On 14 December 2007 the Corporate Laws Amendment Act finally became law and brought with it a new dispensation for allowing a company to provide financial assistance for the purchase of its shares and disposing of the whole or a substantial part of its business or assets. However another change this Act brought to the corporate world is ,that of refined financial reporting.

Before we get into the details of the financial reporting requirements we have to mention that the Act already gives birth to the term ?widely held company? as envisaged in the current Companies Bill that is expected to change South Africa's corporate landscape within the next year or two. A widely held company in terms of the Act broadly means that its articles permit the offer of shares to the public or provides for the unrestricted transfer of shares.

Accordingly a new requirement for all widely held companies is that every financial year the board appoints an audit committee for the next financial year. Such an audit committee consists of at least two members and must consist only of non-executive directors of the company, who of course have to act independently. The Act also places certain qualifications on what would constitute an independent non-executive director. Essentially the audit committee will be tasked with appointing an independent auditor, determining terms and conditions of such engagement and reporting in the financial statements as to how the audit committee has carried out its functions and stating that that audit committee was satisfied that the auditor was independent of the company. The Act then also prescribes certain requirements in order to determine whether the auditor was indeed independent of the company. The audit committee and the auditor of a widely held company must meet not more than one month before the board of the company meets to approve the financials and discuss related matters of importance or relevance.

Every widely held company must now also report its interim and final results to every member and debenture holder as previously required of public companies. Widely held companies must also comply with financial reporting standards and Schedule 4 of the Companies Act which has been substantially amended, whilst limited interest companies must comply with accounting standards and Schedule 4.

The Act then inserts a new chapter in the Companies Act which deals exclusively with financial reporting standards. In terms of the new chapter a ?Financial Reporting Standards Council' is established which will establish financial reporting standards for widely held companies and accounting practices for limited interest companies. Any person who believes that a widely held company is not conforming to these standards may complain to the Financial Reporting Investigations Panel who will investigate the matter.

Any company that falls within the definition of a widely held company may delay compliance with the financial reporting standards until its first financial year after 14 December 2007.

Should you require any additional information on the changes brought about by the Corporate Laws Amendment Act, kindly visit our website here for informative articles or contact Rian Geldenhuys.