The Minister of Trade, Industry and Competition has proposed the Companies Amendment Bill, 2023 (First Bill) and the Companies Second Amendment Bill, 2023 (Second Bill).

While the Second Bill proposes to amend certain provisions of the Companies Act, 71 of 2008 (Companies Act) to extend the time periods for which a court may declare a director delinquent or under probation (section 162), and the prescription period for claims against directors for loss or damages (s77(7)), the majority of the proposed amendments to the Companies Act emanate from the First Bill. From a transaction perspective, legal advisers should note the amendments proposed in the First Bill to s38 (regarding the validation of the irregular creation, allotment or issuing of shares), to s45 (regarding intra-group financial assistance), to s48 (regarding the repurchase of shares) and to s118 (regarding the application of the takeover provisions in the context of private companies).

S38 states that the board may resolve to issue shares within the classes and to the extent that the shares have been authorised by the Company’s MOI, in accordance with s36. If shares are issued but not authorised in terms of s36, or in excess of the number of authorised shares of any particular class, the share issue must be retroactively authorised in terms of s36 – within 60 business days after the date of issue – failing which, the share issue will be a nullity and any entry into the securities register will be void. The proposed amendment in s38A of the First Bill provides that, on application by the company or any party holding an interest, a court may validate the creation, allotment or issue of shares if it is satisfied that it is just and equitable to do so. This proposed change is useful to companies and shareholders which find themselves in circumstances where retroactive authorisation has not occurred within the prescribed 60 business day period.

The First Bill amends s45, by inserting s45(2A), which provides that the financial assistance provisions of s45 do not apply to the giving of a company of financial assistance to or for the benefit of its subsidiaries. The proposed carve out to this category of inter-group financial assistance should be welcomed, given the somewhat onerous requirements prescribed by s45.

In instances where a company wishes to acquire its own shares, it will no longer have to comply with the provisions of s114 and s115. The proposed amendment to s48(8) requires a special resolution of shareholders (and nothing else) if a company intends to acquire shares from a director of the company (or any person/s related to such director), or if the acquisition is not as a result of:

• a pro rata offer made to all the shareholders of the company or holders of a particular class of shares; or

• a transaction effected on a recognised stock exchange on which the shares are traded.

The result? A company will not have to obtain an expert report in respect of transactions where the company acquires more than 5% of the issued shares of a particular class of its shares. This is another welcome change, as obtaining an expert report can be an expensive and time consuming exercise, with limited benefit to sole shareholders or shareholders in a private company.

The proposed amendment to s118(1)(c) further limits the application of the takeover provisions in respect of private companies, in that the provisions will now only apply to private companies if a company has 10 or more shareholders with direct or indirect shareholding in the company and meets or exceeds the financial threshold of annual turnover or asset value as determined by the Minister.

Other noteworthy amendments and additions in the First Bill include:

• s16(9)(b), to amend the date on which amendments to a MOI take effect, namely within 10 business days of receipt by the commission of the notice of amendment, unless endorsed or rejected by the commission prior to the expiry of the 10 business days;

• s72, to describe instances where a company does not require a social and ethics committee and, among other matters, the composition and manner in which the social and ethics committee must be appointed; and

• s30A and B, which compels all public and state-owned companies to prepare and present a remuneration policy and a remuneration report in respect of the previous financial year, for approval by the shareholders either at an AGM or, in the instance where a remuneration policy was not approved at the AGM, at a shareholders meeting called for this purpose.

The First and Second Bill are currently under consideration by the National Council of Provinces.

Daniel Hart and Janke Strydom are Partners and Nolukhanyo Mpisane a Candidate Attorney | Fasken.

This article first appeared in DealMakers, SA’s quarterly M&A publication.

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