Why the Companies Act of 2008 is to be amended?

The Department of Trade and Industry (the dti) has commenced the process of amending the Companies Act of 2008. This was announced by the Acting Deputy Director General for Consumer and Corporate Regulations at the dti, Mr MacDonald Netshitenzhe while speaking at the International Company Law Seminar that was held at the Industrial Development Corporation (IDC) in Sandton today.

Netshitenzhe said that this was result of the company law reform aimed at instilling corporate accountability, transparency and reduction of regulatory burden.  He further said that purpose of amending the Act was to align problematic areas and enhance better interpretation of the provisions of the Act.

“We are going to Cabinet for broader consultations. Stakeholders and role players should be ready to engage during the public consultations to ensure policy objectives become a success. It is important for the dti to engage, so as to understand the sections that are posing a challenge to practitioners as well as the economy at large. This is meant to ensure that the proposed amendments to the Companies Act are in line with global trends,” said Netshitenzhe.

Netshitenzhe highlighted that the Act encourages economic stability through good governance that will enhance investor confidence and international and domestic competitiveness in the South African economy.

According to Netshitenzhe the provisions of the Act and its Regulations have been benchmarked with other jurisdictions and found to be the best in the world. This is due to the fact that the Act, amongst others, makes provisions for accountability and transparency, and the regulatory burden has been reduced tremendously.

“Amongst others, the highlight is on three issues that may be relevant to this seminar for consideration, namely business rescue, social and ethics committees and the role of the Companies Tribunal. The dti commissioned a research on various cases of business rescue. The research revealed the fact that if business rescue ends in liquidation, it does not necessarily mean the rescue was a failure,” said Netshitenzhe.

He added that when measuring the success of business rescue, numbers of companies that emerged from business rescue as compared to those that have been liquidated must not be a barometer.

Furthermore, Netshitenzhe stressed that the establishment of social and ethics committees in companies was important not only to protect the communities and the environment where companies operate, but for the protection of shareholders’ interests. Companies can now be held liable for not adhering to legislative standards.

Netshitenzhe pointed out the importance of raising awareness of the role of the Companies Tribunal, as it is still appropriate and can be the best dispute resolution mechanism if utilised effectively, by means of mediation, conciliation or arbitration. He mentioned that the processes are easy and cost-effective and faster than going through the normal courts.

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