The National Assembly approved the Companies Bill on 26 September 2008. The Department of Trade and Industry has been busy for quite some time to redraft South Africa's company legislation. South Africa's Company Act dates back to 1973 and our corporate landscape has long been due for an overhaul.

Many of the amendments have been drafted to provide for the more modern way in which companies operate. The amendments also propose even less regulatory compliance for smaller businesses or private companies, but increased compliance for larger companies or public companies.

The Bill, which now still awaits approval by the National Council of Provinces, has undergone numerous changes during its various drafts. One of these changes is that the concepts of closely-held and widely-held companies have been removed. Instead companies will still be regarded as either companies operating for profit or non-profit companies. These for profit companies (termed ?profit companies?) will be divided into private, public, personal liability and state-owned companies. The private companies will, as under our current dispensation, not be allowed to offer their securities (such as shares) to the public and they must restrict the transferability of their securities. A public company in contrast will not have to have such limitations on their ability to offer shares to the public or their transferability of any securities. Personal liability companies will continue to hold the company's current and past directors jointly and severally liable for any debts and liabilities of the company as they were incurred during their respective periods in office. As such professionals such as a firm of attorneys or auditors will therefore continue to make use of personal liability companies.

Close corporations to a certain extent will remain a legal business entity through which persons may conduct a business. However, as is the case with law, it is not always that simple. All close corporations currently in existence and which may be established before the date that the Companies Bill becomes effective (in other words before section 13 of the Companies Bill becomes law) will remain regulated under the Close Corporations Act No 69 of 1984. For these close corporations, the new Companies Bill will bring about no change. These close corporations have the choice of whether or not they want to convert under the Companies Bill into a company. , However after the Companies Bill has become law no close corporations may be established (or incorporated).

In addition the Companies Bill provides for an even simpler method of incorporating a company (or establishing a company) by creating simpler forms which may even be completed electronically. The process has also changed in order to provide for the modernised way of doing business. This is especially true where a transaction is entered into and the parties do not yet have a juristic entity (or company). Previously one had to conclude pre-incorporation contracts which then had to be ratified once the company has been registered and the documentation has been received back from the Companies and Intellectual Property Rights Office (CIPRO). The Companies Bill allows for incorporation to occur before registrations, which in theory should make it easier for newly formed companies to do business.

Capitalisation of companies has also changed to a certain extent and we will be writing hereon as well as other important changes on company law soon. , We have written numerous articles on the new Companies Bill as it has undergone transformation. These articles may be accessed by utilising the search function on our website. Kindly keep a close eye on our website for further articles and developments on the Companies Bill. It is anticipated that the Companies Bill will become the new law in South Africa by 2010. Companies are cautioned however to already pay attention to the Companies Bill.

For further information, kindly contact Rian Geldenhuys.

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