be registered with the Companies and Intellectual Properties Commission (CIPC) by no later than 30 April 2013.

Some weeks ago Aucamp Scholtz Lubbe launched its own MOI-process in order to assist clients with the drafting and registration of these MOIs to ensure compliance with the requirements of the Act. At that time we were receiving the same questions from several clients with regard to the drafting and registration of the MOIs. We therefore deemed it necessary to provide you with the researched answers to these frequently asked questions (FAQs). Whether you have already started compiling your MOI or are struggling with some uncertainties or questions in this regard, we trust that this document will be both valuable and insightful.

FAQ 1: Do I really need a MOI or can I still use my initial founding documents (Memorandum and Articles of Association)?

Yes, you are allowed to use your initial founding documents as your MOI but there are significant implications that need to be taken into consideration.

Should a company decide not to have an MOI registered with the CIPC it is allowed to use its Memorandum and Articles of Association. The existing Memorandum and Articles of Association will, until such time as it is converted to an MOI, be deemed to be the MOI required in terms of the  2008 Act, even after the transition period which ends on 30 April 2013. The company will then continue to be governed in terms of the provisions of its Memorandum and Articles of Association, but only to the extent that those provisions are consistent with the 2008 Companies Act.

In terms of section 15(1) of the 2008 Act, any provision in the Memorandum and Articles of Association which is inconsistent with the 2008 Act, will be deemed void and the provisions of the 2008 Act will prevail. The company could therefore find itself in a situation where it is governed partially by the provisions of its deemed MOI and partially by the provisions of the 2008 Act in so far as the MOI provisions are deemed to be void.

Furthermore, it is important to note that all MOIs completed before the end of the transition period (30 April 2013) can be lodged with the CIPC at a reduced rate whereas, if the MOI is submitted after the expiration of the transition period, the standard fee for registering an MOI will be required.

FAQ 2: What are the implications for the audit requirements of my company, of not having an MOI?

In terms of the provisions of the 2008 Act, with certain exceptions companies might, based on their Public Interest Score, qualify for alternatives to a statutory audit, i.e. either an independent review or, in very limited circumstances, a compilation. However, as long as a company’s articles of association specify that an auditor shall be appointed, that company shall appoint an auditor and an audit shall be performed for the company in terms of the requirements of Chapter 3 of the 2008 Act. In essence this is a statutory audit with much more stringent requirements.

The most significant of these requirements is Section 90(2)(b)(iv) of the Act which stipulates that, in the case of a statutory audit, no accounting or secretarial services shall be performed by the appointed auditor.

Accordingly, in order to prevent the application of certain requirements in Chapter 3, either of the following has to be done:

(1)    Register the new MOI in terms of the 2008 Act with the CIPC

This will ensure that the company is allowed to use alternatives other than only an audit (based on their Public Interest Score).

Furthermore, should the company elect to have an audit performed even if it is not required in terms of the Act, based on the Public Interest Score provisions such audit will be deemed a voluntary audit. In the case of a voluntary audit the requirements in terms of the 2008 Act are far less onerous and the most significant provisions of chapter 3 will not be applicable.

OR

(2)    Amend the Articles of Association (the deemed MOI) by means of a  special resolution registered with the CIPC

It is advisable that in both the following instances a special resolution is passed by the shareholders in order to remove the requirement  regarding the appointment of an auditor from the company’s Articles of  Association:

i.    All companies which are still in the process of formalising their MOI before the expiration of the transition period; and
ii.    Companies where the old Memorandum and Articles of  Association will be deemed the MOI after the transition period.

It is important to note that in both instances (i) and (ii) above the required resolution needs to be taken before the company can exercise any of the following options:

i.    Voluntary audit (i.e. not statutory in terms of Chapter 3 of the Act);
ii.    Independent review; or
iii.    Compilation (in the case of owner-managed businesses)

FAQ 3: What are the risk(s) for me as a director for not putting in place an MOI?

As mentioned in FAQ 1, your company is allowed to use its old Memorandum and Articles of Association, so there are no implicit risks for you as a director of the company. Note, however, that in this case the company will be using an MOI (in terms of the old Act) and that you will not be certain which provisions apply and which are deemed void.

Theoretically there is also no risk for third party claims against a company for not having an MOI. However, because the directors might not always be sure what their responsibilities are in view of the fact that certain provisions are contained in the Act and not in the MOI (old Memorandum and Articles), they might incur liability in instances of non-compliance.

Considering what has been explained above we urge our clients not to use their existing Memorandum and Articles of Association but rather to get their MOI in place as required by the 2008 Act, as soon as possible.  Ultimately the costs saved by not doing so are just not worth the risk for both you and your company.

Because we have cooperation agreements with leading law firms we are well-positioned to assist you with the drafting of you company’s new Memorandum of Incorporation (MOI). We offer this service in the knowledge that the product that we will be providing to your company will meet the highest standards of comprehensiveness, accuracy and applicability. These are, after all, the distinctive service qualities that we are committed to.

Please do not hesitate to contact any of our directors should you require a quotation for our assistance in the process of converting to an MOI.

U maatskappy en sy Akte van Inlywing soos vereis deur die Maatskappywet nr. 71, 2008

Kragtens die nuwe Maatskappywet (Nr. 71, 2008) moet alle maatskappye hul huidige Akte van Oprigting en Statute (die aanvanklike stigtingsdokumente) vervang met ‘n enkele nuwe dokument, die Akte van Inlywing (hierna afgekort na MOI vir Memorandum of Incorporation). Hierdie MOI moet voor 30 April 2013 by die Kommissie vir Maatskappye en Intellektuele Eiendom (CIPC) geregistreer word.

‘n Paar weke gelede het Aucamp Scholtz Lubbe sy eie MOI-proses geloods om kliënte te help met die opstel en registrasie van die MOI’s sodat aan die vereistes van die Wet voldoen kan word. Op daardie tydstip het ons gereeld dieselfde navrae met betrekking tot die opstel en registrasie van MOI’s van verskillende kliënte ontvang. Ons meen dit is nodig om aan u die nagevorste antwoorde op hierdie ‘Frequently Asked Questions’ (FAQ’s) te verskaf. Ongeag of u reeds begin het om u MOI op te stel of nog worstel met onduidelikhede of vrae in hierdie verband, vertrou ons dat hierdie dokument vir u waardevol en insiggewend sal wees.

FAQ 1: Het ek regtig ‘n MOI nodig of kan ek steeds my aanvanklike stigtingsdokumente (Akte en Statute) gebruik?

Ja, u mag u aanvanklike stigtingsdokumente as MOI gebruik maar daar is betekenisvolle implikasies wat in ag geneem moet word.

Sou ‘n maatskappy besluit om nie ‘n MOI by die CIPC te registreer nie mag hy steeds sy Akte en Statute gebruik. Die bestaande Akte en Statute sal, tot tyd en wyl dit in ‘n MOI omgesit word, geag word die MOI te wees wat deur die 2008 Wet vereis word, selfs na die verstryking van die oorgangstydperk op 30 April 2013. Die maatskappy sal dan steeds ingevolge die bepalings van sy Akte van Oprigting en Statute beheer word maar slegs in dié mate dat hierdie bepalings in ooreenstemming met die 2008 Maatskappywet is.

Kragtens Afdeling 15(1) van die 2008 Wet  sal enige bepaling in die Akte van Oprigting en Statute wat strydig is met die 2008 Wet, geag word ongeldig te wees en sal die bepalings van die 2008 Wet geld. Die maatskappy kan hom dan in die posisie bevind dat hy gedeeltelik deur die bepalings van sy geagte MOI beheer word en gedeeltelik deur die bepalings van die 2008 Wet in sover die bepalings van die MOI ongeldig geag word.

Daar moet verder op gelet word dat alle MOI’s wat voor die afloop van die oorgangstydperk (30 April 2013) voltooi word, teen ‘n verminderde tarief by die CIPC geregistreer kan word. As die MOI egter ná afloop van die oorgangstydperk ingedien word sal die standaardfooi vir registrasie van ‘n MOI gehef word.

FAQ 2: Wat is die implikasies vir die ouditvereistes van my maatskappy as ek nie ‘n MOI het nie?

Kragtens die bepalings van die 2008 Wet kan, met bepaalde uitsonderinge, maatskappye op grond van hul Openbare Belang puntetelling kwalifiseer vir alternatiewe tot ‘n statutêre oudit, d.w.s. óf ‘n onafhanklike oorsig óf, in beperkte omstandighede, ‘n kompilasie. Maar solank ‘n maatskappy se statute spesifiseer dat ‘n ouditeur aangestel moet word, moet die maatskappy ‘n ouditeur aanstel en moet ‘n oudit uitgevoer word kragtens die vereistes van Hoofstuk 3 van die 2008 Wet.  In wese is dit ‘n statutêre oudit met veel strenger vereistes.

Die mees betekenisvolle van hierdie vereistes is Afdeling 90(2)(b)(iv) van die Wet wat bepaal dat, in die geval van ‘n statutêre oudit, geen rekenmeesters- of sekretariële dienste deur die aangestelde ouditeur verrig mag word nie.

Derhalwe, ten einde die toepassing van sekere vereistes van Hoofstuk 3 te verhoed, moet die volgende gedoen word:

(1)    Registreer die nuwe MOI kragtens die 2008 Wet by die CIPC

Dit sal verseker dat die maatskappy alternatiewe tot slegs ‘n oudit (op grond van sy Openbare Belang puntetelling) kan gebruik.

Voorts, sou die maatskappy kies om ‘n oudit te laat doen al word dit nie deur die Wet vereis nie, sal sodanige oudit op grond van die bepalings van die Openbare Belang puntetelling geag word ‘n vrywillige oudit te wees. In die geval van ‘n vrywillige oudit is die vereistes van die 2008  Wet veel minder veeleisend en sal die mees betekenisvolle vereistes van Hoofstuk 3 nie van toepassing wees nie.

OF

(2)    Wysig die Statute (die geagte MOI) by wyse van ‘n spesiale besluit wat by die CIPC geregistreer word.

Daar word aanbeveel dat in albei die volgende gevalle ‘n spesiale besluit deur die aandeelhouers geneem word om die vereiste oor die aanstelling van ‘n ouditeur in die maatskappy se Statute te skrap:

i.    Alle maatskappye wat nog besig is om hul MOI te formaliseer teen die tyd dat die oorgangstydperk verstryk; en
ii.    Maatskappye waarvan die ou Akte en Statute na afloop van die oorgangstydperk geag sal word die MOI te wees.

Dit is belangrik om daarop te let dat in albei gevalle (i) en (ii) hierbo die vereiste spesiale besluit geneem moet word alvorens enigeen van die volgende opsies uitgeoefen kan word:

i.    Vrywillige oudit (d.w.s. nie statutêr kragtens Hoofstuk 3 van die  Wet nie);
ii.    Onafhanklike oorsig; of
iii.    Kompilasie (in die geval van ‘n eienaar-beheerde besigheid).

FAQ 3: Wat is die risiko(s) vir my as ‘n direkteur as daar nie ‘n MOI opgestel word nie?

Soos in FAQ 1 vermeld, word u maatskappy toegelaat om sy ou Akte en Statute te gebruik. Daar is dus nie enige implisiete risikos vir u as direkteur nie. Let egter daarop dat in hierdie geval die maatskappy ‘n MOI kragtens die ou Wet sal gebruik en dat u nie seker sal wees watter bepalings van toepassing is en watter bepalings geag word ongeldig te wees nie.

Teoreties is daar ook geen risiko vir eise van derdepartye teen ‘n maatskappy omdat dit nie ‘n MOI het nie. Dog, omdat die direkteure nie altyd seker mag wees wat hulle verantwoordelikhede is gesien die feit dat sekere bepalings in die Wet vervat is en nie in die MOI (ou Akte en Statute) nie, mag hulle aan aanspreeklikheid blootgestel wees.

In die lig van die bostaande uiteensetting moedig ons ons kliënte aan om nie hul bestaande Akte en Statute te gebruik nie maar om liefs so gou doenlik ‘n MOI op te stel en te registreer, soos deur die 2008 Wet vereis word. Op die duur is die koste wat gespaar kan word deur dit nie te doen nie, eenvoudig nie die risiko wat dit vir u en u besigheid inhou, werd nie.
Omdat ons samewerkingsooreenkomste met toonaangewende regs-firmas het, is ons in ‘n goeie posisie om u te help met die opstel van u maatskappy se nuwe Akte van Inlywing (MOI). Ons bied hierdie diens aan in die wete dat die produk wat ons aan u maatskappy gaan voorsien, aan die hoogste standaarde van omvattendheid, akkuraatheid en toepaslik-heid sal voldoen. Hierdie is, per slot van rekening, die kenmerkende dienskwaliteite waartoe ons verbind is.

Moet nie huiwer om met een van ons direkteure te skakel as u ‘n kwotasie verlang vir ons hulp met die proses om na ‘n MOI om te skakel nie.

Notules van direksievergaderings

Kliënte word herinner aan die wetlike vereistes rakende direksievergaderings soos bepaal in Art. 73 (6), (7) en (8) van die Maatskappywet, 71, 2008.

Die Wet vereis dat ‘n maatskappy notule moet hou van die vergaderings van die direkteure en van enige van die direkteure se komitees en dat ‘n meerderheid van direkteure op ‘n direksievergadering teenwoordig moet wees voordat enige besluit geneem word. Elke besluit wat deur die direkteure geneem word, asook enige verklaring wat deur ‘n direkteur gemaak word, moet in die notule opgeneem word. ‘n Besluit van die direkteure tree in werking op die datum van die besluit tensy daar in die besluit wat geneem word ‘n ander datum van inwerkingtreding bepaal word. Aandag word in die besonder gevestig op die vereiste dat besluite gedateer en opeenvolgend genommer moet word.

Indien ‘n maatskappy se Akte van Inlywing daarvoor voorsiening maak mag ‘n direksievergadering ook deur middel van elektroniese kommunikasie gehou word of mag een of meer direkteure deur middel van elektroniese kommunikasie aan ‘n vergadering deelneem. Die voorwaarde is dat die elektroniese kommunikasie-medium toelaat dat alle deelnemers met mekaar kan kommunikeer sonder dat ‘n tussenpersoon betrokke is.

‘n Notule of besluit wat deur die voorsitter van ‘n direksievergadering of die voorsitter van die volgende vergadering onderteken is dien as bewys van die verrigtinge van die vergadering of van die aanvaarding van die betrokke besluit.

Indien u meer inligting in hierdie verband verlang is u welkom om u navraag aan pty@asl.co.za te stuur.

Minutes of board meetings

Clients are reminded of the legal requirements relating to board meetings as stipulated in Art. 73 (6), (7) and (8) of the Companies Act, 71, 2008.

The Act requires a company to keep minutes of meetings of the board and of any of the board’s committees, and that a majority of the directors must be present before a vote may be called at a meeting of the directors. Each resolution taken by the board and also any statement made by a board member must be recorded in the minutes. A board resolution takes effect on the date that the resolution is made unless another date of implementation is recorded in the resolution. Attention is drawn in particular to the requirement that resolutions must be dated and numbered sequentially.

Providing that a company’s Memorandum of Incorporation allows therefor, a board meeting may also be held by means of electronic communication, or one or more directors may participate in a meeting by means of electronic communication. This is conditional on the electronic communication facility enabling all participants in the meeting to communicate with each other without an intermediary.

Minutes of a meeting, or a resolution, signed by the chair of the board meeting or by the chair of the next meeting is evidence of the proceedings of that meeting or adoption of the particular resolution.

Should you require more information in this regard you are welcome to direct your enquiry to pty@asl.co.za.

Requirements for declaring a dividend

A recent development has been the implementation of The Companies Act 71 of 2008. This act is an improvement on the previous legislation and imposes more rigorous measures on directors when it comes to declaring dividends. Due to the consequences of contravening this act, we would like to make you aware of your extended responsibilities so that you can protect not only your business, but yourself.

Compared to the 1973 Act, the 2008 Act has much more stringent requirements for declaring a dividend to shareholders.  The new Act imposes a greater burden on directors to ensure that the dividends are declared in the correct manner and procedure.  The consequences of not doing so could result in the possibility of a director being held personally liable for the amount the company paid out in terms of a dividend declared and paid in contravention of the Act.

The 2008 Act also extends the liability to include an alternate director, prescribed officer*, a person who is a member of a committee of the board or the audit committee (irrespective of whether or not the person is also a member of the company’s board).  These persons are subject to the same duties of care, skill and diligence as a director on the board, particularly in relation to Section 46, which requires that the dividend must be:

  • Authorised by a board by resolution; and
  • Immediately after giving effect to the resolution, it reasonably appears that the company will satisfy the solvency and liquidity test; and
  • The board resolution acknowledges that the board applied the solvency and liquidity test; and
  • The board reasonably concluded that the company will satisfy that test immediately after completing the proposed distribution.

So what is the solvency and liquidity test?

The assets (as fairly valued) of the company must be equal to or exceed its liabilities (including reasonably foreseeable contingent liabilities) and it must appear that the company will be able to pay its debts as they become due for the following twelve months after the date of the distribution.

The test will be an accounting exercise, as the Act states how the various values are to be calculated and what assets and liabilities are to be taken into account.

Liability for contravention of Section 46

A director will be liable for loss, damages or costs sustained by the company as a direct or indirect consequence of being present at a meeting, or for knowingly consenting to or failing to vote against, the resolution approving a distribution, despite knowing that the distribution was contrary to Section 46. Liability is joint and several with any other person who may be liable for the same act.  Just by being present at a meeting means that you are required to either vote for or against the dividend.  You cannot abstain from voting.  If you abstain you may still be liable.

Dividends declared but not yet paid before 1 May 2011   

Should a company have declared dividends but not yet paid them out before 1 May 2011 (when the new Act came into force), then the company will need to re-authorise them in terms of the 2008 Act’s requirements.

New dividend tax – implemented 1 April 2012

The new dividend tax was implemented on 1 April 2012.  Dividends tax will be levied at a rate of 15% on the amount of any dividend paid by a company.  The recipient of the dividend (the shareholder) will be liable for the dividend tax, but subject to certain exemptions, the company declaring and paying the dividend is obliged to withhold the tax from the amount of the dividend paid and pay the tax to SARS, by the last day of the month succeeding the date of payment.  There are certain persons which are exempt from the dividends tax, the most noteworthy being a South African resident company.

*A prescribed officer is a person, who, despite not being a director on the board, and irrespective of any title given to him or her:

  • exercises general effective control; or
  • regularly participates to a material degree

over the management of the whole or significant portion of the business and activities of the company.

Given the importance of adhering to the correct corporate governance practices, we would like to assist you in making sure that your company is functioning optimally and within the law. Arnold Scholtz or Pieter Aucamp will assist you further should you have any more questions. They can be contacted on 021 840 1600 or respectively at arnold@asl.co.za and pieter@asl.co.za


Round Robin Resolutions

The Companies Act of 2008 introduces flexibility regarding the manner and form of both directors and shareholders meetings, that represents a more practical approach to formal documented decision making. It is imperative that both directors and shareholders take note of these changes and implement it accordingly.

Shareholders meetings

Section 60 allow for resolutions to be validly adopted by a written resolution and not at a meeting of shareholders, known as a “round robin” meeting.  If the “round robin” resolution is supported by the same number of voting rights as would have been required at a shareholders meeting, then it is valid.  For example, an election of a director that could have been conducted at a shareholders meeting may instead by conducted by “round robin”.

There are some instances where decisions cannot be taken in this manner, for example matters that must, in terms of the 2008 Act or the Memorandum of Incorporation (MOI), be decided at an annual general meeting (AGM).  An exception is where a special resolution has been discussed at an AGM.  Then that special resolution may be taken either at the meeting, or by a subsequent “round robin” resolution unless the MOI specifies that such a decision must be taken at the AGM.

The requirements for “round robin” resolutions are:

  • The resolution must have been submitted for consideration to the shareholders beforehand, and the matter is voted on in writing within 20 business days after the resolution was submitted to them; and
  • Within 10 business days after adopting the resolution, in terms of a round robin, the company must deliver a statement describing the results of the vote, consent process, or election to every shareholder who was entitled to vote on, or consent to the resolution.

Reference should also be made to Regulation 7 and Table CR.3 in the Regulations which sets out the deemed delivery dates and times for different methods of delivery.  The calculation method for business days is set out in section 5(3) of the 2008 Act.

Directors meetings

Section 74 allows for Directors to also make use of substantially similar written round robin resolutions for decision making.  A decision adopted by written consent of the majority of directors given in person or by electronic communication is valid, provided each director has received notice of the matter to be decided.

A drawback of “round robin” resolutions is that there is no, or only a limited opportunity for debate on the matter.  There is no specific indication as to whether a shareholder (in the case of shareholders meetings), or indeed, a director (in the case of a directors meeting) could object to the method of decision-making and insist on a meeting being held.

A shareholder could exercise his rights under to relief from oppressive or prejudicial conduct under section 163 of the 2008 Act.

If you would like to act on the relief as provided and start formalising decisions by “round robin” resolutions, you are welcome to contact Christa Marais at 021 840 1600 or christama@asl.co.za for further information or assistance.

Directors could be liable for company’s tax debts

Although companies or close corporations, as legal entities in their own right, bear the responsibility of debts incurred, and although directors, shareholders and members of these entities generally are not personally liable for such debts if the entities should become incapable of settling them, the Tax Administration Bill, 11 of 2011, contains several provisions in terms of which directors, shareholders and members can incur personal liability for such entities’ tax debts. Section 180 of the bill stipulates as follows:

  • A person is personally liable for any tax debt of the taxpayer to the extent that the person’s negligence or fraud resulted in the failure to pay the tax debt if (a) the person controls or is regularly involved in the management of the overall financial affairs of a taxpayer, and (b) a senior SARS official is satisfied that the person is or was negligent or fraudulent in respect of the payment of the tax debts of the taxpayer.

Accordingly, personal liability is not limited to income tax, but extends to “any tax debt”; the trigger for such personal liability is “negligence or fraud”; such negligence or fraud must have been the cause of the failure to pay the tax debt; potential personal liability extends to any person who “controls or is regularly involved in the management of the overall financial affairs of a taxpayer”, and a senior SARS official must be “satisfied” that such negligence or fraud occurred.

Die nuwe Maatskappywet, Wet 71 van 2008

Onsekerheid bestaan steeds in die sakewêreld oor die praktiese wisselwerking tussen maatskappye se aktes van inlywing en die nuwe Maatskappywet, 71 van 2008, wat op 1 Mei verlede jaar in werking getree het. Dit is egter in sakelui se beste belang dat hulle daarvan sal kennis neem dat hierdie wisselwerking in die periode vanaf die inwerkingtredingsdatum van die wet tot voor einde April 2013, anders sal wees as ná Mei 2013. Dit regsposisie is soos volg:

Wisselwerking ná Mei 2011 tot voor Mei 2013

In gevalle waar die bindende, kontraktuele voorwaardes in die akte van oprigting van ’n maatskappy strydig is met die bepalings van die nuwe wet, sal die bepalings van die akte voorrang hê bo die wetsbepalings. Dieselfde geld in die geval van aandeelhouersooreenkomste waarvan die bepalings strydig is met die nuwe wet.

Situasie ná 1 Mei 2013

Die posisie sal vanaf 1 Mei 2013 omgekeerd wees deurdat die Maaskappywet, in die geval van teenstrydigheid met aktes van inlywing en aandeelhouersooreenkomste, die botoon sal voer en die regsposisie sal bepaal. (Voorsiening word wel gemaak vir enkele uitsonderingsgevalle.) Dit beteken dat enige kontraktuele bepaling in ’n akte van inlywing of aandeelhouersooreenkoms, wat strydig is met die wet, nietig sal wees tot die omvang van die teenstrydigheid.

Voorts is dit belangrik dat sakelui en maatskappe ook sal kennis neem van die volgende:

  • Maatskappye wat vóór 1 Mei 2013, ooreenkomstig die nuwe wet, hul akte van oprigting verander na ’n akte van Inlywing hoef geen fooi aan die Kommissie vir Maatskappye en Intellektuele Eiendom (Engels: CIPC) te betaal nie.
  • Sou hierdie wysiging eers ná 1 Mei 2013 plaasvind, bring dit mee dat die tersake maatskappy in der waarheid onder algehele wetskontrole beland. Ter versekering dat ’n maatskappy bestuur word ooreenkomstig die oorspronklike oprigtingsbedoeling, is dit dus aangewese dat die omskaking vóór die genoemde sperdatum gedoen word.
  • Die nuwe bevat altesame 52 wysigbare bepalings, wat na behoefte en keuse ingesluit kan word tydens die oorskakelingsproses. Dit is dus wenslik dat sakelui en maatskappy hul prokureur of ouditeur so gou moontlik sal kontak met die oog op die afhandeling van hierdie proses.

Indien u of u maatskappy hulp in hierdie verband verlang, is u welkom om Arnold Scholtz of Pieter Aucamp by 021 840 1600 of onderskeidelik arnold@asl.co.za of pieter@asl.co.za te kontak.


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