South Africa Advances Corporate Governance with Companies Amendment Acts

In a significant step to bolster corporate governance, the Companies Amendment Act, 2024, and the Companies Second Amendment Act, 2024, collectively known as the Companies Amendment Acts, 2024, have been published in the Government Gazette. An initiative to further transparency and accountability within the corporate sector of South Africa, these legal revisions delineate substantial changes to how companies operate and how they report information.

The amended laws, results of meticulous legislative processes and recommendations from the Zondo Commission of Enquiry into State Capture, encompass a range of provisions that address public and stakeholder concerns about corporate practices. These changes aim to facilitate better business practices and ease the regulatory burden for companies, indicating the government's commitment to improving the business landscape of the country.

Key provisions under the Companies Amendment Acts, 2024, include tighter rules on director remuneration reporting, extensions on the time bars for director delinquency applications, and refinements to rules regarding share repurchase and financial assistance by companies. The aim of these provisions is to ensure greater transparency for companies' internal operations – especially those that involve significant shareholder and public interest.

One of the notable changes is the requirement for expanded disclosure around individual director remuneration for companies that are obliged to have their annual financial statements audited. Third parties are also granted access to critical company records, which is anticipated to promote greater corporate transparency and accountability.

Moreover, in line with easing processes, amendments to a company's Memorandum of Incorporation (MOI), barring a name change, will take effect after ten business days following the receipt by the Companies and Intellectual Property Commission. This revised timeline is expected to expedite administrative processes within corporate changes, thereby speeding up operational efficiencies.

An essential update pertinent to the current economic landscape is the exemption from section 45 financial assistance provisions for a company that provides assistance to its subsidiary. On the other hand, the amendment alleviating restrictions on share repurchase intends to facilitate more fluid capital management within firms.

For delinquency and liability matters, an extension has been made to the period within which proceedings to declare a director delinquent or under probation can be brought. The time has increased to 60 months after the individual ceases to be a director, with a potential for further extensions if warranted.

The Companies Amendment Acts, 2024 have been signed but await commencement dates for the amendments to officially come into force. This gap provides a crucial period for companies to analyze the impact of the amendments on their operations and to seek expert advice to navigate these changes effectively. The Department of Trade, Industry, and Competition (DTIC) has yet to reveal a timeframe for publishing corresponding updates to the Companies Regulations, which will be instrumental in the smooth implementation of the amendments.