Legal

Companies bill 2008

Adrian Dadd, Partner; and Suresh Kana, Assurance Leader, PricewaterhouseCoopers

The Companies Bill, 2008 (the Bill), was recently tabled in Parliament and has just been released to the public. This Bill is a step towards finalising the Department of Trade and Industry’s (DTI) Corporate Law Reform project. We have already seen significant amendments to corporate regulation being enacted through the Corporate Laws Amendments Act, 2006.

The Companies Bill signifies a significant change in our corporate regulatory environment. The revised company categories will now be used to determine the regulatory obligations of individual companies with a focus on improving the accountability and transparency of public companies. A company’s category will determine, for example, whether financial statements need to be prepared and whether an audit or independent review of those financial statements is required or not.

The Bill proposes that the reporting framework used by major corporates must be consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board. This shows that South African legislators have aligned statutory reporting with international financial reporting trends. The Bill also allows for the Minister to establish different reporting regulations applicable to the different categories of companies, thereby recognising that some categories of companies may need less onerous reporting requirements.

One of the significant implications of the Bill relates to close corporations (CC’s) which currently constitute 75% of all registered entities in South Africa. The Bill proposes to remove the dual registered entity system which came into effect with the Close Corporation Act, 1984 in that no new corporations can be registered under the old act.

The Bill contains consequential amendments to the Close Corporations Act, which will remain in the interim to govern existing corporations.

The dti expects for the Companies Bill to become effective during 2010. With the significant changes that the Companies Bill proposes, all stakeholders need to start planning for the changing regulatory environment.

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