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From Agency to Commission ( Adv Rory Voller, South Africa)


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From Agency to Commission ( Adv Rory Voller, South Africa)

  1. 1. The New Companies ActSELECT TOPICS ON THE COMPANIES ACTAND COMPANIES COMMISSION, 2008 Adv Rory Voller Deputy Commissioner Companies and Intellectual Property Commission - South Africa 1
  2. 2. The New Companies Act - Introduction• The new Companies Act development process began in earnest over eight years ago using guidance developed in the Department of Trade and Industry (the dti) policy document titled South African Company Law for the 21 st Century: Guidelines for Corporate Law Reform (May 2004). The ultimate goal of the reform was to ensure that the regulatory framework for enterprises [of all types and sizes] promoted ―growth, employment, innovation, stability, good governance, confidence and international competitiveness.‖• The new Companies Act was introduced in Parliament during 2008 and published for general comment on 27 June 2008 as Bill 61 0f 2008.• The President signed off the Bill during April 2009• The new South African Companies Act became enforceable on the 1 May 2011
  3. 3. INSTITUTIONAL REFORM The Act establishes of one new institution, and the transformation of three existing company law entities, which together will provide for a more predictable regulatory and enforcement system. The four institutions are :• The Companies and Intellectual Property Commission• The Takeover Regulation Panel• The Financial Reporting Standards Council• The Companies Tribunal 3
  4. 4. INSTITUTIONAL REFORM IN THE ACTTHE COMPANIES AND INTELLECTUAL PROPERTY COMMISSIONThe Commission will be a merging of the Companies and Intellectual Property registrationoffice [CIPRO]and the enforcement division of the DTI, known as the Office of Company andIntellectual Property Enforcement [OCIPE]Will be managed by a Commissioner and a Deputy Commissioner who were appointed by Cabineton 30 March 2011.The Registrars authority under all Acts administered by CIPRO, will be amended to provideauthority for the CommissionersCIPRO has been transformed from being an Administrator to a full Regulator of Companies andCompany law.Commission will be self –funded from fees charged for servicesCommission will be an independent juristic person as – an organ of state within public administration – but an institution outside the public service 4
  5. 5. INSTITUTIONAL REFORM IN THE ACTMain functions of Commission• Registration of Companies, Co-operatives and IP Rights and maintenance thereof• Disclosure of Information on its register• Promotion of education and awareness of Company and IP Law• Promotion of compliance with relevant legislation• Efficient and effective enforcement of relevant legislation• Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to FRSC• Licensing of Business rescue practitioners***• Oversight role of Independent Review professional bodies***• Report , research and advise Minister on matters of national policy relating to company and intellectual property law
  6. 6. The Re-birth
  7. 7. INSTITUTIONAL REFORM IN THE ACT The Act further transformed the existing Securities Regulation Panel into an independent organ of state, the THE TAKEOVER REGULATION PANEL, with powers to regulate mergers, acquisitions, schemes of arrangement, change of control issues The FINANCIAL REPORTING STANDARDS COUNCIL ( “the FRSC‖) is re- established as an advisory committee to the Minister, with responsibilities to advise on regulations establishing financial reporting standards, which will govern the form, content and maintenance of companies’ financial records and statements. 7
  8. 8. INSTITUTIONAL REFORM IN THE ACT THE COMPANIES TRIBUNAL : which will be an independent organ of state, with a dual mandate— (a) First, to serve as a forum for voluntary alternative dispute resolution in any matter arising under the Act; and (b) Second, to carry out reviews of administrative decisions made by the Commission. Those decisions of the Tribunal will be binding on the Commission, but not on the other party, which has a constitutional right of access to a court for further review. As is the case under the Companies Act, 1973, the High Court remains the primary medium for resolution of disputes, interpretation and enforcement of the proposed Companies Act. 8
  9. 9. COMPANY NAMESThis Act retains the broad outlines of the existing regime for company names, inparticular continuing the practice of name reservation, but not making samemandatory.The name reservation process will not be a stand alone, formal pre-registrationprocess.If a proposed name is rejected, then the registration number becomes the name ofthe company.In addition, the Act proposes reforming the criteria for acceptable names in a mannerthat seeks to give maximum effect to the constitutional right to freedom of expression. 9
  10. 10. COMPANY NAMES• Symbols allowed in name : + & # @ % = ― – To be deferred for implementation• All languages accepted, with certified translations• Name squatting process now included• Names can be forwarded to the Human Rights Commission if unsure if offensive• Names are allowed to be transferred from applicant to other persons• New Category of Ring –fenced (RF) companies included – special conditions or restrictions in MOI – no need for name change application as suffix only• Business/Trading names to be registered under the Consumer protection Act• Defensive name reservation process retained 10
  11. 11. CATEGORIES OF COMPANIES The Act provides for 2 categories of companies for registration: • Non profit companies – NPC – 3 Directors – 3 Incorporators • For profit companies: 1 Incorporator – private companies – Pty Ltd – 1 director – personal liability companies – Inc – 1 director – public companies – Ltd – 3 director – state-owned companies – SOC ltd – 3 directors Alternate language expression now allowed External company – cross cutting of categories 11
  12. 12. COMPANY FORMATIONA company is incorporated by the lodging of a :• Notice of Incorporation• Memorandum of Incorporation (MoI) adoption with choices,• Payment of filing fee The Act imposes certain specific requirements on the content of a Memorandum of Incorporation, as necessary to protect the interests of shareholders in the company, and provides a number of default rules/Alterable provisions, which companies may accept or alter as they wish to meet their needs and serve their interests. 12
  13. 13. ACCOUNTABILITY AND TRANSPARENCYFlexible regime: In order to provide a flexible regime that balance accountability and transparency, with a lessened regulatory burden, the Act provides for certain common requirements of all companies and differentiated requirements depending on their wider responsibility to the public and their social and economic impact. The following would illustrate the flexibility:• All companies must prepare annual financial statements (AFS), but not all require an audit• Public companies/State owned companies would be subjected to a more demanding regime and would also be required to have these AFS audited annually• All companies would have to file annual returns with the Commission• Other companies must either be audited voluntarily or Independently reviewed in accordance with ISRE 2400 by an Independent Accounting Professional
  14. 14. BUSINESS RESCUE Regime of judicial administration of failing companies is overhauled with a modern business rescue regime:• largely self-administered by the company,• under independent supervision but reportable to the Commission• subject to court intervention The Act recognizes the interests of stakeholders in general (shareholders, creditors and employees) and provides for their respective participation in the development and approval of a business rescue plan. 14
  15. 15. BUSINESS RESCUEBusiness rescue practitioner• BR Practitioner – power to suspend any agreement of company, except contracts of employment and S35A and B Insolvency agreements• Any agreement – no classification of agreements outside those mentioned• BR Practitioner – cannot cancel contracts – require a court application and approval to do so• BR Practitioner – member of Legal, Accounting or Business Management Professions – who is accredited by Commission to practice
  16. 16. BUSINESS RESCUELicensing of Business Rescue Practitioner• Licensed by the Commission, or• The Regulatory Authority to whom he/she reports toThe Commission after receiving application must either:1. Issue a licence as applied for2. Issue a Conditional license on terms that are reasonable3. Refuse the licenceCategories of Practitioners:1. Senior – 10 years or more2. Experienced – 5 years or more3. Junior – Less than 5 yearsJoint appointments are allowed.
  17. 17. ENFORCEMENTThe Act decriminalizes company law. There are very few remaining offences, thosearising out of falsification of records or documents, publishing of untrue or misleadinginformation, or refusal to respond to a summons, give evidence, perjury, and similarmatters relating to the administration of justice in terms of the Act.Any such offences must be referred by the Commission to the National PublicProsecutor for trial in the Magistrate’s Court.Generally, the Act uses a system of administrative enforcement in place of criminalsanctions to ensure compliance with the Act. The Commission or Panel, mayreceive complaints from any stakeholder, or may initiate a complaint itself, or act on amatter as directed by the Minister.The Act introduces a compliance and enforcement tool called a Compliance Notice,empowering the Commission to force companies to correct certain behavior. 17
  18. 18. ENFORCEMENTA person who has been issued a compliance notice may of course challenge it before theCompanies Tribunal, and in court, but failing that, is obliged to satisfy the conditions ofthe notice. If they fail to do so, the Commission may either apply to a court for anadministrative fine, or refer the failure to the National Prosecuting Authority as anoffence.In the case of a company that has failed to comply, been fined, and continues tocontravene the Act, the Commission or Panel may apply to a court for an order dissolvingthe company.To improve corporate accountability, the Act states that it will be an offence, punishableby a fine up to a R1m or up to 10 years imprisonment, for a person to sign or agree to afalse or misleading financial statements or prospectus, or to be reckless in the conduct ofa company’s business. 18
  19. 19. Thank You