My LexisNexis - Custom View Document Page 1of 225 COMPANIES ACT, 2008 NO. 71 OF 2008 [View Regulation] [ASSENTED TO 8 APRIL, 2009] [DATE OF COMMENCEMENT: 1 MAY, 2011] (English text signed by the President) This Act has been updated to Government Gazette 34243 dated 20 April, 2011. as amended by Companies Amendment Act, No. 3 of 2011 EDITORIAL NOTE Please note that there are discrepancies between the English and Afrikaans versions of this Act. Since the English text of this Act has been signed by the President, we suggest that you follow the English text. ACT To 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:— ARRANGEMENT OF SECTIONS CHAPTER 1 INTERPRETATION, PURPOSE AND APPLICATION Part A Interpretation 1. Definitions 2. Related and inter-related persons, and control 3. Subsidiary relationships 4. Solvency and liquidity test http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 2of 225 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 2 FORMATION, ADMINISTRATION AND DISSOLUTION OF COMPANIES Part A Reservation and registration of company names 11. Criteria for names of companies 12. Reservation of name for later use Part B Incorporation and legal status of companies 13. Right to incorporate company or transfer registration of foreign 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. 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. Pre-emptive right to be offered and to subscribe shares 40. Consideration for shares 41. Shareholder approval for issuing shares in certain cases http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 3of 225 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 52. Registration of uncertificated securities 53. Transfer of uncertificated securities 54. Substitution of certificated or uncertificated securities 55. Liability relating to uncertificated securities 56. Beneficial interest in securities Part F Governance of companies 57. Interpretation and application of Part 58. Shareholder right to be represented by proxy 59. Record date for determining shareholder rights 60. Shareholders acting other than at meeting 61. Shareholders meetings 62. Notice of meetings 63. Conduct of meetings 64. Meeting quorum and adjournment 65. Shareholder resolutions 66. Board, directors and prescribed officers 67. First director or directors 68. Election of directors of profit companies 69. Ineligibility and disqualification of persons to be director or prescribed officer 70. Vacancies on board 71. Removal of directors 72. Board committees 73. Board meetings 74. Directors acting other than at meeting 75. Director’s personal financial interests 76. Standards of directors’ conduct 77. Liability of directors and prescribed officers 78. Indemnification and directors’ insurance Part G Winding-up of solvent companies and deregistering companies 79. Winding-up of solvent companies 80. Voluntary winding-up of solvent company 81. Winding-up of solvent companies by court order 82. Dissolution of companies and removal from register 83. Effect of removal of company from register CHAPTER 3 ENHANCED ACCOUNTABILITY AND TRANSPARENCY Part A Application and general requirements of Chapter 84. Application of Chapter 85. Registration of secretaries and auditors http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 4of 225 Part B Company secretary 86. Mandatory appointment of company secretary 87. Juristic person or partnership may be appointed company secretary 88. Duties of company secretary 89. Resignation or removal of company secretary Part B Auditors 90. Appointment of auditor 91. Resignation of auditors and vacancies 92. Rotation of auditors 93. Rights and restricted functions of auditors Part D Audit committees 94. Audit committees CHAPTER 4 PUBLIC OFFERINGS OF COMPANY SECURITIES 95. Application and interpretation of Chapter 96. Offers that are not offers to public 97. Standards for qualifying employee share schemes 98. Advertisements relating to offers 99. General restrictions on offers to public 100. Requirements concerning prospectus 101. Secondary offers to public 102. Consent to use of name in prospectus 103. Variation of agreement mentioned in prospectus 104. Liability for untrue statements in prospectus 105. Liability of experts and others 106. Responsibility for untrue statements in prospectus 107. Time limit as to allotment or acceptance 108. Restrictions on allotment 109. Voidable allotment 110. Minimum interval before allotment or acceptance 111. Conditional allotment if prospectus states securities to be listed CHAPTER 5 FUNDAMENTAL TRANSACTIONS, TAKEOVERS AND OFFERS Part A Approval for certain fundamental transactions 112. Proposals to dispose of all or greater part of assets or undertaking 113. Proposals for amalgamation or merger 114. Proposals for scheme of arrangement 115. Required approval for transactions contemplated in Part 116. Implementation of amalgamation or merger Part B Authority of Panel and Takeover Regulations 117. Definitions applicable to this Part, Part C and Takeover Regulations 118. Application of this Part, Part C and Takeover Regulations 119. Panel regulation of affected transactions 120. Takeover Regulations Part C http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 5of 225 Regulation of affected transactions and offers 121. General requirement concerning transactions and offers 122. Required disclosure concerning certain share transactions 123. Mandatory offers 124. Compulsory acquisitions and squeeze-out 125. Comparable and partial offers 126. Restrictions on frustrating action 127. Prohibited dealings before and during an offer CHAPTER 6 BUSINESS RESCUE AND COMPROMISE WITH CREDITORS Part A Business rescue proceedings 128. Application and definitions applicable only to Chapter 129. Company resolution to begin business rescue proceedings 130. Objections to company resolution 131. Court order to begin business rescue proceedings 132. Duration of business rescue proceedings 133. General moratorium on legal proceedings against company 134. Protection of property interests 135. Post-commencement finance 136. Effect of business rescue on employees and contracts 137. Effect on shareholders and directors Part B Practitioner’s functions and terms of appointment 138. Qualifications of practitioners 139. Removal and replacement of practitioner 140. General powers and duties of practitioner 141. Investigation of affairs of company 142. Directors of company to co-operate with and assist practitioner 143. Remuneration of practitioner Part C Rights of affected persons during business rescue proceedings 144. Rights of employees 145. Participation by creditors 146. Participation by holders of company’s securities 147. First meeting of creditors 148. First meeting of employees’ representatives 149. Functions, duties and membership of committees of affected persons Part D Development and approval of business rescue plan 150. Proposal of business rescue plan 151. Meeting to determine future of company 152. Consideration of business rescue plan 153. Failure to adopt business rescue plan 154. Discharge of debts and claims Part E Compromise with creditors 155. Compromise between company and creditors CHAPTER 7 REMEDIES AND ENFORCEMENT Part A http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 6of 225 General principles 156. Alternative procedures for addressing complaints or securing rights 157. Extended standing to apply for remedies 158. Remedies to promote purpose of Act 159. Protection for whistle-blowers Part B Rights to seek specific remedies 160. Disputes concerning reservation or registration of company names 161. Application to protect rights of securities holders 162. Application to declare director delinquent or under probation 163. Relief from oppressive or prejudicial conduct or from abuse of separate juristic personality of company 164. Dissenting shareholders’ appraisal rights 165. Derivative actions Part C Voluntary resolution of disputes 166. Alternative dispute resolution 167. Dispute resolution may result in consent order Part D Complaints to Commission or Panel 168. Initiating complaint 169. Investigation by Commission or Panel 170. Outcome of investigation 171. Issuance of compliance notices 172. Objection to notices 173. Consent orders 174. Referral of complaints to court 175. Administrative fines Part E Powers to support investigations and inspections 176. Summons 177. Authority to enter and search under warrant 178. Powers to enter and search 179. Conduct of entry and search Part F Companies Tribunal adjudication procedures 180. Adjudication hearings before Tribunal 181. Right to participate in hearing 182. Powers of Tribunal adjudication hearing 183. Rules of procedure 184. Witnesses CHAPTER 8 REGULATORY AGENCIES AND ADMINISTRATION OF ACT Part A Companies and Intellectual Property Commission 185. Establishment of Companies and Intellectual Property Commission 186. Commission objectives 187. Functions of Commission 188. Reporting, research, public information and relations with other regulators 189. Appointment of Commissioner 190. Minister may direct policy and require investigation http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 7of 225 191. Establishment of specialist committees 192. Constitution of specialist committees Part B Companies Tribunal 193. Establishment of Companies Tribunal 194. Appointment of Companies Tribunal 195. Functions of Companies Tribunal Part C Takeover Regulation Panel 196. Establishment of Takeover Regulation Panel 197. Composition of Panel 198. Chairperson and deputy chairpersons 199. Meetings of Panel 200. Executive of Panel 201. Functions of Panel 202. Takeover Special Committee Part D Financial Reporting Standards Council 203. Establishment and composition of Council 204. Functions of Council Part E Administrative provisions applicable to Agencies 205. Qualifications for membership 206. Conflicting interests of agency members 207. Resignation, removal from office and vacancies 208. Conflicting interests of employees 209. Appointment of inspectors and investigators 210. Finances 211. Reviews and reports to Minister 212. Confidential information CHAPTER 9 OFFENCES, MISCELLANEOUS MATTERS AND GENERAL PROVISIONS Part A Offences and penalties 213. Breach of confidence 214. False statements, reckless conduct and non-compliance 215. Hindering administration of Act 216. Penalties 217. Magistrate’s Court jurisdiction to impose penalties Part B Miscellaneous matters 218. Civil actions 219. Limited time for initiating complaints 220. Serving documents 221. Proof of facts 222. State liability Part C Regulations, consequential matters and commencement 223. Regulations 224. Consequential amendments, repeal of laws and transitional arrangements 225. Short title and commencement http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 8of 225 SCHEDULE 1 PROVISIONS CONCERNING NON-PROFIT COMPANIES 1. Objects and policies 2. Fundamental transactions 3. Incorporators of non-profit company 4. Members 5. Directors SCHEDULE 2 CONVERSION OF CLOSE CORPORATIONS TO COMPANIES 1. Notice of conversion of close corporation 2. Effect of conversion on legal status SCHEDULE 3 AMENDMENT OF LAWS A: Close Corporations Act, 1984 1. Amendments to Close Corporations Act definitions 2. Limitation of period to incorporate close corporations or convert companies 3. Legal status of close corporations 4. Names of corporations 5. Transparency and accountability of close corporations 6. Rescue of financially distressed close corporations 7. Dissolution of corporations 8. Deregistration of corporations B: Consequential amendments to certain other Acts listed in Schedule 4 SCHEDULE 4 LEGISLATION TO BE ENFORCED BY COMMISSION SCHEDULE 5 TRANSITIONAL ARRANGEMENTS 1. Interpretation 2. Continuation of pre-existing companies 3. Pending filings 4. Memorandum of Incorporation and rules 5. Pre-incorporation contracts 6. Par value of shares, treasury shares, capital accounts and share certificates 7. Company finance and governance 8. Company names and name reservations 9. Continued application of previous Act to winding-up and liquidation 10. Preservation and continuation of court proceedings and orders 11. General preservation of regulations, rights, duties, notices and other instruments 12. Transition of regulatory agencies 13. Continued investigation and enforcement of previous Act 14. Regulations CHAPTER 1 INTERPRETATION, PURPOSE AND APPLICATION http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 9of 225 Part A Interpretation 1. Definitions.—In this Act, unless the context indicates otherwise— “accounting records” means information in written or electronic form concerning the financial affairs of a company as required in terms of this Act, including but not limited to, purchase and sales records, general and subsidiary ledgers and other documents and books used in the preparation of financial statements; [Definition of “accounting records” inserted by s. 1 (1) (a) of Act No. 3 of 2011.] “acquiring party”, when used in respect of a transaction or proposed transaction, means a person who, as a result of the transaction, would directly or indirectly acquire or establish direct or indirect control or increased control over all or the greater part of a company, or all or the greater part of the assets or undertaking of a company; [Definition of “acquiring party” inserted by s. 1 (1) (a) of Act No. 3 of 2011.] “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; “all or the greater part of the assets or undertaking”, when used in respect of a company, means— (a) in the case of the company’s assets, more than 50% of its gross assets at fair market value, irrespective of its liabilities; or (b) in the case of the company’s undertaking, more than 50% of the value of its entire undertaking, at fair market value; [Definition of “all or the greater part of the assets or undertaking” inserted by s. 1 (1) (b) of Act No. 3 of 2011.] “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 or more new companies, and the vesting in the surviving company or companies, together with such new company or 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; [Para. (b) substituted by s. 1 (1) (c) of Act No. 3 of 2011.] “amalgamated or merged company” means a company that either— http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011 My LexisNexis - Custom View Document Page 10of 225 (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, but does not include an “independent review” of annual financial statements, as contemplated in section 30 (2) (b) (ii) (bb); [Definition of “audit” substituted by s. 1 (1) (d) of Act No. 3 of 2011.] “Auditing Profession Act” means the Auditing Profession Act, 2005 (Act No. 26 of 2005); “auditor” has the meaning set out in the Auditing Profession Act; [Definition of “auditor” substituted by s. 1 (1) (e) of Act No. 3 of 2011.] “Banks Act” means the Banks Act, 1990 (Act No. 94 of 1990); [Definition of “Banks Act” substituted by s. 1 (1) (f) of Act No. 3 of 2011.] “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 http://www.mylexisnexis.co.za/nxt/gateway.dll?f=multiview$mh=1000$mkb=5120$ch=... 5/3/2011