Companies Act, 2008

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Jurisdiction: South Africa
Citation: Act 71 of 2008
Date: 9 April 2009
Language: English
Type: Legislation
Download: Download PDF (1.7 MB)

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Subject areas > Business, Trade and Industry

Companies Act, 2008

Act 71 of 2008

Published in Government Gazette 32121 on 9 April 2009
Assented to on 8 April 2009
There are multiple commencements

Provisions	Status
Chapter 1 (section 1–10); Chapter 2, Part A, section 11(1)(a)(i), 11(1)(a)(iv), 11(1)(b), 11(2), 11(3), 11(4), section 12; Part B (section 13–22); Part C (section 23–34); Part D (section 35–48); Part E (section 49–56); Part F (section 57–78); Part G (section 79–83); Chapter 3 (section 84–94); Chapter 4 (section 95–111); Chapter 5 (section 112–127); Chapter 6 (section 128–155); Chapter 7 (section 156–184); Chapter 8 (section 185–212); Chapter 9 (section 213–225)	commenced on 1 May 2011 by Proclamation R32 of 2011.
Chapter 2, Part A, section 11(1)(a)(ii), 11(1)(a)(iii)	commenced on 1 May 2014. Note: Date of commencement of sections 11(1)(a)(ii) and (iii) (see section 225(2))

Provisions

Status

Chapter 1 (section 1–10); Chapter 2, Part A, section 11(1)(a)(i), 11(1)(a)(iv), 11(1)(b), 11(2), 11(3), 11(4), section 12; Part B (section 13–22); Part C (section 23–34); Part D (section 35–48); Part E (section 49–56); Part F (section 57–78); Part G (section 79–83); Chapter 3 (section 84–94); Chapter 4 (section 95–111); Chapter 5 (section 112–127); Chapter 6 (section 128–155); Chapter 7 (section 156–184); Chapter 8 (section 185–212); Chapter 9 (section 213–225)

commenced on 1 May 2011 by Proclamation R32 of 2011.

Chapter 2, Part A, section 11(1)(a)(ii), 11(1)(a)(iii)

commenced on 1 May 2014.
Note: Date of commencement of sections 11(1)(a)(ii) and (iii) (see section 225(2))

[This is the version of this document as it was from 9 April 2009 to 30 April 2011.]

(English text signed by the President)ACTTo provide for the incorporation, registration, organisation and management of companies, the capitalisation of profit companies, and the registration of offices of foreign companies carrying on business within the Republic; to define the relationships between companies and their respective shareholders or members and directors; to provide for equitable and efficient amalgamations, mergers and takeovers of companies; to provide for efficient rescue of financially distressed companies; to provide appropriate legal redress for investors and third parties with respect to companies; to establish a Companies and Intellectual Property Commission and a Takeover Regulation Panel to administer the requirements of the Act with respect to companies, to establish a Companies Tribunal to facilitate alternative dispute resolution and to review decisions of the Commission; to establish a Financial Reporting Standards Council to advise on requirements for financial record-keeping and reporting by companies; to repeal the Companies Act, 1973 (Act No. 61 of 1973), and make amendments to the Close Corporations Act, 1984 (Act No. 69 of 1984), as necessary to provide for a consistent and harmonious regime of business incorporation and regulation; and to provide for matters connected therewith.BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:—

Chapter 1
Interpretation, purpose and application

Part A – Interpretation

1. Definitions

In this Act, unless the context indicates otherwise—"advertisement" means any direct or indirect communication transmitted by any medium, or any representation or reference written, inscribed, recorded, encoded upon or embedded within any medium, by means of which a person seeks to bring any information to the attention of all or part of the public;"agreement" includes a contract, or an arrangement or understanding between or among two or more parties that purports to create rights and obligations between or among those parties;"alterable provision" means a provision of this Act in which it is expressly contemplated that its effect on a particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by that company’s Memorandum of Incorporation;"alternate director" means a person elected or appointed to serve, as the occasion requires, as a member of the board of a company in substitution for a particular elected or appointed director of that company;"amalgamation or merger" means a transaction, or series of transactions, pursuant to an agreement between two or more companies, resulting in—(a)the formation of one or more new companies, which together hold all of the assets and liabilities that were held by any of the amalgamating or merging companies immediately before the implementation of the agreement, and the dissolution of each of the amalgamating or merging companies; or(b)the survival of at least one of the amalgamating or merging companies, with or without the formation of one ore more new companies, and the vesting in the surviving company or companies, together with such new companies, of all of the assets and liabilities that were held by any of the amalgamating or merging companies immediately before the implementation of the agreement;"amalgamated or merged company" means a company that either—(a)was incorporated pursuant to an amalgamation or merger agreement; or(b)was an amalgamating or merging company and continued in existence after the implementation of the amalgamation or merger agreement,and holds any part of the assets and liabilities that were held by any of the amalgamating or merging companies immediately before the implementation of the agreement;"amalgamating or merging company" means a company that is a party to an amalgamation or merger agreement;"annual general meeting" means the meeting of a public company required by section 61(7);"audit" has the meaning set out in the Auditing Profession Act;"Auditing Profession Act" means the Auditing Profession Act, 2005 (Act No. 26 of 2005);"auditor" has the meaning set out in the Auditing Professions Act;"Banks Act" means the Banks Act, 1993 (Act No. 124 of 1993);"beneficial interest", when used in relation to a company’s securities, means the right or entitlement of a person, through ownership, agreement, relationship or otherwise, alone or together with another person to—(a)receive or participate in any distribution in respect of the company’s securities;(b)exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company’s securities; or(c)dispose or direct the disposition of the company’s securities, or any part of a distribution in respect of the securities,but does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective Investment Schemes Act, 2002 (Act No. 45 of 2002);"board" means the board of directors of a company;"business days" has the meaning determined in accordance with section 5(3);"Cabinet" means the body of the national executive described in section 91 of the Constitution;"central securities depository" has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004);"close corporation" means a juristic person incorporated under the Close Corporations Act, 1984 (Act No. 69 of 1984);"Commission" means the Companies and Intellectual Property Commission established by section 185;"Commissioner" means the person appointed to or acting in the office of that name, as contemplated in section 189;"Companies Tribunal" means the Companies Tribunal established in terms of section 193;"companies register" means the register required to be established by the Commission in terms of section 187(4);"company" means a juristic person incorporated in terms of this Act, or a juristic person that, immediately before the effective date—(a)was registered in terms of the—(i)Companies Act, 1973 (Act No. 61 of 1973), other than as an external company as defined in that Act; or(ii)Close Corporations Act, 1984 (Act No. 69 of 1984), if it has subsequently been converted in terms of Schedule 2;(b)was in existence and recognised as an ‘existing company’ in terms of the Companies Act, 1973 (Act No. 61 of 1973); or(c)was deregistered in terms of the Companies Act, 1973 (Act No. 61 of 1973), and has subsequently been re-registered in terms of this Act;"Competition Act", means the Competition Act, 1998 (Act No. 89 of 1998);"consideration" means anything of value given and accepted in exchange for any property, service, act, omission or forbearance or any other thing of value, including—(a)any money, property, negotiable instrument, securities, investment credit facility, token or ticket;(b)any labour, barter or similar exchange of one thing for another; or(c)any other thing, undertaking, promise, agreement or assurance, irrespective of its apparent or intrinsic value, or whether it is transferred directly or indirectly;"Constitution" means the Constitution of the Republic of South Africa, 1996;"convertible securities" means any securities of a company that may, by their terms, be converted into other securities of the company, including—(a)any non-voting securities issued by a company and which will become voting securities—(i)on the happening of a designated event; or(ii)if the holder of those securities so elects at some time after acquiring them; and(b)options to acquire securities to be issued by the company, irrespective of whether or not those securities may be voting securities, or non-voting securities contemplated in paragraph (a);"co-operative" means a juristic person as defined in the Co-operatives Act, 2005 (Act No. 14 of 2005);"Council" means the Financial Reporting Standards Council established by section 203;"director" means a member of the board of a company, as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated;"distribution" means a direct or indirect—(a)transfer by a company of money or other property of the company, other than its own shares, to or for the benefit of one more holders of any of the shares of that company or of another company within the same group of companies, whether—(i)in the form of a dividend;(ii)as a payment in lieu of a capitalisation share, as contemplated in section 47;(iii)is consideration for the acquisition—(aa)by the company of any of its shares, as contemplated in section 48; or(bb)by any company within the same group of companies, of any shares of a company within that group of companies; or(iv)otherwise in respect of any of the shares of that company or of another company within the same group of companies, subject to section 164(19);(b)incurrence of a debt or other obligation by a company for the benefit of one or more holders of any of the shares of that company or of another company within the same group of companies; or(c)forgiveness or waiver by a company of a debt or other obligation owed to the company by one more holders of any of the shares of that company or of another company within the same group of companies,but does not include any such action taken upon the final liquidation of the company;"effective date", with reference to any particular provision of this Act, means the date on which that provision came into operation in terms of section 225;"electronic communication" has the meaning set out in section 1 of the Electronic Communications and Transactions Act;"Electronic Communications and Transactions Act" means the Electronic Communications and Transactions Act, 2002 (Act No. 25 of 2002);"employee share scheme" has the meaning set out in section 95(1)(c);"exchange" when used as a noun, has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004);"exercise", when used in relation to voting rights, includes voting by proxy, nominee, trustee or other person in a similar capacity;"ex officio director" means a person who holds office as a director of a particular company solely as a consequence of that person holding some other office, title, designation or similar status specified in the company’s Memorandum of Incorporation;"external company" means a foreign company that is carrying on business, or non-profit activities, as the case may be, within the Republic, subject to section 23(2);"file", when used as a verb, means to deliver a document to the Commission in the manner and form, if any, prescribed for that document;"financial reporting standards", with respect to any particular company’s financial statements, means the standards applicable to that company, as prescribed in terms of section 29(4) and (5);"financial statement" includes—(a)annual financial statements and provisional annual financial statements;(b)interim or preliminary reports;(c)group and consolidated financial statements in the case of a group of companies; and(d)financial information in a circular, prospectus or provisional announcement of results, that an actual or prospective creditor or holder of the company’s securities, or the Commission, Panel or other regulatory authority, may reasonably be expected to rely on;"foreign company" means an entity incorporated outside the Republic, irrespective of whether it is—(a)a profit, or non-profit, entity; or(b)carrying on business or non-profit activities, as the case may be, within the Republic;"general voting rights" means voting rights that can be exercised generally at a general meeting of a company;"group of companies" means two or more companies that share a holding company or subsidiary relationship;"holding company", in relation to a subsidiary, means a juristic person or undertaking that controls that subsidiary;"Human Rights Commission" means the South African Human Rights Commission established in terms of Chapter 9 of the Constitution;"incorporator", when used—(a)with respect to a company incorporated in terms of this Act, means a person who incorporated that company, as contemplated in section 13; or(b)with respect to a pre-existing company, means a person who took the relevant actions comparable to those contemplated in section 13 to bring about the incorporation of that company;"individual" means a natural person;"inspector" means a person appointed as such in terms of section 209;"investigator" means a person appointed as such in terms of section 209;"inter-related", when used in respect of three or more persons, means persons who are related to one another in a series of relationships, as contemplated in section 2(1)(d);"juristic person" includes—(a)a foreign company; and(b)a trust, irrespective of whether or not it was established within or outside the Republic;"knowing", "knowingly" or "knows", when used with respect to a person, and in relation to a particular matter, means that the person either—(a)had actual knowledge of that matter;(b)was in a position in which the person reasonably ought to have—(i)had actual knowledge;(ii)investigated the matter to an extent that would have provided the person with actual knowledge; or(iii)taken other measures which, if taken, would reasonably be expected to have provided the person with actual knowledge of the matter;"listed securities" has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004);"Master" means the person holding the office of that name in terms of the Supreme Court Act, 1959 (Act No. 59 of 1959);"material", when used as an adjective, means significant in the circumstances of a particular matter, to a degree that is—(a)of consequence in determining the matter; or(b)might reasonably affect a person’s judgement or decision-making in the matter;"member", when used in reference to a non-profit company, means a person who holds membership in, and specified rights in respect of, that non-profit company, as contemplated in item 4 of Schedule 1;"Memorandum of Incorporation" means the document, as amended from time to time—(a)that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company, and other matters as contemplated in section 15; and(b)by which—(i)the company was incorporated in terms of this Act, as contemplated in section 13; or(ii)a pre-existing company was structured and governed before the later of—(aa)the effective date; or(bb)the date it was converted to a company in terms of Schedule 2;"Minister" means the member of the Cabinet responsible for companies;"nominee" has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004);"non-profit company" means a company—(a)incorporated for a public benefit or other object as required by item 1(1) of Schedule 1; and(b)the income and property of which are not distributable to its incorporators, members, directors, officers or persons related to any of them except to the extent permitted by item 1(3) of Schedule 1;"Notice of Incorporation" means the notice to be filed in terms of section 13(1), by which the incorporators of a company inform the Commission of the incorporation of that company, for the purpose of having it registered;"official language" means a language mentioned in section 6(1) of the Constitution;"ordinary resolution" means a resolution adopted—(a)at a shareholders meeting, with the support of more than 50% of the voting rights exercised on the resolution, or a higher percentage as contemplated in section 65(8); or(b)by holders of a company’s securities acting other than at a meeting, as contemplated in section 60;"organ of state" has the meaning set out in section 239 of the Constitution;"Panel" means the Takeover Regulation Panel, established by section 196;"participant" has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004);"person" includes a juristic person;"personal financial interest", when used with respect to any person—(a)means a direct material interest of that person, of a financial, monetary or economic nature, or to which a monetary value may be attributed; but(b)does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective Investment Schemes Act, 2002 (Act No. 45 of 2002), unless that person has direct control over the investment decisions of that fund or investment;"personal liability company" means a company whose Memorandum of Incorporation states that the company is a personal liability company, as contemplated in section 8(2)(c);"pre-existing company" means a company contemplated in paragraph (a), (b) or (c) of the definition of ‘company’ in this section;"pre-incorporation contract" means an agreement entered into before the incorporation of a company by a person who purports to act in the name of, or on behalf of, the company, with the intention or understanding that the company will be incorporated, and will thereafter be bound by the agreement;"premises" includes land, or any building, structure, vehicle, ship, boat, vessel, aircraft or container;"prescribed" means determined, stipulated, required, authorised, permitted or otherwise regulated by a regulation or notice made in terms of this Act;"prescribed officer" means the holder of an office, within a company, that has been designated by the Minister in terms of section 66(11);"present at a meeting" means to be present in person, or able to participate in the meeting by electronic communication, or to be represented by a proxy who is present in person or able to participate in the meeting by electronic communication;"private company" means a profit company that—(a)is not a company or a personal liability state-owned company; and(b)satisfies the criteria set out in section 8(2)(b);"profit company" means a company incorporated for the purpose of financial gain for its shareholders;"public company" means a profit company that is not a state-owned company, a private company or a personal liability company;"public regulation" means any national, provincial or local government legislation or subordinate legislation, or any licence, tariff, directive or similar authorisation issued by a regulatory authority or pursuant to any statutory authority;"records", when used with respect to any information pertaining to a company, means any information contemplated in section 24(1);"record date" means the date established under section 59 on which a company determines the identity of its shareholders and their shareholdings for the purposes of this Act;"registered auditor" has the meaning set out in the Auditing Profession Act;"registered external company" means an external company that has registered its office as required by section 23, and has been assigned a registration number in terms of that section;"registered office" means the office of a company, or of an external company, that is registered as required by section 23;"registered trade union" means a trade union registered in terms of section 96 of the Labour Relations Act, 1995 (Act No. 66 of 1995);"registration certificate", when used with respect to a—(a)company incorporated on or after the effective date, means the certificate, or amended certificate, issued by the Commission as evidence of the incorporation and registration of that company;(b)pre-existing company registered in terms of—(i)the Companies Act, 1973 (Act No. 61 of 1973), means the certificate of incorporation or registration issued to it in terms of that Act;(ii)the Close Corporations Act, 1984 (Act No. 69 of 1984), and converted in terms of Schedule 2 to this Act, means the certificate of incorporation issued to the company in terms of that Schedule, read with section 14; or(iii)any other law, means any document issued to the company in terms of that law as evidence of the company’s incorporation; or(c)registered external company, means the certificate of registration issued to it in terms of this Act or the Companies Act, 1973 (Act No. 61 of 1973);"registry" means a depository of documents required to be kept by the Commission in terms of section 187(4);"regulated person or entity" means a person that has been granted authority to conduct business by a regulatory authority;"regulation" means a regulation made under this Act;"regulatory authority" means an entity established in terms of national or provincial legislation responsible for regulating an industry, or sector of an industry;"related", when used in respect of two persons, means persons who are connected to one another in any manner contemplated in section 2(1)(a) to (c);"relationship" includes the connection subsisting between any two or more persons who are related or inter-related, as determined in accordance with section 2;"rules" and "rules of a company" means any rules made by a company as contemplated in section 15(3) to (5);"securities" has the meaning set out in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004), and includes shares held in a private company;"share" means one of the units into which the proprietary interest in a profit company is divided;"shareholder", subject to section 57(1), means the holder of a share issued by a company and who is entered as such in the certificated or uncertificated securities register, as the case may be;"shareholders meeting", with respect to any particular matter concerning a company, means a meeting of those holders of that company’s issued securities who are entitled to exercise voting rights in relation to that matter;"solvency and liquidity test" means the test set out in section 4(1);"special resolution" means a resolution adopted—(a)at a shareholders meeting, with the support of at least 75% of the voting rights exercised on the resolution, or a lower percentage as contemplated in section 65(10); or(b)by holders of a company’s securities acting other than at a meeting, as contemplated in section 60;"state-owned company" means an enterprise that is registered in terms of this Act as a company, and either—(a)falls within the meaning of "state-owned enterprise" in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999); or(b)is owned by a municipality, as contemplated in the Local Government: Municipal Systems Act, 2000 (Act No. 32 of 2000), and is otherwise similar to an enterprise referred to in paragraph (a);"subsidiary" has the meaning determined in accordance with section 3;"Takeover Regulations" means the regulations made by the Minister in terms of sections 120 and 223;"this Act" includes the Schedules and regulations;"unalterable provision" means a provision of this Act that does not expressly contemplate that its effect on any particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by a company’s Memorandum of Incorporation or rules;"uncertificated securities" means any securities defined as such in section 29 of the Securities Services Act, 2004 (Act No. 36 of 2004);"uncertificated securities register" means the record of uncertificated securities administered and maintained by a participant or central securities depository, as determined in accordance with the rules of a central securities depository, and which forms part of the relevant company’s securities register established and maintained in terms of Part E of Chapter 2;"voting power", with respect to any matter to be decided by a company, means the voting rights that may be exercised in connection with that matter by a particular person, as a percentage of all such voting rights;"voting rights", with respect to any matter to be decided by a company, means—(a)the rights of any holder of the company’s securities to vote in connection with that matter, in the case of a profit company; or(b)the rights of a member to vote in connection with the matter, in the case of a non-profit company;"voting securities", with respect to any particular matter, means securities that—(a)carry voting rights with respect to that matter; or(b)are presently convertible to securities that carry voting rights with respect to that matter; and"wholly-owned subsidiary" has the meaning determined in accordance with section 3(1)(b).

2. Related and inter-related persons, and control

(1)For all purposes of this Act—

(a)an individual is related to another individual if they—

(i)are married, or live together in a relationship similar to a marriage; or

(ii)are separated by no more than two degrees of natural or adopted consanguinity or affinity;

(b)an individual is related to a juristic person if the individual directly or indirectly controls the juristic person, as determined in accordance with subsection (2); and

(c)a juristic person is related to another juristic person if—

(i)either of them directly or indirectly controls the other, or the business of the other, as determined in accordance with subsection (2);

(ii)either is a subsidiary of the other; or

(iii)a person directly or indirectly controls each of them, or the business of each of them, as determined in accordance with subsection (2).

(2)For the purpose of subsection (1), a person controls a juristic person, or its business, if—

(a)in the case of a juristic person that is a company—

(i)that juristic person is a subsidiary of that first person, as determined in accordance with section 3(1)(a); or

(ii)that first person together with any related or inter-related person, is—

(aa)directly or indirectly able to exercise or control the exercise of a majority of the voting rights associated with securities of that company, whether pursuant to a shareholder agreement or otherwise; or

(bb)has the right to appoint or elect, or control the appointment or election of, directors of that company who control a majority of the votes at a meeting of the board;

(b)in the case of a juristic person that is a close corporation, that first person owns the majority of the members’ interest, or controls directly, or has the right to control, the majority of members’ votes in the close corporation;

(c)in the case of a juristic person that is a trust, that first person has the ability to control the majority of the votes of the trustees or to appoint the majority of the trustees, or to appoint or change the majority of the beneficiaries of the trust; or

(d)that first person has the ability to materially influence the policy of the juristic person in a manner comparable to a person who, in ordinary commercial practice, would be able to exercise an element of control referred to in paragraph (a), (b) or (c).

(3)With respect to any particular matter arising in terms of this Act, a court, the Companies Tribunal or the Panel may exempt any person from the application of a provision of this Act that would apply to that person because of a relationship contemplated in subsection (1) if the person can show that, in respect of that particular matter, there is sufficient evidence to conclude that the person acts independently of any related or inter-related person.

3. Subsidiary relationships

(1)A company is—

(a)a subsidiary of another juristic person if that juristic person, one or more other subsidiaries of that juristic person, or one or more nominees of that juristic person or any of its subsidiaries, alone or in any combination—

(i)is or are directly or indirectly able to exercise, or control the exercise of, a majority of the general voting rights associated with issued securities of that company, whether pursuant to a shareholder agreement or otherwise; or

(ii)has or have the right to appoint or elect, or control the appointment or election of, directors of that company who control a majority of the votes at a meeting of the board; or

(b)a wholly-owned subsidiary of another juristic person if all of the general voting rights associated with issued securities of the company are held or controlled, alone or in any combination, by persons contemplated in paragraph (a).

(2)For the purpose of determining whether a person controls all or a majority of the general voting rights associated with issued securities of a company—

(a)voting rights that are exercisable only in certain circumstances are to be taken into account only—

(i)when those circumstances have arisen, and for so long as they continue; or

(ii)when those circumstances are under the control of the person holding the voting rights;

(b)voting rights that are exercisable only on the instructions or with the consent or concurrence of another person are to be treated as being held by a nominee for that other person; and

(c)voting rights held by—

(i)a person as nominee for another person are to be treated as held by that other person; or

(ii)a person in a fiduciary capacity are to be treated as held by the beneficiary of those voting rights.

(3)For the purposes of subsection (2), 'hold', or any derivative of it, refers to the registered or direct or indirect beneficial holder of securities conferring a right to vote.

4. Solvency and liquidity test

(1)For any purpose of this Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time—

(a)the assets of the company or, if the company is a member of a group of companies, the aggregate assets of the company, as fairly valued, equal or exceed the liabilities of the company or, if the company is a member of a group of companies, the aggregate liabilities of the company, as fairly valued; and

(b)it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of—

(i)12 months after the date on which the test is considered; or

(ii)in the case of a distribution contemplated in paragraph (a) of the definition of ‘distribution’ in section 1, 12 months following that distribution.

(2)For the purposes contemplated in subsection (1)—

(a)any financial information to be considered concerning the company must be based on—

(i)accounting records that satisfy the requirements of section 28; and

(ii)financial statements that satisfy the requirements of section 29;

(b)subject to paragraph (c), the board or any other person applying the solvency and liquidity test to a company—

(i)must consider a fair valuation of the company’s assets and liabilities, including any reasonably foreseeable contingent assets and liabilities, irrespective of whether or not arising as a result of the proposed distribution, or otherwise; and

(ii)may consider any other valuation of the company’s assets and liabilities that is reasonable in the circumstances; and

(c)unless the Memorandum of Incorporation of the company provides otherwise, a person applying the test in respect of a distribution contemplated in paragraph (a) of the definition of 'distribution' in section 1 is not to be regarded as a liability any amount that would be required, if the company were to be liquidated at the time of the distribution, to satisfy the preferential rights upon liquidation of shareholders whose preferential rights upon liquidation are superior to the preferential rights upon liquidation of those receiving the distribution.

5. General interpretation of Act

(1)This Act must be interpreted and applied in a manner that gives effect to the purposes set out in section 7.

(2)To the extent appropriate, a court interpreting or applying this Act may consider foreign company law.

(3)When, in this Act, a particular number of ‘business days’ is provided for between the happening of one event and another, the number of days must be calculated by—

(a)excluding the day on which the first such event occurs;

(b)including the day on or by which the second event is to occur; and

(c)excluding any public holiday, Saturday or Sunday that falls on or between the days contemplated in paragraphs (a) and (b), respectively.

(4)If there is an inconsistency between any provision of this Act and a provision of any other national legislation—

(a)the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and

(b)to the extent that it is impossible to apply or comply with one of the inconsistent provisions without contravening the second—

(i)any applicable provisions of the—

(aa)Auditing Profession Act;

(bb)Labour Relations Act, 1995 (Act No. 66 of 1995);

(cc)Promotion of Access to Information Act, 2000 (Act No. 2 of 2000);

(dd)Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000);

(ee)Public Finance Management Act, 1999 (Act No. 1 of 1999);

(ff)Securities Services Act, 2004 (Act No. 36 of 2004); or

(gg)Banks Act,

prevail in the case of an inconsistency involving any of them, except to the extent provided otherwise in section 49(4); or

(ii)the provisions of this Act prevail in any other case, except to the extent provided otherwise in subsection (5) or section 118(4).

(5)If there is a conflict between a provision of Chapter 8 and a provision of the Public Service Act, 1994 (Proclamation No. 103 of 1994), the provisions of that Act prevail.

6. Anti-avoidance, exemptions and substantial compliance

(1)A court, on application by the Commission or Panel, may declare any agreement, transaction, arrangement, resolution or provision of a company’s Memorandum of Incorporation or rules—

(a)to be primarily or substantially intended to defeat or reduce the effect of a prohibition or requirement established by or in terms of an unalterable provision of this Act; and

(b)void to the extent that it defeats or reduces the effect of a prohibition or requirement established by or in terms of an unalterable provision of this Act.

(2)A person may apply to the Companies Tribunal for an administrative order exempting an agreement, transaction, arrangement, resolution or provision of a company’s Memorandum of Incorporation or rules from any prohibition or requirement established by or in terms of an unalterable provision of this Act, other than a provision that falls within the jurisdiction of the Panel.

(3)The Companies Tribunal may make an administrative order contemplated in subsection (2) if it is satisfied that—

(a)the agreement, transaction, arrangement, resolution or provision serves a reasonable purpose other than to defeat or reduce the effect of that prohibition or requirement; and

(b)it is reasonable and justifiable to grant the exemption, having regard to the purposes of this Act and all relevant factors, including—

(i)the purpose and policy served by the relevant prohibition or requirement; and

(ii)the extent to which the agreement, transaction, arrangement, resolution or provision infringes or would infringe the relevant prohibition or requirement.

(4)The producer of a prospectus, notice, disclosure or document that is required, in terms of this Act, to be published, produced or provided to a potential investor, a company’s creditor or potential creditor, a holder of a company’s securities, a member of a non-profit company, an employee of a company or a representative of any employees of a company, must publish, produce, or provide that prospectus, notice, disclosure or document—

(a)in the prescribed form, if any, for that prospectus, notice, disclosure or document, or;

(b)in plain language, if no form has been prescribed for that prospectus, notice, disclosure or document.

(5)For the purposes of this Act, a prospectus, notice, disclosure or document is in plain language if it is reasonable to conclude that a person of the class of persons for whom the prospectus, notice, disclosure or document is intended, with average literacy skills and minimal experience in dealing with company law matters, could be expected to understand the content, significance and import of the prospectus, notice, disclosure or document without undue effort, having regard to—

(a)the context, comprehensiveness and consistency of the prospectus, notice, disclosure or document;

(b)the organisation, form and style of the prospectus, notice, disclosure or document;

(c)the vocabulary, usage and sentence structure of the prospectus, notice, disclosure or document; and

(d)the use of any illustrations, examples, headings or other aids to reading and understanding in the prospectus, notice, disclosure or document.

(6)The Commission may publish guidelines for methods of assessing whether a prospectus, notice, disclosure or document satisfies the requirements of subsection (4)(b).

(7)An unaltered electronically or mechanically generated reproduction of any document, other than a share certificate, may be substituted for the original for any purpose for which the original could be used in terms of this Act.

(8)If a form of document, record, statement or notice is prescribed in terms of this Act for any purpose—

(a)it is sufficient if the person required to prepare or complete such a document, record, statement or notice does so in a form that satisfies all of the substantive requirements of the prescribed form; and

(b)any deviation from the design or content of the prescribed form does not invalidate the action taken by the person preparing or completing that document, record, statement or notice, unless the deviation—

(i)negatively and materially affects the substance of the document, record, statement or notice; or

(ii)is such that it would reasonably mislead a person reading the document, record, statement or notice.

(9)If a manner of delivery of a document, record, statement or notice is prescribed in terms of this Act for any purpose—

(a)it is sufficient if the person required to deliver such a document, record, statement or notice does so in a manner that satisfies all of the substantive requirements as prescribed; and

(b)any deviation from the prescribed manner does not invalidate the action taken by the person delivering that document, record, statement or notice, unless the deviation—

(i)materially reduces the probability that the intended recipient will receive the document, record, statement or notice; or

(ii)is such as would reasonably mislead a person to whom the document, record, statement or notice is, or is to be, delivered.

(10)If, in terms of this Act, a notice is required or permitted to be given or published to any person, it is sufficient if the notice is transmitted electronically directly to that person in a manner and form such that the notice can conveniently be printed by the recipient within a reasonable time and at a reasonable cost.

(11)If, in terms of this Act, a document, record or statement, other than a notice contemplated in subsection (10), is required—

(a)to be retained, it is sufficient if an electronic original or reproduction of that document is retained as provided for in section 15 of the Electronic Communications and Transactions Act; or

(b)to be published, provided or delivered, it is sufficient if—

(i)an electronic original or reproduction of that document, record or statement is published, provided or delivered by electronic communication in a manner and form such that the document, record or statement can conveniently be printed by the recipient within a reasonable time and at a reasonable cost; or

(ii)a notice of the availability of that document, record or statement, summarising its content and satisfying any prescribed requirements, is delivered to each intended recipient of the document, record or statement, together with instructions for receiving the complete document, record or statement.

(12)If a provision of this Act requires a document to be signed or initialled—

(a)by or on behalf of a person, that signing or initialling may be effected in any manner provided for in the Electronic Communications and Transactions Act; or

(b)by two or more persons, it is sufficient if—

(i)all of those persons sign a single original of the document, in person or as contemplated in paragraph (a); or

(ii)each of those persons signs a separate duplicate original of the document, in person or as contemplated in paragraph (a), and in such a case, the several signed duplicate originals, when combined, constitute the entire document.

(13)The Commission may—

(a)establish a system, using any means of electronic communication, to facilitate the automated—

(i)reservation of names in terms of Part A of Chapter 2 or in terms of any other legislation listed in Schedule 4;

(ii)incorporation and registration of companies or close corporations; or

(iii)filing of any information contemplated by this Act or by any legislation listed in Schedule 4; or

(b)accredit an established system that—

(i)is capable of facilitating any activity contemplated in paragraph (a); and

(ii)satisfies any prescribed requirements.

(14)The Minister may—

(a)make regulations relating to the standards of operation, accessibility, technical requirements, service quality, and fees for the use of any system contemplated in subsection 13; and

(b)declare any system established or accredited by the Commission to be an acceptable mechanism for the filing of any particular document, in lieu of any other requirements set out in legislation relating to the filing of that document.

Part B – Purpose and application

7. Purposes of Act

The purposes of this Act are to—

(a)promote compliance with the Bill of Rights as provided for in the Constitution, in the application of company law;

(b)promote the development of the South African economy by—

(i)encouraging entrepreneurship and enterprise efficiency;

(ii)creating flexibility and simplicity in the formation and maintenance of companies; and

(iii)encouraging transparency and high standards of corporate governance as appropriate, given the significant role of enterprises within the social and economic life of the nation;

(c)promote innovation and investment in the South African markets;

(d)reaffirm the concept of the company as a means of achieving economic and social benefits;

(e)continue to provide for the creation and use of companies, in a manner that enhances the economic welfare of South Africa as a partner within the global economy;

(f)promote the development of companies within all sectors of the economy, and encourage active participation in economic organisation, management and productivity;

(g)create optimum conditions for the aggregation of capital for productive purposes, and for the investment of that capital in enterprises and the spreading of economic risk;

(h)provide for the formation, operation and accountability of non-profit companies in a manner designed to promote, support and enhance the capacity of such companies to perform their functions;

(i)balance the rights and obligations of shareholders and directors within companies;

(j)encourage the efficient and responsible management of companies;

(k)provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders; and

(l)provide a predictable and effective environment for the efficient regulation of companies.

8. Categories of companies

(1)Two types of companies may be formed and incorporated under this Act, namely profit companies and non-profit companies.

(2)A profit company is—

(a)a state-owned company; or

(b)a private company if—

(i)it is not a state-owned company; and

(ii)its Memorandum of Incorporation—

(aa)prohibits it from offering any of its securities to the public; and

(bb)restricts the transferability of its securities;

(c)a personal liability company if—

(i)it meets the criteria for a private company; and

(ii)its Memorandum of Incorporation states that it is a personal liability company; or

(d)a public company, in any other case.

(3)No association of persons formed after 31 December 1939 for the purpose of carrying on any business that has for its object the acquisition of gain by the association or its individual members is or may be a company or other form of body corporate unless it—

(a)is registered as a company under this Act;

(b)is formed pursuant to another law; or

(c)was formed pursuant to Letters Patent or Royal Charter before 31 May 1962.

9. Modified application with respect to state-owned companies

(1)Subject to section 5(4) and (5), any provision of this Act that applies to a public company applies also to a state-owned company, except to the extent that the Minister has granted an exemption in terms of subsection (3).

(2)The member of the Cabinet responsible for—

(a)state-owned companies may request the Minister to grant a total, partial or conditional exemption from one or more provisions of this Act, applicable to all state-owned companies, any class of state-owned companies, or to one or more particular state-owned company; or

(b)local government matters may request the Minister to grant a total, partial or conditional exemption from one or more provisions of this Act, applicable to all state-owned companies owned by a municipality, any class of such enterprises, or to one or more particular such enterprises,

on the grounds that those provisions overlap or duplicate an applicable regulatory scheme established in terms of any other national legislation.

(3)The Minister, by notice in the Gazette after receiving the advice of the Commission, may grant an exemption contemplated in subsection (2)—

(a)only to the extent that the relevant alternative regulatory scheme ensures the achievement of the purposes of this Act at least as well as the provisions of this Act; and

(b)subject to any limits or conditions necessary to ensure the achievement of the purposes of this Act.

10. Modified application with respect to non-profit companies

(1)Every provision of this Act applies to a non-profit company, subject to the provisions, limitations, alterations or extensions set out in this section, and in Schedule 1.

(2)The following provisions of this Act do not apply to a non-profit company:

(a)Part D of Chapter 2—Capitalisation of profit companies.

(b)Part E of Chapter 2—Securities registration and transfer.

(c)Parts B and D of Chapter 3—Company secretaries, and audit committees, except to the extent contemplated in section 34(2).

(d)Chapter 4—Public offerings of company securities.

(e)Chapter 5—Takeovers, offers and fundamental transactions.

(f)Sections 146 (d), and 152(3)(c)—Rights of shareholders to approve a business rescue plan, except to the extent that the non-profit company is itself a shareholder of a profit company engaged in business rescue proceedings.

(g)Section 164—Dissenting shareholders’ appraisal rights, except to the extent that the non-profit company is itself a shareholder of a profit company.

(3)Sections 58 to 65, read with the changes required by the context—

(a)apply to a non-profit company only if the company has voting members; and

(b)when applied to a non-profit company, are subject to the provisions of item 4 of Schedule 1.

(4)With respect to a non-profit company that has voting members, a reference in this Act to "a shareholder", "the holders of a company’s securities", "holders of issued securities of that company" or "a holder of voting rights entitled to be voted" is a reference to the voting members of the non-profit company.

Chapter 2
Formation, administration and dissolution of companies

Part A – Reservation and registration of company names

11. Criteria for names of companies

(1)Subject to subsections (2) and (3), a company name—

(a)may comprise words in any language, irrespective of whether or not the words are commonly used or contrived for the purpose, together with—

(i)any letters, numbers or punctuation marks;

(ii)any of the following symbols: +, &, #,, %, =;

(iii)any other symbol permitted by the regulations made in terms of subsection (4); or

(iv)round brackets used in pairs to isolate any other part of the name, alone or in any combination; or

(b)in the case of a profit company, may be the registration number of the company together with the relevant expressions required by subsection (3).

(2)The name of a company must—

(a)not be the same as, or confusingly similar to—

(i)the name of another company, registered external company, close corporation or co-operative unless the company forms part of a group of companies using similar names;

(ii)a name registered for the use of a person as a business name in terms of the Business Names Act, 1960 (Act No. 27 of 1960);

(iii)a registered trade mark belonging to a person other than the company, or a mark in respect of which an application has been filed in the Republic for registration as a trade mark or a well-known trade mark as contemplated in section 35 of the Trade Marks Act, 1993 (Act No. 194 of 1993); or

(iv)a mark, word or expression the use of which is restricted or protected in terms of the Merchandise Marks Act, 1941 (Act No. 17 of 1941), except to the extent permitted by or in terms of that Act;

(b)not falsely imply or suggest, or be such as would reasonably mislead a person to believe incorrectly, that the company—

(i)is part of, or associated with, any other person or entity;

(ii)is an organ of state or a court, or is operated, sponsored, supported or endorsed by the State or by any organ of state or a court;

(iii)is owned, managed or conducted by a person or persons having any particular educational designation or who is a regulated person or entity;

(iv)is owned, operated, sponsored, supported or endorsed by, or enjoys the patronage of, any—

(aa)foreign state, head of state, head of government, government or administration or any department of such a government or administration; or

(bb)international organisation; and

(c)not include any word, expression or symbol that, in isolation or in context within the rest of the name, may reasonably be considered to constitute—

(i)propaganda for war;

(ii)incitement of imminent violence; or

(iii)advocacy of hatred based on race, ethnicity, gender or religion, or incitement to cause harm.

(3)In addition to complying with the requirements of subsections (1) and (2)—

(a)if the name of a profit company is the company’s registration number, as contemplated in subsection (1)(b), that number must be immediately followed by the expression "(South Africa)";

(b)if the company’s Memorandum of Incorporation includes any provision contemplated in section 15(2)(b) or (c), the name must be immediately followed by the expression "(RF)"; and

(c)a company name, irrespective of its form or language, must end with one of the following expressions, as appropriate for the category of the particular company:

(i)The word "Incorporated" or its abbreviation "Inc. ", in the case of a personal liability company.

(ii)The expression "Proprietary Limited" or its abbreviation, "(Pty) Ltd. ", in the case of a private company.

(iii)The word "Limited" or its abbreviation, "Ltd. ", in the case of a public company.

(iv)The expression "SOC Ltd. " in the case of a state-owned company.

(v)The expression "NPC", in the case of a non-profit company.

(4)The Minister may prescribe additional commonly recognised symbols for use in company names as contemplated in subsection (1)(a)(iii).

12. Reservation of name and defensive names

(1)A person may reserve one or more names to be used at a later time, either for a newly incorporated company, or as an amendment to the name of an existing company, by filing an application together with the prescribed fee.

(2)The Commission must reserve each name as applied for in the name of the applicant, unless the name as applied for is—

(a)the registered name of another company, close corporation or co-operative;

(b)the name of a registered external company; or

(c)already reserved in terms of this section.

(3)If, upon reserving a name in terms of subsection (2), there are reasonable grounds for considering that the name may be inconsistent with the requirements of—

(a)section 11(2)(a) or (b)—

(i)the Commission, by written notice, may require the applicant to serve a copy of the application and name reservation on any particular person, or class of persons, named in the notice, on the grounds that the person or persons may have an interest in the use of the name that has been reserved for the applicant; and

(ii)any person to whom a notice is required to be given in terms of subparagraph (i) may apply to the Companies Tribunal for a determination and order in terms of section 160; or

(b)section 11(2)(c)—

(i)the Commission may refer the application and name reservation to the South African Human Rights Commission; and

(ii)the South African Human Rights Commission may apply to the Companies Tribunal for a determination and order in terms of section 160.

(4)A name reservation continues for a period of six months from the date of the application, and may be extended by the Commission for good cause shown, on application by the person for whom the name is reserved together with the prescribed fee, for a period of 60 business days at a time.

(5)A person for whom a name has been reserved in terms of subsection (2) may transfer that reservation to another person by filing a signed notice of the transfer together with the prescribed fee.

(6)If the Commission reasonably believes that an applicant in terms of subsection (1), a person to whom a reserved name is to be transferred, or a person for whom a name is reserved, may be attempting to abuse the name reservation system for the purpose of selling access to names, or trading in or marketing names, the Commission may issue a notice to that person—

(a)requiring the person to show cause why that name should be reserved or continue to be reserved, or why the reservation should be transferred;

(b)refusing to extend a name reservation upon its expiry;

(c)refusing to transfer a reserved name; or

(d)cancelling a name reservation.

(7)If, as a result of a pattern of conduct by a person, or two or more persons who are related or inter-related, the Commission has reasonable grounds to believe that the person or persons have abused the name reservation system by—

(a)selling access to names, or trading in or marketing reserved names; or

(b)repeatedly attempting to reserve names for the purpose of selling access to names, or trading in or marketing reserved names,

the Commission may apply to a court for an order prohibiting the person or persons from applying to reserve any names in terms of this section for a period that the court considers just and reasonable in the circumstances.

(8)In considering whether a person has abused, or may be attempting to abuse, the name reservation system as contemplated in subsection (6) or (7), the Commission may consider any relevant conduct by that person or any related or inter-related person, including—

(a)the reservation of more than one name in a single application or a series of applications;

(b)a pattern of repetitious applications to reserve a particular name or a number of substantially similar names, or to extend the reservation of a particular name;

(c)a failure to show good cause for a reservation period to be extended; or

(d)a pattern of unusually frequent transfers of reserved names without apparent legitimate cause having regard to the nature of the person’s profession or business.

(9)Any person may on application on the prescribed form and on payment of the prescribed fee apply to the Commission to—

(a)register any name as a defensive name for a period of two years; or

(b)renew, for a period of two years, the registration of a name as a defensive name,

in respect of which he or she has furnished proof, to the satisfaction of the Commission, that he or she has a direct and material interest.

Part B – Incorporation and legal status of companies

13. Right to incorporate company

(1)One or more persons may incorporate a profit company, or three or more persons may incorporate a non-profit company, by—

(a)completing, and each signing in person or by proxy, a Memorandum of Incorporation—

(i)in the prescribed form; or

(ii)in a form unique to the company; and

(b)filing a Notice of Incorporation, in accordance with subsection (2).

(2)The Notice of Incorporation of a company must be—

(a)filed together with the prescribed fee; and

(b)accompanied by a copy of the Memorandum of Incorporation, subject to any declaration contemplated in section 6(14)(b).

(3)If a company’s Memorandum of Incorporation includes any provision contemplated in section 15(2)(b) or (c), the Notice of Incorporation filed by the company must include a prominent statement drawing attention to each such provision, and its location in the Memorandum of Incorporation.

(4)The Commission—

(a)may reject a Notice of Incorporation if the notice, or any thing required to be filed with it, is incomplete, or improperly completed in any respect, subject to section 6(8); and

(b)must reject a Notice of Incorporation if—

(i)the initial directors of the company, as set out in the Notice, are fewer than required by or in terms of section 66(2); or

(ii)the Commission reasonably believes that any of the initial directors of the company, as set out in the Notice, are disqualified in terms of section 69(8), and the remaining directors are fewer than required by or in terms of section 66(2).

14. Registration of company

(1)As soon as practicable after accepting a filed Notice of Incorporation in terms of section 13, the Commission must—

(a)assign to the company a unique registration number; and

(b)subject to subsection (2)—

(i)enter the prescribed information concerning the company in the companies register;

(ii)endorse the Notice of Incorporation, and, if applicable, the copy of the Memorandum of Incorporation filed with it, in the prescribed manner; and

(iii)issue and deliver to the company a registration certificate in the prescribed manner and form, dated as of the later of—

(aa)the date on, and time at, which the Commission issued the certificate; or

(bb)the date, if any, stated by the incorporators in the Notice of Incorporation.

(2)If the name of a company, as entered on the Notice of Incorporation—

(a)fails to satisfy the requirements of section 11(3), the Commission, in taking the steps required by subsection (1)(b), may alter the name by inserting or substituting the appropriate expressions as required by section 11(3); or

(b)is the same as the name of another company, close corporation or co-operative, or is reserved in terms of section 12 for a person other than one of the incorporators, the Commission—

(i)must take the steps set out in subsection (1)(b), using the company’s registration number, followed by "Inc.", "(Pty) Ltd", "Ltd.", "SOC", or "NPC", as appropriate, as the interim name of the company in the companies register and on the registration certificate;

(ii)must invite the company to file an amended Notice of Incorporation using a satisfactory name; and

(iii)when the company files such an amended Notice of Incorporation, must—

(aa)enter the company’s amended name in the companies register; and

(bb)issue and deliver to the company an amended registration certificate showing the amended name of the company.

(3)If, upon registering a company in terms of subsection (2), there are reasonable grounds for considering that the company’s name may be inconsistent with the requirements of—

(a)section 11(2)(a) or (b)—

(ii)any person contemplated in subparagraph (i) may apply to the Companies Tribunal for a determination and order in terms of section 160; or

(b)section 11(2)(c)—

(i)the Commission may refer the application and name reservation to the South African Human Rights Commission; and

(ii)the South African Human Rights Commission may apply to the Companies Tribunal for a determination and order in terms of section 160.

(4)A registration certificate issued in terms of subsection (1) is conclusive evidence that—

(a)all the requirements for the incorporation of the company have been complied with; and

(b)the company is incorporated under this Act as from the date, and the time, if any, stated in the certificate.

15. Memorandum of Incorporation, shareholder agreements and rules of company

(1)Each provision of a company’s Memorandum of Incorporation—

(a)must be consistent with this Act; and

(b)is void to the extent that it contravenes, or is inconsistent with, this Act.

(2)The Memorandum of Incorporation of any company may—

(a)include any provision—

(i)dealing with a matter that this Act does not address; or

(ii)altering the effect of any alterable provision of this Act;

(b)contain any special conditions applicable to the company, and any requirement for the amendment of any such condition in addition to the requirements set out in section 16; or

(c)prohibit the amendment of any particular provision of the Memorandum of Incorporation.

(3)Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the board of the company may make, amend or repeal any necessary or incidental rules relating to the governance of the company in respect of matters that are not addressed in this Act or the Memorandum of Incorporation, by—

(a)publishing a copy of those rules, in any manner required or permitted by the Memorandum of Incorporation, or the rules of the company; and

(b)filing a copy of those rules.

(4)A rule contemplated in subsection (3)—

(a)must be consistent with this Act and the company’s Memorandum of Incorporation, and any such rule that is inconsistent with this Act or the company’s Memorandum of Incorporation is void to the extent of the inconsistency;

(b)takes effect on a date that is the later of—

(i)20 business days after the rule is published in terms of subsection (3)(a); or

(ii)the date, if any, specified in the rule; and

(c)is binding—

(i)on an interim basis from the time it takes effect until it is put to a vote at the next general shareholders meeting of the company; and

(ii)on a permanent basis only if it has been ratified by an ordinary resolution at the meeting contemplated in subparagraph (i).

(5)If a rule that has been published in terms of subsection (3) is not subsequently ratified as contemplated in subsection (4)(c), the company’s board may not make a substantially similar rule within the ensuing 12 months, unless it has been approved in advance by ordinary resolution at a shareholders meeting.

(6)A company’s Memorandum of Incorporation, and any rules of the company, are binding—

(a)between the company and each shareholder;

(b)between or among the shareholders of the company; and

(c)between the company and—

(i)each director or prescribed officer of the company; or

(ii)any other person serving the company as a member of the audit committee or as a member of a committee of the board,

in the exercise of their respective functions within the company.

(7)The shareholders of a company may enter into any agreement with one another concerning any matter relating to the company, but any such agreement must be consistent with this Act and the company’s Memorandum of Incorporation, and any provision of such an agreement that is inconsistent with this Act or the company’s Memorandum of Incorporation is void to the extent of the inconsistency.

16. Amending Memorandum of Incorporation

(1)A company’s Memorandum of Incorporation may be amended—

(a)in compliance with a court order in the manner contemplated in subsection (4);

(b)in the manner contemplated in section 36(3) and (4); or

(c)at any other time if a special resolution to amend it—

(i)is proposed by—

(aa)the board of the company; or

(bb)shareholders entitled to exercise at least 10% of the voting rights that may be exercised on such a resolution; and

(ii)is adopted at a shareholders meeting, or in accordance with section 60, subject to subsection (3).

(2)A company’s Memorandum of Incorporation may provide different requirements than those set out in subsection (1)(c)(i) with respect to proposals for amendments.

(3)Despite subsection (1)(c)(ii), if a non-profit company has no voting members—

(a)the board of that company may amend its Memorandum of Incorporation in the manner contemplated in subsection (1)(c)(i)(aa); and

(b)the requirements of subsection (1)(c)(ii) do not apply to the company.

(4)An amendment to a company’s Memorandum of Incorporation required by any court order—

(a)must be effected by a resolution of the company’s board; and

(b)does not require a special resolution as contemplated in subsection (1)(c)(ii).

(5)An amendment contemplated in subsection (1)(c) may take the form of—

(a)a new Memorandum of Incorporation in substitution for the existing Memorandum; or

(b)one or more alterations to the existing Memorandum of Incorporation by—

(i)changing the name of the company;

(ii)deleting, altering or replacing any of its provisions;

(iii)inserting any new provisions into the Memorandum of Incorporation; or

(iv)making any combination of alterations contemplated in this paragraph.

(6)If a profit company amends its Memorandum of Incorporation in such a manner that it no longer meets the criteria for its particular category of profit company, the company must also amend its name at the same time by altering the ending expression as appropriate to reflect the category of profit company into which it now falls.

(7)Within the prescribed time after amending its Memorandum of Incorporation, a company must file a Notice of Amendment together with the prescribed fee, and—

(a)the provisions of section 13(3) and (4)(a) and section 14, each read with the changes required by the context, apply to the filing of the Notice of Amendment; and

(b)if the amendment to a company’s Memorandum of Incorporation—

(i)has substituted a new Memorandum, as contemplated in subsection (5)(a), the provisions of section 13(2)(b), read with the changes required by the context, apply to the filing of the Notice of Amendment; or

(ii)has altered the existing Memorandum, as contemplated in subsection (5)(b)—

(aa)the company must include a copy of the amendment with the Notice of Amendment; and

(bb)the Commission may require the company to file a full copy of its amended Memorandum of Incorporation within a reasonable time.

(8)If a company’s amendment to its Memorandum of Incorporation includes a change of the company’s name—

(a)the provisions of section 14(2) and (3), read with the changes required by the context, apply afresh to the company; and

(b)if the amended name of the company—

(i)is reserved in terms of section 12 for that company, the Commission must—

(aa)issue to the company an amended registration certificate; and

(bb)alter the name of the company on the companies register; or

(ii)is not reserved in terms of section 12 for that company, the Commission must take the steps set out in subparagraph (i), unless the name is—

(aa)the registered name of another company, registered external company, close corporation or co-operative; or

(bb)reserved in terms of section 12 for another person.

(9)An amendment to a company’s Memorandum of Incorporation takes effect from the later of—

(a)the date on, and time at, which the Commission accepts the filing of the Notice of Amendment; or

(b)the date, if any, set out in the Notice of Amendment.

17. Alterations, translations and consolidations of Memorandum of Incorporation

(1)The board of a company, or an individual authorised by the board, may alter the company’s rules, or its Memorandum of Incorporation, in any manner necessary to correct a patent error in spelling, punctuation, reference, grammar or similar defect on the face of the document, by—

(a)publishing a notice of the alteration, in any manner required or permitted by the Memorandum of Incorporation or the rules of the company; and

(b)filing a notice of the alteration.

(2)The Commission, or a director or shareholder of a company, may apply to the Companies Tribunal for an administrative order setting aside the notice of an alteration published in terms of subsection (1), only on the grounds that the alteration exceeds the authority to correct a patent error or defect, as contemplated in that subsection.

(3)At any time, a company that has filed its Memorandum of Incorporation may file one or more translations of it, in any official language or languages of the Republic.

(4)A translation of a company’s Memorandum of Incorporation must be accompanied by a sworn statement by the person who made the translation, stating that it is a true, accurate and complete translation of the Memorandum of Incorporation.

(5)At any time after a company has filed its Memorandum of Incorporation, and subsequently filed one or more alterations or amendments to it—

(a)the company may file a consolidated revision of its Memorandum of Incorporation, as so altered or amended; or

(b)the Commission may require the company to file a consolidated revision of its Memorandum of Incorporation, as so altered or amended.

(6)A consolidated revision of a company’s Memorandum of Incorporation must be accompanied by—

(a)a sworn statement by a director of the company; or

(b)a statement by an attorney or notary public,

stating that the consolidated revision is a true, accurate and complete representation of the company’s Memorandum of Incorporation, as altered and amended up to the date of the statement.

18. Authenticity of versions of Memorandum of Incorporation

(1)The Memorandum of Incorporation of a company, as altered or amended, prevails in any case of a conflict between it and—

(a)a translation filed in terms of section 17(3); or

(b)a consolidated revision filed in terms of section 17(5), unless the consolidated revision has subsequently been ratified by a special resolution at a general shareholders meeting of the company.

(2)The latest version of a company’s Memorandum of Incorporation that has been endorsed by the Commission in terms of this Part prevails in the case of any conflict between it and any other purported version of the company’s Memorandum of Incorporation.

19. Legal status of companies

(1)From the date and time that the incorporation of a company is registered, as stated in its registration certificate, the company—

(a)is a juristic person, which exists continuously until its name is removed from the companies register in accordance with this Act;

(b)has all of the legal powers and capacity of an individual, except to the extent that—

(i)a juristic person is incapable of exercising any such power, or having any such capacity; or

(ii)the company’s Memorandum of Incorporation provides otherwise;

(c)is constituted in accordance with—

(i)the unalterable provisions of this Act;

(ii)the alterable provisions of this Act, subject to any negation, restriction, limitation, qualification, extension or other alteration that is contemplated in an alterable provision, and has been noted in the company’s Memorandum of Incorporation; and

(iii)any further provisions of the company’s Memorandum of Incorporation.

(2)A person is not, solely by reason of being an incorporator, shareholder or director of a company, liable for any liabilities or obligations of the company, except to the extent that this Act or the company’s Memorandum of Incorporation provides otherwise.

(3)If a company is a personal liability company the directors and past directors are jointly and severally liable, together with the company, for any debts and liabilities of the company as are or were contracted during their respective periods of office.

(4)Subject to subsection (5), a person must not be regarded as having received notice or knowledge of the contents of any document relating to a company merely because the document—

(a)has been filed; or

(b)is accessible for inspection at an office of the company.

(5)A person must be regarded as having received notice and knowledge of—

(a)any provision of a company’s Memorandum of Incorporation contemplated in section 15(2)(b) if the company’s Notice of Incorporation or a Notice of Amendment has drawn attention to the provision, as contemplated in section 13(3); or

(b)the effect of subsection (3) on a personal liability company.

(6)If a company has amended its Memorandum of Incorporation, the Memorandum of Incorporation as previously adopted by the company has no force or effect with respect to any right, cause of action or matter occurring or arising after the date on which the amendment took effect.

(7)After a company has changed its name, any legal proceedings that might have been commenced or continued by or against the company under its former name may be commenced or continued by or against it under its new name.

20. Validity of company actions

(1)If a company’s Memorandum of Incorporation limits, restricts or qualifies the purposes, powers or activities of that company, as contemplated in section 19(1)(b)(ii)—

(a)no action of the company is void by reason only that—

(i)the action was prohibited by that limitation, restriction or qualification; or

(ii)as a consequence of that limitation, restriction or qualification, the directors had no authority to authorise the action by the company; and

(b)in any legal proceeding, other than proceedings between—

(i)the company and its shareholders, directors or prescribed officers; or

(ii)the shareholders and directors or prescribed officers of the company,

no person may rely on such limitation, restriction or qualification to assert that an action contemplated in paragraph (a) is void.

(2)If a company’s Memorandum of Incorporation limits, restricts or qualifies the purposes, powers or activities of that company, or limits the authority of the directors to perform an act on behalf of the company, the shareholders, by special resolution, may ratify any action by the company or the directors that is inconsistent with any such limit, restriction or qualification, subject to subsection (3).

(3)An action contemplated in subsection (2) may not be ratified if it is in contravention of this Act.

(4)One or more shareholders, directors or prescribed officers of a company, or a trade union representing employees of the company, may take proceedings to restrain the company from doing anything inconsistent with this Act.

(5)One or more shareholders, directors or prescribed officers of a company may take proceedings to restrain the company or the directors from doing anything inconsistent with any limitation, restriction or qualification contemplated in subsection (2), but any such proceedings are without prejudice to any rights to damages of a third party who—

(a)obtained those rights in good faith; and

(b)did not have actual knowledge of the limit, restriction or qualification.

(6)Each shareholder of a company has a claim for damages against any person who fraudulently or due to gross negligence causes the company to do anything inconsistent with—

(a)this Act; or

(b)a limitation, restriction or qualification contemplated in this section, unless that action has been ratified by the shareholders in terms of subsection (2).

(7)A person dealing with a company in good faith, other than a director, prescribed officer or shareholder of the company, is entitled to presume that the company, in making any decision in the exercise of its powers, has complied with all of the formal and procedural requirements in terms of this Act, its Memorandum of Incorporation and any rules of the company unless, in the circumstances, the person knew or reasonably ought to have known of any failure by the company to comply with any such requirement.

(8)Subsection (7) must be construed concurrently with, and not in substitution for, any relevant common law principle relating to the presumed validity of the actions of a company in the exercise of its powers.

21. Pre-incorporation contracts

(1)A person may enter into a written agreement in the name of, or purport to act in the name of, or on behalf of, an entity that is contemplated to be incorporated in terms of this Act, but does not yet exist at the time.

(2)A person who does anything contemplated in subsection (1) is jointly and severally liable with any other such person for liabilities created as provided for in the pre-incorporation contract while so acting, if—

(a)the contemplated entity is not subsequently incorporated; or

(b)after being incorporated, the company rejects any part of such an agreement or action.

(3)If, after its incorporation, a company enters into an agreement on the same terms as, or in substitution for, an agreement contemplated in subsection (1), the liability of a person under subsection (2) in respect of the substituted agreement is discharged.

(4)Within three months after the date on which a company was incorporated the board of that company may completely, partially or conditionally ratify or reject any pre-incorporation contract or other action purported to have been made or done in its name or on its behalf, as contemplated in subsection (1).

(5)If, within three months after the date on which a company was incorporated, the board has neither ratified nor rejected a particular pre-incorporation contract, or other action purported to have been made or done in the name of the company, or on its behalf, as contemplated in subsection (1), the company will be regarded to have ratified that agreement or action.

(6)To the extent that a pre-incorporation contract or action has been ratified or regarded to have been ratified in terms of subsection (5)—

(a)the agreement is as enforceable against the company as if the company had been a party to the agreement when it was made; and

(b)the liability of a person under subsection (2) in respect of the ratified agreement or action is discharged.

(7)If a company rejects an agreement or action contemplated in subsection (1), a person who bears any liability in terms of subsection (2) for that rejected agreement or action may assert a claim against the company for any benefit it has received, or is entitled to receive, in terms of the agreement or action.

22. Reckless trading prohibited

(1)A company must not—

(a)carry on its business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose; or

(b)trade under insolvent circumstances.

(2)If the Commission has reasonable grounds to believe that a company is engaging in conduct prohibited by subsection (1), the Commission may issue a notice to the company to show cause why the company should be permitted to continue carrying on its business, or to trade, as the case may be.

(3)If a company to whom a notice has been issued in terms of subsection (2) fails within 20 business days to satisfy the Commission that it is not engaging in conduct prohibited by subsection (1), the Commission may issue a compliance notice to the company requiring it to cease carrying on its business or trading, as the case may be.

Part C – Transparency, accountability and integrity of companies

23. Registration of external companies and registered office

(1)An external company must register with the Commission within 20 business days after it first begins to conduct business, or non-profit activities, as the case may be, within the Republic—

(a)as an external non-profit company if, within the jurisdiction in which it was incorporated, it meets legislative or definitional requirements that are comparable to the legislative or definitional requirements of a non-profit company incorporated under this Act; or

(b)as an external profit company, if, within the jurisdiction in which it was incorporated, it meets legislative or definitional requirements that are comparable to the legislative or definitional requirements of a profit company incorporated under this Act.

(2)For the purposes of subsection (1), and the definition of "external company" as set out in section 1, a foreign company is not to be regarded as "conducting business, or non-profit activities, as the case may be, within the Republic", unless that foreign company is engaged in, or has engaged in, one or more of the following activities within the Republic:

(a)Holding a meeting or meetings of the shareholders or board of the foreign company, or otherwise conducting the internal affairs of the company;

(b)establishing or maintaining any bank or other financial accounts;

(c)establishing or maintaining offices or agencies for the transfer, exchange or registration of the foreign company’s own securities;

(d)creating or acquiring any debts, mortgages or security interests in any property;

(e)securing or collecting any debt, or enforcing any mortgage or security interest.

(f)acquiring any interest in any property; and

(g)entering into contracts of employment.

(3)Each company or external company must—

(a)continuously maintain at least one office in the Republic; and

(b)register the address of its office, or its principal office if it has more than one office—

(i)initially in the case of—

(aa)a company, by providing the required information on its Notice of Incorporation; or

(bb)an external company, by providing the required information when filing its registration in terms of subsection (1); and

(ii)subsequently, by filing a notice of change of registered office, together with the prescribed fee.

(4)A change contemplated in subsection (2)(b)(ii) takes effect as from the later of—

(a)the date, if any, stated in the notice; or

(b)five business days after the date on which the notice was filed.

(5)The Commission must—

(a)assign a unique registration number to each external company that has registered in accordance with subsection (1);

(b)maintain a register of external companies;

(c)enter the prescribed information concerning each external company in the register; and

(d)in the case of an external company whose name is a foreign registration number but does not indicate the name of the foreign jurisdiction in which it was incorporated, append to its name on the registry the name of that jurisdiction in a manner comparable to that required for a company under section 11(3)(a).

(6)If an external company has failed to register in terms of subsection (1) within 12 months after commencing its activities within the Republic, the Commission may issue a compliance notice to that external company requiring it to—

(a)register as required by subsection (1) within 20 business days after receiving the notice; or

(b)if it fails to register within the time allowed in paragraph (a), to cease carrying on its business or activities within the Republic.

24. Form and standards for company records

(1)Any documents, accounts, books, writing, records or other information that a company is required to keep in terms of this Act or any other public regulation must be kept—

(a)in written form, or other form or manner that allows that information to be converted into written form within a reasonable time; and

(b)for a period of seven years, or any longer period of time specified in any other applicable public regulation, subject to subsection (2).

(2)If a company has existed for a shorter time than contemplated in subsection (1)(b), the company is required to retain records for that shorter time.

(3)Every company must maintain—

(a)a copy of its Memorandum of Incorporation, and any amendments or alterations to it, and any rules of the company made in terms of section 15(3) to (5);

(b)a record of its directors, including—

(i)details of any person who has served as a director of the company, for a period of seven years after the person ceases to serve as a director; and

(ii)the information required by or in terms of subsection (5);

(c)copies of all—

(i)reports presented at an annual general meeting of the company, for a period of seven years after the date of any such meeting;

(ii)annual financial statements required by this Act, for seven years after the date on which each such particular statements were issued; and

(iii)accounting records required by this Act, for the current financial year and for the previous seven completed financial years of the company;

(d)notice and minutes of all shareholders meetings, including—

(i)all resolutions adopted by them, for seven years after the date each such resolution was adopted; and

(ii)any document that was made available by the company to the holders of securities in relation to each such resolution;

(e)copies of any written communications sent generally by the company to all holders of any class of the company’s securities, for a period of seven years after the date on which each such communication was issued; and

(f)minutes of all meetings and resolutions of directors, or directors’ committees, or the audit committee, if any, for a period of seven years after the date—

(i)of each such meeting; or

(ii)on which each such resolution was adopted.

(4)In addition to the requirements of subsection (3), every profit company must maintain—

(a)a securities register or its equivalent, as required by section 50; and

(b)the records required in terms of section 85, if that section applies to the company.

(5)A company’s record of directors must include, in respect of each director, that person’s—

(a)full name, and any former names;

(b)identity number or, if the person does not have an identity number, the person’s date of birth;

(c)nationality and passport number, if the person is not a South African;

(d)occupation;

(e)date of their most recent election or appointment as director of the company;

(f)name and registration number of every other company or foreign company of which the person is a director, and in the case of a foreign company, the nationality of that company; and

(g)any other prescribed information.

(6)To protect personal privacy, the Minister, by notice in the Gazette, may exempt from the application of subsection (5)(a) categories of names as formerly used by any person—

(a)before attaining majority, or by persons who have been adopted, married, divorced or widowed; or

(b)in other circumstances prescribed by the Minister.

25. Location of company records

(1)The records referred to in section 24 must be accessible at or from the company’s registered office or another location, or other locations, within the Republic.

(2)A company must file a notice, setting out the location or locations at which any particular records referred to in section 24 are kept or from which they are accessible if those records—

(a)are not kept at or made accessible from the company’s registered office, as contemplated in subsection (1); or

(b)are moved from one location to another.

26. Access to company records

(1)A person who holds or has a beneficial interest in any securities issued by a company—

(a)has a right to inspect and copy the information contained in the records of the company—

(i)mentioned in section 24(3)(a), (b), (c)(i) and (ii), (d) and (e); or

(ii)contemplated in section 24(4)(a) or (b);

(b)has a right to any other information to the extent granted by the Memorandum of Incorporation, as contemplated in subsection (2); and

(c)may exercise the rights set out in paragraph (a) or (b)—

(i)by direct request made to the company in the prescribed manner, either in person or through an attorney or other personal representative designated in writing; or

(ii)in accordance with the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000).

(2)In addition to the information rights set out in subsection (1)(a), the Memorandum of Incorporation of a company may establish additional information rights of any person, with respect to any information pertaining to the company, but no such right may negate or diminish any mandatory protection of any record, as set out in Part 3 of the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000).

(3)The register of members and register of directors of a company, must, during business hours for reasonable periods be open to inspection by any member, free of charge and by any other person, upon payment for each inspection of an amount not more than R100,00.

(4)The rights of access to information set out in this section are in addition to, and not in substitution for, any rights a person may have to access information in terms of—

(a)section 32 of the Constitution;

(b)the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000); or

(c)any other public regulation.

(5)The Minister may make regulations respecting the exercise of the rights set out in this section.

(6)It is an offence for a company to—

(a)fail to accommodate any reasonable request for access, or to unreasonably refuse access, to any record that a person has a right to inspect or copy in terms of this section; or

(b)to otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person of the rights set out in this section.

27. Financial year of company

(1)A company must have a financial year, ending on a date set out in the company’s Notice of Incorporation, subject to any change made in terms of subsection (4).

(2)The first financial year of a company—

(a)begins on the date that the incorporation of the company is registered, as stated in its registration certificate; and

(b)ends on the date set out in the Notice of Incorporation, which may not be more than 15 months after the date contemplated in paragraph (a).

(3)The second and each subsequent financial year of a company—

(a)begins when the preceding financial year ends; and

(b)ends on the first anniversary of the date contemplated in paragraph (a), unless the financial year end has been changed as contemplated in subsection (4).

(4)The board of a company may change its financial year end at any time, by filing a notice of that change, but—

(a)it may not do so more than once during any financial year;

(b)the newly established financial year end must be later than the date on which the notice is filed; and

(c)the date as changed may not result in a financial year ending more than 15 months after the end of the preceding financial year.

(5)Despite subsection (2)(b) or (3), the financial year of a company that has changed the date contemplated in subsection (1) ends on the date as changed.

(6)If, in a particular year, the financial year of a company ends on a Saturday, Sunday or public holiday, that financial year will be regarded to have ended on the next following business day.

(7)The financial year of the company is its annual accounting period.

28. Accounting records

(1)A company must keep accurate and complete accounting records in one of the official languages of the Republic—

(a)as necessary to enable the company to satisfy its obligations in terms of this Act or any other law with respect to the preparation of financial statements; and

(b)including any prescribed accounting records, which must be kept in the prescribed manner and form.

(2)A company’s accounting records must be kept at, or be accessible from, the registered office of the company.

(3)It is an offence for—

(a)a company—

(i)with an intention to deceive or mislead any person—

(aa)to fail to keep accurate or complete accounting records;

(bb)to keep records other than in the prescribed manner and form, if any; or

(ii)to falsify any of its accounting records, or permit any person to do so; or

(b)any person to falsify a company’s accounting records.

(4)For greater certainty, the Commission may issue a compliance notice, as contemplated in section 171, to a company in respect of any failure by the company to comply with the requirements of this section, irrespective whether that failure constitutes an offence in terms of subsection (3).

29. Financial statements

(1)If a company provides any financial statements, including any annual financial statements, to any person for any reason, those statements must—

(a)satisfy the financial reporting standards as to form and content, if any such standards are prescribed;

(b)present fairly the state of affairs and business of the company, and explain the transactions and financial position of the business of the company;

(c)show the company’s assets, liabilities and equity, as well as its income and expenses, and any other prescribed information;

(d)set out the date on which the statements were produced, and the accounting period to which the statements apply; and

(e)bear, on the first page of the statements, a prominent notice indicating—

(i)whether the statements—

(aa)have been audited in compliance with any applicable requirements of this Act;

(bb)if not audited, have been independently reviewed in compliance with any applicable requirements of this Act; or

(cc)have not been audited or independently reviewed; and

(ii)the name, and professional designation, if any, of the individual who prepared, or supervised the preparation of, those statements.

(2)Any financial statements prepared by a company, including any annual financial statements of a company as contemplated in section 30, must not be—

(a)false or misleading in any material respect; or

(b)incomplete in any material particular, subject only to subsection (3).

(3)A company may provide any person with a summary of any particular financial statements, but—

(a)any such summary must comply with any prescribed requirements; and

(b)the first page of the summary must bear a prominent notice—

(i)stating that it is a summary of particular financial statements prepared by the company, and setting out the date of those statements;

(ii)stating whether the financial statements that it summarises have been audited, independently reviewed, or are unaudited, as contemplated in subsection (1)(e);

(iii)stating the name, and professional designation, if any, of the individual who prepared, or supervised the preparation of, the financial statements that it summarises; and

(iv)setting out the steps required to obtain a copy of the financial statements that it summarises.

(4)Subject to subsection (5), the Minister, after consulting the Council, may make regulations prescribing—

(a)financial reporting standards contemplated in this Part; or

(b)form and content requirements for summaries contemplated in subsection (3).

(5)Any regulations contemplated in subsection (4)—

(a)must promote sound and consistent accounting practices;

(b)in the case of financial reporting standards, must be consistent with the International Financial Reporting Standards of the International Accounting Standards Board or its successor body; and

(c)may establish different standards applicable to—

(i)profit and non-profit companies; and

(ii)different categories of profit companies.

(6)Subject to section 214(2), a person is guilty of an offence if the person is a party to the preparation, approval, dissemination or publication of—

(a)any financial statements, including any annual financial statements contemplated in section 30, knowing that those statements—

(i)do not comply with the requirements of subsection (1); or

(ii)are materially false or misleading, as contemplated in subsection (2); or

(b)a summary of any financial statements, knowing that—

(i)the statements that it summarises do not comply with the requirements of subsection (1), or are materially false or misleading, as contemplated in subsection (2); or

(ii)the summary does not comply with the requirements of subsection (3), or is materially false or misleading.

30. Annual financial statements

(1)Each year, a company must prepare annual financial statements within six months after the end of its financial year, or such shorter period as may be appropriate to provide the required notice of an annual general meeting in terms of section 61(7).

(2)The annual financial statements must—

(a)be audited, in the case of a public company; or

(b)in the case of any other company—

(i)be audited, if so required by the regulations made in terms of subsection (7) taking into account whether it is desirable in the public interest, having regard to the economic or social significance of the company, as indicated by—

(aa)its annual turnover;

(bb)the size of its workforce; or

(cc)the nature and extent of its activities; or

(ii)be either—

(aa)audited voluntarily at the option of the company; or

(bb)independently reviewed in a manner that satisfies the regulations made in terms of subsection (7) unless exempted if it is a private company and—

(AA)one person holds, or has all of the beneficial interest in, all of the securities issued by the company; or

(BB)every person who is a holder of, or has a beneficial interest in, any securities issued by the company is also a director of the company unless the company has only one director, and that director is a person contemplated in section 69(12).

(3)The annual financial statements of a company must—

(a)include an auditor’s report, if the statements are audited;

(b)include a report by the directors with respect to the state of affairs, the business and profit or loss of the company, or of the group of companies, if the company is part of a group, including—

(i)any matter material for the shareholders to appreciate the company’s state of affairs; and

(ii)any prescribed information;

(c)be approved by the board and signed by an authorised director; and

(d)be presented to the first shareholders meeting after the statements have been approved by the board.

(4)The annual financial statements of each company that is required in terms of this Act to have its annual financial statements audited, must include particulars showing—

(a)the remuneration, as defined in subsection (6), and benefits received by each director, or individual holding any prescribed office in the company;

(b)the amount of—

(i)any pensions paid by the company to or receivable by current or past directors or individuals who hold or have held any prescribed office in the company;

(ii)any amount paid or payable by the company to a pension scheme with respect to current or past directors or individuals who hold or have held any prescribed office in the company;

(c)the amount of any compensation paid in respect of loss of office to current or past directors or individuals who hold or have held any prescribed office in the company;

(d)the number and class of any securities issued to a director or person holding any prescribed office in the company, or to any person related to any of them, and the consideration received by the company for those securities; and

(e)details of service contracts of current directors and individuals who hold any prescribed office in the company.

(5)The information to be disclosed under subsection (4) must satisfy the prescribed standards, and must show the amount of any remuneration or benefits paid to or receivable by persons in respect of—

(a)services rendered as directors or prescribed officers of the company; or

(b)services rendered while being directors or prescribed officers of the company—

(i)as directors or prescribed officers of any other company within the same group of companies; or

(ii)otherwise in connection with the carrying on of the affairs of the company or any other company within the same group of companies.

(6)For the purposes of subsections (4) and (5), ‘remuneration’ includes—

(a)fees paid to directors for services rendered by them to or on behalf of the company, including any amount paid to a person in respect of the person’s accepting the office of director;

(b)salary, bonuses and performance-related payments;

(c)expense allowances, to the extent that the director is not required to account for the allowance;

(d)contributions paid under any pension scheme not otherwise required to be disclosed in terms of subsection (4)(b);

(e)the value of any option or right given directly or indirectly to a director, past director or future director, or person related to any of them, as contemplated in section 42;

(f)financial assistance to a director, past director or future director, or person related to any of them, for the subscription of shares, as contemplated in section 44; and

(g)with respect to any loan or other financial assistance by the company to a director, past director or future director, or a person related to any of them, or any loan made by a third party to any such person, as contemplated in section 45, if the company is a guarantor of that loan, the value of—

(i)any interest deferred, waived or forgiven; or

(ii)the difference in value between—

(aa)the interest that would reasonably be charged in comparable circumstances at fair market rates in an arm’s length transaction; and

(bb)the interest actually charged to the borrower, if less.

(7)The Minister may make regulations, including different requirements for different categories of companies, prescribing—

(a)the categories of any private companies that are required to have their respective annual financial statements audited, as contemplated in subsection (2)(b)(i); and

(b)the manner, form and procedures for the conduct of an independent review other than an audit, as contemplated in subsection (2)(b)(ii)(bb), as well as the professional qualifications, if any, of persons who may conduct such reviews.

31. Access to financial statements or related information

(1)In addition to the rights set out in section 26, a person who holds or has a beneficial interest in any securities issued by a company, is entitled—

(a)without demand to receive a notice of the publication of any annual financial statements of the company required by this Act, setting out the steps required to obtain a copy of those statements; and

(b)on demand to receive without charge one copy of any annual financial statements of the company required by this Act.

(2)If a judgment creditor of a company has been informed, by a person whose duty it is to execute the judgment, that there appears to be insufficient disposable property to satisfy that judgment, the judgement creditor is entitled within five business days after making a demand, to receive without charge, one copy of the most recent annual financial statements of the company.

(3)Trade unions must, through the Commission and under conditions as determined by the Commission, be given access to company financial statements for purposes of initiating a business rescue process.

32. Use of company name and registration number

(1)A company or external company must—

(a)provide its full registered name or registration number to any person on demand; and

(b)not misstate its name or registration number in a manner likely to mislead or deceive any person.

(2)If the Commission has issued to a company a registration certificate with an interim name, as contemplated in section 14(2)(b), the company must use its interim name, until its name has been amended.

(3)A person must not—

(a)use the name or registration number of a company in a manner likely to convey an impression that the person is acting or communicating on behalf of that company, unless the company has authorised that person to do so; or

(b)use a form of name for any purpose if, in the circumstances, the use of that form of name is likely to convey a false impression that the name is the name of a company.

(4)Every company must have its name and registration number mentioned in legible characters in all notices and other official publications of the company, including such notices and publications in electronic format as contemplated in the Electronic Communications and Transactions Act, and in all bills of exchange, promissory notes, cheques and orders for money or goods and in all letters, delivery notes, invoices, receipts and letters of credit of the company.

(5)Contravention of subsection (1), (2), (3) or (4) is an offence.

(6)A company, or incorporator, shareholder or director of a company, or a person acting with the authority or on behalf of the company, must not, by any act or omission, misrepresent to any person, in any way or to any degree, the true legal status of the company.

(7)Despite section 19(2), if a person contravenes subsection (6), a court, on application by any person affected by that failure, may impose personal liability on any shareholder, director or incorporator of the company for any liability or obligation of the company, to the extent that the court determines to be just and equitable in the circumstances.

33. Annual return

(1)Every company must file an annual return in the prescribed form with the prescribed fee, and within the prescribed period after the end of the anniversary of the date of its incorporation, including in that return—

(a)a copy of its annual financial statements, if it is required to have such statements audited in terms of section 30(2)(a); and

(b)any other prescribed information.

(2)Every external company must file an annual return in the prescribed form with the prescribed fee, and within the prescribed period after the anniversary of the date on which it was registered in terms of section 23(1).

(3)Each year, in its annual return filed in terms of subsection (1), every company must designate a director, employee or other person who is responsible for the company’s compliance with the requirements of this Part, and Chapter 3, if it applies to the company.

34. Additional accountability requirements for certain companies

(1)In addition to complying with the requirements of this Part, a public company or state-owned company must also comply with the extended accountability requirements set out in Chapter 3.

(2)A private company, personal liability company or non-profit company is not required to comply with the extended accountability requirements set out in Chapter 3, except to the extent that the company’s Memorandum of Incorporation provides otherwise.

Part D – Capitalisation of profit companies

35. Legal nature of company shares and requirement to have shareholders

(1)A share issued by a company is movable property, transferable in any manner provided for or recognised by this Act or other legislation.

(2)A share does not have a nominal or par value, subject to item 6 of Schedule 5.

(3)A company may not issue shares to itself.

(4)An authorised share of a company has no rights associated with it until it has been issued.

(5)Shares of a company that have been issued and subsequently—

(a)acquired by that company, as contemplated in section 48; or

(b)surrendered to that company in the exercise of appraisal rights in terms of section 164,

have the same status as shares that have been authorised but not issued.

(6)Despite the repeal of the Companies Act, 1973 (Act No. 61 of 1973), a share issued by a pre-existing company, and held by a shareholder immediately before the effective date, continues to have all of the rights associated with it immediately before the effective date, irrespective of whether those rights existed in terms of the company’s Memorandum of Incorporation, or in terms of that Act, subject only to—

(a)amendments to that company’s Memorandum of Incorporation after the effective date;

(b)the operation of subsection (5); and

(c)the regulations contemplated in item 6(3) of Schedule 5.

36. Authorisation for shares

(1)A company’s Memorandum of Incorporation—

(a)must set out the classes of shares, and the number of shares of each class, that the company is authorised to issue;

(b)must set out, with respect to each class of shares—

(i)a distinguishing designation for that class; and

(ii)the preferences, rights, limitations and other terms associated with that class, subject to paragraph (d);

(c)may authorise a stated number of unclassified shares, which are subject to classification by the board of the company in accordance with subsection (3)(c); and

(d)may set out a class of shares—

(i)without specifying the associated preferences, rights, limitations or other terms of that class;

(ii)for which the board of the company must determine the associated preferences, rights, limitations or other terms; and

(iii)which must not be issued until the board of the company has determined the associated preferences, rights, limitations or other terms, as contemplated in subparagraph (ii).

(2)The authorisation and classification of shares, the numbers of authorised shares of each class, and the preferences, rights, limitations and other terms associated with each class of shares, as set out in a company’s Memorandum of Incorporation, may be changed only by—

(a)an amendment of the Memorandum of Incorporation by special resolution of the shareholders; or

(b)the board of the company, in the manner contemplated in subsection (3), except to the extent that the Memorandum of Incorporation provides otherwise.

(3)Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the company’s board may—

(a)increase or decrease the number of authorised shares of any class of shares;

(b)reclassify any classified shares that have been authorised but not issued;

(c)classify any unclassified shares that have been authorised as contemplated in subsection (1)(c), but are not issued; or

(d)determine the preferences, rights, limitations or other terms of shares in a class contemplated in subsection (1)(d).

(4)If the board of a company acts pursuant to its authority contemplated in subsection (3), the company must file a Notice of Amendment of its Memorandum of Incorporation, setting out the changes effected by the board.

37. Preferences, rights, limitations and other share terms

(1)All of the shares of any particular class authorised by a company have preferences, rights, limitations and other terms that are identical to those of other shares of the same class, except to the extent that the company’s Memorandum of Incorporation provides otherwise.

(2)Each issued share of a company, regardless of its class, has associated with it one general voting right, except to the extent provided otherwise by—

(a)this Act; or

(b)the preferences, rights, limitations and other terms determined by or in terms of the company’s Memorandum of Incorporation in accordance with section 36.

(3)Despite anything to the contrary in a company’s Memorandum of Incorporation—

(a)every share issued by that company has associated with it an irrevocable right of the shareholder to vote on any proposal to amend the preferences, rights, limitations and other terms associated with that share; and

(b)if that company has established only one class of shares—

(i)those shares have a right to be voted on every matter that may be decided by shareholders of the company; and

(ii)the holders of that class of shares are entitled to receive the net assets of the company upon its liquidation.

(4)If a company’s Memorandum of Incorporation has established more than one class of shares the Memorandum of Incorporation, in setting out the preferences, rights, limitations and other terms of those classes of shares, must provide that—

(a)for each particular matter that may be submitted for a decision to shareholders of the company, at least one class of the company’s shares has voting rights that may be exercised on that matter; and

(b)the holders of at least one class of the company’s shares, irrespective of whether it is the same as any class contemplated in paragraph (a), are entitled to receive the net assets of the company upon its liquidation.

(5)Subject to any other law, a company’s Memorandum of Incorporation may establish, for any particular class of shares, preferences, rights, limitations or other terms that—

(a)confer special, conditional or limited voting rights;

(b)provide for shares of that class to be redeemable, subject to the requirements of sections 46 and 48, or convertible, as specified in the Memorandum of Incorporation—

(i)at the option of the company, the shareholder, or another person at any time, or upon the occurrence of any specified contingency;

(ii)for cash, indebtedness, securities or other property;

(iii)at prices and in amounts specified, or determined in accordance with a formula; or

(iv)subject to any other terms set out in the company’s Memorandum of Incorporation;

(c)entitle the shareholders to distributions calculated in any manner, including dividends that may be cumulative, non-cumulative, or partially cumulative, subject to the requirements of sections 46 and 47; or

(d)provide for shares of that class to have preference over any other class of shares with respect to distributions, or rights upon the final liquidation of the company.

(6)The Memorandum of Incorporation of a company may provide for preferences, rights, limitations or other terms of any class of shares of that company to vary in response to any objectively ascertainable external fact or facts.

(7)For the purpose of subsection (6)—

(a)"external fact or facts" includes the occurrence of any event, a variation in any fact, benchmark or other point of reference, a determination or action by the company, its board, or any other person, an agreement to which the company is a party, or any other document; and

(b)the manner in which a fact affects the preferences, rights, limitations or other terms of shares must be expressly determined by or in terms of the company’s Memorandum of Incorporation, in accordance with section 36.

(8)If the Memorandum of Incorporation of a company has been amended to materially and adversely alter the preferences, rights, limitations or other terms of a class of shares, any holder of those shares is entitled to seek relief in terms of section 164 if that shareholder—

(a)notified the company in advance of the intention to oppose the resolution to amend the Memorandum of Incorporation; and

(b)was present at the meeting, and voted against that resolution.

38. Issuing shares

(1)The board of a company may resolve to issue shares of the company at any time, but only within the classes, and to the extent, that the shares have been authorised by or in terms of the company’s Memorandum of Incorporation, in accordance with section 36.

(2)If a company issues shares—

(a)that have not been authorised in accordance with section 36; or

(b)in excess of the number of authorised shares of any particular class,

the issuance of those shares may be retroactively authorised in accordance with section 36.

(3)If a resolution seeking to retroactively authorise an issue of shares, as contemplated in subsection (2), is not adopted when it is put to a vote—

(a)the share issue is a nullity to the extent that it exceeds any authorisation;

(b)the company must return to any person the fair value of the consideration received by the company in respect of that share issue to the extent that it is nullified, together with interest in accordance with the Prescribed Rate of Interest Act, 1975 (Act No. 55 of 1975), from the date on which the consideration for the shares was received by the company, until the date on which the company complies with this paragraph;

(c)any certificate evidencing a share so issued and nullified, and any entry in a securities register in respect of such an issue, is void; and

(d)a director of the company is liable to the extent set out in section 77(3)(e)(i) if the director—

(i)was present at a meeting when the board approved the issue of any unauthorised shares, or participated in the making of such a decision in terms of section 74; and

(ii)failed to vote against the issue of those shares, despite knowing that the shares had not been authorised in accordance with section 36.

39. Subscription of shares

(1)This section—

(a)does not apply to a public company or state-owned company, except to the extent that the company’s Memorandum of Incorporation provides otherwise; and

(b)applies to a private company or personal liability company with respect to any issue of its shares, other than—

(i)shares issued—

(aa)in terms of options or conversion rights; or

(bb)as contemplated in section 40(5) to (7); or

(ii)capitalisation shares issued as contemplated in section 47.

(2)If a private company proposes to issue any shares, other than as contemplated in subsection (1)(b), each shareholder of that private company has a right, before any other person who is not a shareholder of that company, to be offered and, within a reasonable time to subscribe for, a percentage of the shares to be issued equal to the voting power of that shareholder’s general voting rights immediately before the offer was made.

(3)A private or personal liability company’s Memorandum of Incorporation may limit, negate, restrict or place conditions upon the right set out in subsection (2), with respect to any or all classes of shares of that company.

(4)Except to the extent that a private or personal liability company’s Memorandum of Incorporation provides otherwise—

(a)in exercising a right in terms of subsection (2), a shareholder may subscribe fewer shares than the shareholder would be entitled to subscribe under that subsection; and

(b)shares not subscribed by a shareholder within the reasonable time contemplated in subsection (2), may be offered to other persons to the extent permitted by the Memorandum of Incorporation.

40. Consideration for shares

(1)The board of a company may issue authorised shares only—

(a)for adequate consideration to the company, as determined by the board;

(b)in terms of conversion rights associated with previously issued securities of the company; or

(c)as a capitalisation share as contemplated in section 47.

(2)Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued.

(3)A determination by the board of a company in terms of subsection (2) as to the adequacy of consideration for any shares may not be challenged on any basis other than in terms of section 76, read with section 77(2).

(4)Subject to subsections (5) to (7), when a company has received the consideration approved by its board for the issuance of any shares—

(a)those shares are fully paid; and

(b)the company must issue those shares and cause the name of the holder to be entered on the company’s securities register in accordance with Part E of this Chapter.

(5)If the consideration for any shares that are issued or to be issued is in the form of an instrument that is not negotiable by the company at the time the shares are to be issued, or is in the form of an agreement for future services, future benefits or future payment by the subscribing party—

(a)the consideration for those shares is regarded as having been received by the company at any time only to the extent—

(i)that the instrument is negotiable by the company; or

(ii)that the subscribing party to the agreement has fulfilled its obligations in terms of the agreement; and

(b)upon receiving the instrument or entering into the agreement, the company must—

(i)issue the shares immediately; and

(ii)cause the issued shares to be transferred to a third party, to be held in trust and later transferred to the subscribing party in accordance with a trust agreement.

(6)Except to the extent that a trust agreement contemplated in subsection (5)(b) provides otherwise—

(a)voting rights, and appraisal rights set out in section 164, associated with shares that have been issued but are held in trust may not be exercised;

(b)any pre-emptive rights associated with shares that have been issued but are held in trust may be exercised only to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

(c)any distribution with respect to shares that have been issued but are held in trust—

(i)must be paid or credited by the company to the subscribing party to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement; and

(ii)may be credited against the remaining value at that time of any services still to be performed by the subscribing party, any future payment remaining due, or the benefits still to be received by the company; and

(d)shares that have been issued but are held in trust—

(i)may not be transferred by or at the direction of the subscribing party unless the company has expressly consented to the transfer in advance;

(ii)may be transferred to the subscribing party on a quarterly basis, to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

(iii)must be transferred to the subscribing party when the instrument has become negotiable by the company, or upon satisfaction of all of the subscribing party’s obligations in terms of the agreement; and

(iv)to the extent that the instrument is dishonoured after becoming negotiable, or that the subscribing party has failed to fulfil its obligations under the agreement, must be returned to the company and cancelled, on demand by the company.

(7)A company may not make a demand contemplated in subsection (6)(d)(iv) unless—

(a)a negotiable instrument is dishonoured after becoming negotiable by the company; or

(b)in the case of an agreement, the subscribing party has failed to fulfil any obligation in terms of the agreement for a period of at least 40 business days after the date on which the obligation was due to be fulfilled.

41. Shareholder approval for issuing shares in certain cases

(1)Subject to subsection (2), an issue of shares or securities convertible into shares, or a grant of options contemplated in section 42, or a grant of any other rights exercisable for securities, must be approved by a special resolution of the shareholders of a company, if the shares, securities, options or rights are issued to a—

(a)director, future director, prescribed officer, or future prescribed officer of the company;

(b)person related or inter-related to the company, or to a director or prescribed officer of the company; or

(c)nominee of a person contemplated in paragraph (a) or (b).

(2)Subsection (1) does not apply if the issue of shares, securities or rights is—

(a)under an agreement underwriting the shares, securities or rights;

(b)in the exercise of a pre-emptive right to be offered and to subscribe shares, as contemplated in section 39;

(c)in proportion to existing holdings, and on the same terms and conditions as have been offered to all the shareholders of the company or to all the shareholders of the class or classes of shares being issued;

(d)pursuant to an employee share scheme that satisfies the requirements of section 97; or

(e)pursuant to an offer to the public, as defined in section 95(1)(h), read with section 96.

(3)An issue of shares, securities convertible into shares, or rights exercisable for shares in a transaction, or a series of integrated transactions, requires approval of the shareholders by special resolution if the voting power of the class of shares that are issued or issuable as a result of the transaction or series of integrated transactions will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction or series of transactions.

(4)In subsection (3)—

(a)for purposes of determining the voting power of shares issued and issuable as a result of a transaction or series of integrated transactions, the voting power of shares is the greater of—

(i)the voting power of the shares to be issued; or

(ii)the voting power of the shares that would be issued after giving effect to the conversion of convertible shares and other securities and the exercise of rights to be issued;

(b)a series of transactions is integrated if—

(i)consummation of one transaction is made contingent on consummation of one or more of the other transactions; or

(ii)the transactions are entered into within a 12-month period, and involve the same parties, or related persons; and—

(aa)they involve the acquisition or disposal of an interest in one particular company or asset; or

(bb)taken together, they lead to substantial involvement in a business activity that did not previously form part of the company’s principal activity.

(5)A director of a company is liable to the extent set out in section 77(3)(e)(ii) if the director—

(a)was present at a meeting when the board approved the issue of any securities as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the issue of those securities, despite knowing that the issue of those securities was inconsistent with this section.

(6)In this section, ‘future director’ or ‘future prescribed officer’ does not include a person who becomes a director or prescribed officer of the company more than six months after acquiring a particular option or right.

42. Options for subscription of securities

(1)A company may issue options for the allotment or subscription of authorised shares or other securities of the company.

(2)The board of a company must determine the consideration or other benefit for which, and the terms upon which—

(a)any options are issued; and

(b)the related shares or other securities are to be issued.

(3)A decision by the board that the company may issue—

(a)any options, constitutes also the decision of the board to issue any authorised shares or other securities for which the options may be exercised; or

(b)any securities convertible into shares of any class, constitutes also the decision of the board to issue the authorised shares into which the securities may be converted.

(4)A director of a company is liable to the extent set out in section 77(3)(e)(iii) if the director—

(a)was present at a meeting when the board approved the granting of an option or a right as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the granting of the option or right, despite knowing that any shares—

(i)for which the options could be exercised; or

(ii)into which any securities could be converted, had not been authorised in terms of section 36.

43. Securities other than shares

(1)In this section—

(a)"debt instrument"—

(i)includes any securities other than the shares of a company, irrespective of whether or not issued in terms of a security document, such as a trust deed; but

(ii)does not include promissory notes and loans, whether constituting an encumbrance on the assets of the company or not; and

(b)"security document" includes any document by which a debt instrument is offered or proposed to be offered, embodying the terms and conditions of the debt instrument including, but not limited to, a trust deed or certificate.

(2)The board of a company—

(a)may authorise the company to issue a secured or unsecured debt instrument at any time, except to the extent provided by that the company’s Memorandum of Incorporation; and

(b)must determine whether each such debt instrument is secured or unsecured.

(3)Except to the extent that a company’s Memorandum of Incorporation provides otherwise, a debt instrument issued by the company may grant special privileges regarding—

(a)attending and voting at general meetings and the appointment of directors; or

(b)allotment of securities, redemption by the company, or substitution of the debt instrument for shares of the company, provided that the securities to be allotted or substituted in terms of any such privilege, are authorised by or in terms of the company’s Memorandum of Incorporation in accordance with section 36.

(4)Every security document must clearly indicate, on its first page, whether the relevant debt instrument is secured or unsecured.

(5)A company may appoint any person, including a juristic person, as trustee for the holders of the company’s debt instruments, if—

(a)the person—

(i)is not a director or prescribed officer of the company, or a person related or inter-related to the company, a director or a prescribed officer; and

(ii)does not have any interest in, or relationship with, the company that might conflict with the duties of a trustee; and

(b)the board is satisfied that the person has the requisite knowledge and experience to carry out the duties of a trustee.

(6)Any new trustee appointed for the purpose of this section must—

(a)satisfy the requirements of subsection (5)(a); and

(b)be approved by the holders of at least 75% by value of debt instruments present at a meeting called for that purpose.

(7)Any provision contained in a trust deed for securing any debt instruments, or in any agreement with the holders of any debt instruments secured by a trust deed, is void to the extent that it would exempt a trustee from, or indemnify a trustee against, liability for breach of trust, or failure to exercise the degree of care and diligence required of the prudent and careful person, having regard to the provisions of the trust deed respecting the powers, authorities or discretions of the trustee.

(8)Subsection (7) does not invalidate—

(a)any release validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or

(b)any provision of a debt instrument—

(i)enabling a release to be given with the consent of the majority of not less than three fourths in value of the holders of debt instruments present and voting at a meeting called for the purpose; and

(ii)with respect to a specific act or omission, or of the trustee dying or ceasing to act.

44. Financial assistance for subscription of securities

(1)In this section, "financial assistance" does not include lending money in the ordinary course of business by a company whose primary business is the lending of money.

(2)To the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide financial assistance by way of a loan, guarantee, the provision of security or otherwise to any person for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, subject to subsections (3) and (4).

(3)Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless—

(a)the particular provision of financial assistance is—

(i)pursuant to an employee share scheme that satisfies the requirements of section 97; or

(ii)pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

(b)the board is satisfied that—

(i)immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

(ii)the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

(4)In addition to satisfying the requirements of subsection (3), the board must ensure that any conditions or restrictions respecting the granting of financial assistance set out in the company’s Memorandum of Incorporation have been satisfied.

(5)A decision by the board of a company to provide financial assistance contemplated in subsection (2), or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with—

(a)this section; or

(b)a prohibition, condition or requirement contemplated in subsection (4).

(6)If a resolution or an agreement has been declared void in terms of subsection (5) read with section 218(1), a director of a company is liable to the extent set out in section 77(3)(e)(iv) if the director—

(a)was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section or a prohibition, condition or requirement contemplated in subsection (4).

45. Loans or other financial assistance to directors

(1)In this section, "financial assistance"—

(a)includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation; but

(b)does not include—

(i)lending money in the ordinary course of business by a company whose primary business is the lending of money;

(ii)an accountable advance to meet—

(aa)legal expenses in relation to a matter concerning the company; or

(bb)anticipated expenses to be incurred by the person on behalf of the company; or

(iii)an amount to defray the person’s expenses for removal at the company’s request.

(2)Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member, subject to subsections (3) and (4).

(3)Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless—

(a)the particular provision of financial assistance is—

(i)pursuant to an employee share scheme that satisfies the requirements of section 97; or

(b)the board is satisfied that immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test.

(5)If the board of a company adopts a resolution to do anything contemplated in subsection (2), the company must provide written notice of that resolution to all shareholders, unless every shareholder is also a director of the company, and to any trade union representing its employees—

(a)within 10 business days after the board adopts the resolution, if the total value of all loans, debts, obligations or assistance contemplated in that resolution, together with any previous such resolution during the financial year, exceeds one-tenth of 1% of the company’s net worth at the time of the resolution; or

(b)within 30 business days after the end of the financial year, in any other case.

(6)A resolution by the board of a company to provide financial assistance contemplated in subsection (2), or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with—

(a)this section; or

(b)a prohibition, condition or requirement contemplated in subsection (4).

(7)If a resolution or an agreement has been declared void in terms of subsection (6) read with section 218(1), a director of a company is liable to the extent set out in section 77(3)(e)(v) if the director—

(a)was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision in terms of section 74; and

46. Distributions must be authorised by board

(1)A company must not make any proposed distribution unless—

(a)the distribution—

(i)is pursuant to an existing legal obligation of the company, or a court order; or

(ii)the board of the company, by resolution, has authorised the distribution;

(b)it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution; and

(c)the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test, as set out in section 4, and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.

(2)When the board of a company has adopted a resolution contemplated in subsection (1)(c), the relevant distribution must be fully carried out, subject only to subsection (3).

(3)If the distribution contemplated in a particular board resolution, court order or existing legal obligation has not been completed within 120 business days after the board made the acknowledgement required by subsection (1)(c), or after a fresh acknowledgement being made in terms of this subsection, as the case may be—

(a)the board must reconsider the solvency and liquidity test with respect to the remaining distribution to be made pursuant to the original resolution, order or obligation; and

(b)despite any law, order or agreement to the contrary, the company must not proceed with or continue with any such distribution unless the board adopts a further resolution as contemplated in subsection (1)(c).

(4)If a distribution takes the form of the incurrence of a debt or other obligation by the company, as contemplated in paragraph (b) of the definition of ‘distribution’ set out in section 1, the requirements of this section—

(a)apply at the time that the board resolves that the company may incur that debt or obligation; and

(b)do not apply to any subsequent action of the company in satisfaction of that debt or obligation, except to the extent that the resolution, or the terms and conditions of the debt or obligation, provide otherwise.

(5)If, after considering the solvency and liquidity test as required by this section, it appears to the company that the section prohibits its immediate compliance with a court order contemplated in subsection (1)(a)(i)—

(a)the company may apply to a court for an order varying the original order; and

(b)the court may make an order that—

(i)is just and equitable, having regard to the financial circumstances of the company; and

(ii)ensures that the person to whom the company is required to make a payment in terms of the original order is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

(6)A director of a company is liable to the extent set out in section 77(3)(e)(vi) if the director—

(a)was present at the meeting when the board approved a distribution as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the distribution, despite knowing that the distribution was contrary to this section.

47. Capitalisation shares

(1)Except to the extent that a company’s Memorandum of Incorporation provides otherwise—

(a)the board of that company, by resolution, may approve the issuing of any authorised shares of the company, as capitalisation shares, on a pro rata basis to the shareholders of one or more classes of shares;

(b)shares of one class may be issued as a capitalisation share in respect of shares of another class; and

(c)subject to subsection (2), when resolving to award a capitalisation share, the board may at the same time resolve to permit any shareholder entitled to receive such an award to elect instead to receive a cash payment, at a value determined by the board.

(2)The board of a company may not resolve to offer a cash payment in lieu of awarding a capitalisation share, as contemplated in subsection (1)(c), unless the board—

(a)has considered the solvency and liquidity test, as required by section 46, on the assumption that every such shareholder would elect to receive cash; and

(b)is satisfied that the company would satisfy the solvency and liquidity test immediately upon the completion of the distribution.

48. Company or subsidiary acquiring company’s shares

(1)The making of a demand, tendering of shares and payment by a company to a shareholder in terms of a shareholder’s appraisal rights set out in section 164 do not constitute an acquisition of its shares by the company within the meaning of this section.

(2)Subject to subsection (3)—

(a)a company may acquire its own shares, if the decision to do so satisfies the requirements of section 46; and

(b)any subsidiary of a company may acquire shares of that company, but—

(i)not more than 10%, in aggregate, of the number of issued shares of any class of shares of a company may be held by, or for the benefit of, all of the subsidiaries of that company, taken together; and

(ii)no voting rights attached to those shares may be exercised while the shares are held by the subsidiary, and it remains a subsidiary of the company whose shares it holds.

(3)Despite any provision of any law, agreement, order or the Memorandum of Incorporation of a company, the company may not acquire its own shares, and a subsidiary of a company may not acquire shares of that company, if, as a result of that acquisition, there would no longer be any shares of the company in issue other than—

(a)shares held by one or more subsidiaries of the company; or

(b)convertible or redeemable shares.

(4)An agreement with a company providing for the acquisition by the company of shares issued by it is enforceable against the company, subject to subsections (2) and (3).

(5)If a company alleges that, as a result of the operation of subsection (2) or (3), it is unable to fillfil its obligations in terms of an agreement contemplated in subsection (4)—

(a)the company must apply to a court for an order in terms of paragraph (c);

(b)the company has the burden of proving that fulfilment of its obligations would put it in breach of subsections (2) or (3); and

(c)if the court is satisfied that the company is prevented from fulfilling its obligations pursuant to the agreement, the court may make an order that—

(i)is just and equitable, having regard to the financial circumstances of the company; and

(ii)ensures that the person to whom the company is required to make a payment in terms of the agreement is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

(6)If a company acquires any shares contrary to section 46, or this section, the company may, not more than two years after the acquisition, apply to a court for an order reversing the acquisition, and the court may order—

(a)the person from whom the shares were acquired to return the amount paid by the company; and

(b)the company to issue to that person an equivalent number of shares of the same class as those acquired.

(7)A director of a company is liable to the extent set out in section 77(3)(e)(vii) if the director—

(a)was present at the meeting when the board approved an acquisition of shares contemplated in this section, or participated in the making of such a decision in terms of section 74; and

(b)failed to vote against the acquisition of shares, despite knowing that the acquisition was contrary to this section or section 46.

Part E – Securities registration and transfer

49. Securities to be evidenced by certificates or uncertificated

(1)In this Part, "certificated" means evidenced by a certificate, as contemplated in subsection (2)(a).

(2)Any securities issued by a company must be either—

(a)evidenced by certificates; or

(b)uncertificated, in which case the company must not issue certificates evidencing or purporting to evidence title to those securities, subject to subsection (6).

(3)Except to the extent that this Act expressly provides otherwise,—

(a)the rights and obligations of security holders are not different solely on the basis of their respective securities being certificated or uncertificated; and

(b)any provision of this Act applies with respect to any uncertificated securities in the same manner as it applies to certificated securities.

(4)Sections 52 to 55—

(a)apply only to uncertificated securities; and

(b)prevail in the case of a conflict between any provision of those sections and any other provision of this Act, any other law, the common law, the company’s Memorandum of Incorporation or any agreement.

(5)Any certificated securities may cease to be evidenced by certificates, and thereafter be uncertificated, in which case any provision of this Act contemplated in subsection (4) applies to those securities from the date on which they ceased to be evidenced by certificates.

(6)In the manner set out in section 54, any uncertificated securities may be withdrawn from the uncertificated securities register, and certificates issued evidencing those securities, in which case from the date on which they became certificated—

(a)sections 52 to 55 cease to apply to those securities; and

(b)for greater certainty, transfer of ownership in those securities cannot be effected by a participant or central securities depository while they remain in certificated form.

(7)The Minister may make regulations regarding matters that are supplementary and ancillary to the provisions of this Part.

50. Securities register and numbering

(1)Every company must—

(a)establish or cause to be established a register of its issued securities in the prescribed form; and

(b)maintain its securities register in accordance with the prescribed standards.

(2)As soon as practicable after issuing any securities a company must enter or cause to be entered in its securities register, in respect of every class of securities that it has issued—

(a)the total number of those securities that are held in uncertificated form; and

(b)with respect to certificated securities—

(i)the names and addresses of the persons to whom the securities were issued;

(ii)the number of securities issued to each of them;

(iii)the number of, and prescribed circumstances relating to, any securities—

(aa)that have been placed in trust as contemplated in section 40(6)(d); or

(bb)whose transfer has been restricted;

(iv)in the case of securities contemplated in section 43—

(aa)the number of those securities issued and outstanding; or

(bb)the names and addresses of the registered owner of the security and any holders of a beneficial interest in the security; and

(v)any other prescribed information.

(3)If a company has issued uncertificated securities, or has issued securities that have ceased to be certificated, as contemplated in section 49(5), a record must be administered and maintained by a participant or central securities depository in the prescribed form, as the company’s uncertificated securities register, which—

(a)forms part of that company’s securities register; and

(b)must contain, with respect to all securities contemplated in this subsection, any details—

(i)referred to in subsection (2)(b), read with the changes required by the context; or

(ii)determined by the rules of the central securities depository.

(4)A securities register, or an uncertificated securities register, maintained in accordance with this Act is sufficient proof of the facts recorded in it, in the absence of evidence to the contrary.

(5)Unless all the shares of a company rank equally for all purposes, the company’s shares, or each class of shares, and any other securities, must be distinguished by an appropriate numbering system.

51. Registration and transfer of certificated securities

(1)A certificate evidencing any certificated securities of a company—

(a)must state on its face—

(i)the name of the issuing company;

(ii)the name of the person to whom the securities were issued;

(iii)

Companies Act, 2008

Taxonomies

Related documents

Companies Act, 2008

Act 71 of 2008

Chapter 1Interpretation, purpose and application

Part A – Interpretation

1. Definitions

2. Related and inter-related persons, and control

3. Subsidiary relationships

4. Solvency and liquidity test

5. General interpretation of Act

6. Anti-avoidance, exemptions and substantial compliance

Part B – Purpose and application

7. Purposes of Act

8. Categories of companies

9. Modified application with respect to state-owned companies

10. Modified application with respect to non-profit companies

Chapter 2Formation, administration and dissolution of companies

Part A – Reservation and registration of company names

11. Criteria for names of companies

12. Reservation of name and defensive names

Part B – Incorporation and legal status of companies

13. Right to incorporate company

14. Registration of company

15. Memorandum of Incorporation, shareholder agreements and rules of company

16. Amending Memorandum of Incorporation

17. Alterations, translations and consolidations of Memorandum of Incorporation

18. Authenticity of versions of Memorandum of Incorporation

19. Legal status of companies

20. Validity of company actions

21. Pre-incorporation contracts

22. Reckless trading prohibited

Part C – Transparency, accountability and integrity of companies

23. Registration of external companies and registered office

24. Form and standards for company records

25. Location of company records

26. Access to company records

27. Financial year of company

28. Accounting records

29. Financial statements

30. Annual financial statements

31. Access to financial statements or related information

32. Use of company name and registration number

33. Annual return

34. Additional accountability requirements for certain companies

Part D – Capitalisation of profit companies

35. Legal nature of company shares and requirement to have shareholders

36. Authorisation for shares

37. Preferences, rights, limitations and other share terms

38. Issuing shares

39. Subscription of shares

40. Consideration for shares

41. Shareholder approval for issuing shares in certain cases

42. Options for subscription of securities

43. Securities other than shares

44. Financial assistance for subscription of securities

45. Loans or other financial assistance to directors

46. Distributions must be authorised by board

47. Capitalisation shares

48. Company or subsidiary acquiring company’s shares

Part E – Securities registration and transfer

49. Securities to be evidenced by certificates or uncertificated

50. Securities register and numbering

51. Registration and transfer of certificated securities

Chapter 1
Interpretation, purpose and application

Chapter 2
Formation, administration and dissolution of companies