South Africa: Consolidated Acts

[Last checked: 14 October 2024.*]

*The last time this Act was reviewed for updates.

COMPANIES ACT 71 OF 2008

[Updated to 1 June 2023.**]

**Date of last changes incorporated into this Act.

_________________________________

(English text signed by the President.)

(Assented to 8 April 2009

_____________________________

 

[Commencement: 1 May 2011 except s 11(1)(a)(ii) and (iii); s 11(1)(a)(ii) and (iii): 1 May 2014.]

 

Act 71 of 2008 (GoN 421, G. 32121),

Proc. R32, G. 34239,

Act 3 of 2011 (GoN 370, G. 34243, c.i.o 1 May 2011),

Act 19 of 2012 (GoN 70, G. 36121, c.i.o 3 June 2012 [Proc. 12, G. 36485]),

Act 22 of 2022 (GoN 1535, G. 47815, c.i.o 31 December 2022 and 1 April 2023 [Proc. 109, G. 47805]),

Act 23 of 2021 (GoN 789, G. 45825, c.i.o 1 June 2023 [GoN 3202, G. 48294]).

 

 

 

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 61 of 1973), and make amendments to the Close Corporations Act, 1984 (Act 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

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

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 and beneficial ownership of company

 

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

 

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 C

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

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

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

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

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 matters

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

 

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;

[“accounting records” ins by s 1(a) of Act 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;

[“acquiring party” ins by s 1(a) of Act 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;

 

“affected company” means a regulated company as set out in section 117(1)(i) and a private company that is controlled by or a subsidiary of a regulated company as a result of any circumstances contemplated in section 2(2)(a) or 3(1)(a);

[“affected company” ins by s 55(a) of Act 22 of 2022 wef 31 December 2022.]

 

“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 fairly valued, irrespective of its liabilities; or

 

(b)     in the case of the company’s undertaking, more than 50% of the value of its entire undertaking, fairly valued;

[“all or the greater part of the assets or undertaking” ins by s 1(b) of Act 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 any 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;

[“amalgamation or merger” para (b) subs by s 1(c) of Act 3 of 2011.]

 

“amalgamated or merged company” means a company that either—

 

(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);

[“audit” subs by s 1(d) of Act 3 of 2011.]

 

“Auditing Profession Act” means the Auditing Profession Act, 2005 (Act 26 of 2005);

 

“auditor” has the meaning set out in the Auditing Profession Act;

[“auditor” subs by s 1(e) of Act 3 of 2011.]

 

“Banks Act” means the Banks Act, 1990 (Act 94 of 1990);

[“Banks Act” subs by s 1(f) of Act 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 45 of 2002);

 

 

‘‘beneficial owner”, in respect of a company, means an individual who, directly or indirectly, ultimately owns that company or exercises effective control of that company, including through—

 

(a)      the holding of beneficial interests in the securities of that company;

 

(b)      the exercise of, or control of the exercise of the voting rights associated with securities of that     company;

 

(c)      the exercise of, or control of the exercise of the right to appoint or remove members of the         board of directors of that company;

 

(d)      the holding of beneficial interests in the securities, or the ability to exercise control, including      through a chain of ownership or control, of a holding company of that company;

 

(e)      the ability to exercise control, including through a chain of ownership or control, of—

 

          (i)       a juristic person other than a holding company of that company;

 

          (ii)      a body of persons corporate or unincorporate;

 

          (iii)     a person acting on behalf of a partnership;

 

          (iv)     a person acting in pursuance of the provisions of a trust agreement; or

 

(f)      the ability to otherwise materially influence the management of that company;

[“beneficial owner” ins by s 55(b) of Act 22 of 2022 wef 31 December 2022.]

 

“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 Financial Markets Act, 2012;

[“central securities depository” subs by s 111 of Act 19 of 2012.]

 

“close corporation” means a juristic person incorporated under the Close Corporations Act, 1984 (Act 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 section 187(4);

 

“company” means a juristic person incorporated in terms of this Act, a domesticated company, or a juristic person that, immediately before the effective date—

[Words preceding para (a) subs by s 1(g) of Act 3 of 2011.]

 

(a)     was registered in terms of the—

 

(i)      Companies Act, 1973 (Act 61 of 1973), other than as an external company as defined in that Act; or

 

(ii)      Close Corporations Act, 1984 (Act 69 of 1984), if it has subsequently been converted in terms of Schedule 2;

 

(b)     was in existence and recognised as an ‘existing company’ in terms of the Companies Act, 1973 (Act 61 of 1973); or

 

(c)      was deregistered in terms of the Companies Act, 1973 (Act 61 of 1973), and has subsequently been re-registered in terms of this Act;

 

“Competition Act”, means the Competition Act, 1998 (Act 89 of 1998);

 

“consideration” means anything of value given and accepted in exchange for any property, service, act, omission or forbearance or any other thing of value, including—

 

(a)     any money, property, negotiable instrument, securities, investment credit facility, token or ticket;

 

(b)     any labour, barter or similar exchange of one thing for another; or

 

(c)      any other thing, undertaking, promise, agreement or assurance, irrespective of its apparent or intrinsic value, or whether it is transferred directly or indirectly;

 

“Constitution” means the Constitution of the Republic South Africa, 1996;

 

“convertible”, when used in relation to any securities of a company means securities that may, by their terms, be converted into other securities of the company, including—

 

(a)     any non-voting securities issued by the company and which will become voting securities—

 

(i)      on the happening of a designated event; or

 

(ii)      if the holder of those securities so elects at some time after acquiring them; and

 

(b)     options to acquire securities to be issued by the company, irrespective of whether those securities may be voting securities, or non-voting securities contemplated in paragraph (a);

[“convertible” subs for “convertible securities” by s 1(h) of Act 3 of 2011.]

 

“co-operative” means a juristic person as defined in the Co-operatives Act, 2005 (Act 14 of 2005);

 

“Council” means the Financial Reporting Standards Council established by section 203;

 

“director” means a member of the board of a company, as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated;

 

“distribution” means a direct or indirect—

 

(a)     transfer by a company of money or other property of the company, other than its own shares, to or for the benefit of one or more holders of any of the shares, or to the holder of a beneficial interest in any such shares, of that company or of another company within the same group of companies, whether—

[Words preceding para (a)(i) subs by s 1(i)(i) of Act 3 of 2011.]

 

(i)      the form of a dividend;

 

(ii)      as a payment in lieu of a capitalisation share, as contemplated in section 47;

 

(iii)     as consideration for the acquisition—

[Words preceding para (a)(iii)(aa) subs by s 1(i)(ii) of Act 3 of 2011.]

 

(aa)   by the company of any of its shares, as contemplated in section 48; or

 

(bb)   by any company within the same group of companies, of any shares of a company within that group of companies; or

 

(iv)     otherwise in respect of any of the shares of that company or of another company within the same group of companies, subject to section 164(19);

 

(b)     incurrence of a debt or other obligation by a company for the benefit of one or more holders of any of the shares of that company or of another company within the same group of companies; or

 

(c)      forgiveness or waiver by a company of a debt or other obligation owed to the company by one or more holders of any of the shares of that company or of another company within the same group of companies,

[“distribution” para (c) subs by s 1(i)(iii) of Act 3 of 2011.]

 

but does not include any such action taken upon the final liquidation of the company;

 

“domesticated company” means a foreign company whose registration has been transferred to the Republic in terms of section 13(5) to (11);

[“domesticated company” ins by s 1(j) of Act 3 of 2011.]

 

“effective date”, with reference to any particular provision of this Act, means the date on which that provision came into operation in terms of section 225;

 

“electronic communication” has the meaning set out in section 1 of the Electronic Communications and Transactions Act;

 

“Electronic Communications and Transactions Act” means the Electronic Communications and Transactions Act, 2002 (Act 25 of 2002);

 

“employee share scheme” has the meaning set out in section 95(1)(c);

 

“exchange” when used as a noun, has the meaning set out in section 1 of the Financial Markets Act, 2012;

[“exchange” subs by s 111 of Act 19 of 2012.]

 

“exercise”, when used in relation to voting rights, includes voting by proxy, nominee, trustee or other person in a similar capacity;

 

“ex officio director” means a person who holds office as a director of a particular company solely as a consequence of that person holding some other office, title, designation or similar status specified in the company’s Memorandum of Incorporation;

 

“external company” means a foreign company that is carrying on business, or non-profit activities, as the case may be, within the Republic, subject to section 23(2);

 

“file”, when used as a verb, means to deliver a document to the Commission in the manner and form, if any, prescribed for that document;

 

“financial reporting standards”, with respect to any particular company’s financial statements, means the standards applicable to that company, as prescribed in terms of section 29(4) and (5);

 

“financial statement” includes—

 

(a)     annual financial statements and provisional annual financial statements;

 

(b)     interim or preliminary reports;

 

(c)      group and consolidated financial statements in the case of a group of companies; and

 

(d)     financial information in a circular, prospectus or provisional announcement of results, that an actual or prospective creditor or holder of the company’s securities, or the Commission, Panel or other regulatory authority, may reasonably be expected to rely on;

 

“foreign company” means an entity incorporated outside the Republic, irrespective of whether it is—

 

(a)     a profit, or non-profit, entity; or

 

(b)     carrying on business or non-profit activities, as the case may be, within the Republic;

 

“general voting rights” means voting rights that can be exercised generally at a general meeting of a company;

 

“group of companies” means a holding company and all of its subsidiaries;

[“group of companies” subs by s 1(k) of Act 3 of 2011.]

 

“holding company”, in relation to a subsidiary, means a juristic person that controls that subsidiary as a result of any circumstances contemplated in section 2(2)(a) or 3(1)(a);

[“holding company” subs by s 1(l) of Act 3 of 2011.]

 

“Human Rights Commission” means the South African Human Rights Commission established in terms of Chapter 9 of the Constitution;

 

“incorporator”, when used—

 

(a)     with respect to a company incorporated in terms of this Act, means a person who incorporated that company, as contemplated in section 13; or

 

(b)     with respect to a pre-existing company, means a person who took the relevant actions comparable to those contemplated in section 13 to bring about the incorporation of that company;

 

“individual” means a natural person;

 

“inspector” means a person appointed as such in terms of section 209(1);

[“inspector” subs by s 1(m) of Act 3 of 2011.]

 

“investigator” …

[“investigator” rep by s 1(n) of Act 3 of 2011.]

 

“inter-related”, when used in respect of three or more persons, means persons who are related to one another in a linked series of relationships, such that two of the persons are related in a manner contemplated in section 2(1), and one of them is related to the third in any such manner, and so forth in an unbroken series;

[“inter-related” subs by s 1(o) of Act 3 of 2011.]

 

“investigator” means a person appointed as such in terms of section 209(3);

[“investigator” ins by s 1(p) of Act 3 of 2011.]

 

“juristic person” includes—

 

(a)     a foreign company; and

 

(b)     a trust, irrespective of whether or not it was established within or outside the Republic;

 

“knowing”, “knowingly” or “knows”, when used with respect to a person, and in relation to a particular matter, means that the person either—

 

(a)     had actual knowledge of the matter;

[“knowing”, “knowingly” or “knows” para (a) subs by s 1(q) of Act 3 of 2011.]

 

(b)     was in a position in which the person reasonably ought to have—

 

(i)      had actual knowledge;

 

(ii)      investigated the matter to an extent that would have provided the person with actual knowledge; or

 

(iii)     taken other measures which, if taken, would reasonably be expected to have provided the person with actual knowledge of the matter;

 

“listed securities” has the meaning set out in section 1 of the Financial Markets Act, 2012;

[“listed securities” subs by s 111 of Act 19 of 2012.]

 

“Master” means the officer of the High Court, referred to in section 2 of the Administration of Estates Act, 1965 (Act 66 of 1965), who has jurisdiction over a particular matter arising in terms of this Act;

[“Master” subs by s 1(r) of Act 3 of 2011.]

 

“material”, when used as an adjective, means significant in the circumstances of a particular matter, to a degree that is—

 

(a)     of consequence in determining the matter; or

 

(b)     might reasonably affect a person’s judgement or decision-making in the matter;

 

“member”, when used in reference to—

 

(a)     a close corporation, has the meaning set out in section 1 of the Close Corporations Act, 1984 (Act 69 of 1984); or

 

(b)     a non-profit company, means a person who holds membership in, and specified rights in respect of, that non-profit company, as contemplated in Schedule 1; or

 

(c)      any other entity, means a person who is a constituent part of that entity;

[“member” subs by s 1(s) of Act 3 of 2011.]

 

“Memorandum”, or “Memorandum of Incorporation”, means the document, as amended from time to time that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company, and other matters as contemplated in section 15 and by which—

 

(a)     the company was incorporated under this Act, as contemplated in section 13;

 

(b)     a pre-existing company was structured and governed before the later of the—

 

(i)      effective date; or

 

(ii)      date it was converted to a company in terms of Schedule 2; or

 

(c)      a domesticated company is structured and governed;

[“Memorandum” or “Memorandum of Incorporation” subs for “Memorandum of Incorporation” by s 1(t) of Act 3 of 2011.]

 

“Minister” means the member of the Cabinet responsible for companies;

 

“nominee” means a person that acts as the registered holder of securities or an interest in securities on behalf of other persons;

[“nominee” subs by s 111 of Act 19 of 2012.]

 

“non-profit company” means a company—

 

(a)     incorporated for a public benefit or other object as required by item 1(1) of Schedule 1; and

 

(b)     the income and property of which are not distributable to its incorporators, members, directors, officers or persons related to any of them except to the extent permitted by item 1(3) of Schedule 1;

 

“Notice of Incorporation” means the notice to be filed in terms of section 13(1), by which the incorporators of a company inform the Commission of the incorporation of that company, for the purpose of having it registered;

 

“official language” means a language mentioned in section 6(1) of the Constitution;

 

“ordinary resolution” means a resolution adopted with the support of more than 50% of the voting rights exercised on the resolution, or a higher percentage as contemplated in section 65(8)—

 

(a)     at a shareholders meeting; or

 

(b)     by holders of the company’s securities acting other than at a meeting, as contemplated in section 60;

[“ordinary resolution” subs by s 1(u) of Act 3 of 2011.]

 

“organ of state” has the meaning set out in section 239 of the Constitution;

 

“Panel” means the Takeover Regulation Panel, established by section 196;

 

“participant” has the meaning set out in section 1 of the Financial Markets Act, 2012;

[“participant” subs by s 111 of Act 19 of 2012.]

 

“person” includes a juristic person;

 

“personal financial interest”, when used with respect to any person—

 

(a)     means a direct material interest of that person, of a financial, monetary or economic nature, or to which a monetary value may be attributed; but

 

(b)     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 45 of 2002), unless that person has direct control over the investment decisions of that fund or investment;

 

“personal liability company” means a profit company that satisfies the criteria in section 8(2)(c);

[“personal liability company” subs by s 1(v) of Act 3 of 2011.]

 

“pre-existing company” means a company contemplated in paragraph (a), (b) or (c) of the definition of ‘company’ in this section;

 

“pre-incorporation contract” means a written agreement entered into before the incorporation of a company by a person who purports to act in the name of, or on behalf of, the proposed company, with the intention or understanding that the proposed company will be incorporated, and will thereafter be bound by the agreement;

[“pre-incorporation contract” subs by s 1(w) of Act 3 of 2011.]

 

“premises” includes land, or any building, structure, vehicle, ship, boat, vessel, aircraft or container;

 

“prescribed” means determined, stipulated, required, authorised, permitted or otherwise regulated by a regulation or notice made in terms of this Act;

 

“prescribed officer” means a person who, within a company, performs any function that has been designated by the Minister in terms of section 66(10);

[“prescribed officer” subs by s 1(x) of Act 3 of 2011.]

 

“present at a meeting” means to be present in person, or able to participate in the meeting by electronic communication, or to be represented by a proxy who is present in person or able to participate in the meeting by electronic communication;

 

“private company” means a profit company that—

 

(a)     is not a public, personal liability or state-owned company; and

[“private company” para (a) subs by s 1(y) of Act 3 of 2011.]

 

(b)     satisfies the criteria set out in section 8(2)(b);

 

“profit company” means a company incorporated for the purpose of financial gain for its shareholders;

 

“public company” means a profit company that is not a state-owned company, a private company or a personal liability company;

 

“public regulation” means any national, provincial or local government legislation or subordinate legislation, or any licence, tariff, directive or similar authorisation issued by a regulatory authority or pursuant to any statutory authority;

 

“records”, when used with respect to any information pertaining to a company, means any information contemplated in section 24(1);

 

“record date” means the date established under section 59 on which a company determines the identity of its shareholders and their shareholdings for the purposes of this Act;

 

“registered auditor” has the meaning set out in the Auditing Profession Act;

 

“registered external company” means an external company that has registered its office as required by section 23, and has been assigned a registration number in terms of that section;

 

“registered office” means the office of a company, or of an external company, that is registered as required by section 23;

 

“registered trade union” means a trade union registered in terms of section 96 of the Labour Relations Act, 1995 (Act 66 of 1995);

 

“registration certificate”, when used with respect to a—

 

(a)     company incorporated on or after the effective date, means the certificate, or amended certificate, issued by the Commission as evidence of the incorporation and registration of that company;

 

(b)     pre-existing company registered in terms of—

 

(i)      the Companies Act, 1973 (Act 61 of 1973), means the certificate of incorporation or registration issued to it in terms of that Act;

 

(ii)      the Close Corporations Act, 1984 (Act 69 of 1984), and converted in terms of Schedule 2 to this Act, means the certificate of incorporation issued to the company in terms of that Schedule, read with section 14; or

 

(iii)     any other law, means any document issued to the company in terms of that law as evidence of the company’s incorporation; or

 

(c)      registered external company, means the certificate of registration issued to it in terms of this Act or the Companies Act, 1973 (Act 61 of 1973); or

[“registration certificate” para (c) am by s 1(z)(i) of Act 3 of 2011.]

 

(d)     a domesticated company, means the certificate issued to it upon the transfer of its registration to the Republic in terms of section 13(5) to (11);

[“registration certificate” para (d) ins by s 1(z)(ii) of Act 3 of 2011.]

 

“registry” means a depository of documents required to be kept by the Commission in terms of section 187(4);

 

“regulated person or entity” means a person that has been granted authority to conduct business by a regulatory authority;

 

“regulation” means a regulation made under this Act;

 

“regulatory authority” means an entity established in terms of national or provincial legislation responsible for regulating an industry, or sector of an industry;

 

“related”, when used in respect of two persons, means persons who are connected to one another in any manner contemplated in section 2(1)(a) to (c);

 

“relationship” includes the connection subsisting between any two or more persons who are related or inter-related, as determined in accordance with section 2;

 

“rules” and “rules of a company” means any rules made by a company as contemplated in section 15(3) to (5);

 

“securities” means any shares, debentures or other instruments, irrespective of their form or title, issued or authorised to be issued by a profit company;

[“securities” subs by s 1(aa) of Act 3 of 2011.]

 

“securities register” means the register required to be established by a profit company in terms of section 50(1);

[“securities register” ins by s 1(bb) of Act 3 of 2011.]

 

“series of integrated transactions” has the meaning set out in section 41(4)(b);

[“series of integrated transactions” ins by s 1(bb) of Act 3 of 2011.]

 

“share” means one of the units into which the proprietary interest in a profit company is divided;

 

“shareholder”, subject to section 57(1), means the holder of a share issued by a company and who is entered as such in the certificated or uncertificated securities register, as the case may be;

 

“shareholders meeting”, with respect to any particular matter concerning a company, means a meeting of those holders of that company’s issued securities who are entitled to exercise voting rights in relation to that matter;

 

“solvency and liquidity test” means the test set out in section 4(1);

 

“special resolution” means—

 

(a)     in the case of a company, a resolution adopted with the support of at least 75% of the voting rights exercised on the resolution, or a different percentage as contemplated in section 65(10)—

 

(i)      at a shareholders meeting; or

 

(ii)      by holders of the company’s securities acting other than at a meeting, as contemplated in section 60; or

 

(b)     in the case of any other juristic person, a decision by the owner or owners of that person, or by another authorised person, that requires the highest level of support in order to be adopted, in terms of the relevant law under which that juristic person was incorporated;

[“special resolution” subs by s 1(cc) of Act 3 of 2011.]

 

“state-owned company” means an enterprise that is registered in terms of this Act as a company, and either—

 

(a)     is listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act, 1999 (Act 1 of 1999); or

[“state-owned company” para (a) subs by s 1(dd) of Act 3 of 2011.]

 

(b)     is owned by a municipality, as contemplated in the Local Government: Municipal Systems Act, 2000 (Act 32 of 2000), and is otherwise similar to an enterprise referred to in paragraph (a);

 

“subsidiary” has the meaning determined in accordance with section 3;

 

“Takeover Regulations” means the regulations made by the Minister in terms of sections 120 and 223;

 

“this Act” includes the Schedules and regulations;

 

“unalterable provision” means a provision of this Act that does not expressly contemplate that its effect on any particular company may be negated, restricted, limited, qualified, extended or otherwise altered in substance or effect by a company’s Memorandum of Incorporation or rules;

 

“uncertificated securities” means any securities defined as such in section 1 of the Financial Markets Act, 2012;

[“uncertificated securities” subs by s 111 of Act 19 of 2012.]

 

“uncertificated securities register” means the record of uncertificated securities administered and maintained by a participant or central securities depository, as determined in accordance with the rules of a central securities depository, and which forms part of the relevant company’s securities register established and maintained in terms of Part E of Chapter 2;

 

“voting power”, with respect to any matter to be decided by a company, means the voting rights that may be exercised in connection with that matter by a particular person, as a percentage of all such voting rights;

 

“voting rights”, with respect to any matter to be decided by a company, means—

 

(a)     the rights of any holder of the company’s securities to vote in connection with that matter, in the case of a profit company; or

 

(b)     the rights of a member to vote in connection with the matter, in the case of a non-profit company;

 

“voting securities”, with respect to any particular matter, means securities that—

 

(a)     carry voting rights with respect to that matter; or

 

(b)     are presently convertible to securities that carry voting rights with respect to that matter; and

 

“wholly-owned subsidiary” has the meaning determined in accordance with section 3(1)(b).

 

2.       Related and inter-related persons, and control

 

(1)     For all purposes of this Act—

 

(a)     an individual is related to another individual if they—

 

(i)      are married, or live together in a relationship similar to a marriage; or

 

(ii)      are separated by no more than two degrees of natural or adopted consanguinity or affinity;

 

(b)     an individual is related to a juristic person if the individual directly or indirectly controls the juristic person, as determined in accordance with subsection (2); and

 

(c)      a juristic person is related to another juristic person if—

 

(i)      either of them directly or indirectly controls the other, or the business of the other, as determined in accordance with subsection (2);

 

(ii)      either is a subsidiary of the other; or

 

(iii)     a person directly or indirectly controls each of them, or the business of each of them, as determined in accordance with subsection (2).

 

(2)     For the purpose of subsection (1), a person controls a juristic person, or its business, if—

 

(a)     in the case of a juristic person that is a company—

 

(i)      that juristic person is a subsidiary of that first person, as determined in accordance with section 3(1)(a); or

 

(ii)      that first person together with any related or inter-related person, is—

 

(aa)   directly or indirectly able to exercise or control the exercise of a majority of the voting rights associated with securities of that company, whether pursuant to a shareholder agreement or otherwise; or

 

(bb)   has the right to appoint or elect, or control the appointment or election of, directors of that company who control a majority of the votes at a meeting of the board;

 

(b)     in the case of a juristic person that is a close corporation, that first person owns the majority of the members’ interest, or controls directly, or has the right to control, the majority of members’ votes in the close corporation;

 

(c)      in the case of a juristic person that is a trust, that first person has the ability to control the majority of the votes of the trustees or to appoint the majority of the trustees, or to appoint or change the majority of the beneficiaries of the trust; or

 

(d)     that first person has the ability to materially influence the policy of the juristic person in a manner comparable to a person who, in ordinary commercial practice, would be able to exercise an element of control referred to in paragraph (a), (b) or (c).

 

(3)     With respect to any particular matter arising in terms of this Act, a court, the Companies Tribunal or the Panel may exempt any person from the application of a provision of this Act that would apply to that person because of a relationship contemplated in subsection (1) if the person can show that, in respect of that particular matter, there is sufficient evidence to conclude that the person acts independently of any related or inter-related person.

 

3.       Subsidiary relationships

 

(1)     A company is—

 

(a)     a subsidiary of another juristic person if that juristic person, one or more other subsidiaries of that juristic person, or one or more nominees of that juristic person or any of its subsidiaries, alone or in any combination—

 

(i)      is or are directly or indirectly able to exercise, or control the exercise of, a majority of the general voting rights associated with issued securities of that company, whether pursuant to a shareholder agreement or otherwise; or

 

(ii)      has or have the right to appoint or elect, or control the appointment or election of, directors of that company who control a majority of the votes at a meeting of the board; or

 

(b)     a wholly-owned subsidiary of another juristic person if all of the general voting rights associated with issued securities of the company are held or controlled, alone or in any combination, by persons contemplated in paragraph (a).

 

(2)     For the purpose of determining whether a person controls all or a majority of the general voting rights associated with issued securities of a company—

 

(a)     voting rights that are exercisable only in certain circumstances are to be taken into account only—

 

(i)      when those circumstances have arisen, and for so long as they continue; or

 

(ii)      when those circumstances are under the control of the person holding the voting rights;

 

(b)     voting rights that are exercisable only on the instructions or with the consent or concurrence of another person are to be treated as being held by a nominee for that other person; and

 

(c)      voting rights held by—

 

(i)      a person as nominee for another person are to be treated as held by that other person; or

 

(ii)      a person in a fiduciary capacity are to be treated as held by the beneficiary of those voting rights.

 

(3)     For the purposes of subsection (2), ‘hold’, or any derivative of it, refers to the registered or direct or indirect beneficial holder of securities conferring a right to vote.

 

4.       Solvency and liquidity test

 

(1)     For any purpose of this Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time—

 

(a)     the assets of the company, as fairly valued, equal or exceed the liabilities of the company, as fairly valued; and

[S 4(1)(a) subs by s 2(a) of Act 3 of 2011.]

 

(b)     it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of—

 

(i)      12 months after the date on which the test is considered; or

 

(ii)      in the case of a distribution contemplated in paragraph (a) of the definition of ‘distribution’ in section 1, 12 months following that distribution.

 

(2)     For the purposes contemplated in subsection (1)—

 

(a)     any financial information to be considered concerning the company must be based on—

 

(i)      accounting records that satisfy the requirements of section 28; and

 

(ii)      financial statements that satisfy the requirements of section 29;

 

(b)     subject to paragraph (c), the board or any other person applying the solvency and liquidity test to a company—

 

(i)      must consider a fair valuation of the company’s assets and liabilities, including any reasonably foreseeable contingent assets and liabilities, irrespective of whether or not arising as a result of the proposed distribution, or otherwise; and

 

(ii)      may consider any other valuation of the company’s assets and liabilities that is reasonable in the circumstances; and

 

(c)      unless the Memorandum of Incorporation of the company provides otherwise, when applying the test in respect of a distribution contemplated in paragraph (a) of the definition of ‘distribution’ in section 1, a person is not to include as a liability any amount that would be required, if the company were to be liquidated at the time of the distribution, to satisfy the preferential rights upon liquidation of shareholders whose preferential rights upon liquidation are superior to the preferential rights upon liquidation of those receiving the distribution.

[S 4(1)(c) subs by s 2(b) of Act 3 of 2011.]

 

5.       General interpretation of Act

 

(1)     This Act must be interpreted and applied in a manner that gives effect to the purposes set out in section 7.

 

(2)     To the extent appropriate, a court interpreting or applying this Act may consider foreign company law.

 

(3)     When, in this Act, a particular number of ‘business days’ is provided for between the happening of one event and another, the number of days must be calculated by—

 

(a)     excluding the day on which the first such event occurs;

 

(b)     including the day on or by which the second event is to occur; and

 

(c)      excluding any public holiday, Saturday or Sunday that falls on or between the days contemplated in paragraphs (a) and (b), respectively.

 

(4)     If there is an inconsistency between any provision of this Act and a provision of any other national legislation—

 

(a)     the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and

 

(b)     to the extent that it is impossible to apply or comply with one of the inconsistent provisions without contravening the second—

 

(i)      any applicable provisions of the—

 

(aa)   Auditing Profession Act;

 

(bb)   Labour Relations Act, 1995 (Act 66 of 1995);

 

(cc)    Promotion of Access to Information Act, 2000 (Act 2 of 2000);

 

(dd)   Promotion of Administrative Justice Act, 2000 (Act 3 of 2000);

 

(ee)   Public Finance Management Act, 1999 (Act 1 of 1999);

 

(ff)     Financial Markets Act, 2012;

[S 5(4)(b)(i)(ff) subs by s 3(a) of Act 3 of 2011; s 111 of Act 19 of 2012.]

 

(gg)   Banks Act;

[S 5(4)(b)(i)(gg) subs by s 3(a) of Act 3 of 2011.]

 

(hh)   Local Government: Municipal Finance Management Act, 2003 (Act 56 of 2003); or

[S 5(4)(b)(i)(hh) ins by s 3(b) of Act 3 of 2011.]

 

(ii)      Section 8 of the National Payment System Act, 1998 (Act 78 of 1998),

[S 5(4)(b)(i)(ii) ins by s 3(b) of Act 3 of 2011.]

 

prevail in the case of an inconsistency involving any of them, except to the extent provided otherwise in sections 30(8) or 49(4); or

[Words following s 5(4)(b)(i)(ii) subs by s 3(c) of Act 3 of 2011.]

 

(ii)      the provisions of this Act prevail in any other case, except to the extent provided otherwise in subsection (5) or section 118(4).

 

(5)     If there is a conflict between a provision of Chapter 8 and a provision of the Public Service Act, 1994 (Proclamation 103 of 1994), the provisions of that Act prevail.

 

(6)     If there is a conflict between any provision of this Act and a provision of the listing requirements of an exchange—

 

(a)     the provisions of both this Act and the listing requirements apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and

 

(b)     to the extent that it is impossible to apply and comply with one of the inconsistent provisions without contravening the second, the provisions of this Act prevail, except to the extent that this Act expressly provides otherwise.

[S 5(6) ins by s 3(d) of Act 3 of 2011.]

 

6.       Anti-avoidance, exemptions and substantial compliance

 

(1)     A court, on application by the Commission, Panel or an exchange in respect of a company listed on that exchange, may declare any agreement, transaction, arrangement, resolution or provision of a company’s Memorandum of Incorporation or rules—

[Words preceding s 6(1)(a) subs by s 4(a) of Act 3 of 2011.]

 

(a)     to be primarily or substantially intended to defeat or reduce the effect of a prohibition or requirement established by or in terms of an unalterable provision of this Act; and

 

(b)     void to the extent that it defeats or reduces the effect of a prohibition or requirement established by or in terms of an unalterable provision of this Act.

 

(2)     A person may apply to the Companies Tribunal for an administrative order exempting an agreement, transaction, arrangement, resolution or provision of a company’s Memorandum of Incorporation or rules from any prohibition or requirement established by or in terms of an unalterable provision of this Act, other than a provision that falls within the jurisdiction of the Panel.

 

(3)     The Companies Tribunal may make an administrative order contemplated in subsection (2) if it is satisfied that—

 

(a)     the agreement, transaction, arrangement, resolution or provision serves a reasonable purpose other than to defeat or reduce the effect of that prohibition or requirement; and

 

(b)     it is reasonable and justifiable to grant the exemption, having regard to the purposes of this Act and all relevant factors, including—

 

(i)      the purpose and policy served by the relevant prohibition or requirement; and

 

(ii)      the extent to which the agreement, transaction, arrangement, resolution or provision infringes or would infringe the relevant prohibition or requirement.

 

(4)     The producer of a prospectus, notice, disclosure or document that is required, in terms of this Act, to be published, produced or provided to a potential investor, a company’s creditor or potential creditor, a holder of a company’s securities, a member of a non-profit company, an employee of a company or a representative of any employees of a company, must publish, produce, or provide that prospectus, notice, disclosure or document—

 

(a)     in the prescribed form, if any, for that prospectus, notice, disclosure or document; or

 

(b)     in plain language, if no form has been prescribed for that prospectus, notice, disclosure or document.

 

(5)     For the purposes of this Act, a prospectus, notice, disclosure or document is in plain language if it is reasonable to conclude that a person of the class of persons for whom the prospectus, notice, disclosure or document is intended, with average literacy skills and minimal experience in dealing with company law matters, could be expected to understand the content, significance and import of the prospectus, notice, disclosure or document without undue effort, having regard to—

 

(a)     the context, comprehensiveness and consistency of the prospectus, notice, disclosure or document;

 

(b)     the organisation, form and style of the prospectus, notice, disclosure or document;

 

(c)      the vocabulary, usage and sentence structure of the prospectus, notice, disclosure or document; and

 

(d)     the use of any illustrations, examples, headings or other aids to reading and understanding in the prospectus, notice, disclosure or document.

 

(6)     The Commission may publish guidelines for methods of assessing whether a prospectus, notice, disclosure or document satisfies the requirements of subsection (4)(b).

 

(7)     An unaltered electronically or mechanically generated reproduction of any document, other than a share certificate, may be substituted for the original for any purpose for which the original could be used in terms of this Act, if that reproduction satisfies any applicable prescribed requirements as to the form or manner of reproduction.

[S 6(7) subs by s 4(b) of Act 3 of 2011.]

 

(8)     If a form of document, record, statement or notice is prescribed in terms of this Act for any purpose—

 

(a)     it is sufficient if the person required to prepare or complete such a document, record, statement or notice does so in a form that satisfies all of the substantive requirements of the prescribed form; and

 

(b)     any deviation from the design or content of the prescribed form does not invalidate the action taken by the person preparing or completing that document, record, statement or notice, unless the deviation—

 

(i)      negatively and materially affects the substance of the document, record, statement or notice; or

 

(ii)      is such that it would reasonably mislead a person reading the document, record, statement or notice.

 

(9)     If a manner of delivery of a document, record, statement or notice is prescribed in terms of this Act for any purpose—

 

(a)     it is sufficient if the person required to deliver such a document, record, statement or notice does so in a manner that satisfies all of the substantive requirements as prescribed; and

 

(b)     any deviation from the prescribed manner does not invalidate the action taken by the person delivering that document, record, statement or notice, unless the deviation—

 

(i)      materially reduces the probability that the intended recipient will receive the document, record, statement or notice; or

 

(ii)      is such as would reasonably mislead a person to whom the document, record, statement or notice is, or is to be, delivered.

 

(10)   If, in terms of this Act, a notice is required or permitted to be given or published to any person, it is sufficient if the notice is transmitted electronically directly to that person in a manner and form such that the notice can conveniently be printed by the recipient within a reasonable time and at a reasonable cost.

 

(11)   If, in terms of this Act, a document, record or statement, other than a notice contemplated in subsection (10), is required—

 

(a)     to be retained, it is sufficient if an electronic original or reproduction of that document is retained as provided for in section 15 of the Electronic Communications and Transactions Act; or

 

(b)     to be published, provided or delivered, it is sufficient if—

 

(i)      an electronic original or reproduction of that document, record or statement is published, provided or delivered by electronic communication in a manner and form such that the document, record or statement can conveniently be printed by the recipient within a reasonable time and at a reasonable cost; or

 

(ii)      a notice of the availability of that document, record or statement, summarising its content and satisfying any prescribed requirements, is delivered to each intended recipient of the document, record or statement, together with instructions for receiving the complete document, record or statement.

 

(12)   If a provision of this Act requires a document to be signed or initialled—

 

(a)     by or on behalf of a person, that signing or initialling may be effected in any manner provided for in the Electronic Communications and Transactions Act; or

 

(b)     by two or more persons, it is sufficient if—

 

(i)      all of those persons sign a single original of the document, in person or as contemplated in paragraph (a); or

 

(ii)      each of those persons signs a separate duplicate original of the document, in person or as contemplated in paragraph (a), and in such a case, the several signed duplicate originals, when combined, constitute the entire document.

 

(13)   The Commission may—

 

(a)     establish a system, using any means of electronic communication, to facilitate the automated—

 

(i)      reservation of names in terms of Part A of Chapter 2 or in terms of any other legislation listed in Schedule 4;

 

(ii)      incorporation and registration of companies or close corporations; or

 

(iii)     filing of any information contemplated by this Act or by any legislation listed in Schedule 4; or

 

(b)     accredit an established system that—

 

(i)      is capable of facilitating any activity contemplated in paragraph (a); and

 

(ii)      satisfies any prescribed requirements.

 

(14)   The Minister may—

 

(a)     make regulations relating to the standards of operation, accessibility, technical requirements, service quality, and fees for the use of any system contemplated in subsection (13); and

[S 6(14)(a) subs by s 4(c) of Act 3 of 2011.]

 

(b)     declare any system established or accredited by the Commission to be an acceptable mechanism for the filing of any particular document, in lieu of any other requirements set out in legislation relating to the filing of that document.

 

(15)   To the extent that the specific content, or a particular effect, of any provision of a company’s Memorandum of Incorporation—

 

(a)     is required of the company by or in terms of any applicable public regulation, or by the listing requirements of an exchange; and

 

(b)     has the effect of negating, restricting, limiting, qualifying, extending or otherwise altering the substance or effect of an unalterable provision of the Act,

 

that provision of the company’s Memorandum of Incorporation must not be construed as being contrary to section 15(1)(a).

[S 6(15) ins by s 4(d) of Act 3 of 2011.]

 

Part B

Purpose and application

 

7.       Purposes of Act

 

The purposes of this Act are to—

 

(a)     promote compliance with the Bill of Rights as provided for in the Constitution, in the application of company law;

 

(b)     promote the development of the South African economy by—

 

(i)      encouraging entrepreneurship and enterprise efficiency;

 

(ii)      creating flexibility and simplicity in the formation and maintenance of companies; and

 

(iii)     encouraging transparency and high standards of corporate governance as appropriate, given the significant role of enterprises within the social and economic life of the nation;

 

(c)      promote innovation and investment in the South African markets;

 

(d)     reaffirm the concept of the company as a means of achieving economic and social benefits;

 

(e)     continue to provide for the creation and use of companies, in a manner that enhances the economic welfare of South Africa as a partner within the global economy;

 

(f)      promote the development of companies within all sectors of the economy, and encourage active participation in economic organisation, management and productivity;

 

(g)     create optimum conditions for the aggregation of capital for productive purposes, and for the investment of that capital in enterprises and the spreading of economic risk;

 

(h)     provide for the formation, operation and accountability of non-profit companies in a manner designed to promote, support and enhance the capacity of such companies to perform their functions;

 

(i)       balance the rights and obligations of shareholders and directors within companies;

 

(j)       encourage the efficient and responsible management of companies;

 

(k)      provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders; and

 

(l)       provide a predictable and effective environment for the efficient regulation of companies.

 

8.       Categories of companies

 

(1)     Two types of companies may be formed and incorporated under this Act, namely profit companies and non-profit companies.

 

(2)     A profit company is—

 

(a)     a state-owned company; or

 

(b)     a private company if—

 

(i)      it is not a state-owned company; and

 

(ii)      its Memorandum of Incorporation—

 

(aa)   prohibits it from offering any of its securities to the public; and

 

(bb)   restricts the transferability of its securities;

 

(c)      a personal liability company if—

 

(i)      it meets the criteria for a private company; and

 

(ii)      its Memorandum of Incorporation states that it is a personal liability company; or

 

(d)     a public company, in any other case.

 

(3)     No association of persons formed after 31 December 1939 for the purpose of carrying on any business that has for its object the acquisition of gain by the association or its individual members is or may be a company or other form of body corporate unless it—

 

(a)     is registered as a company under this Act;

 

(b)     is formed pursuant to another law; or

 

(c)      was formed pursuant to Letters Patent or Royal Charter before 31 May 1962.

 

9.       Modified application with respect to state-owned companies

 

(1)     Subject to section 5(4) and (5), any provision of this Act that applies to a public company applies also to a state-owned company, except to the extent that the Minister has granted an exemption in terms of subsection (3).

 

(2)     The member of the Cabinet responsible for—

 

(a)     state-owned companies may request the Minister to grant a total, partial or conditional exemption from one or more provisions of this Act, applicable to all state-owned companies, any class of state-owned companies, or to one or more particular state-owned company; or

 

(b)     local government matters may request the Minister to grant a total, partial or conditional exemption from one or more provisions of this Act, applicable to all state-owned companies owned by a municipality, any class of such enterprises, or to one or more particular such enterprises, on the grounds that those provisions overlap or duplicate an applicable regulatory scheme established in terms of any other national legislation.

 

(3)     The Minister, by notice in the Gazette after receiving the advice of the Commission, may grant an exemption contemplated in subsection (2)—

 

(a)     only to the extent that the relevant alternative regulatory scheme ensures the achievement of the purposes of this Act at least as well as the provisions of this Act; and

 

(b)     subject to any limits or conditions necessary to ensure the achievement of the purposes of this Act.

 

10.     Modified application with respect to non-profit companies

 

(1)     Every provision of this Act applies to a non-profit company, subject to the provisions, limitations, alterations or extensions set out in this section, and in Schedule 1.

 

(2)     The following provisions of this Act, and any regulations made in respect of any such provisions, do not apply to a non-profit company—

 

(a)     Part D of Chapter 2 – Capitalisation of profit companies.

 

(b)     Part E of Chapter 2 – Securities registration and transfer.

 

(c)      Section 66(8) and (9) and section 68 – Remuneration and election of directors.

 

(d)     Parts B and D of Chapter 3 – Company secretaries, and audit committees, except to the extent that an obligation to appoint a company secretary, auditor or audit committee arises in terms of—

 

(i)      a requirement in the company’s Memorandum of Incorporation, as contemplated in section 34(2); or

 

(ii)      regulations contemplated in section 30(7).

 

(e)     Chapter 4 – Public offerings of company securities.

 

(f)      Chapter 5 – Takeovers, offers and fundamental transactions, except to the extent contemplated in item 2 of Schedule 1.

 

(g)     Sections 146(d), and 152(3)(c) – Rights of shareholders to approve a business rescue plan, except to the extent that the non-profit company is itself a shareholder of a profit company that is engaged in business rescue proceedings.

 

(h)     Section 164 – Dissenting shareholders’ appraisal rights, except to the extent that the non-profit company is itself a shareholder of a profit company.

[S 10(2) subs by s 5 of Act 3 of 2011.]

 

(3)     Sections 58 to 65, read with the changes required by the context—

 

(a)     apply to a non-profit company only if the company has voting members; and

 

(b)     when applied to a non-profit company, are subject to the provisions of item 4 of Schedule 1.

 

(4)     With respect to a non-profit company that has voting members, a reference in this Act to “a shareholder”, “the holders of a company’s securities”, “holders of issued securities of that company” or “a holder of voting rights entitled to be voted’ is a reference to the voting members of the non-profit company.

 

CHAPTER 2

FORMATION, ADMINISTRATION AND DISSOLUTION OF COMPANIES

 

Part A

Reservation and registration of company names

 

11.     Criteria for names of companies

 

(1)     Subject to subsections (2) and (3), a company name—

 

(a)     may comprise one or more words in any language, irrespective of whether the word or words are commonly used or contrived for the purpose, together with—

[Words preceding s 11(1)(a)(i) subs by s 6(a) of Act 3 of 2011.]

 

(i)      any letters, numbers or punctuation marks;

 

(ii)      any of the following symbols: +, &, #, @, %, =;

[S 11(1)(a)(ii) subs by s 6(b) of Act 3 of 2011; commencement of s 11(1)(a)(ii): 1 May 2014.]

 

(iii)     any other symbol permitted by the regulations made in terms of subsection (4); or

[Commencement of s 11(1)(a)(iii): 1 May 2014.]

 

(iv)     round brackets used in pairs to isolate any other part of the name,

 

alone or in any combination; or

 

(b)     in the case of a profit company, may be the registration number of the company together with the relevant expressions required by subsection (3).

 

(2)     The name of a company must—

 

(a)     not be the same as—

 

(i)      the name of another company, domesticated company, registered external company, close corporation or co-operative;

 

(ii)      a name registered for the use of a person, other than the company itself or a person controlling the company, as a defensive name in terms of section 12(9), or as a business name in terms of the Business Names Act, 1960 (Act 27 of 1960), unless the registered user of that defensive name or business name has executed the necessary documents to transfer the registration in favour of the company;

 

(iii)     a registered trade mark belonging to a person other than the company, or a mark in respect of which an application has been filed in the Republic for registration as a trade mark or a well-known trade mark as contemplated in section 35 of the Trade Marks Act, 1993 (Act 194 of 1993), unless the registered owner of that mark has consented in writing to the use of the mark as the name of the company; or

 

(iv)     a mark, word or expression the use of which is restricted or protected in terms of the Merchandise Marks Act, 1941 (Act 17 of 1941), except to the extent permitted by or in terms of that Act;

[S 11(2)(a) subs by s 6(c) of Act 3 of 2011.]

 

(b)     not be confusingly similar to a name, trade mark, mark, word or expression contemplated in paragraph (a) unless—

 

(i)      in the case of names referred to in paragraph (a)(i), each company bearing any such similar name is a member of the same group of companies;

 

(ii)      in the case of a company name similar to a defensive name or to a business name referred to in paragraph (a)(ii), the company, or a person who controls the company, is the registered owner of that defensive name or business name;

 

(iii)     in the case of a name similar to a trade mark or mark referred to in paragraph (a)(iii), the company is the registered owner of the business name, trade mark or mark, or is authorised by the registered owner to use it; or

 

(iv)     in the case of a name similar to a mark, word or expression referred to in paragraph (a)(iv), the use of that mark, word or expression by the company is permitted by or in terms of the Merchandise Marks Act, 1941;

[S 11(2)(b) ins by s 6(d) of Act 3 of 2011.]

 

(c)      not falsely imply or suggest, or be such as would reasonably mislead a person to believe incorrectly, that the company—

 

(i)      is part of, or associated with, any other person or entity;

 

(ii)      is an organ of state or a court, or is operated, sponsored, supported or endorsed by the State or by any organ of state or a court;

 

(iii)     is owned, managed or conducted by a person or persons having any particular educational designation or who is a regulated person or entity;

 

(iv)     is owned, operated, sponsored, supported or endorsed by, or enjoys the patronage of, any—

 

(aa)   foreign state, head of state, head of government, government or administration or any department of such a government or administration; or

 

(bb)   international organisation; and

[S 11(2)(b) renumbered as 11(2)(c) by s 6(d) of Act 3 of 2011.]

 

(d)     not include any word, expression or symbol that, in isolation or in context within the rest of the name, may reasonably be considered to constitute—

 

(i)      propaganda for war;

 

(ii)      incitement of imminent violence; or

 

(iii)     advocacy of hatred based on race, ethnicity, gender or religion, or incitement to cause harm.

[S 11(2)(c) renumbered as 11(2)(d) by s 6(d) of Act 3 of 2011.]

 

(3)     In addition to complying with the requirements of subsections (1) and (2)—

 

(a)     if the name of a profit company is the company’s registration number, as contemplated in subsection (1)(b), that number must be immediately followed by the expression “(South Africa)”;

 

(b)     if the company’s Memorandum of Incorporation includes any provision contemplated in section 15(2)(b) or (c) restricting or prohibiting the amendment of any particular provision of the Memorandum, the name must be immediately followed by the expression “(RF)”; and

[S 11(3)(b) subs by s 6(e) of Act 3 of 2011.]

 

(c)      a company name, irrespective of its form or language, must end with one of the following expressions, as appropriate for the category of the particular company—

 

(i)      The word “Incorporated” or its abbreviation “Inc.”, in the case of a personal liability company.

 

(ii)      The expression “Proprietary Limited” or its abbreviation, “(Pty) Ltd.”, in the case of a private company.

 

(iii)     The word “Limited” or its abbreviation, “Ltd.”, in the case of a public company.

 

(iv)     The expression “SOC Ltd.” in the case of a state-owned company.

 

(v)      The expression “NPC”, in the case of a non-profit company.

 

(4)     The Minister may prescribe—

 

(a)     additional commonly recognised symbols for use in company names as contemplated in subsection (1)(a)(iii); and

 

(b)     alternative expressions, in any official language, which may be used in substitution for any expression required to follow a company’s name in terms of subsection (3).

[S 11(4) subs by s 6(f) of Act 3 of 2011.]

 

12.     Reservation of name and defensive names

 

(1)     A person may reserve one or more names to be used at a later time, either for a newly incorporated company, or as an amendment to the name of an existing company, by filing an application together with the prescribed fee.

 

(2)     The Commission must reserve each name as applied for in the name of the applicant, unless—

 

(a)     the applicant is prohibited, in terms of section 11(2)(a), from using the name as applied for; or

 

(b)     the name as applied for is already reserved in terms of this section.

[S 12(2) subs by s 7(a) of Act 3 of 2011.]

 

(3)     If, upon reserving a name in terms of subsection (2), there are reasonable grounds for considering that the name may be inconsistent with the requirements of—

 

(a)     section 11(2)(b) or (c)—

[Words preceding s 12(3)(a)(i) subs by s 7(b) of Act 3 of 2011.]

 

(i)      the Commission, by written notice, may require the applicant to serve a copy of the application and name reservation on any particular person, or class of persons, named in the notice, on the grounds that the person or persons may have an interest in the use of the name that has been reserved for the applicant; and

 

(ii)      any person to whom a notice is required to be given in terms of subparagraph (i) may apply to the Companies Tribunal for a determination and order in terms of section 160; or

 

(b)     section 11(2)(d)—

[Words preceding s 12(3)(b)(i) subs by s 7(c) of Act 3 of 2011.]

 

(i)      the Commission may refer the application and name reservation to the South African Human Rights Commission; and

 

(ii)      the South African Human Rights Commission may apply to the Companies Tribunal for a determination and order in terms of section 160.

 

(4)     A name reservation continues for a period of six months from the date of the application, and may be extended by the Commission for good cause shown, on application by the person for whom the name is reserved together with the prescribed fee, for a period of 60 business days at a time.

 

(5)     A person for whom a name has been reserved in terms of subsection (2) may transfer that reservation to another person by filing a signed notice of the transfer together with the prescribed fee.

 

(6)     If the Commission reasonably believes that an applicant in terms of subsection (1), a person to whom a reserved name is to be transferred, or a person for whom a name is reserved, may be attempting to abuse the name reservation system for the purpose of selling access to names, or trading in or marketing names, the Commission may issue a notice to that person—

 

(a)     requiring the person to show cause why that name should be reserved or continue to be reserved, or why the reservation should be transferred;

 

(b)     refusing to extend a name reservation upon its expiry;

 

(c)      refusing to transfer a reserved name; or

 

(d)     cancelling a name reservation.

 

(7)     If, as a result of a pattern of conduct by a person, or two or more persons who are related or inter-related, the Commission has reasonable grounds to believe that the person or persons have abused the name reservation system by—

 

(a)     selling access to names, or trading in or marketing reserved names; or

 

(b)     repeatedly attempting to reserve names for the purpose of selling access to names, or trading in or marketing reserved names,

 

the Commission may apply to a court for an order prohibiting the person or persons from applying to reserve any names in terms of this section for a period that the court considers just and reasonable in the circumstances.

 

(8)     In considering whether a person has abused, or may be attempting to abuse, the name reservation system as contemplated in subsection (6) or (7), the Commission, Tribunal or a court may consider any relevant conduct by that person or any related or inter-related person, including—

[Words preceding s 12(8)(a) subs by s 7(d) of Act 3 of 2011.]

 

(a)     the reservation of more than one name in a single application or a series of applications;

 

(b)     a pattern of repetitious applications to reserve a particular name or a number of substantially similar names, or to extend the reservation of a particular name;

 

(c)      a failure to show good cause for a reservation period to be extended; or

 

(d)     a pattern of unusually frequent transfers of reserved names without apparent legitimate cause having regard to the nature of the person’s profession or business.

 

(9)     Any person may on application on the prescribed form and on payment of the prescribed fee apply to the Commission to—

 

(a)     register any name as a defensive name for a period of two years; or

 

(b)     renew, for a period of two years, the registration of a name as a defensive name,

 

in respect of which he or she has furnished proof, to the satisfaction of the Commission, that he or she has a direct and material interest.

 

(10)   The registration of a defensive name may be transferred to another person by notice in the prescribed manner and form and upon payment of the prescribed fee.

[S 12(10) ins by s 7(e) of Act 3 of 2011.]

 

Part B

Incorporation and legal status of companies

 

13.     Right to incorporate company or transfer registration of foreign company

[Section heading subs by s 8(a) of Act 3 of 2011.]

 

(1)     One or more persons, or an organ of state, may incorporate a profit company, and an organ of state, a juristic person, or three or more persons acting in concert, may incorporate a non-profit company, by—

[Words preceding s 13(1)(a) subs by s 8(b) of Act 3 of 2011.]

 

(a)     completing, and each signing in person or by proxy, a Memorandum of Incorporation—

 

(i)      in the prescribed form; or

 

(ii)      in a form unique to the company; and

 

(b)     filing a Notice of Incorporation, in accordance with subsection (2).

 

(2)     The Notice of Incorporation of a company must be—

 

(a)     filed in the prescribed manner and form, together with the prescribed fee; and

[S 13(2)(a) subs by s 8(c) of Act 3 of 2011.]

 

(b)     accompanied by a copy of the Memorandum of Incorporation, subject to any declaration contemplated in section 6(14)(b).

 

(3)     If a company’s Memorandum of Incorporation includes any provision contemplated in section 15(2)(b) or (c), the Notice of Incorporation filed by the company must include a prominent statement drawing attention to each such provision, and its location in the Memorandum of Incorporation.

 

(4)     The Commission—

 

(a)     may reject a Notice of Incorporation if the notice, or any thing required to be filed with it, is incomplete, or improperly completed in any respect, subject to section 6(8); and

 

(b)     must reject a Notice of Incorporation if—

 

(i)      the initial directors of the company, as set out in the Notice, are fewer than required by or in terms of section 66(2); or

 

(ii)      the Commission reasonably believes that any of the initial directors of the company, as set out in the Notice, are disqualified in terms of section 69(8), and the remaining directors are fewer than required by or in terms of section 66(2).

 

(5)     Subject to subsections (6) and (7), a foreign company may apply in the prescribed manner and form, accompanied by the prescribed application fee, to transfer its registration to the Republic from the foreign jurisdiction in which it is registered, and thereafter exists as a company in terms of this Act as if it had been originally so incorporated and registered.

[S 13(5) ins by s 8(d) of Act 3 of 2011.]

 

(6)     A foreign company may transfer its registration as contemplated in subsection (5) if—

 

(a)     the law of the jurisdiction in which the company is registered permits such a transfer, and the company has complied with the requirements of that law in relation to the transfer;

 

(b)     the transfer has been approved by the company’s shareholders—

 

(i)      in accordance with the law of the jurisdiction in which the company is registered, if that law imposes such a requirement; or

 

(ii)      by the equivalent of a special resolution in terms of this Act, if the law of the jurisdiction in which the company is registered does not require such shareholder approval;

 

(c)      the whole or greater part of its assets and undertaking are within the Republic, other than the assets and undertaking of any subsidiary that is incorporated outside the Republic;

 

(d)     the majority of its shareholders are resident in the Republic;

 

(e)     the majority of its directors are or will be South African citizens; and

 

(f)      immediately following the transfer of registration, the company—

 

(i)      will satisfy the solvency and liquidity test; and

 

(ii)      will no longer be registered in another jurisdiction.

[S 13(6) ins by s 8(d) of Act 3 of 2011.]

 

(7)     Despite satisfying the requirements of subsection (6), a foreign company may not transfer its registration to the Republic as contemplated in subsection (5) if—

 

(a)     the foreign company—

 

(i)      is permitted, in terms of any law or its Articles or Memorandum of Incorporation, to issue bearer shares; or

 

(ii)      has issued any bearer shares that remain issued;

 

(b)     the foreign company is in liquidation;

 

(c)      a receiver or manager has been appointed, whether by a court or otherwise, in relation to the property of the foreign company;

 

(d)     the foreign company—

 

(i)      is engaged in proceedings comparable to business rescue proceedings in terms of this Act; or

 

(ii)      is subject to an approved plan, or a court order, comparable to an approved business rescue plan in terms of this Act; or

 

(iii)     has entered into a compromise or arrangement with a creditor, and the compromise or arrangement is in force; or

 

(e)     an application has been made to a court in any jurisdiction, and not fully disposed of—

 

(i)      to put the foreign company into liquidation, to wind it up or to have it declared insolvent;

 

(ii)      for the approval of a compromise or arrangement between the foreign company and a creditor; or

 

(iii)     for the appointment of a receiver or administrator in relation to any property of the foreign company.

[S 13(7) ins by s 8(d) of Act 3 of 2011.]

 

(8)     The Minister may make regulations—

 

(a)     prescribing forms and procedures for the consideration of applications contemplated in subsection (5);

 

(b)     for the registration of domesticated companies as contemplated in subsections (5) to (7) and for the issuing of registration certificates to such companies; and

 

(c)      establishing requirements for each domesticated company to harmonise its Memorandum of Incorporation with this Act.

[S 13(8) ins by s 8(d) of Act 3 of 2011.]

 

(9)     Subsections (3) and (4) and section 14, each read with the changes required by the context, apply to an application in terms of subsections (5) to (7).

[S 13(9) ins by s 8(d) of Act 3 of 2011.]

 

(10)   Upon compliance of the requirements for registration of a domesticated company as contemplated in terms of this section, the Commissioner must issue to such company a registration certificate to the effect that such registration has taken place and that it deemed that the company has been incorporated under this Act.

[S 13(10) ins by s 8(d) of Act 3 of 2011.]

 

(11)   The registration of a domesticated company in terms of subsections (5) to (9) does not—

 

(a)     establish a new juristic person;

 

(b)     prejudice or affect the identity of the juristic person constituted by that domesticated company, or its continuity as a juristic person;

 

(c)      prejudice the rights of any person or affect the property, rights, liabilities or obligations of that juristic person; or

 

(d)     render ineffective any legal proceedings by or against that juristic person.

[S 13(11) ins by s 8(d) of Act 3 of 2011.]

 

14.     Registration of company

 

(1)     As soon as practicable after accepting a Notice of Incorporation in terms of section 13(1), or an application for the domestication of a foreign company in terms of section 13(5), the Commission must—

[Words preceding s 14(1)(a) subs by s 9(a) of Act 3 of 2011.]

 

(a)     assign to the company a unique registration number; and

 

(b)     subject to subsection (2)—

 

(i)      enter the prescribed information concerning the company in the companies register;

 

(ii)      endorse the Notice of Incorporation, and, if applicable, the copy of the Memorandum of Incorporation filed with it, in the prescribed manner; and

 

(iii)     issue and deliver to the company a registration certificate in the prescribed manner and form, dated as of the later of—

 

(aa)   the date on, and time at, which the Commission issued the certificate; or

 

(bb)   the date, if any, stated by the incorporators in the Notice of Incorporation.

 

(2)     If the name of a company, as entered on the Notice of Incorporation—

 

(a)     fails to satisfy the requirements of section 11(3), the Commission, in taking the steps required by subsection (1)(b), may alter the name by inserting or substituting the appropriate expressions as required by section 11(3); or

 

(b)     is a name that the company is prohibited, in terms of section 11(2)(a), from using, or is reserved in terms of section 12 for a person other than one of the incorporators, the Commission—

[Words preceding s 14(2)(b)(i) subs by s 9(b) of Act 3 of 2011.]

 

(i)      must take the steps set out in subsection (1)(b), using the company’s registration number, followed by “Inc.”, (Pty) Ltd”, “Ltd.”, “SOC”, or NPC”, as appropriate, as the interim name of the company in the companies register and on the registration certificate;

 

(ii)      must invite the company to file an amended Notice of Incorporation using a satisfactory name; and

 

(iii)     when the company files such an amended Notice of Incorporation, must—

 

(aa)   enter the company’s amended name in the companies register; and

 

(bb)   issue and deliver to the company an amended registration certificate showing the amended name of the company.

 

(3)     If, upon registering a company in terms of subsection (1), there are reasonable grounds for considering that the company’s name may be inconsistent with the requirements of—

[Words preceding s 14(3)(a) subs by s 9(c) of Act 3 of 2011.]

 

(a)     section 11(2)(b) or (c)—

[Words preceding s 14(3)(a)(i) subs by s 9(d) of Act 3 of 2011.]

 

(i)      the Commission, by written notice, may require the applicant to serve a copy of the application and name reservation on any particular person, or class of persons, named in the notice, on the grounds that the person or persons may have an interest in the use of the reserved name by the applicant; and

 

(ii)      any person contemplated in subparagraph (i) may apply to the Companies Tribunal for a determination and order in terms of section 160; or

 

(b)     section 11(2)(d)—

[Words preceding s 14(3)(b)(i) subs by s 9(e) of Act 3 of 2011.]

 

(i)      the Commission may refer the application and name reservation to the South African Human Rights Commission; and

 

(ii)      the South African Human Rights Commission may apply to the Companies Tribunal for a determination and order in terms of section 160.

 

(4)     A registration certificate issued in terms of subsection (1) is conclusive evidence that—

 

(a)     all the requirements for the incorporation of the company have been complied with; and

 

(b)     the company is incorporated under this Act as from the date, and the time, if any, stated in the certificate.

 

15.     Memorandum of Incorporation, shareholder agreements and rules of company

 

(1)     Each provision of a company’s Memorandum of Incorporation—

 

(a)     must be consistent with this Act; and

 

(b)     is void to the extent that it contravenes, or is inconsistent with, this Act, subject to section 6(15).

[S 15(1)(b) subs by s 10(a) of Act 3 of 2011.]

 

(2)     The Memorandum of Incorporation of any company may—

 

(a)     include any provision—

 

(i)      dealing with a matter that this Act does not address;

[S 15(2)(a)(i) subs by s 10(b) of Act 3 of 2011.]

 

(ii)      altering the effect of any alterable provision of this Act; or

[S 15(2)(a)(ii) subs by s 10(b) of Act 3 of 2011.]

 

(iii)     imposing on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the company in terms of an unalterable provision of this Act;

[S 15(2)(a)(iii) ins by s 10(c) of Act 3 of 2011.]

 

(b)     contain any restrictive conditions applicable to the company, and any requirement for the amendment of any such condition in addition to the requirements set out in section 16;

[S 15(2)(b) subs by s 10(d) of Act 3 of 2011.]

 

(c)      prohibit the amendment of any particular provision of the Memorandum of Incorporation; or

[S 15(2)(c) subs by s 10(e) of Act 3 of 2011.]

 

(d)     not include any provision that negates, restricts, limits, qualifies, extends or otherwise alters the substance or effect of an unalterable provision of this Act, except to the extent contemplated in paragraph (a)(iii).

[S 15(2)(d) ins by s 10(f) of Act 3 of 2011.]

 

(3)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the board of the company may make, amend or repeal any necessary or incidental rules relating to the governance of the company in respect of matters that are not addressed in this Act or the Memorandum of Incorporation, by—

 

(a)     publishing a copy of those rules, in any manner required or permitted by the Memorandum of Incorporation, or the rules of the company; and

 

(b)     filing a copy of those rules.

 

(4)     A rule contemplated in subsection (3)—

 

(a)     must be consistent with this Act and the company’s Memorandum of Incorporation, and any such rule that is inconsistent with this Act or the company’s Memorandum of Incorporation is void to the extent of the inconsistency;

 

(b)     takes effect on a date that is the later of—

 

(i)      10 business days after the rule is filed in terms of subsection (3)(b); or

[S 15(4)(b)(i) subs by s 10(g) of Act 3 of 2011.]

 

(ii)      the date, if any, specified in the rule; and

 

(c)      is binding—

 

(i)      on an interim basis from the time it takes effect until it is put to a vote at the next general shareholders meeting of the company; and

 

(ii)      on a permanent basis only if it has been ratified by an ordinary resolution at the meeting contemplated in subparagraph (i).

 

(5)     If a rule that has been filed in terms of subsection (3) is subsequently—

 

(a)     ratified as contemplated in subsection (4)(c), the company must file a notice of ratification within five business days in the prescribed manner and form; or

 

(b)     not ratified when put to a vote—

 

(i)      the company must file a notice of non-ratification within five business days after the vote, in the prescribed manner and form; and

 

(ii)      the company’s board may not make a substantially similar rule within the ensuing 12 months, unless it has been approved in advance by ordinary resolution of the shareholders.

[S 15(5) subs by s 10(h) of Act 3 of 2011.]

 

(5A)   Any failure to ratify the rules of a company does not affect the validity of anything done in terms of those rules during the period that they had an interim effect as provided in subsection (4)(c)(i).

[S 15(5A) ins by s 10(i) of Act 3 of 2011.]

 

(6)     A company’s Memorandum of Incorporation, and any rules of the company, are binding—

 

(a)     between the company and each shareholder;

 

(b)     between or among the shareholders of the company; and

 

(c)      between the company and—

 

(i)      each director or prescribed officer of the company; or

 

(ii)      any other person serving the company as a member of a committee of the board,

[S 15(6)(c)(ii) subs by s 10(j) of Act 3 of 2011.]

 

in the exercise of their respective functions within the company.

 

(7)     The shareholders of a company may enter into any agreement with one another concerning any matter relating to the company, but any such agreement must be consistent with this Act and the company’s Memorandum of Incorporation, and any provision of such an agreement that is inconsistent with this Act or the company’s Memorandum of Incorporation is void to the extent of the inconsistency.

 

16.     Amending Memorandum of Incorporation

 

(1)     A company’s Memorandum of Incorporation may be amended—

 

(a)     in compliance with a court order in the manner contemplated in subsection (4); 

 

(b)     in the manner contemplated in section 36(3) and (4); or

 

(c)      at any other time if a special resolution to amend it—

 

(i)      is proposed by—

 

(aa)   the board of the company; or

 

(bb)   shareholders entitled to exercise at least 10% of the voting rights that may be exercised on such a resolution; and

 

(ii)      is adopted at a shareholders meeting, or in accordance with section 60, subject to subsection (3).

 

(2)     A company’s Memorandum of Incorporation may provide different requirements than those set out in subsection (1)(c)(i) with respect to proposals for amendments.

 

(3)     Despite subsection (1)(c)(ii), if a non-profit company has no voting members—

 

(a)     the board of that company may amend its Memorandum of Incorporation in the manner contemplated in subsection (1)(c)(i)(aa); and

 

(b)     the requirements of subsection (1)(c)(ii) do not apply to the company.

 

(4)     An amendment to a company’s Memorandum of Incorporation required by any court order—

 

(a)     must be effected by a resolution of the company’s board; and

 

(b)     does not require a special resolution as contemplated in subsection (1)(c)(ii).

 

(5)     An amendment contemplated in subsection (1)(c) may take the form of—

 

(a)     a new Memorandum of Incorporation in substitution for the existing Memorandum; or

 

(b)     one or more alterations to the existing Memorandum of Incorporation by—

 

(i)      changing the name of the company;

 

(ii)      deleting, altering or replacing any of its provisions;

 

(iii)     inserting any new provisions into the Memorandum of Incorporation; or

 

(iv)     making any combination of alterations contemplated in this paragraph.

 

(6)     If a profit company amends its Memorandum of Incorporation in such a manner that it no longer meets the criteria for its particular category of profit company, the company must also amend its name at the same time by altering the ending expression as appropriate to reflect the category of profit company into which it now falls.

 

(7)     Within the prescribed time after amending its Memorandum of Incorporation, a company must file a Notice of Amendment together with the prescribed fee, and—

 

(a)     the provisions of section 13(3) and (4)(a) and section 14, each read with the changes required by the context, apply to the filing of the Notice of Amendment; and

 

(b)     if the amendment to a company’s Memorandum of Incorporation—

 

(i)      has substituted a new Memorandum, as contemplated in subsection (5)(a), the provisions of section 13 (2)(b), read with the changes required by the context, apply to the filing of the Notice of Amendment; or

 

(ii)      has altered the existing Memorandum, as contemplated in subsection (5)(b)—

 

(aa)   the company must include a copy of the amendment with the Notice of Amendment; and

 

(bb)   the Commission may require the company to file a full copy of its amended Memorandum of Incorporation within a reasonable time.

 

(8)     If a company’s amendment to its Memorandum of Incorporation includes a change of the company’s name—

 

(a)     the provisions of section 14(2) and (3), read with the changes required by the context, apply afresh to the company; and

 

(b)     if the amended name of the company—

 

(i)      is reserved in terms of section 12 for that company, the Commission must—

 

(aa)   issue to the company an amended registration certificate; and

 

(bb)   alter the name of the company on the companies register; or

 

(ii)      is not reserved in terms of section 12 for that company, the Commission must take the steps set out in subparagraph (i), unless the name is—

 

(aa)   the registered name of another company, registered external company, close corporation or co-operative; or

 

(bb)   reserved in terms of section 12 for another person.

 

(9)     An amendment to a company’s Memorandum of Incorporation takes effect—

 

(a)     in the case of an amendment that changes the name of the company, on the date set out in the amended registration certificate issued by the Commission in terms of subsection (8), read with section 14(1)(b)(iii); or

 

(b)     in any other case, on the later of—

 

(i)      the date on, and time at, which the Notice of Amendment is filed; or

 

(ii)      the date, if any, set out in the Notice of Amendment.

[S 16(9) subs by s 11(a) of Act 3 of 2011.]

 

(10)   If an amendment to the Memorandum of Incorporation of a personal liability company has the effect of transforming that company into any other category of company, the company must give at least 10 business days advance notice of the filing of the notice of amendment to—

 

(a)     any professional or industry regulatory authority that has jurisdiction over the business activities carried on by the company; and

 

(b)     any person who—

 

(i)      in its dealings with the company, may reasonably be considered to have acted in reliance upon the joint and several liability of any of the directors for the debts and liabilities of the company; or

 

(ii)      may be adversely affected if the joint and several liability of any of the directors for the debts and liabilities of the company is terminated as a consequence of the amendment to the Memorandum of Incorporation.

[S 16(10) ins by s 11(b) of Act 3 of 2011.]

 

(11)   A person who receives, or is entitled to receive, a notice in terms of subsection (10) may apply to a court in the prescribed manner and form for an order sufficient to protect the interests of that person.

[S 16(11) ins by s 11(b) of Act 3 of 2011.]

 

17.     Alterations, translations and consolidations of Memorandum of Incorporation

 

(1)     The board of a company, or an individual authorised by the board, may alter the company’s rules, or its Memorandum of Incorporation, in any manner necessary to correct a patent error in spelling, punctuation, reference, grammar or similar defect on the face of the document, by—

 

(a)     publishing a notice of the alteration, in any manner required or permitted by the Memorandum of Incorporation or the rules of the company; and

 

(b)     filing a notice of the alteration.

 

(2)     The Commission, or a director or shareholder of a company, may apply to the Companies Tribunal for an administrative order setting aside the notice of an alteration published in terms of subsection (1), only on the grounds that the alteration exceeds the authority to correct a patent error or defect, as contemplated in that subsection.

 

(3)     At any time, a company that has filed its Memorandum of Incorporation may file one or more translations of it, in any official language or languages of the Republic.

 

(4)     A translation of a company’s Memorandum of Incorporation must be accompanied by a sworn statement by the person who made the translation, stating that it is a true, accurate and complete translation of the Memorandum of Incorporation.

 

(5)     At any time after a company has filed its Memorandum of Incorporation, and subsequently filed one or more alterations or amendments to it—

 

(a)     the company may file a consolidated revision of its Memorandum of Incorporation, as so altered or amended; or

 

(b)     the Commission may require the company to file a consolidated revision of its Memorandum of Incorporation, as so altered or amended.

 

(6)     A consolidated revision of a company’s Memorandum of Incorporation must be accompanied by—

 

(a)     a sworn statement by a director of the company; or

 

(b)     a statement by an attorney or notary public,

 

stating that the consolidated revision is a true, accurate and complete representation of the company’s Memorandum of Incorporation, as altered and amended up to the date of the statement.

 

18.     Authenticity of versions of memorandum of incorporation

 

(1)     The Memorandum of Incorporation of a company, as altered or amended, prevails in any case of a conflict between it and—

 

(a)     a translation filed in terms of section 17(3); or

 

(b)     a consolidated revision filed in terms of section 17(5), unless the consolidated revision has subsequently been ratified by a special resolution at a general shareholders meeting of the company.

 

(2)     The latest version of a company’s Memorandum of Incorporation that has been endorsed by the Commission in terms of this Part prevails in the case of any conflict between it and any other purported version of the company’s Memorandum of Incorporation.

 

19.     Legal status of companies

 

(1)     From the date and time that the incorporation of a company is registered, as stated in its registration certificate, the company—

 

(a)     is a juristic person, which exists continuously until its name is removed from the companies register in accordance with this Act;

 

(b)     has all of the legal powers and capacity of an individual, except to the extent that—

 

(i)      a juristic person is incapable of exercising any such power, or having any such capacity; or

 

(ii)      the company’s Memorandum of Incorporation provides otherwise;

 

(c)      is constituted in accordance with—

 

(i)      the unalterable provisions of this Act;

 

(ii)      the alterable provisions of this Act, subject to any negation, restriction, limitation, qualification, extension or other alteration that is contemplated in an alterable provision, and has been noted in the company’s Memorandum of Incorporation; and

 

(iii)     any further provisions of the company’s Memorandum of Incorporation.

 

(2)     A person is not, solely by reason of being an incorporator, shareholder or director of a company, liable for any liabilities or obligations of the company, except to the extent that this Act or the company’s Memorandum of Incorporation provides otherwise.

 

(3)     If a company is a personal liability company the directors and past directors are jointly and severally liable, together with the company, for any debts and liabilities of the company as are or were contracted during their respective periods of office.

 

(4)     Subject to subsection (5), a person must not be regarded as having received notice or knowledge of the contents of any document relating to a company merely because the document—

 

(a)     has been filed; or

 

(b)     is accessible for inspection at an office of the company.

 

(5)     A person must be regarded as having notice and knowledge of—

 

(a)     any provision of a company’s Memorandum of Incorporation contemplated in section 15(2)(b) or (c) if the company’s name includes the element “RF” as contemplated in section 11(3)(b), and the company’s Notice of Incorporation or a subsequent Notice of Amendment has drawn attention to the relevant provision, as contemplated in section 13(3); and

 

(b)     the effect of subsection (3) on a personal liability company.

[S 19(5) subs by s 12 of Act 3 of 2011.]

 

(6)     If a company has amended its Memorandum of Incorporation, the Memorandum of Incorporation as previously adopted by the company has no force or effect with respect to any right, cause of action or matter occurring or arising after the date on which the amendment took effect.

 

(7)     After a company has changed its name, any legal proceedings that might have been commenced or continued by or against the company under its former name may be commenced or continued by or against it under its new name.

 

20.     Validity of company actions

 

(1)     If a company’s Memorandum of Incorporation limits, restricts or qualifies the purposes, powers or activities of that company, as contemplated in section 19(1)(b)(ii)—

 

(a)     no action of the company is void by reason only that—

 

(ii)      the action was prohibited by that limitation, restriction or qualification; or

 

(ii)      as a consequence of that limitation, restriction or qualification, the directors had no authority to authorise the action by the company; and

[Editor Note: Numbering as per original Gazette.]

 

(b)     in any legal proceeding, other than proceedings between—

 

(i)      the company and its shareholders, directors or prescribed officers; or

 

(ii)      the shareholders and directors or prescribed officers of the company,

 

no person may rely on such limitation, restriction or qualification to assert that an action contemplated in paragraph (a) is void.

 

(2)     If a company’s Memorandum of Incorporation limits, restricts or qualifies the purposes, powers or activities of that company, or limits the authority of the directors to perform an act on behalf of the company, the shareholders, by special resolution, may ratify any action by the company or the directors that is inconsistent with any such limit, restriction or qualification, subject to subsection (3).

 

(3)     An action contemplated in subsection (2) may not be ratified if it is in contravention of this Act.

 

(4)     One or more shareholders, directors or prescribed officers of a company, or a trade union representing employees of the company, may apply to the High Court for an appropriate order to restrain the company from doing anything inconsistent with this Act.

[S 20(4) subs by s 13(a) of Act 3 of 2011.]

 

(5)     One or more shareholders, directors or prescribed officers of a company may apply to the High Court for an appropriate order to restrain the company or the directors from doing anything inconsistent with any limitation, restriction or qualification contemplated in subsection (2), but any such proceedings are without prejudice to any rights to damages of a third party who—

[Words preceding s 20(5)(a) subs by s 13(b) of Act 3 of 2011.]

 

(a)     obtained those rights in good faith; and

 

(b)     did not have actual knowledge of the limit, restriction or qualification.

 

(6)     Each shareholder of a company has a claim for damages against any person who intentionally, fraudulently or due to gross negligence causes the company to do anything inconsistent with—

[Words preceding s 20(6)(a) subs by s 13(c) of Act 3 of 2011.]

 

(a)     this Act; or

 

(b)     a limitation, restriction or qualification contemplated in this section, unless that action has been ratified by the shareholders in terms of subsection (2).

 

(7)     A person dealing with a company in good faith, other than a director, prescribed officer or shareholder of the company, is entitled to presume that the company, in making any decision in the exercise of its powers, has complied with all of the formal and procedural requirements in terms of this Act, its Memorandum of Incorporation and any rules of the company unless, in the circumstances, the person knew or reasonably ought to have known of any failure by the company to comply with any such requirement.

 

(8)     Subsection (7) must be construed concurrently with, and not in substitution for, any relevant common law principle relating to the presumed validity of the actions of a company in the exercise of its powers.

 

(9)     If, on application by an interested person or in any proceedings in which a company is involved, a court finds that the incorporation of the company, any use of the company, or any act by or on behalf of the company, constitutes an unconscionable abuse of the juristic personality of the company as a separate entity, the court may—

 

(a)     declare that the company is to be deemed not to be a juristic person in respect of any right, obligation or liability of the company or of a shareholder of the company or, in the case of a non‑profit company, a member of the company, or of another person specified in the declaration; and

 

(b)     make any further order the court considers appropriate to give effect to a declaration contemplated in paragraph (a).

[S 20(9) ins by s 13(d) of Act 3 of 2011.]

 

21.     Pre-incorporation contracts

 

(1)     A person may enter into a written agreement in the name of, or purport to act in the name of, or on behalf of, an entity that is contemplated to be incorporated in terms of this Act, but does not yet exist at the time.

 

(2)     A person who does anything contemplated in subsection (1) is jointly and severally liable with any other such person for liabilities created as provided for in the pre-incorporation contract while so acting, if—

 

(a)     the contemplated entity is not subsequently incorporated; or

 

(b)     after being incorporated, the company rejects any part of such an agreement or action.

 

(3)     If, after its incorporation, a company enters into an agreement on the same terms as, or in substitution for, an agreement contemplated in subsection (1), the liability of a person under subsection (2) in respect of the substituted agreement is discharged.

 

(4)     Within three months after the date on which a company was incorporated the board of that company may completely, partially or conditionally ratify or reject any pre-incorporation contract or other action purported to have been made or done in its name or on its behalf, as contemplated in subsection (1).

 

(5)     If, within three months after the date on which a company was incorporated, the board has neither ratified nor rejected a particular pre-incorporation contract, or other action purported to have been made or done in the name of the company, or on its behalf, as contemplated in subsection (1), the company will be regarded to have ratified that agreement or action.

 

(6)     To the extent that a pre-incorporation contract or action has been ratified or regarded to have been ratified in terms of subsection (5)—

 

(a)     the agreement is as enforceable against the company as if the company had been a party to the agreement when it was made; and

 

(b)     the liability of a person under subsection (2) in respect of the ratified agreement or action is discharged.

 

(7)     If a company rejects an agreement or action contemplated in subsection (1), a person who bears any liability in terms of subsection (2) for that rejected agreement or action may assert a claim against the company for any benefit it has received, or is entitled to receive, in terms of the agreement or action.

 

22.     Reckless trading prohibited

 

(1)     A company must not carry on its business recklessly, with gross negligence, with intent to defraud any person or for any fraudulent purpose.

[S 22(1) subs by s 14 of Act 3 of 2011.]

 

(2)     If the Commission has reasonable grounds to believe that a company is engaging in conduct prohibited by subsection (1), or is unable to pay its debts as they become due and payable in the normal course of business, the Commission may issue a notice to the company to show cause why the company should be permitted to continue carrying on its business, or to trade, as the case may be.

[S 22(2) subs by s 14 of Act 3 of 2011.]

 

(3)     If a company to whom a notice has been issued in terms of subsection (2) fails within 20 business days to satisfy the Commission that it is not engaging in conduct prohibited by subsection (1), or that it is able to pay its debts as they become due and payable in the normal course of business, the Commission may issue a compliance notice to the company requiring it to cease carrying on its business or trading, as the case may be.

[S 22(3) subs by s 14 of Act 3 of 2011.]

 

Part C

Transparency, accountability and integrity of companies

 

23.     Registration of external companies and registered office

 

(1)     An external company must register with the Commission within 20 business days after it first begins to conduct business, or non-profit activities, as the case may be, within the Republic—

 

(a)     as an external non-profit company if, within the jurisdiction in which it was incorporated, it meets legislative or definitional requirements that are comparable to the legislative or definitional requirements of a non-profit company incorporated under this Act; or

 

(b)     as an external profit company, in any other case.

[S 23(1)(b) subs by s 15(a) of Act 3 of 2011.]

 

(2)     For the purposes of subsection (1), and the definition of “external company” as set out in section 1, a foreign company must be regarded as “conducting business, or non-profit activities, as the case may be, within the Republic”, if that foreign company—

 

(a)     is a party to one or more employment contracts within the Republic; or

 

(b)     subject to subsection (2A), is engaging in a course of conduct, or has engaged in a course or pattern of activities within the Republic over a period of at least six months, such as would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within the Republic.

[S 23(2) subs by s 15(b) of Act 3 of 2011.]

 

(2A)   When applying subsection (2)(b), a foreign company must not be regarded as “conducting business activities, or non-profit activities, as the case may be, within the Republic” solely on the ground that the foreign company is or has engaged in one or more of the following activities—

 

(a)     holding a meeting or meetings within the Republic of the shareholders or board of the foreign company, or otherwise conducting any of the company’s internal affairs within the Republic;

 

(b)     establishing or maintaining any bank or other financial accounts within the Republic;

 

(c)      establishing or maintaining offices or agencies within the Republic for the transfer, exchange or registration of the foreign company’s own securities;

 

(d)     creating or acquiring any debts within the Republic, or any mortgages or security interests in any property within the Republic;

 

(e)     securing or collecting any debt, or enforcing any mortgage or security interest within the Republic; or

 

(f)      acquiring any interest in any property within the Republic.

[S 23(2A) ins by s 15(b) of Act 3 of 2011.]

 

(3)     Each company or external company must—

 

(a)     continuously maintain at least one office in the Republic; and

 

(b)     register the address of its office, or its principal office if it has more than one office—

 

(i)      initially in the case of—

 

(aa)   a company, by providing the required information on its Notice of Incorporation; or

 

(bb)   an external company, by providing the required information when filing its registration in terms of subsection (1); and

 

(ii)      subsequently, by filing a notice of change of registered office, together with the prescribed fee.

 

(4)     A change contemplated in subsection (3)(b)(ii) takes effect as from the later of—

[Words preceding s 23(4)(a) subs by s 15(c) of Act 3 of 2011.]

 

(a)     the date, if any, stated in the notice; or

 

(b)     five business days after the date on which the notice was filed.

 

(5)     The Commission must—

 

(a)     assign a unique registration number to each external company that has registered in accordance with subsection (1);

 

(b)     maintain a register of external companies;

 

(c)      enter the prescribed information concerning each external company in the register; and

 

(d)     in the case of an external company whose name is a foreign registration number but does not indicate the name of the foreign jurisdiction in which it was incorporated, append to its name on the registry the name of that jurisdiction in a manner comparable to that required for a company under section 11(3)(a).

 

(6)     If an external company has failed to register in terms of subsection (1) within three months after commencing its activities within the Republic, the Commission may issue a compliance notice to that external company requiring it to—

[Words preceding s 23(6)(a) subs by s 15(d) of Act 3 of 2011.]

 

(a)     register as required by subsection (1) within 20 business days after receiving the notice; or

 

(b)     if it fails to register within the time allowed in paragraph (a), to cease carrying on its business or activities within the Republic.

 

24.     Form and standards for company records

 

(1)     Any documents, accounts, books, writing, records or other information that a company is required to keep in terms of this Act or any other public regulation must be kept—

 

(a)     in written form, or other form or manner that allows that information to be converted into written form within a reasonable time; and

 

(b)     for a period of seven years, or any longer period of time specified in any other applicable public regulation, subject to subsection (2).

 

(2)     If a company has existed for a shorter time than contemplated in subsection (1)(b), the company is required to retain records for that shorter time.

 

(3)     Every company must maintain—

 

(a)     a copy of its Memorandum of Incorporation, and any amendments or alterations to it, and any rules of the company made in terms of section 15(3) to (5);

 

(b)     a record of its directors, including—

 

(i)      all the information required in terms of subsection (5) in respect of each current director at any particular time; and

 

(ii)      with respect to each past director, the information required in terms of subparagraph (i), which must be retained for seven years after the past director retired from the company;

[S 24(3)(b) subs by s 16(a) of Act 3 of 2011.]

 

(c)      copies of all—

 

(i)      reports presented at an annual general meeting of the company, for a period of seven years after the date of any such meeting;

 

(ii)      annual financial statements required by this Act, for seven years after the date on which each such particular statements were issued; and

 

(iii)     accounting records required by this Act, for the current financial year and for the previous seven completed financial years of the company;

 

(d)     notice and minutes of all shareholders meetings, including—

 

(i)      all resolutions adopted by them; and

 

(ii)      any document that was made available by the company to the holders of securities in relation to each such resolution,

 

for seven years after the date each such resolution was adopted;

[S 24(3)(d) subs by s 16(b) of Act 3 of 2011.]

 

(e)     copies of any written communications sent generally by the company to all holders of any class of the company’s securities, for a period of seven years after the date on which each such communication was issued; and

 

(f)      minutes of all meetings and resolutions of directors, or directors’ committees, or the audit committee, if any, for a period of seven years after the date—

 

(i)      of each such meeting; or

 

(ii)      on which each such resolution was adopted.

 

(4)     In addition to the requirements of subsection (3), every company must maintain—

 

(a)     a securities register or its equivalent, as required by section 50, in the case of a profit company, or a member’s register in the case of a non-profit company that has members; and

 

(b)     the records required in terms of section 85, if that section applies to the company.

[S 24(4) subs by s 16(c) of Act 3 of 2011.]

 

(5)     A company’s record of directors must include, in respect of each director, that person’s—

 

(a)     full name, and any former names;

 

(b)     identity number or, if the person does not have an identity number, the person’s date of birth;

 

(c)      nationality and passport number, if the person is not a South African;

 

(d)     occupation;

 

(e)     date of their most recent election or appointment as director of the company;

 

(f)      name and registration number of every other company or foreign company of which the person is a director, and in the case of a foreign company, the nationality of that company; and

 

(g)     any other prescribed information.

 

(6)     To protect personal privacy, the Minister, by notice in the Gazette, may exempt from the application of subsection (5)(a) categories of names as formerly used by any person—

 

(a)     before attaining majority, or by persons who have been adopted, married, divorced or widowed; or

 

(b)     in other circumstances prescribed by the Minister.

 

25.     Location of company records

 

(1)     The records referred to in section 24 must be accessible at or from the company’s registered office or another location, or other locations, within the Republic.

 

(2)     A company must file a notice, setting out the location or locations at which any particular records referred to in section 24 are kept or from which they are accessible if those records—

 

(a)     are not kept at or made accessible from the company’s registered office, as contemplated in subsection (1); or

 

(b)     are moved from one location to another.

 

26.     Access to company records

 

(1)     A person who holds or has a beneficial interest in any securities issued by a profit company, or who is a member of a non-profit company, has a right to inspect and copy, without any charge for any such inspection or upon payment of no more than the prescribed maximum charge for any such copy, the information contained in the following records of the company—

 

(a)     the company’s Memorandum of Incorporation and any amendments to it, and any rules made by the company, as mentioned in section 24(3)(a);

 

(b)     the records in respect of the company’s directors, as mentioned in section 24(3)(b);

 

(c)      the reports to annual meetings, and annual financial statements, as mentioned in section 24(3)(c)(i) and (ii);

 

(d)     the notices and minutes of annual meetings, and communications mentioned in section 24(3)(d) and (e), but the reference in section 24(3)(d) to shareholders meetings, and the reference in section 24(3)(e) to communications sent to holders of a company’s securities, must be regarded in the case of a non-profit company as referring to a meeting of members, or communication to members, respectively; and

 

(e)     the securities register of a profit company, or the members register of a non-profit company that has members, as mentioned in section 24(4).

[S 26(1) subs by s 17(a) of Act 3 of 2011.]

 

(2)     A person not contemplated in subsection (1) has a right to inspect or copy the securities register of a profit company, or the members register of a non-profit company that has members, or the register of directors of a company, upon payment of an amount not exceeding the prescribed maximum fee for any such inspection.

[S 26(2) subs by s 17(a) of Act 3 of 2011.]

 

(3)     In addition to the information rights set out in subsections (1) and (2), the Memorandum of Incorporation of a company may establish additional information rights of any person, with respect to any information pertaining to the company, but no such right may negate or diminish any mandatory protection of any record required by or in terms of Part 3 of the Promotion of Access to Information Act, 2000 (Act 2 of 2000).

[S 26(2) am by s 17(a) of Act 3 of 2011; renumbered as 26(3) by s 17(a) of Act 3 of 2011.]

 

(4)     A person may exercise the rights set out in subsection (1) or (2), or contemplated in subsection (3)—

 

(a)     for a reasonable period during business hours;

 

(b)     by direct request made to a company in the prescribed manner, either in person or through an attorney or other personal representative designated in writing; or

 

(c)      in accordance with the Promotion of Access to Information Act, 2000 (Act 2 of 2000).

[S 26(4) ins by s 17(a) of Act 3 of 2011.]

 

(5)     Where a company receives a request in terms of subsection (4)(b) it must within 14 business days comply with the request by providing the opportunity to inspect or copy the register concerned to the person making such request.

[S 26(5) ins by s 17(a) of Act 3 of 2011.]

 

(6)     The register of members and register of directors of a company, must, during business hours for reasonable periods be open to inspection by any member, free of charge and by any other person, upon payment for each inspection of an amount not more than R100,00.

[S 26(3) renumbered as 26(6) by s 17(b) of Act 3 of 2011.]

 

(7)     The rights of access to information set out in this section are in addition to, and not in substitution for, any rights a person may have to access information in terms of—

 

(a)     section 32 of the Constitution;

 

(b)     the Promotion of Access to Information Act, 2000 (Act 2 of 2000); or

 

(c)      any other public regulation.

[S 26(4) renumbered as 26(7) by s 17(b) of Act 3 of 2011.]

 

(8)     The Minister may make regulations respecting the exercise of the rights set out in this section.

[S 26(5) renumbered as 26(8) by s 17(b) of Act 3 of 2011.]

 

(9)     It is an offence for a company to—

 

(a)     fail to accommodate any reasonable request for access, or to unreasonably refuse access, to any record that a person has a right to inspect or copy in terms of this section or section 31; or

[S 26(9)(a) subs by s 17(c) of Act 3 of 2011.]

 

(b)     to otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person of the rights set out in this section or section 31.

[S 26(6) renumbered as 26(9) by s 17(b) of Act 3 of 2011; s 26(9)(b) subs by s 17(c) of Act 3 of 2011.]

 

27.     Financial year of company

 

(1)     A company must have a financial year, ending on a date set out in the company’s Notice of Incorporation, subject to any change made in terms of subsection (4).

 

(2)     The first financial year of a company—

 

(a)     begins on the date that the incorporation of the company is registered, as stated in its registration certificate; and

 

(b)     ends on the date set out in the Notice of Incorporation, which may not be more than 15 months after the date contemplated in paragraph (a).

 

(3)     The second and each subsequent financial year of a company—

 

(a)     begins when the preceding financial year ends; and

 

(b)     ends on the first anniversary of the date contemplated in paragraph (a), unless the financial year end has been changed as contemplated in subsection (4).

 

(4)     The board of a company may change its financial year end at any time, by filing a notice of that change, but—

 

(a)     it may not do so more than once during any financial year;

 

(b)     the newly established financial year end must be later than the date on which the notice is filed; and

 

(c)      the date as changed may not result in a financial year ending more than 15 months after the end of the preceding financial year.

 

(5)     Despite subsection (2)(b) or (3), the financial year of a company that has changed the date contemplated in subsection (1) ends on the date as changed.

 

(6)     …

[S 27(6) rep by s 18 of Act 3 of 2011.]

 

(7)     The financial year of the company is its annual accounting period.

 

28.     Accounting records

 

(1)     A company must keep accurate and complete accounting records in one of the official languages of the Republic—

 

(a)     as necessary to enable the company to satisfy its obligations in terms of this Act or any other law with respect to the preparation of financial statements; and

 

(b)     including any prescribed accounting records, which must be kept in the prescribed manner and form.

 

(2)     A company’s accounting records must be kept at, or be accessible from, the registered office of the company.

 

(3)     It is an offence for—

 

(a)     a company—

 

(i)      with an intention to deceive or mislead any person—

 

(aa)   to fail to keep accurate or complete accounting records;

 

(bb)   to keep records other than in the prescribed manner and form, if any; or

 

(ii)      to falsify any of its accounting records, or permit any person to do so; or

 

(b)     any person to falsify a company’s accounting records.

 

(4)     For greater certainty, the Commission may issue a compliance notice, as contemplated in section 171, to a company in respect of any failure by the company to comply with the requirements of this section, irrespective whether that failure constitutes an offence in terms of subsection (3).

 

29.     Financial statements

 

(1)     If a company provides any financial statements, including any annual financial statements, to any person for any reason, those statements must—

 

(a)     satisfy the financial reporting standards as to form and content, if any such standards are prescribed;

 

(b)     present fairly the state of affairs and business of the company, and explain the transactions and financial position of the business of the company;

 

(c)      show the company’s assets, liabilities and equity, as well as its income and expenses, and any other prescribed information;

 

(d)     set out the date on which the statements were published, and the accounting period to which the statements apply; and

[S 29(1)(d) subs by s 19(a) of Act 3 of 2011.]

 

(e)     bear, on the first page of the statements, a prominent notice indicating—

 

(i)      whether the statements—

 

(aa)   have been audited in compliance with any applicable requirements of this Act;

 

(bb)   if not audited, have been independently reviewed in compliance with any applicable requirements of this Act; or

 

(cc)    have not been audited or independently reviewed; and

 

(ii)      the name, and professional designation, if any, of the individual who prepared, or supervised the preparation of, those statements.

 

(2)     Any financial statements prepared by a company, including any annual financial statements of a company as contemplated in section 30, must not be—

 

(a)     false or misleading in any material respect; or

 

(b)     incomplete in any material particular, subject only to subsection (3).

 

(3)     A company may provide any person with a summary of any particular financial statements, but—

 

(a)     any such summary must comply with any prescribed requirements; and

 

(b)     the first page of the summary must bear a prominent notice—

 

(i)      stating that it is a summary of particular financial statements prepared by the company, and setting out the date of those statements;

 

(ii)      stating whether the financial statements that it summarises have been audited, independently reviewed, or are unaudited, as contemplated in subsection (1)(e);

 

(iii)     stating the name, and professional designation, if any, of the individual who prepared, or supervised the preparation of, the financial statements that it summarises; and

 

(iv)     setting out the steps required to obtain a copy of the financial statements that it summarises.

 

(4)     Subject to subsection (5), the Minister, after consulting the Council, may make regulations prescribing—

 

(a)     financial reporting standards contemplated in this Part; or

 

(b)     form and content requirements for summaries contemplated in subsection (3).

 

(5)     Any regulations contemplated in subsection (4)—

 

(a)     must promote sound and consistent accounting practices;

 

(b)     in the case of financial reporting standards for public companies, must be in accordance with the International Financial Reporting Standards of the International Accounting Standards Board or its successor body; and

[S 29(5)(b) subs by s 19(b) of Act 3 of 2011.]

 

(c)      may establish different standards applicable to—

 

(i)      profit and non-profit companies; and

 

(ii)      different categories of profit companies.

 

(6)     Subject to section 214(2), a person is guilty of an offence if the person is a party to the preparation, approval, dissemination or publication of—

 

(a)     any financial statements, including any annual financial statements contemplated in section 30, knowing that those statements—

 

(i)      fail in a material way to comply with the requirements of subsection (1); or

[S 29(6)(a)(i) subs by s 19(c) of Act 3 of 2011.]

 

(ii)      are materially false or misleading, as contemplated in subsection (2); or

 

(b)     a summary of any financial statements, knowing that—

 

(i)      the statements that it summarises do not comply with the requirements of subsection (1), or are materially false or misleading, as contemplated in subsection (2); or

 

(ii)      the summary does not comply with the requirements of subsection (3), or is materially false or misleading.

 

30.     Annual financial statements

 

(1)     Each year, a company must prepare annual financial statements within six months after the end of its financial year, or such shorter period as may be appropriate to provide the required notice of an annual general meeting in terms of section 61(7).

 

(2)     The annual financial statements must—

 

(a)     be audited, in the case of a public company; or

 

(b)     in the case of any other profit or non-profit company—

[Words preceding s 30(2)(b)(i) subs by s 20(a) of Act 3 of 2011.]

 

(i)      be audited, if so required by the regulations made in terms of subsection (7) taking into account whether it is desirable in the public interest, having regard to the economic or social significance of the company, as indicated by any relevant factors, including—

[Words preceding s 30(2)(b)(i)(aa) subs by s 20(b) of Act 3 of 2011.]

 

(aa)   its annual turnover;

 

(bb)   the size of its workforce; or

 

(cc)    the nature and extent of its activities; or

 

(ii)      be either—

 

(aa)   audited voluntarily if the company’s Memorandum of Incorporation, or a shareholders resolution, so requires or if the Company’s board has so determined; or

[S 30(2)(b)(ii)(aa) subs by s 20(c) of Act 3 of 2011.]

 

(bb)   independently reviewed in a manner that satisfies the regulations made in terms of subsection (7), subject to subsection (2A).

[S 30(2)(b)(ii)(bb) subs by s 20(c) of Act 3 of 2011.]

 

(2A)   If, with respect to a particular company, every person who is a holder of, or has a beneficial interest in, any securities issued by that company is also a director of the company, that company is exempt from the requirements in this section to have its annual financial statements audited or independently reviewed, but this exemption—

 

(a)     does not apply to the company if it falls into a class of company that is required to have its annual financial statement audited in terms of the regulations contemplated in subsection (7)(a); and

 

(b)     does not relieve the company of any requirement to have its financial statements audited or reviewed in terms of another law, or in terms of any agreement to which the company is a party.

[S 30(2A) ins by s 20(d) of Act 3 of 2011.]

 

(3)     The annual financial statements of a company must—

 

(a)     include an auditor’s report, if the statements are audited;

 

(b)     include a report by the directors with respect to the state of affairs, the business and profit or loss of the company, or of the group of companies, if the company is part of a group, including—

 

(i)      any matter material for the shareholders to appreciate the company’s state of affairs; and

 

(ii)      any prescribed information;

 

(c)      be approved by the board and signed by an authorised director; and

 

(d)     be presented to the first shareholders meeting after the statements have been approved by the board.

 

(4)     The annual financial statements of each company that is required in terms of this Act to have its annual financial statements audited, must include particulars showing—

 

(a)     the remuneration, as defined in subsection (6), and benefits received by each director, or individual holding any prescribed office in the company;

 

(b)     the amount of—

 

(i)      any pensions paid by the company to or receivable by current or past directors or individuals who hold or have held any prescribed office in the company;

 

(ii)      any amount paid or payable by the company to a pension scheme with respect to current or past directors or individuals who hold or have held any prescribed office in the company;

 

(c)      the amount of any compensation paid in respect of loss of office to current or past directors or individuals who hold or have held any prescribed office in the company;

 

(d)     the number and class of any securities issued to a director or person holding any prescribed office in the company, or to any person related to any of them, and the consideration received by the company for those securities; and

 

(e)     details of service contracts of current directors and individuals who hold any prescribed office in the company.

 

(5)     The information to be disclosed under subsection (4) must satisfy the prescribed standards, and must show the amount of any remuneration or benefits paid to or receivable by persons in respect of—

 

(a)     services rendered as directors or prescribed officers of the company; or

 

(b)     services rendered while being directors or prescribed officers of the company—

 

(i)      as directors or prescribed officers of any other company within the same group of companies; or

 

(ii)      otherwise in connection with the carrying on of the affairs of the company or any other company within the same group of companies.

 

(6)     For the purposes of subsections (4) and (5), ‘remuneration’ includes—

 

(a)     fees paid to directors for services rendered by them to or on behalf of the company, including any amount paid to a person in respect of the person’s accepting the office of director;

 

(b)     salary, bonuses and performance-related payments;

 

(c)      expense allowances, to the extent that the director is not required to account for the allowance;

 

(d)     contributions paid under any pension scheme not otherwise required to be disclosed in terms of subsection (4)(b);

 

(e)     the value of any option or right given directly or indirectly to a director, past director or future director, or person related to any of them, as contemplated in section 42;

 

(f)      financial assistance to a director, past director or future director, or person related to any of them, for the subscription of options or securities, or the purchase of securities, as contemplated in section 44; and

[S 30(6)(f) subs by s 20(e) of Act 3 of 2011.]

 

(g)     with respect to any loan or other financial assistance by the company to a director, past director or future director, or a person related to any of them, or any loan made by a third party to any such person, as contemplated in section 45, if the company is a guarantor of that loan, the value of—

 

(i)      any interest deferred, waived or forgiven; or

 

(ii)      the difference in value between—

 

(aa)   the interest that would reasonably be charged in comparable circumstances at fair market rates in an arm’s length transaction; and

 

(bb)   the interest actually charged to the borrower, if less.

 

(7)     The Minister may make regulations, including different requirements for different categories of companies, prescribing—

 

(a)     the categories of any profit or non-profit companies that are required to have their respective annual financial statements audited, as contemplated in subsection (2)(b)(i); and

[S 30(7)(a) subs by s 20(f) of Act 3 of 2011.]

 

(b)     the manner, form and procedures for the conduct of an independent review under subsection (2)(b)(ii)(bb), as well as the professional qualifications, if any, and duties of persons who may conduct such reviews and the accreditation of professions whose members may conduct such reviews.

[S 30(7)(b) subs by s 20(g) of Act 3 of 2011.]

 

(8)     Despite section 1 of the Auditing Profession Act, an independent review of a company’s annual financial statements required by this section does not constitute an audit within the meaning of that Act.

[S 30(8) ins by s 20(h) of Act 3 of 2011.]

 

31.     Access to financial statements or related information

 

(1)     In addition to the rights set out in section 26, a person who holds or has a beneficial interest in any securities issued by a company, is entitled—

 

(a)     without demand to receive a notice of the publication of any annual financial statements of the company required by this Act, setting out the steps required to obtain a copy of those statements; and

 

(b)     on demand to receive without charge one copy of any annual financial statements of the company required by this Act.

 

(2)     If a judgment creditor of a company has been informed, by a person whose duty it is to execute the judgment, that there appears to be insufficient disposable property to satisfy that judgment, the judgment creditor is entitled within five business days after making a demand, to receive without charge, one copy of the most recent annual financial statements of the company.

 

(3)     Trade unions must, through the Commission and under conditions as determined by the Commission, be given access to company financial statements for purposes of initiating a business rescue process.

 

(4)     It is an offence for a company to—

 

(a)     fail to accommodate any reasonable request for access, or to unreasonably refuse access, to any record that a person has a right to inspect or copy in terms of this section; or

 

(b)     otherwise impede, interfere with, or attempt to frustrate the reasonable exercise by any person of the rights set out in this section.

[S 31(4) ins by s 21 of Act 3 of 2011.]

 

32.     Use of company name and registration number

 

(1)     A company or external company must—

 

(a)     provide its full registered name or registration number to any person on demand; and

 

(b)     not misstate its name or registration number in a manner likely to mislead or deceive any person.

 

(2)     If the Commission has issued to a company a registration certificate with an interim name, as contemplated in section 14(2)(b), the company must use its interim name, until its name has been amended.

 

(3)     A person must not—

 

(a)     use the name or registration number of a company in a manner likely to convey an impression that the person is acting or communicating on behalf of that company, unless the company has authorised that person to do so; or

 

(b)     use a form of name for any purpose if, in the circumstances, the use of that form of name is likely to convey a false impression that the name is the name of a company.

 

(4)     Every company must have its name and registration number mentioned in legible characters in all notices and other official publications of the company, including such notices and publications in electronic format as contemplated in the Electronic Communications and Transactions Act, and in all bills of exchange, promissory notes, cheques and orders for money or goods and in all letters, delivery notes, invoices, receipts and letters of credit of the company.

 

(5)     Contravention of subsection (1), (2), (3) or (4) is an offence.

 

(6)     …

[S 32(6) rep by s 22 of Act 3 of 2011.]

 

(7)     …

[S 32(7) rep by s 22 of Act 3 of 2011.]

 

33.     Annual return

 

(1)     Every company must file an annual return in the prescribed form with the prescribed fee, and within the prescribed period after the end of the anniversary of the date of its incorporation, including in that return—

 

(a)     a copy of its annual financial statements, if it is required to have such statements audited in terms of section 30(2) or the regulations contemplated in section 30(7);

[S 33(1)(a) subs by s 23 of Act 3 of 2011.]

 

         (aA)   a copy of the company’s securities register as required in terms of section 50;

[S 33(1)(aA) ins by s 56(b) of Act 22 of 2022 wef 1 April 2023.]

 

         (aB)   a copy of the register of the disclosure of beneficial interest as required in terms of section                   56(7)(aA); and

[S 33(1)(aB) ins by s 56(b) of Act 22 of 2022 wef 1 April 2023.]

 

(b)     any other prescribed information.

 

(1A)   (a)      The Commission must make the annual return contemplated in subsection (1) available                      electronically to any person as prescribed.

 

         (b)      The prescribed requirements referred to in paragraph (a) must be prescribed after consultation            with the Minister of Finance and the Financial Intelligence Centre, established by section 2 of                the Financial Intelligence Centre Act, 2001 (Act 38 of 2001).

[S 33(1A) ins by s 56(c) of Act 22 of 2022 wef 1 April 2023.]

 

(2)     Every external company must file an annual return in the prescribed form with the prescribed fee, and within the prescribed period after the anniversary of the date on which it was registered in terms of section 23(1).

 

(3)     Each year, in its annual return filed in terms of subsection (1), every company must designate a director, employee or other person who is responsible for the company’s compliance with the requirements of this Part, and Chapter 3, if it applies to the company.

 

34.     Additional accountability requirements for certain companies

 

(1)     In addition to complying with the requirements of this Part, a public company or state-owned company must also comply with the extended accountability requirements set out in Chapter 3.

 

(2)     A private company, personal liability company, or non-profit company is not required to comply with the extended accountability requirements set out in Chapter 3, except to the extent contemplated in section 84(1)(c), or as required by the company’s Memorandum of Incorporation.

[S 34(2) subs by s 24 of Act 3 of 2011.]

 

Part D

Capitalisation of profit companies

 

35.     Legal nature of company shares and requirement to have shareholders

 

(1)     A share issued by a company is movable property, transferable in any manner provided for or recognised by this Act or other legislation.

 

(2)     A share does not have a nominal or par value, subject to item 6 of Schedule 5.

 

(3)     A company may not issue shares to itself.

 

(4)     An authorised share of a company has no rights associated with it until it has been issued.

 

(5)     Shares of a company that have been issued and subsequently—

 

(a)     acquired by that company, as contemplated in section 48; or

 

(b)     surrendered to that company in the exercise of appraisal rights in terms of section 164,

 

have the same status as shares that have been authorised but not issued.

 

(6)     Despite the repeal of the Companies Act, 1973 (Act 61 of 1973), a share issued by a pre-existing company, and held by a shareholder immediately before the effective date, continues to have all of the rights associated with it immediately before the effective date, irrespective of whether those rights existed in terms of the company’s Memorandum of Incorporation, or in terms of that Act, subject only to—

 

(a)     amendments to that company’s Memorandum of Incorporation after the effective date;

 

(b)     the operation of subsection (5); and

 

(c)      the regulations contemplated in item 6(3) of Schedule 5.

 

36.     Authorisation for shares

 

(1)     A company’s Memorandum of Incorporation—

 

(a)     must set out the classes of shares, and the number of shares of each class, that the company is authorised to issue;

 

(b)     must set out, with respect to each class of shares—

 

(i)      a distinguishing designation for that class; and

 

(ii)      the preferences, rights, limitations and other terms associated with that class, subject to paragraph (d);

 

(c)      may authorise a stated number of unclassified shares, which are subject to classification by the board of the company in accordance with subsection (3)(c); and

 

(d)     may set out a class of shares—

 

(i)      without specifying the associated preferences, rights, limitations or other terms of that class;

 

(ii)      for which the board of the company must determine the associated preferences, rights, limitations or other terms; and

 

(iii)     which must not be issued until the board of the company has determined the associated preferences, rights, limitations or other terms, as contemplated in subparagraph (ii).

 

(2)     The authorisation and classification of shares, the numbers of authorised shares of each class, and the preferences, rights, limitations and other terms associated with each class of shares, as set out in a company’s Memorandum of Incorporation, may be changed only by—

 

(a)     an amendment of the Memorandum of Incorporation by special resolution of the shareholders; or

 

(b)     the board of the company, in the manner contemplated in subsection (3), except to the extent that the Memorandum of Incorporation provides otherwise.

 

(3)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the company’s board may—

 

(a)     increase or decrease the number of authorised shares of any class of shares;

 

(b)     reclassify any classified shares that have been authorised but not issued;

 

(c)      classify any unclassified shares that have been authorised as contemplated in subsection (1)(c), but are not issued; or

 

(d)     determine the preferences, rights, limitations or other terms of shares in a class contemplated in subsection (1)(d).

 

(4)     If the board of a company acts pursuant to its authority contemplated in subsection (3), the company must file a Notice of Amendment of its Memorandum of Incorporation, setting out the changes effected by the board.

 

37.     Preferences, rights, limitations and other share terms

 

(1)     All of the shares of any particular class authorised by a company have preferences, rights, limitations and other terms that are identical to those of other shares of the same class.

[S 37(1) subs by s 25(a) of Act 3 of 2011.]

 

(2)     Each issued share of a company, regardless of its class, has associated with it one general voting right, except to the extent provided otherwise by—

 

(a)     this Act; or

 

(b)     the preferences, rights, limitations and other terms determined by or in terms of the company’s Memorandum of Incorporation in accordance with section 36.

 

(3)     Despite anything to the contrary in a company’s Memorandum of Incorporation—

 

(a)     every share issued by that company has associated with it an irrevocable right of the shareholder to vote on any proposal to amend the preferences, rights, limitations and other terms associated with that share; and

 

(b)     if that company has established only one class of shares—

 

(i)      those shares have a right to be voted on every matter that may be decided by shareholders of the company; and

 

(ii)      the holders of that class of shares are entitled to receive the net assets of the company upon its liquidation.

 

(4)     If a company’s Memorandum of Incorporation has established more than one class of shares the Memorandum of Incorporation, in setting out the preferences, rights, limitations and other terms of those classes of shares, must provide that—

 

(a)     for each particular matter that may be submitted for a decision to shareholders of the company, at least one class of the company’s shares has voting rights that may be exercised on that matter; and

 

(b)     the holders of at least one class of the company’s shares, irrespective of whether it is the same as any class contemplated in paragraph (a), are entitled to receive the net assets of the company upon its liquidation.

 

(5)     Subject to any other law, a company’s Memorandum of Incorporation may establish, for any particular class of shares, preferences, rights, limitations or other terms that—

 

(a)     confer special, conditional or limited voting rights;

 

(b)     provide for shares of that class to be redeemable, subject to the requirements of sections 46 and 48, or convertible, as specified in the Memorandum of Incorporation—

 

(i)      at the option of the company, the shareholder, or another person at any time, or upon the occurrence of any specified contingency;

 

(ii)      for cash, indebtedness, securities or other property;

 

(iii)     at prices and in amounts specified, or determined in accordance with a formula; or

 

(iv)     subject to any other terms set out in the company’s Memorandum of Incorporation;

 

(c)      entitle the shareholders to distributions calculated in any manner, including dividends that may be cumulative, non-cumulative, or partially cumulative, subject to the requirements of sections 46 and 47; or

 

(d)     provide for shares of that class to have preference over any other class of shares with respect to distributions, or rights upon the final liquidation of the company.

 

(6)     The Memorandum of Incorporation of a company may provide for preferences, rights, limitations or other terms of any class of shares of that company to vary in response to any objectively ascertainable external fact or facts.

 

(7)     For the purpose of subsection (6)—

 

(a)     “external fact or facts” includes the occurrence of any event, a variation in any fact, benchmark or other point of reference, a determination or action by the company, its board, or any other person, an agreement to which the company is a party, or any other document; and

 

(b)     the manner in which a fact affects the preferences, rights, limitations or other terms of shares must be expressly determined by or in terms of the company’s Memorandum of Incorporation, in accordance with section 36.

 

(8)     If the Memorandum of Incorporation of a company has been amended to materially and adversely alter the preferences, rights, limitations or other terms of a class of shares, any holder of those shares is entitled to seek relief in terms of section 164 if that shareholder—

 

(a)     notified the company in advance of the intention to oppose the resolution to amend the Memorandum of Incorporation; and

 

(b)     was present at the meeting, and voted against that resolution.

 

(9)     A person—

 

(a)     acquires the rights associated with any particular securities of a company—

 

(i)      when that person’s name is entered in the company’s certificated securities register; or

 

(ii)      as determined in accordance with the rules of the Central Securities Depository, in the case of uncertificated securities; and

 

(b)     ceases to have the rights associated with any particular securities of a company—

 

(i)      when the transfer to another person, re-acquisition by the company, or surrender to the company has been entered in the company’s certificated securities register; or

 

(ii)      as determined in accordance with the rules of the Central Securities Depository, in the case of uncertificated securities.

[S 37(9) ins by s 25(b) of Act 3 of 2011.]

 

38.     Issuing shares

 

(1)     The board of a company may resolve to issue shares of the company at any time, but only within the classes, and to the extent, that the shares have been authorised by or in terms of the company’s Memorandum of Incorporation, in accordance with section 36.

 

(2)     If a company issues shares—

 

(a)     that have not been authorised in accordance with section 36; or

 

(b)     in excess of the number of authorised shares of any particular class,

 

the issuance of those shares may be retroactively authorised in accordance with section 36 within 60 business days after the date on which the shares were issued.

[S 38(2) subs by s 26 of Act 3 of 2011.]

 

(3)     If a resolution seeking to retroactively authorise an issue of shares, as contemplated in subsection (2), is not adopted when it is put to a vote—

 

(a)     the share issue is a nullity to the extent that it exceeds any authorisation;

 

(b)     the company must return to any person the fair value of the consideration received by the company in respect of that share issue to the extent that it is nullified, together with interest in accordance with the Prescribed Rate of Interest Act, 1975 (Act 55 of 1975), from the date on which the consideration for the shares was received by the company, until the date on which the company complies with this paragraph;

 

(c)      any certificate evidencing a share so issued and nullified, and any entry in a securities register in respect of such an issue, is void; and

 

(d)     a director of the company is liable to the extent set out in section 77(3)(e)(i) if the director—

 

(i)      was present at a meeting when the board approved the issue of any unauthorised shares, or participated in the making of such a decision in terms of section 74; and

 

(ii)      failed to vote against the issue of those shares, despite knowing that the shares had not been authorised in accordance with section 36.

 

39.     Subscription of shares

 

(1)     This section—

 

(a)     does not apply to a public company or state-owned company, except to the extent that the company’s Memorandum of Incorporation provides otherwise; and

 

(b)     applies to a private company or personal liability company with respect to any issue of its shares, other than—

 

(i)      shares issued—

 

(aa)   in terms of options or conversion rights; or

 

(bb)   as contemplated in section 40(5) to (7); or

 

(ii)      capitalisation shares issued as contemplated in section 47.

 

(2)     If a private company proposes to issue any shares, other than as contemplated in subsection (1)(b), each shareholder of that private company has a right, before any other person who is not a shareholder of that company, to be offered and, within a reasonable time to subscribe for, a percentage of the shares to be issued equal to the voting power of that shareholder’s general voting rights immediately before the offer was made.

 

(3)     A private or personal liability company’s Memorandum of Incorporation may limit, negate, restrict or place conditions upon the right set out in subsection (2), with respect to any or all classes of shares of that company.

 

(4)     Except to the extent that a private or personal liability company’s Memorandum of Incorporation provides otherwise—

 

(a)     in exercising a right in terms of subsection (2), a shareholder may subscribe for fewer shares than the shareholder would be entitled to subscribe for under that subsection; and

 

(b)     shares not subscribed for by a shareholder within the reasonable time contemplated in subsection (2), may be offered to other persons to the extent permitted by the Memorandum of Incorporation.

[S 39(4) subs by s 27 of Act 3 of 2011.]

 

40.     Consideration for shares

 

(1)     The board of a company may issue authorised shares only—

 

(a)     for adequate consideration to the company, as determined by the board;

 

(b)     in terms of conversion rights associated with previously issued securities of the company; or

 

(c)      as a capitalisation share as contemplated in section 47.

 

(2)     Before a company issues any particular shares, the board must determine the consideration for which, and the terms on which, those shares will be issued.

 

(3)     A determination by the board of a company in terms of subsection (2) as to the adequacy of consideration for any shares may not be challenged on any basis other than in terms of section 76, read with section 77(2).

 

(4)     Subject to subsections (5) to (7), when a company has received the consideration approved by its board for the issuance of any shares—

 

(a)     those shares are fully paid; and

 

(b)     the company must issue those shares and cause the name of the holder to be entered on the company’s securities register in accordance with Part E of this Chapter.

 

(5)     If the consideration for any shares that are issued or to be issued is in the form of an instrument such that the value of the consideration cannot be realised by the company until a date after the time the shares are to be issued, or is in the form of an agreement for future services, future benefits or future payment by the subscribing party—

[Words preceding s 40(5)(a) subs by s 28(a) of Act 3 of 2011.]

 

(a)     the consideration for those shares is regarded as having been received by the company at any time only to the extent—

 

(i)      that the value of the consideration for any of those shares has been realised by the company; or

[S 40(5)(a)(i) subs by s 28(b) of Act 3 of 2011.]

 

(ii)      that the subscribing party to the agreement has fulfilled its obligations in terms of the agreement; and

 

(b)     upon receiving the instrument or entering into the agreement, the company must—

 

(i)      issue the shares immediately; and

 

(ii)      cause the issued shares to be transferred to a third party, to be held in trust and later transferred to the subscribing party in accordance with a trust agreement.

 

(6)     Except to the extent that a trust agreement contemplated in subsection (5)(b) provides otherwise—

 

(a)     voting rights, and appraisal rights set out in section 164, associated with shares that have been issued but are held in trust may not be exercised;

 

(b)     any pre-emptive rights associated with shares that have been issued but are held in trust may be exercised only to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

 

(c)      any distribution with respect to shares that have been issued but are held in trust—

 

(i)      must be paid or credited by the company to the subscribing party to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement; and

 

(ii)      may be credited against the remaining value at that time of any services still to be performed by the subscribing party, any future payment remaining due, or the benefits still to be received by the company; and

 

(d)     shares that have been issued but are held in trust—

 

(i)      may not be transferred by or at the direction of the subscribing party unless the company has expressly consented to the transfer in advance;

 

(ii)      may be transferred to the subscribing party on a quarterly basis, to the extent that the instrument has become negotiable by the company or the subscribing party has fulfilled its obligations under the agreement;

 

(iii)     must be transferred to the subscribing party when the instrument has become negotiable by the company, or upon satisfaction of all of the subscribing party’s obligations in terms of the agreement; and

 

(iv)     to the extent that the instrument is dishonoured after becoming negotiable, or that the subscribing party has failed to fulfil its obligations under the agreement, must be returned to the company and cancelled, on demand by the company.

 

(7)     A company may not make a demand contemplated in subsection (6)(d)(iv) unless—

 

(a)     a negotiable instrument is dishonoured after becoming negotiable by the company; or

 

(b)     in the case of an agreement, the subscribing party has failed to fulfil any obligation in terms of the agreement for a period of at least 40 business days after the date on which the obligation was due to be fulfilled.

 

41.     Shareholder approval for issuing shares in certain cases

 

(1)     Subject to subsection (2), an issue of shares or securities convertible into shares, or a grant of options contemplated in section 42, or a grant of any other rights exercisable for securities, must be approved by a special resolution of the shareholders of a company, if the shares, securities, options or rights are issued to a—

 

(a)     director, future director, prescribed officer, or future prescribed officer of the company;

 

(b)     person related or inter-related to the company, or to a director or prescribed officer of the company; or

 

(c)      nominee of a person contemplated in paragraph (a) or (b).

 

(2)     Subsection (1) does not apply if the issue of shares, securities or rights is—

 

(a)     under an agreement underwriting the shares, securities or rights;

 

(b)     in the exercise of a pre-emptive right to be offered and to subscribe shares, as contemplated in section 39;

 

(c)      in proportion to existing holdings, and on the same terms and conditions as have been offered to all the shareholders of the company or to all the shareholders of the class or classes of shares being issued;

 

(d)     pursuant to an employee share scheme that satisfies the requirements of section 97; or

 

(e)     pursuant to an offer to the public, as defined in section 95(1)(h), read with section 96.

 

(3)     An issue of shares, securities convertible into shares, or rights exercisable for shares in a transaction, or a series of integrated transactions, requires approval of the shareholders by special resolution if the voting power of the class of shares that are issued or issuable as a result of the transaction or series of integrated transactions will be equal to or exceed 30% of the voting power of all the shares of that class held by shareholders immediately before the transaction or series of transactions.

 

(4)     In subsection (3)—

 

(a)     for purposes of determining the voting power of shares issued and issuable as a result of a transaction or series of integrated transactions, the voting power of shares is the greater of—

 

(i)      the voting power of the shares to be issued; or

 

(ii)      the voting power of the shares that would be issued after giving effect to the conversion of convertible shares and other securities and the exercise of rights to be issued;

 

(b)     a series of transactions is integrated if—

 

(i)      consummation of one transaction is made contingent on consummation of one or more of the other transactions; or

 

(ii)      the transactions are entered into within a 12-month period, and involve the same parties, or related persons; and—

 

(aa)   they involve the acquisition or disposal of an interest in one particular company or asset; or

 

(bb)   taken together, they lead to substantial involvement in a business activity that did not previously form part of the company’s principal activity.

 

(5)     A director of a company is liable to the extent set out in section 77(3)(e)(ii) if the director—

 

(a)     was present at a meeting when the board approved the issue of any securities as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the issue of those securities, despite knowing that the issue of those securities was inconsistent with this section.

 

(6)     In this section, “future director” or “future prescribed officer” does not include a person who becomes a director or prescribed officer of the company more than six months after acquiring a particular option or right.

 

42.     Options for subscription of securities

 

(1)     A company may issue options for the allotment or subscription of authorised shares or other securities of the company.

 

(2)     The board of a company must determine the consideration or other benefit for which, and the terms upon which—

 

(a)     any options are issued; and

 

(b)     the related shares or other securities are to be issued.

 

(3)     A decision by the board that the company may issue—

 

(a)     any options, constitutes also the decision of the board to issue any authorised shares or other securities for which the options may be exercised; or

 

(b)     any securities convertible into shares of any class, constitutes also the decision of the board to issue the authorised shares into which the securities may be converted.

 

(4)     A director of a company is liable to the extent set out in section 77(3)(e)(iii) if the director—

 

(a)     was present at a meeting when the board approved the granting of an option or a right as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the granting of the option or right, despite knowing that any shares—

 

(i)      for which the options could be exercised; or

 

(ii)      into which any securities could be converted,

 

had not been authorised in terms of section 36.

 

43.     Securities other than shares

 

(1)     In this section—

 

(a)     “debt instrument”—

 

(i)      includes any securities other than the shares of a company, irrespective of whether or not issued in terms of a security document, such as a trust deed; but

 

(ii)      does not include promissory notes and loans, whether constituting an encumbrance on the assets of the company or not; and

 

(b)     “security document” includes any document by which a debt instrument is offered or proposed to be offered, embodying the terms and conditions of the debt instrument including, but not limited to, a trust deed or certificate.

 

(2)     The board of a company—

 

(a)     may authorise the company to issue a secured or unsecured debt instrument at any time, except to the extent provided otherwise by the company’s Memorandum of Incorporation; and

[S 43(2)(a) subs by s 29 of Act 3 of 2011.]

 

(b)     must determine whether each such debt instrument is secured or unsecured.

 

(3)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise, a debt instrument issued by the company may grant special privileges regarding—

 

(a)     attending and voting at general meetings and the appointment of directors; or

 

(b)     allotment of securities, redemption by the company, or substitution of the debt instrument for shares of the company, provided that the securities to be allotted or substituted in terms of any such privilege, are authorised by or in terms of the company’s Memorandum of Incorporation in accordance with section 36.

 

(4)     Every security document must clearly indicate, on its first page, whether the relevant debt instrument is secured or unsecured.

 

(5)     A company may appoint any person, including a juristic person, as trustee for the holders of the company’s debt instruments, if—

 

(a)     the person—

 

(i)      is not a director or prescribed officer of the company, or a person related or inter-related to the company, a director or a prescribed officer; and

 

(ii)      does not have any interest in, or relationship with, the company that might conflict with the duties of a trustee; and

 

(b)     the board is satisfied that the person has the requisite knowledge and experience to carry out the duties of a trustee.

 

(6)     Any new trustee appointed for the purpose of this section must—

 

(a)     satisfy the requirements of subsection (5)(a); and

 

(b)     be approved by the holders of at least 75% by value of debt instruments present at a meeting called for that purpose.

 

(7)     Any provision contained in a trust deed for securing any debt instruments, or in any agreement with the holders of any debt instruments secured by a trust deed, is void to the extent that it would exempt a trustee from, or indemnify a trustee against, liability for breach of trust, or failure to exercise the degree of care and diligence required of the prudent and careful person, having regard to the provisions of the trust deed respecting the powers, authorities or discretions of the trustee.

 

(8)     Subsection (7) does not invalidate—

 

(a)     any release validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or

 

(b)     any provision of a debt instrument—

 

(i)      enabling a release to be given with the consent of the majority of not less than three fourths in value of the holders of debt instruments present and voting at a meeting called for the purpose; and

 

(ii)      with respect to a specific act or omission, or of the trustee dying or ceasing to act.

 

44.     Financial assistance for subscription of securities

 

(1)     In this section, “financial assistance” does not include lending money in the ordinary course of business by a company whose primary business is the lending of money.

 

(2)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide financial assistance by way of a loan, guarantee, the provision of security or otherwise to any person for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, subject to subsections (3) and (4).

[S 44(2) subs by s 30(a) of Act 3 of 2011.]

 

(3)     Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless—

 

(a)     the particular provision of financial assistance is—

 

(i)      pursuant to an employee share scheme that satisfies the requirements of section 97; or

 

(ii)      pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

 

(b)     the board is satisfied that—

 

(i)      immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

 

(ii)      the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

 

(4)     In addition to satisfying the requirements of subsection (3), the board must ensure that any conditions or restrictions respecting the granting of financial assistance set out in the company’s Memorandum of Incorporation have been satisfied.

 

(5)     A decision by the board of a company to provide financial assistance contemplated in subsection (2), or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with—

 

(a)     this section; or

 

(b)     a prohibition, condition or requirement contemplated in subsection (4).

 

(6)     If a resolution or an agreement is void in terms of subsection (5) a director of the company is liable to the extent set out in section 77(3)(e)(iv) if the director—

[Words preceding s 44(6)(a) subs by s 30(b) of Act 3 of 2011.]

 

(a)     was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section or a prohibition, condition or requirement contemplated in subsection (4).

 

45.     Loans or other financial assistance to directors

 

(1)     In this section, “financial assistance”—

 

(a)     includes lending money, guaranteeing a loan or other obligation, and securing any debt or obligation; but

 

(b)     does not include—

 

(i)      lending money in the ordinary course of business by a company whose primary business is the lending of money;

 

(ii)      an accountable advance to meet—

 

(aa)   legal expenses in relation to a matter concerning the company; or

 

(bb)   anticipated expenses to be incurred by the person on behalf of the company; or

 

(iii)     an amount to defray the person’s expenses for removal at the company’s request.

 

(2)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board may authorise the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member, subject to subsections (3) and (4).

 

(3)     Despite any provision of a company’s Memorandum of Incorporation to the contrary, the board may not authorise any financial assistance contemplated in subsection (2), unless—

 

(a)     the particular provision of financial assistance is—

 

(i)      pursuant to an employee share scheme that satisfies the requirements of section 97; or

 

(ii)      pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

 

(b)     the board is satisfied that—

 

(i)      immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

 

(ii)      the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.

[S 45(3)(b) subs by s 31(a) of Act 3 of 2011.]

 

(4)     In addition to satisfying the requirements of subsection (3), the board must ensure that any conditions or restrictions respecting the granting of financial assistance set out in the company’s Memorandum of Incorporation have been satisfied.

 

(5)     If the board of a company adopts a resolution to do anything contemplated in subsection (2), the company must provide written notice of that resolution to all shareholders, unless every shareholder is also a director of the company, and to any trade union representing its employees—

 

(a)     within 10 business days after the board adopts the resolution, if the total value of all loans, debts, obligations or assistance contemplated in that resolution, together with any previous such resolution during the financial year, exceeds one-tenth of 1% of the company’s net worth at the time of the resolution; or

 

(b)     within 30 business days after the end of the financial year, in any other case.

 

(6)     A resolution by the board of a company to provide financial assistance contemplated in subsection (2), or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with—

 

(a)     this section; or

 

(b)     a prohibition, condition or requirement contemplated in subsection (4).

 

(7)     If a resolution or agreement is void in terms of subsection (6) a director of the company is liable to the extent set out in section 77(3)(e)(v) if the director—

[Words preceding s 45(7)(a) subs by s 31(b) of Act 3 of 2011.]

 

(a)     was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section or a prohibition, condition or requirement contemplated in subsection (4).

 

46.     Distributions must be authorised by board

 

(1)     A company must not make any proposed distribution unless—

 

(a)     the distribution—

 

(i)      is pursuant to an existing legal obligation of the company, or a court order; or

 

(ii)      the board of the company, by resolution, has authorised the distribution;

 

(b)     it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution; and

 

(c)      the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test, as set out in section 4, and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.

 

(2)     When the board of a company has adopted a resolution contemplated in subsection (1)(c), the relevant distribution must be fully carried out, subject only to subsection (3).

 

(3)     If the distribution contemplated in a particular board resolution, court order or existing legal obligation has not been completed within 120 business days after the board made the acknowledgement required by subsection (1)(c), or after a fresh acknowledgement being made in terms of this subsection, as the case may be—

 

(a)     the board must reconsider the solvency and liquidity test with respect to the remaining distribution to be made pursuant to the original resolution, order or obligation; and

 

(b)     despite any law, order or agreement to the contrary, the company must not proceed with or continue with any such distribution unless the board adopts a further resolution as contemplated in subsection (1)(c).

 

(4)     If a distribution takes the form of the incurrence of a debt or other obligation by the company, as contemplated in paragraph (b) of the definition of ‘distribution’ set out in section 1, the requirements of this section—

 

(a)     apply at the time that the board resolves that the company may incur that debt or obligation; and

 

(b)     do not apply to any subsequent action of the company in satisfaction of that debt or obligation, except to the extent that the resolution, or the terms and conditions of the debt or obligation, provide otherwise.

 

(5)     If, after considering the solvency and liquidity test as required by this section, it appears to the company that the section prohibits its immediate compliance with a court order contemplated in subsection (1)(a)(i)—

 

(a)     the company may apply to a court for an order varying the original order; and

 

(b)     the court may make an order that—

 

(i)      is just and equitable, having regard to the financial circumstances of the company; and

 

(ii)      ensures that the person to whom the company is required to make a payment in terms of the original order is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

 

(6)     A director of a company is liable to the extent set out in section 77(3)(e)(vi) if the director—

 

(a)     was present at the meeting when the board approved a distribution as contemplated in this section, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the distribution, despite knowing that the distribution was contrary to this section.

 

47.     Capitalisation shares

 

(1)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise—

 

(a)     the board of that company, by resolution, may approve the issuing of any authorised shares of the company, as capitalisation shares, on a pro rata basis to the shareholders of one or more classes of shares;

 

(b)     shares of one class may be issued as a capitalisation share in respect of shares of another class; and

 

(c)      subject to subsection (2), when resolving to award a capitalisation share, the board may at the same time resolve to permit any shareholder entitled to receive such an award to elect instead to receive a cash payment, at a value determined by the board.

 

(2)     The board of a company may not resolve to offer a cash payment in lieu of awarding a capitalisation share, as contemplated in subsection (1)(c), unless the board—

 

(a)     has considered the solvency and liquidity test, as required by section 46, on the assumption that every such shareholder would elect to receive cash; and

 

(b)     is satisfied that the company would satisfy the solvency and liquidity test immediately upon the completion of the distribution.

 

48.     Company or subsidiary acquiring company’s shares

 

(1)     This section does not apply to—

 

(a)     the making of a demand, tendering of shares and payment by a company to a shareholder in terms of a shareholder’s appraisal rights set out in section 164; or

 

(b)     the redemption by the company of any redeemable securities in accordance with the terms and conditions of those securities.

[S 48(1) subs by s 32(a) of Act 3 of 2011.]

 

(2)     Subject to subsections (3) and (8), and if the decision to do so satisfies the requirements of section 46—

[Words preceding s 48(2)(a) subs by s 32(b) of Act 3 of 2011.]

 

(a)     the board of a company may determine that the company will acquire a number of its own shares; and

[S 48(2)(a) subs by s 32(c) of Act 3 of 2011.]

 

(b)     the board of a subsidiary company may determine that it will acquire shares of its holding company, but—

[Words preceding s 48(2)(b)(i) subs by s 32(c) of Act 3 of 2011.]

 

(i)      not more than 10%, in aggregate, of the number of issued shares of any class of shares of a company may be held by, or for the benefit of, all of the subsidiaries of that company, taken together; and

 

(ii)      no voting rights attached to those shares may be exercised while the shares are held by the subsidiary, and it remains a subsidiary of the company whose shares it holds.

 

(3)     Despite any provision of any law, agreement, order or the Memorandum of Incorporation of a company, the company may not acquire its own shares, and a subsidiary of a company may not acquire shares of that company, if, as a result of that acquisition, there would no longer be any shares of the company in issue other than—

 

(a)     shares held by one or more subsidiaries of the company; or

 

(b)     convertible or redeemable shares.

 

(4)     An agreement with a company providing for the acquisition by the company of shares issued by it is enforceable against the company, subject to subsections (2) and (3).

 

(5)     If a company alleges that, as a result of the operation of subsection (2) or (3), it is unable to fulfil its obligations in terms of an agreement contemplated in subsection (4)—

 

(a)     the company must apply to a court for an order in terms of paragraph (c);

 

(b)     the company has the burden of proving that fulfilment of its obligations would put it in breach of subsections (2) or (3); and

 

(c)      if the court is satisfied that the company is prevented from fulfilling its obligations pursuant to the agreement, the court may make an order that—

 

(i)      is just and equitable, having regard to the financial circumstances of the company; and

 

(ii)      ensures that the person to whom the company is required to make a payment in terms of the agreement is paid at the earliest possible date compatible with the company satisfying its other financial obligations as they fall due and payable.

 

(6)     If a company acquires any shares contrary to section 46, or this section, the company must, not more than two years after the acquisition, apply to a court for an order reversing the acquisition, and the court may order—

[Words preceding s 48(6)(a) subs by s 32(d) of Act 3 of 2011.]

 

(a)     the person from whom the shares were acquired to return the amount paid by the company; and

 

(b)     the company to issue to that person an equivalent number of shares of the same class as those acquired.

 

(7)     A director of a company is liable to the extent set out in section 77(3)(e)(vii) if the director—

 

(a)     was present at the meeting when the board approved an acquisition of shares contemplated in this section, or participated in the making of such a decision in terms of section 74; and

 

(b)     failed to vote against the acquisition of shares, despite knowing that the acquisition was contrary to this section or section 46.

 

(8)     A decision by the board of a company contemplated in subsection (2)(a)—

 

(a)     must be approved by a special resolution of the shareholders of the company if any shares are to be acquired by the company from a director or prescribed officer of the company, or a person related to a director or prescribed officer of the company; and

 

(b)     is subject to the requirements of sections 114 and 115 if, considered alone, or together with other transactions in an integrated series of transactions, it involves the acquisition by the company of more than 5% of the issued shares of any particular class of the company’s shares.

[S 48(8) ins by s 32(e) of Act 3 of 2011.]

 

Part E

Securities registration and transfer

 

49.     Securities to be evidenced by certificates or uncertificated

 

(1)     In this Part, “certificated” means evidenced by a certificate, as contemplated in subsection (2)(a).

 

(2)     Any securities issued by a company must be either—

 

(a)     evidenced by certificates; or

 

(b)     uncertificated, in which case the company must not issue certificates evidencing or purporting to evidence title to those securities, subject to subsection (6).

 

(3)     Except to the extent that this Act expressly provides otherwise—

 

(a)     the rights and obligations of security holders are not different solely on the basis of their respective securities being certificated or uncertificated; and

 

(b)     any provision of this Act applies with respect to any uncertificated securities in the same manner as it applies to certificated securities.

 

(4)     Sections 52 to 55—

 

(a)     apply only to uncertificated securities; and

 

(b)     prevail in the case of a conflict between any provision of those sections and any other provision of this Act, any other law, the common law, the company’s Memorandum of Incorporation or any agreement.

 

(5)     Any certificated securities may cease to be evidenced by certificates, and thereafter be uncertificated, in which case any provision of this Act contemplated in subsection (4) applies to those securities from the date on which they ceased to be evidenced by certificates.

 

(6)     In the manner set out in section 54, any uncertificated securities may be withdrawn from the uncertificated securities register, and certificates issued evidencing those securities, in which case from the date on which they became certificated—

 

(a)     sections 52 to 55 cease to apply to those securities; and

 

(b)     for greater certainty, transfer of ownership in those securities cannot be effected by a participant or central securities depository while they remain in certificated form, unless they are held in certificated form in collective custody by the participant or central securities depository.

[S 49(6)(b) subs by s 33 of Act 3 of 2011.]

 

(7)     The Minister may make regulations regarding matters that are supplementary and ancillary to the provisions of this Part.

 

50.     Securities register and numbering

 

(1)     Every company must—

 

(a)     establish or cause to be established a register of its issued securities in the prescribed form; and

 

(b)     maintain its securities register in accordance with the prescribed standards.

 

(2)     As soon as practicable after issuing any securities a company must enter or cause to be entered in its securities register, in respect of every class of securities that it has issued—

 

(a)     the total number of those securities that are held in uncertificated form; and

 

(b)     with respect to certificated securities—

 

(i)      the names and addresses of the persons to whom the securities were issued;

 

(ii)      the number of securities issued to each of them;

 

(iii)     the number of, and prescribed circumstances relating to, any securities—

 

(aa)   that have been placed in trust as contemplated in section 40(6)(d); or

 

(bb)   whose transfer has been restricted;

 

(iv)     in the case of securities contemplated in section 43—

 

(aa)   the number of those securities issued and outstanding; and

[S 50(2)(b)(iv)(aa) subs by s 34 of Act 3 of 2011.]

 

(bb)   the names and addresses of the registered owner of the security and any holders of a beneficial interest in the security; and

 

(v)      any other prescribed information.

 

(3)     If a company has issued uncertificated securities, or has issued securities that have ceased to be certificated, as contemplated in section 49(5), a record must be administered and maintained by a participant or central securities depository in the prescribed form, as the company’s uncertificated securities register, which—

 

(a)     forms part of that company’s securities register; and

 

(b)     must contain, with respect to all securities contemplated in this subsection, any details—

 

(i)      referred to in subsection (2)(b), read with the changes required by the context; or

 

(ii)      determined by the rules of the central securities depository.

 

(3A)   (a)      A company that does not fall within the meaning of an “affected company” must record in its                securities register prescribed information regarding the natural persons who are the beneficial                  owners of the company, in the prescribed form, and must ensure that this information is updated                    within the prescribed period after any changes in beneficial ownership have occurred.

         (b)      The prescribed requirements referred to in paragraph (a) must be prescribed after consultation            with the Minister of Finance and the Financial Intelligence Centre, established by section 2 of                the Financial Intelligence Centre Act, 2001 (Act 38 of 2001).

[S 50(3A) ins by  s 57 of Act 22 of 2022 (wef 1 April 2023).]

 

(4)     A securities register, or an uncertificated securities register, maintained in accordance with this Act is sufficient proof of the facts recorded in it, in the absence of evidence to the contrary.

 

(5)     Unless all the shares of a company rank equally for all purposes, the company’s shares, or each class of shares, and any other securities, must be distinguished by an appropriate numbering system.

 

51.     Registration and transfer of certificated securities

 

(1)     A certificate evidencing any certificated securities of a company—

 

(a)     must state on its face—

 

(i)      the name of the issuing company;

 

(ii)      the name of the person to whom the securities were issued;

 

(iii)     the number and class of shares and the designation of the series, if any, evidenced by that certificate; and

 

(iv)     any restriction on the transfer of the securities evidenced by that certificate,

 

subject to item 6(4) of Schedule 5;

 

(b)     must be signed by two persons authorised by the company’s board; and

 

(c)      is proof that the named security holder owns the securities, in the absence of evidence to the contrary.

 

(2)     A signature contemplated in subsection (1)(b) may be affixed to or placed on the certificate by autographic, mechanical or electronic means.

 

(3)     A certificate remains valid despite the subsequent departure from office of any person who signed it.

 

(4)     If, as contemplated in section 50(5), all of a company’s shares rank equally for all purposes, and are therefore not distinguished by a numbering system—

 

(a)     each certificate issued in respect of those shares must be distinguished by a numbering system; and

 

(b)     if the share has been transferred, the certificate must be endorsed with a reference number or similar device that will enable each preceding holder of the share in succession to be identified.

 

(5)     Subject to subsection (6), a company must enter in its securities register every transfer of any certificated securities, including in the entry—

 

(a)     the name and address of the transferee;

 

(b)     the description of the securities, or interest transferred;

 

(c)      the date of the transfer; and

 

(d)     the value of any consideration still to be received by the company on each share or interest, in the case of a transfer of securities contemplated in section 40(5) and (6).

 

(6)     A company may make an entry contemplated in subsection (5) only if the transfer—

 

(a)     is evidenced by a proper instrument of transfer that has been delivered to the company; or

 

(b)     was effected by operation of law.

 

52.     Registration of uncertificated securities

 

(1)     At the request of a company, and on payment of the prescribed fee, if any, a participant or central securities depository, as determined in accordance with the rules of the central securities depository, must furnish that company with all details of that company’s uncertificated securities reflected in the uncertificated securities register.

 

(2)     A person who wishes to inspect an uncertificated securities register may do so only—

 

(a)     through the relevant company in terms of section 26; and

 

(b)     in accordance with the rules of the central securities depository.

 

(3)     Within five business days after the date of a request for inspection, a company must produce a record of the uncertificated securities register, which record must reflect at least the details referred to in section 50(3)(b) at the close of business on the day on which the request for inspection was made.

 

(4)     A participant or central securities depository, determined in accordance with the rules of the central securities depository—

 

(a)     must provide a regular statement at prescribed intervals to each person for whom any uncertificated securities are held in an uncertificated securities register, setting out the number and identity of the uncertificated securities held on that person’s behalf;

 

(b)     must not impose a charge for a statement on the person entitled to the statement; and

 

(c)      may impose a charge or service fee for such a statement on the relevant company in accordance with the regulations.

 

(5)     The regulations contemplated in section 49(7) may provide for a charge or service fee for statements contemplated in subsection (4)(c).

 

53.     Transfer of uncertificated securities

 

(1)     The transfer of uncertificated securities in an uncertificated securities register may be effected only—

 

(a)     by a participant or central securities depository;

 

(b)     on receipt of—

 

(i)      an instruction to transfer sent and properly authenticated in terms of the rules of a central securities depository; or

 

(ii)      an order of a court; and

 

(c)      in accordance with this section and the rules of the central securities depository.

 

(2)     Transfer of ownership in any uncertificated securities must be effected by—

 

(a)     debiting the account in the uncertificated securities register from which the transfer is effected; and

 

(b)     crediting the account in the uncertificated securities register to which the transfer is effected,

 

in accordance with the rules of a central securities depository.

 

(3)     The requirements of section 51(5), read with the changes required by the context, apply with respect to a transfer of uncertificated securities.

 

(4)     A transfer of ownership in accordance with this section occurs despite any fraud, illegality or insolvency that may—

 

(a)     affect the relevant uncertificated securities; or

 

(b)     have resulted in the transfer being effected,

 

but a transferee who was a party to or had knowledge of the fraud or illegality, or had knowledge of the insolvency, as the case may be, may not rely on this subsection.

 

(5)     A court may not order the name of a transferee contemplated in this section to be removed from an uncertificated securities register, unless that person was a party to or had knowledge of a fraud or illegality as contemplated in subsection (4).

[S 53(5) subs by s 35 of Act 3 of 2011.]

 

(6)     Nothing in this section prejudices any power of a participant or central securities depository, as the case may be, to effect a transfer to a person to whom the right to any uncertificated securities of a company has been transmitted by operation of law.

 

54.     Substitution of certificated or uncertificated securities

 

(1)     A person who wishes to withdraw all or part of the uncertificated securities held by that person in an uncertificated securities register, and obtain a certificate in respect of those withdrawn securities, may so notify the relevant participant or central securities depository, as determined in accordance with the rules of the central securities depository, which must within five business days—

 

(a)     notify the relevant company to provide the requested certificate; and

 

(b)     remove the details of the uncertificated securities from the uncertificated securities register.

 

(2)     After receiving a notice in terms of subsection (1)(a) from a participant or central securities depository, as the case may be, a company must—

 

(a)     immediately enter the relevant person’s name and details of that person’s holding of securities in the company’s securities register and indicate on the register that the securities so withdrawn are no longer held in uncertificated form; and

 

(b)     within 10 business days, or 20 business days in the case of a holder of securities who is not resident within the Republic—

 

(i)      prepare and deliver to the relevant person a certificate in respect of the securities; and

 

(ii)      notify the central securities depository that the securities are no longer held in uncertificated form.

 

(3)     A company may charge a holder of its securities a reasonable fee to cover the actual costs of issuing a certificate, as contemplated in this section.

 

55.     Liability relating to uncertificated securities

 

(1)     A person who takes any unlawful action in consequence of which any of the following events occur in a securities register or uncertificated securities register, namely—

 

(a)     the name of any person remains in, is entered in, or is removed or omitted;

 

(b)     the number of uncertificated securities is increased, reduced, or remains unaltered; or

 

(c)      the description of any uncertificated securities is changed,

 

is liable to any person who has suffered any direct loss or damage arising out of that action.

 

(2)     A person who gives an instruction to transfer uncertificated securities must—

 

(a)     warrant the legality and correctness of that instruction; and

 

(b)     indemnify the company and the participant or central securities depository required to effect the transfer in accordance with the rules of the central securities depository, against any claim and against any direct loss or damage suffered by them arising out of such a transfer by virtue of an instruction referred to in this subsection.

 

(3)     A participant or central securities depository who may effect the transfer of uncertificated securities in accordance with the rules of a central securities depository must indemnify—

 

(a)     a company against any claim made upon it and against any direct loss or damage suffered by it arising out of a transfer of any uncertificated securities; and

 

(b)     any other person against any direct loss or damage arising out of a transfer of any uncertificated securities,

 

if that transfer was effected by the participant or central securities depository without instruction, or in accordance with an instruction that was not sent and properly authenticated in terms of the rules of a central securities depository, or in a manner inconsistent with an instruction that was sent and properly authenticated in terms of the rules of a central securities depository.

 

56.     Beneficial interest in securities and beneficial ownership of company

[Heading subs by s 58(a) of Act 22 of 2022 wef 1 April 2023.]

 

(1)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the company’s issued securities may be held by, and registered in the name of, one person for the beneficial interest of another person.

 

(2)     A person is regarded to have a beneficial interest in a security of a public company if the security is held nomine officii by another person on that first person’s behalf, or if that first person—

 

(a)     is married in community of property to a person who has a beneficial interest in that security;

 

(b)     is the parent of a minor child who has a beneficial interest in that security;

 

(c)      acts in terms of an agreement with another person who has a beneficial interest in that security, and the agreement is in respect of the co-operation between them for the acquisition, disposal or any other matter relating to a beneficial interest in that security;

 

(d)     is the holding company of a company that has a beneficial interest in that security;

 

(e)     is entitled to exercise or control the exercise of the majority of the voting rights at general meetings of a juristic person that has a beneficial interest in that security; or

 

(f)      gives directions or instructions to a juristic person that has a beneficial interest in that security, and its directors or the trustees are accustomed to act in accordance with that person’s directions or instructions.

 

(3)     If a security of a public company is registered in the name of a person who is not the holder of the beneficial interest in all of the securities in the same company held by that person, that registered holder of security must disclose—

 

(a)     the identity of the person on whose behalf that security is held; and

 

(b)     the identity of each person with a beneficial interest in the securities so held, the number and class of securities held for each such person with a beneficial interest, and the extent of each such beneficial interest.

[S 56(3)(b) subs by s 36(a) of Act 3 of 2011.]

 

(4)     The information required in terms of subsection (3) must—

 

(a)     be disclosed in writing to the company within five business days after the end of every month during which a change has occurred in the information contemplated in subsection (3), or more promptly or frequently to the extent so provided by the requirements of a central securities depository; and

[S 56(4)(a) subs by s 36(b) of Act 3 of 2011.]

 

(b)     otherwise be provided on payment of a prescribed fee charged by the registered holder of securities.

 

(5)     A company that knows or has reasonable cause to believe that any of its securities are held by one person for the beneficial interest of another, by notice in writing, may require either of those persons to—

 

(a)     confirm or deny that fact;

 

(b)     provide particulars of the extent of the beneficial interest held during the three years preceding the date of the notice; and

 

(c)      disclose the identity of each person with a beneficial interest in the securities held by that person.

 

(6)     The information required in terms of subsection (5) must be provided not later than 10 business days after receipt of the notice.

 

(7)     An affected company must—

[Words preceding s 56(7)(a) subs by s 58(b) of Act 22 of 2022 wef 1 April 2023.]

 

(a)     establish and maintain a register of the disclosures made in terms of this section;

 

(aA) establish and maintain a register of the persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class issued by the company, together with the extent of those beneficial interests, and ensure that this register is updated within the prescribed period after having received a notice contemplated in section 122(1); and

[S 56(7)(aA) ins by s 58(c) of Act 22 of 2022 wef 1 April 2023.]

 

(b)     publish in its annual financial statements, if it is required to have such statements audited in terms of section 30(2), a list of the persons who hold beneficial interests equal to or in excess of 5% of the total number of securities of that class issued by the company, together with the extent of those beneficial interests.

[S 56(7) am by s 58(b) of Act 22 of 2022 wef 1 April 2023.]

 

(8)     Subsections (9) to (11) do not apply in respect of securities that are subject to the rules of a central securities depository.

[S 56(8) ins by s 36(c) of Act 3 of 2011.]

 

(9)     A person who holds a beneficial interest in any securities may vote in a matter at a meeting of shareholders, only to the extent that—

 

(a)     the beneficial interest includes the right to vote on the matter; and

 

(b)     the person’s name is on the company’s register of disclosures as the holder of a beneficial interest, or the person holds a proxy appointment in respect of that matter from the registered holder of those securities.

[S 56(9) ins by s 36(c) of Act 3 of 2011.]

 

(10)   The registered holder of any securities in which any person has a beneficial interest must deliver to each such person—

 

(a)     a notice of any meeting of a company at which those securities may be voted on within two business days after receiving such a notice from the company; and

 

(b)     a proxy appointment to the extent of that person’s beneficial interest, if the person so demands in terms of subsection (11).

[S 56(10) ins by s 36(c) of Act 3 of 2011.]

 

(11)   A person who has a beneficial interest in any securities that are entitled to be voted on at a meeting of a company’s shareholders, may demand a proxy appointment from the registered holder of those securities, to the extent of that person’s beneficial interest, by delivering such a demand to the registered holder, in writing, or as required by the applicable requirements of a central securities depository.

[S 56(11) ins by s 36(c) of Act 3 of 2011.]

 

(12)   A company that does not fall within the meaning of an “affected company” must file a record with the    Commission, in the prescribed form and containing the prescribed information, regarding the      individuals who are the beneficial owners of the company, and must ensure that this information is       updated by filing notices with the Commission within the prescribed period after any changes in          beneficial ownership have occurred.

[S 56(12) ins by s 58(d) of Act 22 of 2022 wef 1 April 2023.]

 

(13)   The prescribed requirements referred to in subsection (12) must be prescribed after consultation with   the Minister of Finance and the Financial Intelligence Centre, established by section 2 of the Financial      Intelligence Centre Act, 2001 (Act 38 of 2001).

[S 56(13) ins by s 58(d) of Act 22 of 2022 wef 1 April 2023.]

 

 

(14)   The Commission must maintain a register of the information contained in the records contemplated in subsections (7)(aA) and (12)

[S 56(14) ins by s 58(d) of Act 22 of 2022 wef 1 April 2023.]

 

Part F

Governance of companies

 

57.     Interpretation and application of Part

[Section heading subs by s 37(a) of Act 3 of 2011.]

 

(1)     In this Part, “shareholder” has the meaning set out in section 1, but also includes a person who is entitled to exercise any voting rights in relation to a company, irrespective of the form, title or nature of the securities to which those voting rights are attached.

[S 57(1) subs by s 37(b) of Act 3 of 2011.]

 

(2)     If a profit company, other than a state-owned company, has only one shareholder—

 

(a)     that shareholder may exercise any or all of the voting rights pertaining to that company on any matter, at any time, without notice or compliance with any other internal formalities, except to the extent that the company’s Memorandum of Incorporation provides otherwise; and

 

(b)     sections 59 to 65 do not apply to the governance of that company.

 

(3)     If a profit company, other than a state-owned company, has only one director—

 

(a)     that director may exercise any power or perform any function of the board at any time, without notice or compliance with any other internal formalities, except to the extent that the company’s Memorandum of Incorporation provides otherwise; and

 

(b)     sections 71(3) to (7), 73 and 74 do not apply to the governance of that company.

 

(4)     If every shareholder of a particular company, other than a state-owned company, is also a director of that company—

 

(a)     any matter that is required to be referred by the board to the shareholders for decision may be decided by the shareholders at any time after being referred by the board, without notice or compliance with any other internal formalities, except to the extent that the Memorandum of Incorporation provides otherwise, provided that—

 

(i)      every such person was present at the board meeting when the matter was referred to them in their capacity as shareholders;

 

(ii)      sufficient persons are present in their capacity as shareholders to satisfy the quorum requirements set out in section 64; and

 

(iii)     a resolution adopted by those persons in their capacity as shareholders has at least the support that would have been required for it to be adopted as an ordinary or special resolution, as the case may be, at a properly constituted shareholder’s meeting; and

 

(b)     when acting in their capacity as shareholders, those persons are not subject to the provisions of section 73 to 78 relating to the duties, obligations, liabilities and indemnification of directors.

 

(5)     The board of a company that holds any securities of a second company may authorise any person to act as its representative at any shareholders meeting of that second company.

 

(6)     A person authorised to act as a company’s representative, as contemplated in subsection (5), may exercise the same powers as the authorising company could have exercised if it were an individual holder of securities.

 

(7)     For greater certainty, this section applies to the exercise of authority within a company in respect of any matter arising in terms of this Act or a company’s Memorandum of Incorporation, irrespective of whether any such particular matter is expressly addressed in this Part.

[S 57(7) ins by s 37(c) of Act 3 of 2011.]

 

58.     Shareholder right to be represented by proxy

 

(1)     At any time, a shareholder of a company may appoint any individual, including an individual who is not a shareholder of that company, as a proxy to—

 

(a)     participate in, and speak and vote at, a shareholders meeting on behalf of the shareholder; or

 

(b)     give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.

[S 58(1) subs by s 38(a) of Act 3 of 2011.]

 

(2)     A proxy appointment—

 

(a)     must be in writing, dated and signed by the shareholder; and

 

(b)     remains valid for—

 

(i)      one year after the date on which it was signed; or

 

(ii)      any longer or shorter period expressly set out in the appointment,

 

unless it is revoked in a manner contemplated in subsection (4)(c), or expires earlier as contemplated in subsection (8)(d).

 

(3)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise—

 

(a)     a shareholder of that company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder;

[S 58(3)(a) subs by s 38(b) of Act 3 of 2011.]

 

(b)     a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and

 

(c)      a copy of the instrument appointing a proxy must be delivered to the company, or to any other person on behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders meeting.

 

(4)     Irrespective of the form of instrument used to appoint a proxy—

 

(a)     the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder;

 

(b)     the appointment is revocable unless the proxy appointment expressly states otherwise; and

 

(c)      if the appointment is revocable, a shareholder may revoke the proxy appointment by—

 

(i)      cancelling it in writing, or making a later inconsistent appointment of a proxy; and

 

(ii)      delivering a copy of the revocation instrument to the proxy, and to the company.

 

(5)     The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of—

 

(a)     the date stated in the revocation instrument, if any; or

 

(b)     the date on which the revocation instrument was delivered as required in subsection (4)(c)(ii).

 

(6)     If the instrument appointing a proxy or proxies has been delivered to a company, as long as that appointment remains in effect, any notice that is required by this Act or the company’s Memorandum of Incorporation to be delivered by the company to the shareholder must be delivered by the company to—

 

(a)     the shareholder; or

 

(b)     the proxy or proxies, if the shareholder has—

 

(i)      directed the company to do so, in writing; and

 

(ii)      paid any reasonable fee charged by the company for doing so.

 

(7)     A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy, provides otherwise.

 

(8)     If a company issues an invitation to shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of instrument for appointing a proxy—

 

(a)     the invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;

 

(b)     the invitation, or form of instrument supplied by the company for the purpose of appointing a proxy, must—

 

(i)      bear a reasonably prominent summary of the rights established by this section;

 

(ii)      contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by the shareholder; and

 

(iii)     provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution or resolutions to be put at the meeting, or is to abstain from voting;

 

(c)      the company must not require that the proxy appointment be made irrevocable; and

 

(d)     the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to subsection (5).

 

(9)     Subsection (8)(b) and (d) do not apply if the company merely supplies a generally available standard form of proxy appointment on request by a shareholder.

 

59.     Record date for determining shareholder rights

 

(1)     The board of a company may set a record date for the purpose of determining which shareholders are entitled to—

 

(a)     receive notice of a shareholders meeting;

 

(b)     participate in and vote at a shareholders meeting;

 

(c)      decide any matter by written consent or electronic communication, as contemplated in section 60;

 

(d)     exercise pre-emptive rights, as contemplated in section 39;

 

(e)     receive a distribution; or

 

(f)      be allotted or exercise other rights.

 

(2)     A record date determined by the board in terms of subsection (1)—

 

(a)     may not be—

 

(i)      earlier than the date on which the record date is determined; or

 

(ii)      more than 10 business days before the date on which the event or action, for which the record date is being set, is scheduled to occur; and

 

(b)     must be published to the shareholders in a manner that satisfies any prescribed requirements.

 

(3)     If the board does not determine a record date for any action or event, the record date is—

 

(a)     in the case of a meeting, the latest date by which the company is required to give shareholders notice of that meeting; or

 

(b)     the date of the action or event, in any other case,

 

unless the Memorandum of Incorporation or rules of the company provide otherwise.

 

60.     Shareholders acting other than at meeting

 

(1)     A resolution that could be voted on at a shareholders meeting may instead be—

 

(a)     submitted for consideration to the shareholders entitled to exercise voting rights in relation to the resolution; and

 

(b)     voted on in writing by shareholders entitled to exercise voting rights in relation to the resolution within 20 business days after the resolution was submitted to them.

 

(2)     A resolution contemplated in subsection (1)—

 

(a)     will have been adopted if it is supported by persons entitled to exercise sufficient voting rights for it to have been adopted as an ordinary or special resolution, as the case may be, at a properly constituted shareholders meeting; and

 

(b)     if adopted, has the same effect as if it had been approved by voting at a meeting.

 

(3)     An election of a director that could be conducted at a shareholders meeting may instead be conducted by written polling of all of the shareholders entitled to exercise voting rights in relation to the election of that director.

 

(4)     Within 10 business days after adopting a resolution, or conducting an election of directors, in terms of this section, the company must deliver a statement describing the results of the vote, consent process, or election to every shareholder who was entitled to vote on or consent to the resolution, or vote in the election of the director, as the case may be.

 

(5)     For greater certainty, any business of a company that is required by this Act or the company’s Memorandum of Incorporation to be conducted at an annual general meeting of the company, may not be conducted in the manner contemplated in this section.

 

61.     Shareholders meetings

 

(1)     The board of a company, or any other person specified in the company’s Memorandum of Incorporation or rules, may call a shareholders meeting at any time.

 

(2)     Subject to section 60, a company must hold a shareholders meeting—

 

(a)     at any time that the board is required by this Act or the Memorandum of Incorporation to refer a matter to shareholders for decision;

 

(b)     whenever required in terms of section 70(3) to fill a vacancy on the board; and

 

(c)      when otherwise required—

 

(i)      in terms of subsection (3) or (7); or

 

(ii)      by the company’s Memorandum of Incorporation.

 

(3)     Subject to subsection (5) and (6), the board of a company, or any other person specified in the company’s Memorandum of Incorporation or rules, must call a shareholders meeting if one or more written and signed demands for such a meeting are delivered to the company, and—

 

(a)     each such demand describes the specific purpose for which the meeting is proposed; and

 

(b)     in aggregate, demands for substantially the same purpose are made and signed by the holders, as of the earliest time specified in any of those demands, of at least 10% of the voting rights entitled to be exercised in relation to the matter proposed to be considered at the meeting.

[S 61(3)(b) subs by s 39 of Act 3 of 2011.]

 

(4)     A company’s Memorandum of Incorporation may specify a lower percentage in substitution for that set out in subsection (3)(b).

 

(5)     A company, or any shareholder of the company, may apply to a court for an order setting aside a demand made in terms of subsection (3) on the grounds that the demand is frivolous, calls for a meeting for no other purpose than to reconsider a matter that has already been decided by the shareholders, or is otherwise vexatious.

 

(6)     At any time before the start of a shareholders meeting contemplated in subsection (3)—

 

(a)     a shareholder who submitted a demand for that meeting may withdraw that demand; and

 

(b)     the company must cancel the meeting if, as a result of one or more demands being withdrawn, the voting rights of any remaining shareholders continuing to demand the meeting, in aggregate, fall below the minimum percentage of voting rights required to call a meeting.

 

(7)     A public company must convene an annual general meeting of its shareholders—

 

(a)     initially, no more than 18 months after the company’s date of incorporation; and

 

(b)     thereafter, once in every calendar year, but no more than 15 months after the date of the previous annual general meeting, or within an extended time allowed by the Companies Tribunal, on good cause shown.

 

(8)     A meeting convened in terms of subsection (7) must, at a minimum, provide for the following business to be transacted—

 

(a)     presentation of—

 

(i)      the directors’ report;

 

(ii)      audited financial statements for the immediately preceding financial year; and

 

(iii)     an audit committee report;

 

(b)     election of directors, to the extent required by this Act or the company’s Memorandum of Incorporation;

 

(c)      appointment of—

 

(i)      an auditor for the ensuing financial year; and

 

(ii)      an audit committee; and

 

(d)     any matters raised by shareholders, with or without advance notice to the company.

 

(9)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise—

 

(a)     the board of the company may determine the location for any shareholders meeting of the company; and

 

(b)     a shareholders meeting of the company may be held in the Republic or in any foreign country.

 

(10)   Every shareholders meeting of a public company must be reasonably accessible within the Republic for electronic participation by shareholders in the manner contemplated in section 63(2), irrespective of whether the meeting is held in the Republic or elsewhere.

 

(11)   If a company is unable to convene a meeting as required in terms of this section because it has no directors, or because all of its directors are incapacitated—

 

(a)     any other person authorised by the company’s Memorandum of Incorporation may convene the meeting; or

 

(b)     if no person has been authorised as contemplated in paragraph (a), the Companies Tribunal, on a request by any shareholder, may issue an administrative order for a shareholders meeting to be convened on a date, and subject to any terms, that the Tribunal considers appropriate in the circumstances.

 

(12)   If a company fails to convene a meeting for any reason other than as contemplated in subsection (11)—

 

(a)     at a time required in accordance with its Memorandum of Incorporation;

 

(b)     when required by shareholders in terms of subsection (3); or

 

(c)      within the time required by subsection (7),

 

a shareholder may apply to a court for an order requiring the company to convene a meeting on a date, and subject to any terms, that the court considers appropriate in the circumstances.

 

(13)   The company must compensate a shareholder who applies to the Companies Tribunal in terms of subsection (11), or to a court in terms of subsection (12), respectively, for the costs of those proceedings.

 

(14)   Any failure to hold a meeting as required by this section does not affect the existence of a company, or the validity of any action by the company.

 

62.     Notice of meetings

 

(1)     The company must deliver a notice of each shareholders meeting in the prescribed manner and form to all of the shareholders of the company as of the record date for the meeting, at least—

 

(a)     15 business days before the meeting is to begin, in the case of a public company or a non-profit company that has voting members; or

 

(b)     10 business days before the meeting is to begin, in any other case.

 

(2)     A company’s Memorandum of Incorporation may provide for longer or shorter minimum notice periods than required by subsection (1).

[S 62(2) subs by s 40(a) of Act 3 of 2011.]

 

(2A)   A company may call a meeting with less notice than required by subsection (1) or by its Memorandum of Incorporation, but such a meeting may proceed only if every person who is entitled to exercise voting rights in respect of any item on the meeting agenda—

 

(a)     is present at the meeting; and

 

(b)     votes to waive the required minimum notice of the meeting.

[S 62(2A) ins by s 40(b) of Act 3 of 2011.]

 

(3)     A notice of a shareholders meeting must be in writing, and must include—

 

(a)     the date, time and place for the meeting, and the record date for the meeting;

 

(b)     the general purpose of the meeting, and any specific purpose contemplated in section 61(3)(a), if applicable;

 

(c)      a copy of any proposed resolution of which the company has received notice, and which is to be considered at the meeting, and a notice of the percentage of voting rights that will be required for that resolution to be adopted;

 

(d)     in the case of an annual general meeting of a company—

 

(i)      the financial statements to be presented or a summarised form thereof; and

[S 62(3)(d)(i) subs by s 40(c) of Act 3 of 2011.]

 

(ii)      directions for obtaining a copy of the complete annual financial statements for the preceding financial year; and

 

(e)     a reasonably prominent statement that—

 

(i)      a shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, participate in and vote at the meeting in the place of the shareholder, or two or more proxies if the Memorandum of Incorporation of the company so permits;

 

(ii)      a proxy need not also be a shareholder of the company; and

 

(iii)     section 63(1) requires that meeting participants provide satisfactory identification.

 

(4)     If there was a material defect in the giving of the notice of a shareholders meeting, the meeting may proceed, subject to subsection (5), only if every person who is entitled to exercise voting rights in respect of any item on the meeting agenda is present at the meeting and votes to approve the ratification of the defective notice.

[S 62(4) subs by s 40(d) of Act 3 of 2011.]

 

(5)     If a material defect in the form or manner of giving notice of a meeting relates only to one or more particular matters on the agenda for the meeting—

 

(a)     any such matter may be severed from the agenda, and the notice remains valid with respect to any remaining matters on the agenda; and

 

(b)     the meeting may proceed to consider a severed matter, if the defective notice in respect of that matter has been ratified in terms of subsection (4)(d).

 

(6)     An immaterial defect in the form or manner of giving notice of a shareholders meeting, or an accidental or inadvertent failure in the delivery of the notice to any particular shareholder to whom it was addressed, does not invalidate any action taken at the meeting.

 

(7)     A shareholder who is present at a meeting, either in person or by proxy—

 

(a)     is regarded as having received or waived notice of the meeting, if at least the required minimum notice was given; and

 

(b)     has a right to—

 

(i)      allege a material defect in the form of notice for a particular item on the agenda for the meeting; and

 

(ii)      participate in the determination whether to waive the requirements for notice if less than the required minimum notice was given, or to ratify a defective notice; and

 

(c)      except to the extent set out in paragraph (b), is regarded as having waived any right based on an actual or alleged defect in the notice of the meeting.

[S 62(7) subs by s 40(e) of Act 3 of 2011.]

 

63.     Conduct of meetings

 

(1)     Before any person may attend or participate in a shareholders meeting—

 

(a)     that person must present reasonably satisfactory identification; and

 

(b)     the person presiding at the meeting must be reasonably satisfied that the right of that person to participate and vote, either as a shareholder, or as a proxy for a shareholder, has been reasonably verified.

 

(2)     Unless prohibited by its Memorandum of Incorporation, a company may provide for—

 

(a)     a shareholders meeting to be conducted entirely by electronic communication; or

 

(b)     one or more shareholders, or proxies for shareholders, to participate by electronic communication in all or part of a shareholders meeting that is being held in person,

 

as long as the electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate reasonably effectively in the meeting.

[S 63(2) subs by s 41(a) of Act 3 of 2011.]

 

(3)     If a company provides for participation in a meeting by electronic communication, as contemplated in subsection (2)—

 

(a)     the notice of that meeting must inform shareholders of the availability of that form of participation, and provide any necessary information to enable shareholders or their proxies to access the available medium or means of electronic communication; and

 

(b)     access to the medium or means of electronic communication is at the expense of the shareholder or proxy, except to the extent that the company determines otherwise.

 

(4)     At a meeting of shareholders, voting may either be by show of hands, or by polling.

[S 63(4) subs by s 41(b) of Act 3 of 2011.]

 

(5)     If voting is by show of hands, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder and entitled to exercise voting rights has one vote, irrespective of the number of voting rights that person would otherwise be entitled to exercise.

[S 63(5) subs by s 41(b) of Act 3 of 2011.]

 

(6)     If voting on a particular matter is by polling, any person who is present at the meeting, whether as a shareholder or as proxy for a shareholder, has the number of votes determined in accordance with the voting rights associated with the securities held by that shareholder.

[S 63(6) ins by s 41(c) of Act 3 of 2011.]

 

(7)     Despite any provision of a company’s Memorandum of Incorporation or agreement to the contrary, a polled vote must be held on any particular matter to be voted on at a meeting if a demand for such a vote is made by—

 

(a)     at least five persons having the right to vote on that matter, either as a shareholder or a proxy representing a shareholder; or

 

(b)     a person who is, or persons who together are, entitled, as a shareholder or proxy representing a shareholder, to exercise at least 10% of the voting rights entitled to be voted on that matter.

[S 63(7) ins by s 41(c) of Act 3 of 2011.]

 

64.     Meeting quorum and adjournment

 

(1)     Subject to subsections (2) to (8)—

 

(a)     a shareholders meeting may not begin until sufficient persons are present at the meeting to exercise, in aggregate, at least 25% of all of the voting rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting; and

 

(b)     a matter to be decided at the meeting may not begin to be considered unless sufficient persons are present at the meeting to exercise, in aggregate, at least 25% of all of the voting rights that are entitled to be exercised on that matter at the time the matter is called on the agenda.

 

(2)     A company’s Memorandum of Incorporation may specify a lower or higher percentage in place of the 25% required in either or both of subsection (1)(a) or (b).

 

(3)     Despite the percentage figures set out in subsection (1), or in any applicable provisions of a company’s Memorandum of Incorporation, if a company has more than two shareholders, a meeting may not begin, or a matter begin to be debated, unless—

 

(a)     at least three shareholders are present at the meeting; and

 

(b)     the requirements of subsection (1) or the Memorandum of Incorporation, if different, are satisfied.

 

(4)     If, within one hour after the appointed time for a meeting to begin, the requirements of subsections (1), or (3) if applicable—

 

(a)     for that meeting to begin have not been satisfied, the meeting is postponed without motion, vote or further notice, for one week;

 

(b)     for consideration of a particular matter to begin have not been satisfied—

 

(i)      if there is other business on the agenda of the meeting, consideration of that matter may be postponed to a later time in the meeting without motion or vote; or

 

(ii)      if there is no other business on the agenda of the meeting, the meeting is adjourned for one week, without motion or vote.

 

(5)     The person intended to preside at a meeting that cannot begin due to the operation of subsection (1)(a), or (3) if applicable, may extend the one-hour limit allowed in subsection (4) for a reasonable period on the grounds that—

 

(a)     exceptional circumstances affecting weather, transportation or electronic communication have generally impeded or are generally impeding the ability of shareholders to be present at the meeting; or

 

(b)     one or more particular shareholders, having been delayed, have communicated an intention to attend the meeting, and those shareholders, together with others in attendance, would satisfy the requirements of subsection (1), or (3) if applicable.

 

(6)     A company’s Memorandum of Incorporation or rules may specify a different time in substitution for—

 

(a)     the period of one hour contemplated in subsections (4) and (5), respectively; or

 

(b)     the period of one week contemplated in subsection (4).

 

(7)     A company is not required to give further notice of a meeting that is postponed or adjourned in terms of subsection (4), unless the location for the meeting is different from—

 

(a)     the location of the postponed or adjourned meeting; or

 

(b)     a location announced at the time of adjournment, in the case of an adjourned meeting.

 

(8)     If, at the time appointed in terms of this section for a postponed meeting to begin, or for an adjourned meeting to resume, the requirements of subsection (1), or (3) if applicable, have not been satisfied, the shareholders, or in the case of a non-profit company, the members of the company present in person or by proxy will be deemed to constitute a quorum.

[S 64(8) subs by s 42(a) of Act 3 of 2011.]

 

(9)     Unless the company’s Memorandum of Incorporation or rules provide otherwise, after a quorum has been established for a meeting, or for a matter to be considered at a meeting, the meeting may continue, or the matter may be considered, so long as at least one shareholder with voting rights entitled to be exercised at the meeting, or on that matter, is present at the meeting.

 

(10)   A shareholders meeting, or the consideration of any matter being debated at the meeting, may be adjourned from time to time without further notice, subject to subsection (11), on a motion supported by persons entitled to exercise, in aggregate, a majority of the voting rights—

 

(a)     held by all of the persons who are present at the meeting at the time; and

 

(b)     that are entitled to be exercised on at least one matter remaining on the agenda of the meeting, or on the matter under debate, as the case may be.

 

(11)   An adjournment of a meeting, or of consideration of a matter being debated at the meeting, in terms of subsection (10)—

 

(a)     may be either—

 

(i)      to a fixed time and place; or

 

(ii)      until further notice,

 

as agreed at the meeting; and

[S 64(11)(a)(ii) subs by s 42(b) of Act 3 of 2011.]

 

(b)     requires that a further notice be given to shareholders only if the meeting determined that the adjournment was “until further notice”, as contemplated in paragraph (a)(ii).

 

(12)   Subject to subsection (13), a meeting may not be adjourned beyond the earlier of—

 

(a)     the date that is 120 business days after the record date determined in accordance with section 59; or

 

(b)     the date that is 60 business days after the date on which the adjournment occurred.

 

(13)   A company’s Memorandum of Incorporation may provide for different maximum periods of adjournment of meetings than those set out in subsection (12), or for unlimited adjournment of meetings.

 

65.     Shareholder resolutions

 

(1)     Every resolution of shareholders is either an ordinary resolution or a special resolution.

 

(2)     The board may propose any resolution to be considered by shareholders, and may determine whether that resolution will be considered at a meeting, or by vote or written consent in terms of section 60.

 

(3)     Any two shareholders of a company—

 

(a)     may propose a resolution concerning any matter in respect of which they are each entitled to exercise voting rights; and

 

(b)     when proposing a resolution, may require that the resolution be submitted to shareholders for consideration—

 

(i)      at a meeting demanded in terms of section 61(3);

 

(ii)      at the next shareholders meeting; or

 

(iii)     by written vote in terms of section 60.

 

(4)     A proposed resolution is not subject to the requirements of section 6(4), but must be—

 

(a)     expressed with sufficient clarity and specificity; and

 

(b)     accompanied by sufficient information or explanatory material,

 

to enable a shareholder who is entitled to vote on the resolution to determine whether to participate in the meeting and to seek to influence the outcome of the vote on the resolution.

[S 65(4) subs by s 43(a) of Act 3 of 2011.]

 

(5)     At any time before the start of the meeting at which a resolution will be considered, a shareholder or director who believes that the form of the resolution does not satisfy the requirements of subsection (4) may seek leave to apply to a court for an order—

 

(a)     restraining the company from putting the proposed resolution to a vote until the requirements of subsection (4) are satisfied; and

 

(b)     requiring the company, or the shareholders who proposed the resolution, as the case may be, to—

 

(i)      take appropriate steps to alter the resolution so that it satisfies the requirements of subsection (4); and

 

(ii)      compensate the applicant for costs of the proceedings, if successful.

 

(6)     Once a resolution has been approved, it may not be challenged or impugned by any person in any forum on the grounds that it did not satisfy subsection (4).

 

(7)     For an ordinary resolution to be approved by shareholders, it must be supported by more than 50% of the voting rights exercised on the resolution.

 

(8)     Except for an ordinary resolution for the removal of a director under section 71, a company’s Memorandum of Incorporation may require—

 

(a)     a higher percentage of voting rights to approve an ordinary resolution; or

 

(b)     one or more higher percentages of voting rights to approve ordinary resolutions concerning one or more particular matters, respectively,

 

provided that there must at all times be a margin of at least 10 percentage points between the highest established requirement for approval of an ordinary resolution on any matter, and the lowest established requirement for approval of a special resolution on any matter.

[Words following s 65(8)(b) subs by s 43(c) of Act 3 of 2011.]

 

(9)     For a special resolution to be approved by shareholders, it must be supported by at least 75% of the voting rights exercised on the resolution.

 

(10)   A company’s Memorandum of Incorporation may permit—

 

(a)     a different percentage of voting rights to approve any special resolution; or

[S 65(10)(a) subs by s 43(b) of Act 3 of 2011.]

 

(b)     one or more different percentages of voting rights to approve special resolutions concerning one or more particular matters, respectively,

[S 65(10)(b) subs by s 43(b) of Act 3 of 2011.]

 

provided that there must at all times be a margin of at least 10 percentage points between the highest established requirement for approval of an ordinary resolution on any matter, and the lowest established requirement for approval of a special resolution on any matter.

[Words following s 65(10) subs by s 43(c) of Act 3 of 2011.]

 

(11)   A special resolution is required to—

 

(a)     amend the company’s Memorandum of Incorporation to the extent required by section 16(1)(c) and section 36(2)(a);

 

(b)     ratify a consolidated revision of a company’s Memorandum of Incorporation, as contemplated in section 18(1)(b);

 

(c)      ratify actions by the company or directors in excess of their authority, as contemplated in section 20(2);

 

(d)     approve an issue of shares or grant of rights in the circumstances contemplated in section 41(1);

 

(e)     approve an issue of shares or securities as contemplated in section 41(3);

 

(f)      authorise the board to grant financial assistance in the circumstances contemplated in section 44(3)(a)(ii) or 45(3)(a)(ii);

 

(g)     approve a decision of the board for re-acquisition of shares in the circumstances contemplated in section 48(8);

 

(h)     authorise the basis for compensation to directors of a profit company, as required by section 66(9);

 

(i)       approve the voluntary winding up of the company, as contemplated in section 80(1);

 

(j)       approve the winding up of a company in the circumstances contemplated in section 81(1);

 

(k)      approve an application to transfer the registration of the company to a foreign jurisdiction as contemplated in section 82(5);

 

(l)       approve any proposed fundamental transaction, to the extent required by Part A of Chapter 5; or

 

(m)     revoke a resolution contemplated in section 164(9)(c).

[S 65(11) subs by s 43(d) of Act 3 of 2011.]

 

(12)   A company’s Memorandum of Incorporation may require a special resolution to approve any other matter not contemplated in subsection (11).

 

66.     Board, directors and prescribed officers

 

(1)     The business and affairs of a company must be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that this Act or the company’s Memorandum of Incorporation provides otherwise.

 

(2)     The board of a company must comprise—

 

(a)     in the case of a private company, or a personal liability company, at least one director; or

 

(b)     in the case of a public company, or a non-profit company, at least three directors,

 

in addition to the minimum number of directors that the company must have to satisfy any requirement, whether in terms of this Act or its Memorandum of Incorporation, to appoint an audit committee, or a social and ethics committee as contemplated in section 72(4).

[S 66(2)(b) subs by s 44(a) of Act 3 of 2011.]

 

(3)     A company’s Memorandum of Incorporation may specify a higher number in substitution for the minimum number of directors required by subsection (2).

 

(4)     A company’s Memorandum of Incorporation—

 

(a)     may provide for—

 

(i)      the direct appointment and removal of one or more directors by any person who is named in, or determined in terms of, the Memorandum of Incorporation;

 

(ii)      a person to be an ex officio director of the company as a consequence of that person holding some other office, title, designation or similar status, subject to subsection (5)(a); or

 

(iii)     the appointment or election of one or more persons as alternate directors of the company; and

 

(b)     in the case of a profit company other than a state-owned company, must provide for the election by shareholders of at least 50% of the directors, and 50% of any alternate directors.

 

(5)     A person contemplated in subsection (4)(a)(ii)—

 

(a)     may not serve or continue to serve as an ex officio director of a company, despite holding the relevant office, title, designation or similar status, if that person is or becomes ineligible or disqualified in terms of section 69; and

 

(b)     who holds office or acts in the capacity of an ex officio director of a company has all the—

 

(i)      powers and functions of any other director of the company, except to the extent that the company’s Memorandum of Incorporation restricts the powers, functions or duties of an ex officio director; and

 

(ii)      duties, and is subject to all of the liabilities, of any other director of the company.

 

(6)     The election or appointment of a person as a director is a nullity if, at the time of the election or appointment, that person is ineligible or disqualified in terms of section 69.

 

(7)     A person becomes entitle to serve as a director of a company when that person—

[Words preceding s 66(7)(a) subs by s 44(b) of Act 3 of 2011.]

 

(a)     has been appointed or elected in accordance with this Part, or holds an office, title, designation or similar status entitling that person to be an ex officio director of the company, subject to subsection (5)(a); and

 

(b)     has delivered to the company a written consent to serve as its director.

 

(8)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the company may pay remuneration to its directors for their service as directors, subject to subsection (9).

 

(9)     Remuneration contemplated in subsection (8) may be paid only in accordance with a special resolution approved by the shareholders within the previous two years.

 

(10)   The Minister may make regulations designating any specific function or functions within a company to constitute a prescribed office for the purposes of this Act.

 

(11)   Any failure by a company at any time to have the minimum number of directors required by this Act or the company’s Memorandum of Incorporation, does not limit or negate the authority of the board, or invalidate anything done by the board or the company.

 

(12)   Save as otherwise provided elsewhere in this Act or in the company’s Memorandum of Incorporation, any particular director may be appointed to more than one committee of the company, and when calculating the minimum number of directors required for a company in terms of subsections (2) and (3), any such director who has been appointed to more than one committee must be counted only once.

[S 66(12) ins by s 44(c) of Act 3 of 2011.]

 

67.     First director or directors

 

(1)     Each incorporator of a company is a first director of the company, and serves until sufficient other directors to satisfy the minimum requirements of this Act, or the company’s Memorandum of Incorporation, have been—

 

(a)     first appointed, as contemplated in section 66(4)(a)(i); or

 

(b)     first elected in accordance with section 68 or the company’s Memorandum of Incorporation.

 

(2)     If the number of incorporators of a company, together with any ex officio directors, or directors to be appointed as contemplated in section 66(4)(a)(i), is fewer than the minimum number of directors required for that company in terms of this Act or the company’s Memorandum of Incorporation, the board must call a shareholders meeting within 40 business days after incorporation of the company for the purpose of electing sufficient directors to fill all vacancies on the board at the time of the election.

 

68.     Election of directors of profit companies

[Section heading subs by s 45(a) of Act 3 of 2011.]

 

(1)     Subject to subsection (3), each director of a profit company, other than the first director or a director contemplated in section 66(4)(a)(i) or (ii), must be elected by the persons entitled to exercise voting rights in such an election, to serve for an indefinite term, or for a term as set out in the Memorandum of Incorporation.

[S 68(1) subs by s 45(b) of Act 3 of 2011.]

 

(2)     Unless a profit company’s Memorandum of Incorporation provides otherwise, in any election of directors—

[Words preceding s 68(2)(a) subs by s 45(c) of Act 3 of 2011.]

 

(a)     the election is to be conducted as a series of votes, each of which is on the candidacy of a single individual to fill a single vacancy, with the series of votes continuing until all vacancies on the board at that time have been filled; and

 

(b)     in each vote to fill a vacancy—

 

(i)      each voting right entitled to be exercised may be exercised once; and

 

(ii)      the vacancy is filled only if a majority of the voting rights exercised support the candidate.

 

(3)     Unless the Memorandum of Incorporation of a profit company provides otherwise, the board may appoint a person who satisfies the requirements for election as a director to fill any vacancy and serve as a director of the company on a temporary basis until the vacancy has been filled by election in terms of subsection (2), and during that period any person so appointed has all of the powers, functions and duties, and is subject to all of the liabilities, of any other director of the company.

[S 68(3) subs by s 45(d) of Act 3 of 2011.]

 

69.     Ineligibility and disqualification of persons to be director or prescribed officer

 

(1)     In this section, “director” includes an alternate director, and—

 

(a)     a prescribed officer; or

 

(b)     a person who is a member of a committee of a board of a company, or of the audit committee of a company,

 

irrespective of whether or not the person is also a member of the company’s board.

 

(2)     A person who is ineligible or disqualified, as set out in this section, must not—

 

(a)     be appointed or elected as a director of a company, or consent to being appointed or elected as a director; or

 

(b)     act as a director of a company.

 

(3)     A company must not knowingly permit an ineligible or disqualified person to serve or act as a director.

 

(4)     A person who becomes ineligible or disqualified while serving as a director of a company ceases to be entitled to continue to act as a director immediately, subject to section 70(2).

[S 69(4) subs by s 46(a) of Act 3 of 2011.]

 

(5)     A person who has been placed under probation by a court in terms of section 162, or in terms of section 47 of the Close Corporations Act, 1984 (Act 69 of 1984), must not serve as a director except to the extent permitted by the order of probation.

 

(6)     In addition to the provisions of this section, the Memorandum of Incorporation of a company may impose—

 

(a)     additional grounds of ineligibility or disqualification of directors; or

 

(b)     minimum qualifications to be met by directors of that company.

 

(7)     A person is ineligible to be a director of a company if the person—

 

(a)     is a juristic person;

 

(b)     is an unemancipated minor, or is under a similar legal disability; or

 

(c)      does not satisfy any qualification set out in the company’s Memorandum of Incorporation.

 

(8)     A person is disqualified to be a director of a company if—

 

(a)     a court has prohibited that person to be a director, or declared the person to be delinquent in terms of section 162, or in terms of section 47 of the Close Corporations Act, 1984 (Act 69 of 1984); or

 

(b)     subject to subsections (9) to (12), the person—

 

(i)      is an unrehabilitated insolvent;

 

(ii)      is prohibited in terms of any public regulation to be a director of the company;

 

(iii)     has been removed from an office of trust, on the grounds of misconduct involving dishonesty;

 

(iv)     has been convicted, in the Republic or elsewhere, and imprisoned without the option of a fine, or fined more than the prescribed amount, for theft, fraud, forgery, perjury or an offence—

 

(aa)   involving fraud, misrepresentation or dishonesty, or money laundering, terrorist financing, or proliferation financing activities as those terms are defined in section 1(1) of the Financial Intelligence Centre Act, 2001 (Act 38 of 2001); or

 

(bb)   in connection with the promotion, formation or management of a company, or in connection with any act contemplated in subsection (2) or (5); or

 

(cc)    under this Act, the Insolvency Act, 1936 (Act 24 of 1936), the Close Corporations Act, 1984, the Competition Act, the Financial Intelligence Centre Act, 2001 the Financial Markets Act, 2012, Chapter 2 of the Prevention and Combating of Corrupt Activities Act, 2004 (Act 12 of 2004), the Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 2004 (Act 33 of 2004) or the Tax Administration Act, 2011 (Act 28 of 2011); or

[S 69(8)(b)(iv) am by s 111 of Act 19 of 2012 and subs by substituted by s 59(b) of Act 22 of 2022 wef 31 December 2022.]

                   (v)      when a person is subject to a resolution adopted by the Security Council of the United                         Nations when acting under Chapter VII of the Charter of the United Nations, providing for                          financial sanctions which entail the identification of persons or entities against whom                             member states of the United Nations must take the actions specified in the resolution:                         and

[S 69(8)(b)(v) ins by s 59(c) of Act 22 of 2022 wef 31 December 2022.]

 

(9)     A disqualification in terms of subsection (8)(b)(iii) or (iv) ends at the later of—

 

(a)     five years after the date of removal from office, or the completion of the sentence imposed for the relevant offence, as the case may be; or

 

(b)     at the end of one or more extensions, as determined by a court from time to time, on application by the Commission in terms of subsection (10).

 

(9A)   A disqualification in terms of subsection (8)(b)(v) ends when the Security Council of the United Nations takes a decision to no longer apply that resolution to a person contemplated in that subsection.

[S 69(9A) ins by s 59(d) of Act 22 of 2022 wef 31 December 2022.]

 

(10)   At any time before the expiry of a person’s disqualification in terms of subsection (8)(b)(iii) or (iv)—

 

(a)     the Commission may apply to a court for an extension contemplated in subsection (9)(b); and

 

(b)     the court may extend the disqualification for no more than five years at a time, if the court is satisfied that an extension is necessary to protect the public, having regard to the conduct of the disqualified person up to the time of the application.

 

(11)   A court may exempt a person from the application of any provision of subsection (8)(b).

 

(11A) The Registrar of the Court must, upon—

 

(a)     the issue of a sequestration order;

 

(b)     the issue of an order for the removal of a person from any office of trust on the grounds of misconduct involving dishonesty; or

 

(c)      a conviction for an offence referred in subsection (8)(b)(iv),

 

send a copy of the relevant order or particulars of the conviction, as the case may be, to the Commission.

[S 69(11A) ins by s 46(b) of Act 3 of 2011.]

 

(11B) The Commission must notify each company which has as a director to whom the order or conviction relates, of the order or conviction.

[S 69(11B) ins by s 46(b) of Act 3 of 2011.]

 

(12)   …

[S 69(12) rep by s 46(c) of Act 3 of 2011.]

 

(13)   The Commission must establish and maintain in the prescribed manner a public register of persons who are disqualified from serving as a director, or who are subject to an order of probation as a director, in terms of an order of a court pursuant to this Act or any other law.

 

70.     Vacancies on board

 

(1)     Subject to subsection (2), a person ceases to be a director, and a vacancy arises on the board of a company—

 

(a)     when the person’s term of office as director expires, in the case of a company whose Memorandum of Incorporation provides for fixed terms, as contemplated in section 68(1); or

 

(b)     in any case, if the person—

 

(i)      resigns or dies;

 

(ii)      in the case of an ex officio director, ceases to hold the office, title, designation or similar status that entitled the person to be an ex officio director;

 

(iii)     becomes incapacitated to the extent that the person is unable to perform the functions of a director, and is unlikely to regain that capacity within a reasonable time, subject to section 71(3);

 

(iv)     is declared delinquent by a court, or placed on probation under conditions that are inconsistent with continuing to be a director of the company, in terms of section 162;

 

(v)      becomes ineligible or disqualified in terms of section 69, subject to section 71(3); or

 

(vi)     is removed—

 

(aa)   by resolution of the shareholders in terms of section 71(1);

 

(bb)   by resolution of the board in terms of section 71(3); or

 

(cc)    by order of the court in terms of section 71(5) or (6).

 

(2)     If, in terms of section 71(3), the board of a company has removed a director, a vacancy on the board does not arise until the later of—

 

(a)     the expiry of the time for filing an application for review in terms of section 71(5); or

 

(b)     the granting of an order by the court on such an application,

 

but the director is suspended from office during that time.

 

(3)     If a vacancy arises on the board, other than as a result of an ex officio director ceasing to hold that office, it must be filled by—

 

(a)     a new appointment, if the director was appointed as contemplated in section 66(4)(a)(i); or

 

(b)     subject to subsection (4), by a new election conducted—

 

(i)      at the next annual general meeting of the company, if the company is required to hold such a meeting; or

 

(ii)      in any other case, within six months after the vacancy arose—

 

(aa)   at a shareholders meeting called for the purpose of electing the director; or

 

(bb)   by a poll of the persons entitled to exercise voting rights in an election of the director, as contemplated in section 60(3).

 

(4)     If, as a result of a vacancy arising on the board of a company there are no remaining directors of a company, any holder of voting rights entitled to be exercised in the election of a director may convene a meeting for the purpose of such an election.

 

(5)     A person contemplated in subsection (4) may apply to a court for relief, and the court may grant a supervisory order relating to a meeting convened in terms of that paragraph if the court is satisfied that such an order is required to prevent the oppression, or preserve the rights, of any shareholder.

 

(6)     Every company must file a notice within 10 business days after a person becomes or ceases to be a director of the company.

 

71.     Removal of directors

 

(1)     Despite anything to the contrary in a company’s Memorandum of Incorporation or rules, or any agreement between a company and a director, or between any shareholders and a director, a director may be removed by an ordinary resolution adopted at a shareholders meeting by the persons entitled to exercise voting rights in an election of that director, subject to subsection (2).

 

(2)     Before the shareholders of a company may consider a resolution contemplated in subsection (1)—

 

(a)     the director concerned must be given notice of the meeting and the resolution, at least equivalent to that which a shareholder is entitled to receive, irrespective of whether or not the director is a shareholder of the company; and

 

(b)     the director must be afforded a reasonable opportunity to make a presentation, in person or through a representative, to the meeting, before the resolution is put to a vote.

 

(3)     If a company has more than two directors, and a shareholder or director has alleged that a director of the company—

 

(a)     has become—

 

(i)      ineligible or disqualified in terms of section 69, other than on the grounds contemplated in section 69(8)(a); or

 

(ii)      incapacitated to the extent that the director is unable to perform the functions of a director, and is unlikely to regain that capacity within a reasonable time; or

 

(b)     has neglected, or been derelict in the performance of, the functions of director,

 

the board, other than the director concerned, must determine the matter by resolution, and may remove a director whom it has determined to be ineligible or disqualified, incapacitated, or negligent or derelict, as the case may be.

 

(4)     Before the board of a company may consider a resolution contemplated in subsection (3), the director concerned must be given—

 

(a)     notice of the meeting, including a copy of the proposed resolution and a statement setting out reasons for the resolution, with sufficient specificity to reasonably permit the director to prepare and present a response; and

 

(b)     a reasonable opportunity to make a presentation, in person or through a representative, to the meeting before the resolution is put to a vote.

 

(5)     If, in terms of subsection (3), the board of a company has determined that a director is ineligible or disqualified, incapacitated, or has been negligent or derelict, as the case may be, the director concerned, or a person who appointed that director as contemplated in section 66(4)(a)(i), if applicable, may apply within 20 business days to a court to review the determination of the board.

 

(6)     If, in terms of subsection (3), the board of a company has determined that a director is not ineligible or disqualified, incapacitated, or has not been negligent or derelict, as the case may be—

 

(a)     any director who voted otherwise on the resolution, or any holder of voting rights entitled to be exercised in the election of that director, may apply to a court to review the determination of the board; and

 

(b)     the court, on application in terms of paragraph (a), may—

 

(i)      confirm the determination of the board; or

 

(ii)      remove the director from office, if the court is satisfied that the director is ineligible or disqualified, incapacitated, or has been negligent or derelict.

 

(7)     An applicant in terms of subsection (6) must compensate the company, and any other party, for costs incurred in relation to the application, unless the court reverses the decision of the board.

 

(8)     If a company has fewer than three directors—

 

(a)     subsection (3) does not apply to the company;

 

(b)     in any circumstances contemplated in subsection (3), any director or shareholder of the company may apply to the Companies Tribunal, to make a determination contemplated in that subsection; and

 

(c)      subsections (4), (5) and (6), each read with the changes required by the context, apply to the determination of the matter by the Companies Tribunal.

 

(9)     Nothing in this section deprives a person removed from office as a director in terms of this section of any right that person may have at common law or otherwise to apply to a court for damages or other compensation for—

 

(a)     loss of office as a director; or

 

(b)     loss of any other office as a consequence of being removed as a director.

 

(10)   This section is in addition to the right of a person, in terms of section 162, to apply to a court for an order declaring a director delinquent, or placing a director on probation.

 

72.     Board committees

 

(1)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, the board of a company may—

 

(a)     appoint any number of committees of directors; and

 

(b)     delegate to any committee any of the authority of the board.

 

(2)     Except to the extent that the Memorandum of Incorporation of a company, or a resolution establishing a committee, provides otherwise, the committee—

 

(a)     may include persons who are not directors of the company, but—

 

(i)      any such person must not be ineligible or disqualified to be a director in terms of section 69; and

 

(ii)      no such person has a vote on a matter to be decided by the committee;

 

(b)     may consult with or receive advice from any person; and

 

(c)      has the full authority of the board in respect of a matter referred to it.

 

(3)     The creation of a committee, delegation of any power to a committee, or action taken by a committee, does not alone satisfy or constitute compliance by a director with the required duty of a director to the company, as set out in section 76.

 

(4)     The Minister, by regulation, may prescribe—

 

(a)     a category of companies that must each have a social and ethics committee, if it is desirable in the public interest, having regard to—

 

(i)      annual turnover;

 

(ii)      workforce size; or

 

(iii)     the nature and extent of the activities of such companies;

 

(b)     the functions to be performed by social and ethics committees required by this subsection; and

 

(c)      rules governing the composition and conduct of social and ethics committees.

[S 72(4) subs by s 47(a) of Act 3 of 2011.]

 

(5)     A company that falls within a category of companies that are required in terms of this section and the regulations to appoint a social and ethics committee may apply to the Tribunal in the prescribed manner and form for an exemption from that requirement, and the Tribunal may grant such an exemption if it is satisfied that—

 

(a)     the company is required in terms of other legislation to have, and does have, some form of formal mechanism within its structures that substantially performs the function that would otherwise be performed by the social and ethics committee in terms of this section and the regulations; or

 

(b)     it is not reasonably necessary in the public interest to require the company to have a social and ethics committee, having regard to the nature and extent of the activities of the company.

[S 72(5) ins by s 47(b) of Act 3 of 2011.]

 

(6)     An exemption granted in terms of subsection (5) is valid for five years, or such shorter period as the Tribunal may determine at the time of granting the exemption, unless set aside by the Tribunal in terms of subsection (7).

[S 72(6) ins by s 47(b) of Act 3 of 2011.]

 

(7)     The Commission, on its own initiative or on request by a shareholder, or a person who was granted standing by the Tribunal at the hearing of the exemption application, may apply to the Tribunal to set aside an exemption only on the grounds that the basis on which the exemption was granted no longer applies.

[S 72(7) ins by s 47(b) of Act 3 of 2011.]

 

(8)     A social and ethics committee of a company is entitled to—

 

(a)     require from any director or prescribed officer of the company any information or explanation necessary for the performance of the committee’s functions;

 

(b)     request from any employee of the company any information or explanation necessary for the performance of the committee’s functions;

 

(c)      attend any general shareholders meeting;

 

(d)     receive all notices of and other communications relating to any general shareholders meeting; and

 

(e)     be heard at any general shareholders meeting contemplated in this paragraph on any part of the business of the meeting that concerns the committee’s functions.

[S 72(8) ins by s 47(b) of Act 3 of 2011.]

 

(9)     A company must pay all the expenses reasonably incurred by its social and ethics committee, including, if the social and ethics committee considers it appropriate, the costs or the fees of any consultant or specialist engaged by the social and ethics committee in the performance of its functions.

[S 72(9) ins by s 47(b) of Act 3 of 2011.]

 

(10)   Section 84(6) and (7), read with the changes required by the context, apply with respect to a company that fails to appoint a social and ethics committee, as required by this section and the regulations.

[S 72(10) ins by s 47(b) of Act 3 of 2011.]

 

73.     Board meetings

 

(1)     A director authorised by the board of a company—

 

(a)     may call a meeting of the board at any time; and

 

(b)     must call such a meeting if required to do so by at least—

 

(i)      25% of the directors, in the case of a board that has at least 12 members; or

 

(ii)      two directors, in any other case.

 

(2)     A company’s Memorandum of Incorporation may specify a higher or lower percentage or number in substitution for those set out in subsection (1)(b).

 

(3)     Except to the extent that this Act or a company’s Memorandum of Incorporation provides otherwise—

 

(a)     a meeting of the board may be conducted by electronic communication; or

 

(b)     one or more directors may participate in a meeting by electronic communication,

 

so long as the electronic communication facility employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting.

 

(4)     The board of a company may determine the form and time for giving notice of its meetings, but—

 

(a)     such a determination must comply with any requirements set out in the Memorandum of Incorporation, or rules, of the company; and

 

(b)     no meeting of a board may be convened without notice to all of the directors, subject to subsection (5).

 

(5)     Except to the extent that the company’s Memorandum of Incorporation provides otherwise—

 

(a)     if all of the directors of the company—

 

(i)      acknowledge actual receipt of the notice;

 

(ii)      are present at a meeting; or

 

(iii)     waive notice of the meeting,

 

the meeting may proceed even if the company failed to give the required notice of that meeting, or there was a defect in the giving of the notice;

 

(b)     a majority of the directors must be present at a meeting before a vote may be called at a meeting of the directors;

 

(c)      each director has one vote on a matter before the board;

 

(d)     a majority of the votes cast on a resolution is sufficient to approve that resolution; and

 

(e)     in the case of a tied vote—

 

(i)      the chair may cast a deciding vote, if the chair did not initially have or cast a vote; or

 

(ii)      the matter being voted on fails, in any other case.

 

(6)     A company must keep minutes of the meetings of the board, and any of its committees, and include in the minutes—

 

(a)     any declaration given by notice or made by a director as required by section 75; and

 

(b)     every resolution adopted by the board.

 

(7)     Resolutions adopted by the board—

 

(a)     must be dated and sequentially numbered; and

 

(b)     are effective as of the date of the resolution, unless the resolution states otherwise.

 

(8)     Any minutes of a meeting, or a resolution, signed by the chair of the meeting, or by the chair of the next meeting of the board, is evidence of the proceedings of that meeting, or adoption of that resolution, as the case may be.

 

74.     Directors acting other than at meeting

 

(1)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a decision that could be voted on at a meeting of the board of that company may instead be adopted by written consent of a majority of the directors, given in person, or by electronic communication, provided that each director has received notice of the matter to be decided.

 

(2)     A decision made in the manner contemplated in this section is of the same effect as if it had been approved by voting at a meeting.

 

75.     Director’s personal financial interests

 

(1)     In this section—

 

(a)     “director” includes—

 

(i)      an alternate director;

 

(ii)      a prescribed officer; and

 

(iii)     a person who is a member of a committee of the board of a company,

 

irrespective of whether the person is also a member of the company’s board; and

 

(b)     “related person”, when used in reference to a director, has the meaning set out in section 1, but also includes a second company of which the director or a related person is also a director, or a close corporation of which the director or a related person is a member.

[S 75(1) subs by s 48(a) of Act 3 of 2011.]

 

(2)     This section does not apply—

 

(a)     to a director of a company—

 

(i)      in respect of a decision that may generally affect—

 

(aa)   all of the directors of the company in their capacity as directors; or

 

(bb)   a class of persons, despite the fact that the director is one member of that class of persons, unless the only members of the class are the director or persons related or inter-related to the director; or

 

(ii)      in respect of a proposal to remove that director from office as contemplated in section 71; or

 

(b)     to a company or its director, if one person—

 

(i)      holds all of the beneficial interests of all of the issued securities of the company; and

 

(ii)      is the only director of that company.

 

(3)     If a person is the only director of a company, but does not hold all of the beneficial interests of all of the issued securities of the company, that person may not—

 

(a)     approve or enter into any agreement in which the person or a related person has a personal financial interest; or

 

(b)     as a director, determine any other matter in which the person or a related person has a personal financial interest,

 

unless the agreement or determination is approved by an ordinary resolution of the shareholders after the director has disclosed the nature and extent of that interest to the shareholders.

 

(4)     At any time, a director may disclose any personal financial interest in advance, by delivering to the board, or shareholders in the case of a company contemplated in subsection (3), a notice in writing setting out the nature and extent of that interest, to be used generally for the purposes of this section until changed or withdrawn by further written notice from that director.

 

(5)     If a director of a company, other than a company contemplated in subsection (2)(b) or (3), has a personal financial interest in respect of a matter to be considered at a meeting of the board, or knows that a related person has a personal financial interest in the matter, the director—

 

(a)     must disclose the interest and its general nature before the matter is considered at the meeting;

 

(b)     must disclose to the meeting any material information relating to the matter, and known to the director;

 

(c)      may disclose any observations or pertinent insights relating to the matter if requested to do so by the other directors;

 

(d)     if present at the meeting, must leave the meeting immediately after making any disclosure contemplated in paragraph (b) or (c);

 

(e)     must not take part in the consideration of the matter, except to the extent contemplated in paragraphs (b) and (c);

 

(f)      while absent from the meeting in terms of this subsection—

 

(i)      is to be regarded as being present at the meeting for the purpose of determining whether sufficient directors are present to constitute the meeting; and

 

(ii)      is not to be regarded as being present at the meeting for the purpose of determining whether a resolution has sufficient support to be adopted; and

 

(g)     must not execute any document on behalf of the company in relation to the matter unless specifically requested or directed to do so by the board.

 

(6)     If a director of a company acquires a personal financial interest in an agreement or other matter in which the company has a material interest, or knows that a related person has acquired a personal financial interest in the matter, after the agreement or other matter has been approved by the company, the director must promptly disclose to the board, or to the shareholders in the case of a company contemplated in subsection (3), the nature and extent of that interest, and the material circumstances relating to the director or related person’s acquisition of that interest.

 

(7)     A decision by the board, or a transaction or agreement approved by the board, or by a company as contemplated in subsection (3), is valid despite any personal financial interest of a director or person related to the director, only if—

 

(a)     it was approved following disclosure of that interest in the manner contemplated in this section; or

 

(b)     despite having been approved without disclosure of that interest, it—

 

(i)      has subsequently been ratified by an ordinary resolution of the shareholders following disclosure of that interest; or

 

(ii)      has been declared to be valid by a court in terms of subsection (8).

[S 75(7) subs by s 48(b) of Act 3 of 2011.]

 

(8)     A court, on application by any interested person, may declare valid a transaction or agreement that had been approved by the board, or shareholders as the case may be, despite the failure of the director to satisfy the disclosure requirements of this section.

[S 75(8) subs by s 48(b) of Act 3 of 2011.]

 

76.     Standards of directors’ conduct

 

(1)     In this section, “director” includes an alternate director, and—

 

(a)     a prescribed officer; or

 

(b)     a person who is a member of a committee of a board of a company, or of the audit committee of a company,

 

irrespective of whether or not the person is also a member of the company’s board.

 

(2)     A director of a company must—

 

(a)     not use the position of director, or any information obtained while acting in the capacity of a director—

 

(i)      to gain an advantage for the director, or for another person other than the company or a wholly-owned subsidiary of the company; or

 

(ii)      to knowingly cause harm to the company or a subsidiary of the company; and

 

(b)     communicate to the board at the earliest practicable opportunity any information that comes to the director’s attention, unless the director—

 

(i)      reasonably believes that the information is—

 

(aa)   immaterial to the company; or

 

(bb)   generally available to the public, or known to the other directors; or

 

(ii)      is bound not to disclose that information by a legal or ethical obligation of confidentiality.

 

(3)     Subject to subsections (4) and (5), a director of a company, when acting in that capacity, must exercise the powers and perform the functions of director—

 

(a)     in good faith and for a proper purpose;

 

(b)     in the best interests of the company; and

 

(c)      with the degree of care, skill and diligence that may reasonably be expected of a person—

 

(i)      carrying out the same functions in relation to the company as those carried out by that director; and

 

(ii)      having the general knowledge, skill and experience of that director.

 

(4)     In respect of any particular matter arising in the exercise of the powers or the performance of the functions of director, a particular director of a company—

 

(a)     will have satisfied the obligations of subsection (3)(b) and (c) if—

 

(i)      the director has taken reasonably diligent steps to become informed about the matter;

 

(ii)      either—

 

(aa)   the director had no material personal financial interest in the subject matter of the decision, and had no reasonable basis to know that any related person had a personal financial interest in the matter; or

 

(bb)   the director complied with the requirements of section 75 with respect to any interest contemplated in subparagraph (aa); and

 

(iii)     the director made a decision, or supported the decision of a committee or the board, with regard to that matter, and the director had a rational basis for believing, and did believe, that the decision was in the best interests of the company; and

 

(b)     is entitled to rely on—

 

(i)      the performance by any of the persons—

 

(aa)   referred to in subsection (5); or

 

(bb)   to whom the board may reasonably have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board’s functions that are delegable under applicable law; and

 

(ii)      any information, opinions, recommendations, reports or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (5).

 

(5)     To the extent contemplated in subsection (4)(b), a director is entitled to rely on—

 

(a)     one or more employees of the company whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports or statements provided;

 

(b)     legal counsel, accountants, or other professional persons retained by the company, the board or a committee as to matters involving skills or expertise that the director reasonably believes are matters—

 

(i)      within the particular person’s professional or expert competence; or

 

(ii)      as to which the particular person merits confidence; or

 

(c)      a committee of the board of which the director is not a member, unless the director has reason to believe that the actions of the committee do not merit confidence.

 

77.     Liability of directors and prescribed officers

 

(1)     In this section, “director” includes an alternate director, and—

 

(a)     a prescribed officer; or

 

(b)     a person who is a member of a committee of a board of a company, or of the audit committee of a company,

 

irrespective of whether or not the person is also a member of the company’s board.

 

(2)     A director of a company may be held liable—

 

(a)     in accordance with the principles of the common law relating to breach of a fiduciary duty, for any loss, damages or costs sustained by the company as a consequence of any breach by the director of a duty contemplated in section 75, 76(2) or 76(3)(a) or (b); or

 

(b)     in accordance with the principles of the common law relating to delict for any loss, damages or costs sustained by the company as a consequence of any breach by the director of—

 

(i)      a duty contemplated in section 76(3)(c);

 

(ii)      any provision of this Act not otherwise mentioned in this section; or

 

(iii)     any provision of the company’s Memorandum of Incorporation.

 

(3)     A director of a company is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having—

 

(a)     acted in the name of the company, signed anything on behalf of the company, or purported to bind the company or authorise the taking of any action by or on behalf of the company, despite knowing that the director lacked the authority to do so;

 

(b)     acquiesced in the carrying on of the company’s business despite knowing that it was being conducted in a manner prohibited by section 22(1);

 

(c)      been a party to an act or omission by the company despite knowing that the act or omission was calculated to defraud a creditor, employee or shareholder of the company, or had another fraudulent purpose;

 

(d)     signed, consented to, or authorised, the publication of—

 

(i)      any financial statements that were false or misleading in a material respect; or

 

(ii)      a prospectus, or a written statement contemplated in section 101, that contained—

 

(aa)   an ‘untrue statement’ as defined and described in section 95; or

 

(bb)   a statement to the effect that a person had consented to be a director of the company, when no such consent had been given,

 

despite knowing that the statement was false, misleading or untrue, as the case may be, but the provisions of section 104(3), read with the changes required by the context, apply to limit the liability of a director in terms of this paragraph; or

[S 77(3)(d)(ii)(bb) subs by s 49(a) of Act 3 of 2011.]

 

(e)     been present at a meeting, or participated in the making of a decision in terms of section 74, and failed to vote against—

 

(i)      the issuing of any unauthorised shares, despite knowing that those shares had not been authorised in accordance with section 36;

 

(ii)      the issuing of any authorised securities, despite knowing that the issue of those securities was inconsistent with section 41;

 

(iii)     the granting of options to any person contemplated in section 42(4), despite knowing that any shares—

 

(aa)   for which the options could be exercised; or

 

(bb)   into which any securities could be converted,

 

had not been authorised in terms of section 36;

 

(iv)     the provision of financial assistance to any person contemplated in section 44 for the acquisition of securities of the company, despite knowing that the provision of financial assistance was inconsistent with section 44 or the company’s Memorandum of Incorporation;

[S 77(3)(e)(iv) subs by s 49(b) of Act 3 of 2011.]

 

(v)      the provision of financial assistance to a director for a purpose contemplated in section 45, despite knowing that the provision of financial assistance was inconsistent with that section or the company’s Memorandum of Incorporation;

[S 77(3)(e)(v) subs by s 49(b)(i) of Act 3 of 2011.]

 

(vi)     a resolution approving a distribution, despite knowing that the distribution was contrary to section 46, subject to subsection (4);

 

(vii)    the acquisition by the company of any of its shares, or the shares of its holding company, despite knowing that the acquisition was contrary to section 46 or 48; or

 

(viii)   an allotment by the company, despite knowing that the allotment was contrary to any provision of Chapter 4.

[S 77(3)(e)(viii) subs by s 49(b)(ii) of Act 3 of 2011.]

 

(4)     The liability of a director in terms of subsection (3)(e)(vi) as a consequence of the director having failed to vote against a distribution in contravention of section 46—

 

(a)     arises only if—

 

(i)      immediately after making all of the distribution contemplated in a resolution in terms of section 46, the company does not satisfy the solvency and liquidity test; and

 

(ii)      it was unreasonable at the time of the decision to conclude that the company would satisfy the solvency and liquidity test after making the relevant distribution; and

 

(b)     does not exceed, in aggregate, the difference between—

 

(i)      the amount by which the value of the distribution exceeded the amount that could have been distributed without causing the company to fail to satisfy the solvency and liquidity test; and

 

(ii)      the amount, if any, recovered by the company from persons to whom the distribution was made.

 

(5)     If the board of a company has made a decision in a manner that contravened this Act, as contemplated in subsection (3)(e)—

 

(a)     the company, or any director who has been or may be held liable in terms of subsection (3)(e), may apply to a court for an order setting aside the decision of the board; and

 

(b)     the court may make—

 

(i)      an order setting aside the decision in whole or in part, absolutely or conditionally; and

 

(ii)      any further order that is just and equitable in the circumstances, including an order—

 

(aa)   to rectify the decision, reverse any transaction, or restore any consideration paid or benefit received by any person in terms of the decision of the board; and

 

(bb)   requiring the company to indemnify any director who has been or may be held liable in terms of this section, including indemnification for the costs of the proceedings under this subsection.

 

(6)     The liability of a person in terms of this section is joint and several with any other person who is or may be held liable for the same act.

 

(7)     Proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of this section may not be commenced more than three years after the act or omission that gave rise to that liability.

 

(8)     In addition to the liability set out elsewhere in this section, any person who would be so liable is jointly and severally liable with all other such persons—

 

(a)     to pay the costs of all parties in the court in a proceeding contemplated in this section unless the proceedings are abandoned, or exculpate that person; and

 

(b)     to restore to the company any amount improperly paid by the company as a consequence of the impugned act, and not recoverable in terms of this Act.

 

(9)     In any proceedings against a director, other than for wilful misconduct or wilful breach of trust, the court may relieve the director, either wholly or partly, from any liability set out in this section, on any terms the court considers just if it appears to the court that—

 

(a)     the director is or may be liable, but has acted honestly and reasonably; or

 

(b)     having regard to all the circumstances of the case, including those connected with the appointment of the director, it would be fair to excuse the director.

 

(10)   A director who has reason to apprehend that a claim may be made alleging that the director is liable, other than for wilful misconduct or wilful breach of trust, may apply to a court for relief, and the court may grant relief to the director on the same grounds as if the matter had come before the court in terms of subsection (9).

 

78.     Indemnification and directors’ insurance

 

(1)     In this section, “director” includes a former director and an alternate director, and—

 

(a)     a prescribed officer; or

 

(b)     a person who is a member of a committee of a board of a company, or of the audit committee of a company,

 

irrespective of whether or not the person is also a member of the company’s board.

 

(2)     Subject to subsections (4) to (6), any provision of an agreement, the Memorandum of Incorporation or rules of a company, or a resolution adopted by a company, whether express or implied, is void to the extent that it directly or indirectly purports to—

 

(a)     relieve a director of—

 

(i)      a duty contemplated in section 75 or 76; or

 

(ii)      liability contemplated in section 77; or

 

(b)     negate, limit or restrict any legal consequences arising from an act or omission that constitutes wilful misconduct or wilful breach of trust on the part of the director.

 

(3)     Subject to subsection (3A), a company may not directly or indirectly pay any fine that may be imposed on a director of the company, or on a director of a related company, as a consequence of that director having been convicted of an offence, unless the conviction was based on strict liability.

[S 78(3) subs by s 50(a) of Act 3 of 2011.]

 

(3A)   Subsection (3) does not apply to a private or personal liability company if—

 

(a)     a single individual is the sole shareholder and sole director of that company; or

 

(b)     two or more related individuals are the only shareholders of that company, and there are no directors of the company other than one or more of those individuals.

[S 78(3A) ins by s 50(b) of Act 3 of 2011.]

 

(4)     Except to the extent that a company’s Memorandum of Incorporation provides otherwise, the company—

 

(a)     may advance expenses to a director to defend litigation in any proceedings arising out of the director’s service to the company; and

 

(b)     may directly or indirectly indemnify a director for expenses contemplated in paragraph (a), irrespective of whether it has advanced those expenses, if the proceedings—

 

(i)      are abandoned or exculpate the director; or

 

(ii)      arise in respect of any liability for which the company may indemnify the director, in terms of subsections (5) and (6).

 

(5)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a company may indemnify a director in respect of any liability arising other than as contemplated in subsection (6).

 

(6)     A company may not indemnify a director in respect of—

 

(a)     any liability arising—

 

(i)      in terms of section 77(3)(a), (b) or (c); or

 

(ii)      from wilful misconduct or wilful breach of trust on the part of the director; or

[S 78(6)(a)(ii) subs by s 50(c) of Act 3 of 2011.]

 

(b)     any fine contemplated in subsection (3).

 

(7)     Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a company may purchase insurance to protect—

 

(a)     a director against any liability or expenses for which the company is permitted to indemnify a director in accordance with subsection (5); or

 

(b)     the company against any contingency including, but not limited to—

[Words preceding s 78(7)(b)(i) subs by s 50(d) of Act 3 of 2011.]

 

(i)      any expenses—

 

(aa)   that the company is permitted to advance in accordance with subsection (4)(a); or

 

(bb)   for which the company is permitted to indemnify a director in accordance with subsection (4)(b); or

 

(ii)      any liability for which the company is permitted to indemnify a director in accordance with subsection (5).

 

(8)     A company is entitled to claim restitution from a director of the company or of a related company for any money paid directly or indirectly by the company to or on behalf of that director in any manner inconsistent with this section.

 

Part G

Winding-up of solvent companies and deregistering companies

 

79.     Winding-up of solvent companies

 

(1)     A solvent company may be dissolved by—

 

(a)     voluntary winding-up initiated by the company as contemplated in section 80, and conducted either—

 

(i)      by the company; or

 

(ii)      by the company’s creditors,

 

as determined by the resolution of the company; or

 

(b)     winding-up and liquidation by court order, as contemplated in section 81.

 

(2)     The procedures for winding-up and liquidation of a solvent company, whether voluntary or by court order, are governed by this Part and, to the extent applicable, by the laws referred to or contemplated in item 9 of Schedule 5.

 

(3)     If, at any time after a company has adopted a resolution contemplated in section 80, or after an application has been made to a court as contemplated in section 81, it is determined that the company to be wound up is or may be insolvent, a court, on application by any interested person, may order that the company be wound up as an insolvent company in terms of the laws referred to or contemplated in item 9 of Schedule 5.

 

80.     Voluntary winding-up of solvent company

 

(1)     A solvent company may be wound up voluntarily if the company has adopted a special resolution to do so, which may provide for the winding-up to be by the company, or by its creditors.

 

(2)     A resolution providing for the voluntary winding-up of a company must be filed, together with the prescribed notice and filing fee.

 

(3)     If a resolution contemplated in this section provides for winding-up by the company, before the resolution and notice are filed the company must—

 

(a)     arrange for security, satisfactory to the Master, for the payment of the company’s debts within no more than 12 months after the start of the winding-up of the company; or

 

(b)     obtain the consent of the Master to dispense with security, which the Master may do only if the company has submitted to the Master—

 

(i)      a sworn statement by a director authorised by the board of the company, stating that the company has no debts; and

 

(ii)      a certificate by the company’s auditor, or if it does not have an auditor, a person who meets the requirements for appointment as an auditor, and appointed for the purpose, stating that to the best of the auditor’s knowledge and belief and according to the financial records of the company, the company appears to have no debts.

 

(4)     Any costs incurred in furnishing the security referred to in subsection (3) may be paid by the company.

 

(5)     A liquidator appointed in a voluntary winding-up may exercise all powers given by this Act, or a law contemplated in item 9 of Schedule 5, to a liquidator in a winding-up by the court—

 

(a)     without requiring specific order or sanction of the court; and

 

(b)     subject to any directions given by—

 

(i)      the shareholders of the company in a general meeting, in the case of a winding-up by the company; or

 

(ii)      the creditors, in the case of a winding-up by creditors.

 

(6)     A voluntary winding-up of a company begins when the resolution of the company has been filed in terms of subsection (2).

 

(7)     When a resolution has been filed in terms of subsection (2), the Commission must promptly deliver a copy of it to the Master.

 

(8)     Despite any provision to the contrary in a company’s Memorandum of Incorporation—

 

(a)     the company remains a juristic person and retains all of its powers as such while it is being wound up voluntarily; but

 

(b)     from the beginning of the company’s winding-up—

 

(i)      it must stop carrying on its business except to the extent required for the beneficial winding-up of the company; and

 

(ii)      all of the powers of the company’s directors cease, except to the extent specifically authorised—

 

(aa)   in the case of a winding-up by the company, by the liquidator or the shareholders in a general meeting; or

 

(bb)   in the case of a winding-up by creditors, the liquidator or the creditors.

 

81.     Winding-up of solvent companies by court order

 

(1)     A court may order a solvent company to be wound up if—

 

(a)     the company has—

 

(i)      resolved, by special resolution, that it be wound up by the court; or

 

(ii)      applied to the court to have its voluntary winding-up continued by the court;

 

(b)     the practitioner of a company appointed during business rescue proceedings has applied for liquidation in terms of section 141(2)(a), on the grounds that there is no reasonable prospect of the company being rescued; or

 

(c)      one or more of the company’s creditors have applied to the court for an order to wind up the company on the grounds that—

 

(i)      the company’s business rescue proceedings have ended in the manner contemplated in section 132(2)(b) or (c)(i) and it appears to the court that it is just and equitable in the circumstances for the company to be wound up; or

 

(ii)      it is otherwise just and equitable for the company to be wound up;

 

(d)     the company, one or more directors or one or more shareholders have applied to the court for an order to wind up the company on the grounds that—

 

(i)      the directors are deadlocked in the management of the company, and the shareholders are unable to break the deadlock, and—

 

(aa)   irreparable injury to the company is resulting, or may result, from the deadlock; or

 

(bb)   the company’s business cannot be conducted to the advantage of shareholders generally, as a result of the deadlock;

 

(ii)      the shareholders are deadlocked in voting power, and have failed for a period that includes at least two consecutive annual general meeting dates, to elect successors to directors whose terms have expired; or

 

(iii)     it is otherwise just and equitable for the company to be wound up;

 

(e)     a shareholder has applied, with leave of the court, for an order to wind up the company on the grounds that—

 

(i)      the directors, prescribed officers or other persons in control of the company are acting in a manner that is fraudulent or otherwise illegal; or

 

(ii)      the company’s assets are being misapplied or wasted;

 

(f)      the Commission or Panel has applied to the court for an order to wind up the company on the grounds that—

 

(i)      the company, its directors or prescribed officers or other persons in control of the company are acting or have acted in a manner that is fraudulent or otherwise illegal, the Commission or Panel, as the case may be, has issued a compliance notice in respect of that conduct, and the company has failed to comply with that compliance notice; and

 

(ii)      within the previous five years, enforcement procedures in terms of this Act or the Close Corporations Act, 1984 (Act 69 or 1984), were taken against the company, its directors or prescribed officers, or other persons in control of the company for substantially the same conduct, resulting in an administrative fine, or conviction for an offence; or

 

         (g)      in the case of a designated institution as defined in the Financial Sector Regulation Act, 2017              (Act 9 of 2017), the Reserve Bank has applied to the court for an order to wind up the company            on the grounds that the company has been placed in resolution in terms of that Act and there                    are no reasonable prospects that the company will cease to be in resolution.

[S 81(1)(g) ins by s 27(b) of Act 23 of 2021 wef 1 June 2023.]

 

(2)     A shareholder may not apply to a court as contemplated in subsection (1)(d) or (e) unless the shareholder—

 

(a)     has been a shareholder continuously for at least six months immediately before the date of the application; or

 

(b)     became a shareholder as a result of—

 

(i)      acquiring another shareholder; or

 

(ii)      the distribution of the estate of a former shareholder,

 

and the present shareholder, and other or former shareholder, in aggregate, satisfied the requirements of paragraph (a).

 

(3)     A court may not make an order applied for in terms of subsection (1)(e) or (f) if, before the conclusion of the court proceedings—

 

(a)     any of the directors have resigned, or have been removed in terms of section 71, and the court concludes that the remaining directors were not materially implicated in the conduct on which the application was based; or

 

(b)     one or more shareholders have applied to the court for a declaration in terms of section 162 to declare delinquent the directors, if any, responsible for the alleged misconduct, and the court is satisfied that the removal of those directors would bring the misconduct to an end.

 

(4)     A winding-up of a company by a court begins when—

 

(a)     an application has been made to the court in terms of subsection (1)(a) or (b); or

 

(b)     the court has made an order applied for in terms of subsection (1)(c), (d), (e) or (f).

 

82.     Dissolution of companies and removal from register

 

(1)     The Master must file a certificate of winding up of a company in the prescribed form when the affairs of the company have been completely wound up.

[S 82(1) subs by s 51(a) of Act 3 of 2011.]

 

(2)     Upon receiving a certificate in terms of subsection (1), the Commission must—

 

(a)     record the dissolution of the company in the prescribed manner; and

 

(b)     remove the company’s name from the companies register.

 

(3)     In addition to the duty to deregister a company contemplated in subsection (2)(b), the Commission may otherwise remove a company from the companies register only if—

 

(a)     the company has transferred its registration to a foreign jurisdiction in terms of subsection (5), or—

[Words preceding s 82(3)(a)(i) subs by s 51(b) of Act 3 of 2011.]

 

(i)      has failed to file an annual return in terms of section 33 for two or more years in succession; and

 

(ii)      on demand by the Commission, has failed to—

 

(aa)   give satisfactory reasons for the failure to file the required annual returns; or

 

(bb)   show satisfactory cause for the company to remain registered; or

 

(b)     the Commission—

 

(i)      has determined in the prescribed manner that the company appears to have been inactive for at least seven years, and no person has demonstrated a reasonable interest in, or reason for, its continued existence; or

[S 82(3)(b)(i) subs by s 51(c) of Act 3 of 2011.]

 

(ii)      has received a request in the prescribed manner and form and has determined that the company—

 

(aa)   has ceased to carry on business; and

 

(bb)   has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the company being liquidated.

 

(4)     If the Commission deregisters a company as contemplated in subsection (3), any interested person may apply in the prescribed manner and form to the Commission, to reinstate the registration of the company.

 

(5)     A company may apply to be deregistered upon the transfer of its registration to a foreign jurisdiction, if—

 

(a)     the shareholders have adopted a special resolution approving such an application and transfer of registration; and

 

(b)     the company has satisfied the prescribed requirements for doing so.

[S 82(5) ins by s 51(d) of Act 3 of 2011.]

 

(6)     The Minister may prescribe criteria and procedural requirements that must be satisfied by a company before it may be de-registered in terms of subsection (5).

[S 82(6) ins by s 51(d) of Act 3 of 2011.]

 

83.     Effect of removal of company from register

 

(1)     A company is dissolved as of the date its name is removed from the companies register unless the reason for the removal is that the company’s registration has been transferred to a foreign jurisdiction, as contemplated in section 82(5).

[S 83(1) subs by s 52 of Act 3 of 2011.]

 

(2)     The removal of a company’s name from the companies register does not affect the liability of any former director or shareholder of the company or any other person in respect of any act or omission that took place before the company was removed from the register.

 

(3)     Any liability contemplated in subsection (2) continues and may be enforced as if the company had not been removed from the register.

 

(4)     At any time after a company has been dissolved—

 

(a)     the liquidator of the company, or other person with an interest in the company, may apply to a court for an order declaring the dissolution to have been void, or any other order that is just and equitable in the circumstances; and

 

(b)     if the court declares the dissolution to have been void, any proceedings may be taken against the company as might have been taken if the company had not been dissolved.

 

CHAPTER 3

ENHANCED ACCOUNTABILITY AND TRANSPARENCY

 

Part A

Application and general requirements of Chapter

 

84.     Application of Chapter

 

(1)     This Chapter applies to—

 

(a)     every public company, subject to sections 5(6) and 94(1);

[S 84(1)(a) subs by s 53(a) of Act 3 of 2011.]

 

(b)     every company that is a state-owned company—

 

(i)      except to the extent that the company has been exempted from the application of this Chapter, in terms of section 9; and

 

(ii)      subject to subsection (3); and

 

(c)      a private company, a personal liability company or a non-profit company—

 

(i)      if the company is required by this Act or the regulations to have its annual financial statements audited every year: Provided that the provisions of Parts B and D of this Chapter will not apply to any such company; or

 

(ii)      otherwise, only to the extent that the company’s Memorandum of Incorporation so requires, as contemplated in section 34(2).

[S 84(1)(c) subs by s 53(b) of Act 3 of 2011.]

 

(2)     …

[S 84(2) rep by s 53(c) of Act 3 of 2011.]

 

(3)     In the case of a state-owned company—

 

(a)     if there is a conflict between a provision of this Chapter and a provision of the Public Audit Act, 2004 (Act 25 of 2004), the provisions of that Act prevail;

 

(b)     despite the provisions of this Chapter to the contrary, the state-owned company is not required to appoint an auditor for any financial year in respect of which the Auditor-General has elected, in terms of the Public Audit Act, 2004 (Act 25 of 2004), to conduct an audit of that enterprise; and

 

(c)      in any year in which the state-owned company is required by this Chapter to appoint an auditor, any requirement in terms of the Public Audit Act, 2004 (Act 25 of 2004), to have the appointment of the company’s auditor approved by the Auditor-General applies to that company, in addition to the relevant provisions of this Chapter.

 

(4)     Every company contemplated in subsection (1)(a) or (b) must appoint—

 

(a)     a person to serve as company secretary, in the manner and for the purposes set out in Part B;

 

(b)     a person to serve as auditor, in the manner and for the purposes set out in Part C; and

 

(c)      an audit committee, in the manner and for the purposes set out in Part D.

 

(5)     A person who is disqualified in terms of section 69(8) to serve as a director of any particular company may not be appointed or continue to serve that company in any capacity mentioned in subsection (4), irrespective of whether that appointment is made—

 

(a)     as required by this Chapter; or

 

(b)     voluntarily, as contemplated in section 34(2).

 

(6)     If the board of a company fails to make an appointment as required by this Part—

[Words preceding s 84(6)(a) subs by s 53(d) of Act 3 of 2011.]

 

(a)     the Commission may issue a notice to that company to show cause why the Commission should not proceed to convene a shareholders meeting for the purpose of making that appointment; and

 

(b)     if the company fails to respond to a notice contemplated in paragraph (a) or, in responding, fails to satisfy the Commission that the board will make the appointment, or convene a shareholders meeting to make the appointment, within an acceptable period, the Commission may—

 

(i)      give notice to the holders of the company’s securities of a general meeting, and convene such a meeting, to make that appointment; and

 

(ii)      assess a pro rata share of the cost of convening the general meeting to each director of the company who knowingly permitted the company to fail to make the appointment in accordance with this Part.

 

(7)     A company that has been given notice contemplated in subsection (6)(a), or a director who has been assessed any portion of the costs of a meeting, as contemplated in subsection (6)(b), may apply to the Companies Tribunal to set aside the notice, or the assessment, in whole or in part.

 

85.     Registration of company secretary and auditor

 

(1)     Every company that makes an appointment contemplated in section 84(4), irrespective of whether the company does so as required by that section or voluntarily as contemplated in section 34(2), must—

 

(a)     maintain a record of its company secretaries and auditors, including, in respect of each person appointed as company secretary or auditor of the company—

 

(i)      the name, including any former name, of each such person; and

 

(ii)      the date of every such appointment; and

 

(b)     if a firm or juristic person is appointed—

 

(i)      the name, registration number and registered office address of that firm or juristic person; and

 

(ii)      the name of any individual contemplated in section 90(3), if that section is applicable; and

 

(c)      any changes in the particulars referred to in paragraphs (a) and (b), as they occur, with the date and nature of each such change.

 

(2)     To protect personal privacy, the Minister, by notice in the Gazette, may exempt from the application of subsection (1)(a) categories of names as formerly used by any person—

 

(a)     before attaining majority, or by persons who have been adopted, married, divorced or widowed; or

 

(b)     in other circumstances prescribed by the Minister.

 

(3)     Within 10 business days after making an appointment contemplated in subsection (1), or after the termination of service of such an appointment, a company must file a notice of the appointment or termination, as the case may be, subject to subsection (4).

 

(4)     The incorporators of a company may file a notice of the appointment of the company’s first company secretary, auditor or audit committee as part of the company’s Notice of Incorporation.

 

Part B

Company secretary

 

86.     Mandatory appointment of company secretary

 

(1)     A public company or state-owned company must appoint a company secretary.

[S 86(1) subs by s 54(a) of Act 3 of 2011.]

 

(2)     Every company secretary, irrespective of whether the appointment is made as required by subsection (1) or in terms of a requirement in a company’s Memorandum of Incorporation, as contemplated in sections 34(2) and 84(1)(c)(ii), must—

 

(a)     have the requisite knowledge of, or experience in, relevant laws; and

 

(b)     be a permanent resident of the Republic, and remain so while serving in that capacity.

[S 86(2) subs by s 54(a) of Act 3 of 2011.]

 

(3)     The first company secretary of a public company or state-owned company may be appointed by—

 

(a)     the incorporators of the company; or

 

(b)     within 40 business days after the incorporation of the company, by either—

 

(i)      the directors of the company; or

 

(ii)      an ordinary resolution of the holders of the company’s securities.

 

(3A)   The first company secretary of a company that is required only in terms of its Memorandum of Incorporation to appoint a company secretary as contemplated in sections 34(2) and 84(1)(c)(ii), must be appointed—

 

(a)     in accordance with subsection (3), if the requirement to appoint a company secretary applies to that company when it is incorporated; or

 

(b)     within 40 business days after the date on which the requirement first applies to the company, by either—

 

(i)      the directors of the company; or

 

(ii)      an ordinary resolution of the holders of the company’s securities.

[S 86(3A) ins by s 54(b) of Act 3 of 2011.]

 

(4)     Within 60 business days after a vacancy arises in the office of company secretary, the board must fill the vacancy by appointing a person whom the directors consider to have the requisite knowledge and experience.

 

87.     Juristic person or partnership may be appointed company secretary

 

(1)     A juristic person or partnership may be appointed to hold the office of company secretary, provided that—

 

(a)     every employee of that juristic person who provides company secretary services, or partner and employee of that partnership, as the case may be, satisfies the requirements contemplated in section 84(5); and

 

(b)     at least one employee of that juristic person, or one partner or employee of that partnership, as the case may be, satisfies the requirements contemplated in section 86.

 

(2)     A change in the membership of a juristic person or partnership that holds office as company secretary does not constitute a casual vacancy in the office of company secretary, if the juristic person or partnership continues to satisfy the requirements of subsection (1).

 

(3)     If at any time a juristic person or partnership holds office as company secretary of a particular company—

 

(a)     the juristic person or partnership must immediately notify the directors of the company if the juristic person or partnership no longer satisfies the requirements of subsection (1), and is regarded to have resigned as company secretary upon giving that notice to the company;

 

(b)     the company is entitled to assume that the juristic person or partnership satisfies the requirements of subsection (1), until the company has received a notice contemplated in paragraph (a); and

 

(c)      any action taken by the juristic person or partnership in performance of its functions as company secretary is not invalidated merely because the juristic person or partnership had ceased to satisfy the requirements of subsection (1) at the time of that action.

 

88.     Duties of company secretary

 

(1)     A company’s secretary is accountable to the company’s board.

 

(2)     A company secretary’s duties include, but are not restricted to—

 

(a)     providing the directors of the company collectively and individually with guidance as to their duties, responsibilities and powers;

 

(b)     making the directors aware of any law relevant to or affecting the company;

 

(c)      reporting to the company’s board any failure on the part of the company or a director to comply with the Memorandum of Incorporation or rules of the company or this Act;

 

(d)     ensuring that minutes of all shareholders meetings, board meetings and the meetings of any committees of the directors, or of the company’s audit committee, are properly recorded in accordance with this Act;

 

(e)     certifying in the company’s annual financial statements whether the company has filed required returns and notices in terms of this Act, and whether all such returns and notices appear to be true, correct and up-to-date;

 

(f)      ensuring that a copy of the company’s annual financial statements is sent, in accordance with this Act, to every person who is entitled to it; and

 

(g)     carrying out the functions of a person designated in terms of section 33(3).

 

89.     Resignation or removal of company secretary

 

(1)     A company secretary may resign from office by giving the company—

 

(a)     one month written notice; or

 

(b)     less than one month written notice, with the approval of the board.

 

(2)     If the company secretary is removed from office by the board, the company secretary may require the company to include a statement in its annual financial statements relating to that financial year, not exceeding a reasonable length, setting out the company secretary’s contention as to the circumstances that resulted in the removal.

 

(3)     If the company secretary wishes to exercise the power referred to in subsection (2), the company secretary must give written notice to that effect to the company by not later than the end of the financial year in which the removal took place and that notice must include the statement referred to in subsection (2).

 

(4)     The statement of the company secretary referred to in subsection (2) must be included in the directors’ report in the company’s annual financial statements.

 

Part C

Auditors

 

90.     Appointment of auditor

 

(1)     Upon its incorporation, and each year at its annual general meeting, a public company or state-owned company must appoint an auditor.

 

(1A)   A company referred to in section 84(1)(c)(i), or a company that is required only in terms of its Memorandum of Incorporation to have its annual financial statements audited as contemplated in sections 34(2) and 84(1)(c)(ii), must appoint an auditor—

 

(a)     in accordance with subsection (1), if the requirement to have its annual financial statements audited applies to that company when it is incorporated; or

 

(b)     at the annual general meeting at which the requirement first applies to the company, and each annual general meeting thereafter.

[S 90(1A) ins by s 55 of Act 3 of 2011.]

 

(2)     To be appointed as an auditor of a company, whether as required by subsection (1) or as contemplated in section 34(2), a person or firm—

 

(a)     must be a registered auditor;

 

(b)     in addition to the prohibition contemplated in section 84(5), must not be—

 

(i)      a director or prescribed officer of the company;

 

(ii)      an employee or consultant of the company who was or has been engaged for more than one year in the maintenance of any of the company’s financial records or the preparation of any of its financial statements;

 

(iii)     a director, officer or employee of a person appointed as company secretary in terms of Part B of this Chapter;

 

(iv)     a person who, alone or with a partner or employees, habitually or regularly performs the duties of accountant or bookkeeper, or performs related secretarial work, for the company;

 

(v)      a person who, at any time during the five financial years immediately preceding the date of appointment, was a person contemplated in any of subparagraphs (i) to (iv); or

 

(vi)     a person related to a person contemplated in subparagraphs (i) to (v); and

 

(c)      must be acceptable to the company’s audit committee as being independent of the company, having regard to the matters enumerated in section 94(8), in the case of a company that has appointed an audit committee, whether as required by section 94, or voluntarily as contemplated in section 34(2).

 

(3)     If a company appoints a firm as an auditor, the individual determined by that firm, in terms of section 44(1) of the Auditing Profession Act, to be responsible for performing the functions of auditor must satisfy the requirements of subsection (2).

 

(4)     If a company that is required to appoint an auditor does not do so when it registers the incorporation of the company, the directors of the company must appoint the first auditor of the company within 40 business days after the date of incorporation of the company.

 

(5)     The first auditor of a company holds office until the conclusion of the first annual general meeting of the company.

 

(6)     A retiring auditor may be automatically reappointed at an annual general meeting without any resolution being passed, unless—

 

(a)     the retiring auditor is—

 

(i)      no longer qualified for appointment;

 

(ii)      no longer willing to accept the appointment, and has so notified the company; or

 

(iii)     required to cease serving as auditor, in terms of section 92;

 

(b)     an audit committee appointed by the company in terms of this Act objects to the reappointment; or

 

(c)      the company has notice of an intended resolution to appoint some other person or persons in place of the retiring auditor.

 

(7)     If an annual general meeting of a company does not appoint or reappoint an auditor the directors must fill the vacancy in the office in terms of the procedure contemplated in section 91 within 40 business days after the date of the meeting.

 

91.     Resignation of auditors and vacancies

 

(1)     The resignation of an auditor is effective when the notice is filed.

 

(2)     Subject to subsection (3), if a vacancy arises in the office of auditor of a company, the board of that company—

 

(a)     must appoint a new auditor within 40 business days, if there was only one incumbent auditor of the company; and

 

(b)     may appoint a new auditor at any time, if there was more than one incumbent, but while any such vacancy continues, the surviving or continuing auditor may act as auditor of the company.

 

(3)     Before making an appointment in terms of subsection (2)—

 

(a)     the board must propose to the company’s audit committee, within 15 business days after the vacancy occurs, the name of at least one registered auditor to be considered for appointment as the new auditor; and

 

(b)     may proceed to make an appointment of a person proposed in terms of paragraph (a) if, within five business days after delivering the proposal, the audit committee does not give notice in writing to the board rejecting the proposed auditor.

 

(4)     If a company appoints a firm as its auditor, any change in the composition of the members of that firm does not by itself create a vacancy in the office of auditor for that year, subject to subsection (5).

 

(5)     If, by comparison with the membership of a firm at the time of its latest appointment, less than one half of the members remain after a change contemplated in subsection (4), that change constitutes the resignation of the firm as auditor of the company, giving rise to a vacancy.

 

(6)     Section 89, read with the changes required by the context, applies with respect to an auditor of a company, but a reference in that section to “company secretary” must be regarded as referring to the company’s auditor.

[S 91(6) ins by s 56 of Act 3 of 2011.]

 

92.     Rotation of auditors

 

(1)     The same individual may not serve as the auditor or designated auditor of a company for more than five consecutive financial years.

 

(2)     If an individual has served as the auditor or designated auditor of a company for two or more consecutive financial years and then ceases to be the auditor or designated auditor, the individual may not be appointed again as the auditor or designated auditor of that company until after the expiry of at least two further financial years.

 

(3)     If a company has appointed two or more persons as joint auditors, the company must manage the rotation required by this section in such a manner that all of the joint auditors do not relinquish office in the same year.

 

93.     Rights and restricted functions of auditors

 

(1)     The auditor of a company—

 

(a)     has the right of access at all times to the accounting records and all books and documents of the company, and is entitled to require from the directors or prescribed officers of the company any information and explanations necessary for the performance of the auditor’s duties;

 

(b)     in the case of the auditor of a holding company, has the right of access to all current and former financial statements of any subsidiary of that holding company and is entitled to require from the directors or officers of the holding company or subsidiary any information and explanations in connection with any such statements and in connection with the accounting records, books and documents of the subsidiary as necessary for the performance of the auditor’s duties; and

 

(c)      is entitled to—

 

(i)      attend any general shareholders meeting;

 

(ii)      receive all notices of and other communications relating to any general shareholders meeting; and

 

(iii)     be heard at any general shareholders meeting contemplated in this paragraph on any part of the business of the meeting that concerns the auditor’s duties or functions.

 

(2)     An auditor may apply to a court for an appropriate order to enforce the rights set out in subsection (1)(a) or (b), and a court may—

 

(a)     make any order that is just and reasonable to prevent frustration of the auditor’s duties by the company or any of its directors, prescribed officers or employees; and

 

(b)     make an order of costs personally against any director or prescribed officer whom the court has found to have wilfully and knowingly frustrated, or attempted to frustrate, the performance of the auditor’s functions.

 

(3)     An auditor appointed by a company may not perform any services for that company—

 

(a)     that would place the auditor in a conflict of interest as prescribed or determined by the Independent Regulatory Board for Auditors in terms of section 44(6) of the Auditing Profession Act; or

 

(b)     as may be determined by the company’s audit committee in terms of section 94(7)(d).

 

Part D

Audit committees

 

94.     Audit committees

 

(1)     This section—

 

(a)     applies concurrently with section 64 of the Banks Act, to any company that is subject to that section of that Act, but subsections (2), (3) and (4) of this section do not apply to the appointment of an audit committee by any such company; and

 

(b)     does not apply to a company that has been granted an exemption in terms of section 64(4) of the Banks Act.

 

(2)     At each annual general meeting, a public company, state-owned company or other company that is required only by its Memorandum of Incorporation to have an audit committee as contemplated in sections 34(2) and 84(1)(c)(ii), must elect an audit committee comprising at least three members, unless—

[Words preceding s 94(2)(a) subs by s 57(a) of Act 3 of 2011.]

 

(a)     the company is a subsidiary of another company that has an audit committee; and

 

(b)     the audit committee of that other company will perform the functions required under this section on behalf of that subsidiary company.

 

(3)     The first members of the audit committee may be appointed by—

 

(a)     the incorporators of a company; or

 

(b)     by the board, within 40 business days after the incorporation of the company.

 

(4)     Each member of an audit committee of a company must—

 

(a)     be a director of the company, who satisfies any applicable requirements prescribed in terms of subsection (5);

 

(b)     not be—

 

(i)      involved in the day-to-day management of the company’s business or have been so involved at any time during the previous financial year;

 

(ii)      a prescribed officer, or full-time employee, of the company or another related or inter-related company, or have been such an officer or employee at any time during the previous three financial years; or

 

(iii)     a material supplier or customer of the company, such that a reasonable and informed third party would conclude in the circumstances that the integrity, impartiality or objectivity of that director is compromised by that relationship; and

 

(c)      not be related to any person who falls within any of the criteria set out in paragraph (b).

 

(5)     The Minister may prescribe minimum qualification requirements for members of an audit committee as necessary to ensure that any such committee, taken as a whole, comprises persons with adequate relevant knowledge and experience to equip the committee to perform its functions.

 

(6)     The board of a company contemplated in section 84(1) must appoint a person to fill any vacancy on the audit committee within 40 business days after the vacancy arises.

 

(7)     An audit committee of a company has the following duties—

 

(a)     to nominate, for appointment as auditor of the company under section 90, a registered auditor who, in the opinion of the audit committee, is independent of the company;

 

(b)     to determine the fees to be paid to the auditor and the auditor’s terms of engagement;

 

(c)      to ensure that the appointment of the auditor complies with the provisions of this Act and any other legislation relating to the appointment of auditors;

 

(d)     to determine, subject to the provisions of this Chapter, the nature and extent of any non-audit services that the auditor may provide to the company, or that the auditor must not provide to the company, or a related company;

 

(e)     to pre-approve any proposed agreement with the auditor for the provision of non-audit services to the company;

 

(f)      to prepare a report, to be included in the annual financial statements for that financial year—

 

(i)      describing how the audit committee carried out its functions;

 

(ii)      stating whether the audit committee is satisfied that the auditor was independent of the company; and

 

(iii)     commenting in any way the committee considers appropriate on the financial statements, the accounting practices and the internal financial control of the company;

 

(g)     to receive and deal appropriately with any concerns or complaints, whether from within or outside the company, or on its own initiative, relating to—

 

(i)      the accounting practices and internal audit of the company;

 

(ii)      the content or auditing of the company’s financial statements;

 

(iii)     the internal financial controls of the company; or

 

(iv)     any related matter;

 

(h)     to make submissions to the board on any matter concerning the company’s accounting policies, financial control, records and reporting; and

 

(i)       to perform such other oversight functions as may be determined by the board.

[S 94(7)(i) subs by s 57(b) of Act 3 of 2011.]

 

(8)     In considering whether, for the purposes of this Part, a registered auditor is independent of a company, the audit committee of that company must—

 

(a)     ascertain that the auditor does not receive any direct or indirect remuneration or other benefit from the company, except—

 

(i)      as auditor; or

 

(ii)      for rendering other services to the company, to the extent permitted in terms of subsection (7)(d);

[S 94(8)(a)(ii) subs by s 57(c) of Act 3 of 2011.]

 

(b)     consider whether the auditor’s independence may have been prejudiced—

 

(i)      as a result of any previous appointment as auditor; or

 

(ii)      having regard to the extent of any consultancy, advisory or other work undertaken by the auditor for the company; and

 

(c)      consider compliance with other criteria relating to independence or conflict of interest as prescribed by the Independent Regulatory Board for Auditors established by the Auditing Profession Act,

 

in relation to the company, and if the company is a member of a group of companies, any other company within that group.

 

(9)     Nothing in this section precludes the appointment by a company at its annual general meeting of an auditor other than one nominated by the audit committee, but if such an auditor is appointed, the appointment is valid only if the audit committee is satisfied that the proposed auditor is independent of the company.

[S 94(9) subs by s 57(d) of Act 3 of 2011.]

 

(10)   Neither the appointment nor the duties of an audit committee reduce the functions and duties of the board or the directors of the company, except with respect to the appointment, fees and terms of engagement of the auditor.

 

(11)   A company must pay all expenses reasonably incurred by its audit committee, including, if the audit committee considers it appropriate, the fees of any consultant or specialist engaged by the audit committee to assist it in the performance of its functions.

 

CHAPTER 4

PUBLIC OFFERINGS OF COMPANY SECURITIES

 

95.     Application and interpretation of Chapter

 

(1)     In this Chapter, unless the context indicates otherwise—

 

(a)     “company”, in addition to the meaning set out in section 1, also includes a foreign company;

 

(b)     “compliance officer” means a compliance officer appointed by a company in respect of its employee share scheme;

 

(c)      “employee share scheme” means a scheme established by a company, whether by means of a trust or otherwise, for the purpose of offering participation therein solely to employees, officers and other persons closely involved in the business of the company or a subsidiary of the company, either—

[Words preceding s 95(1)(c)(i) subs by s 58(a) of Act 3 of 2011.]

 

(i)      by means of the issue of shares in the company; or

 

(ii)      by the grant of options for shares in the company;

 

(d)     “expert” means—

 

(i)      a geologist, engineer, architect, quantity surveyor, valuer, accountant or auditor; or

 

(ii)      any person who professes—

 

(aa)   to be a person referred to in subparagraph (i); or

 

(bb)   to have extensive knowledge or experience, or to exercise special skill which gives or implies authority to a statement made by that person;

 

(e)     “initial public offering” means an offer to the public of any securities of a company, if—

 

(i)      no securities of that company have previously been the subject of an offer to the public; or

 

(ii)      all of the securities of that company that had previously been the subject of an offer to the public have subsequently been re-acquired by the company;

 

(f)      “letter of allocation” means any document conferring a right to subscribe for shares in terms of a rights offer;

 

(g)     “offer”, in relation to securities, means an offer made in any way by any person with respect to the acquisition, for consideration, of any securities in a company;

 

(h)     “offer to the public”—

 

(i)      includes an offer of securities to be issued by a company to any section of the public, whether selected—

 

(aa)   as holders of that company’s securities;

 

(bb)   as clients of the person issuing the prospectus;

 

(cc)    as the holders of any particular class of property; or

 

(dd)   in any other manner; but

 

(ii)      does not include—

 

(aa)   an offer made in any of the circumstances contemplated in section 96; or

 

(bb)   a secondary offer effected through an exchange;

 

(i)       “primary offering” means an offer to the public, made by or on behalf of a company, of securities to be issued by that company, or by another company—

 

(i)      within a group of companies of which the first company is a member; or

 

(ii)      with which the first company proposes to be amalgamated or to merge;

[S 95(1)(i) subs by s 58(b) of Act 3 of 2011.]

 

(j)       “promoter”, in relation to civil and criminal liability in respect of an untrue statement in a prospectus, means—

 

(i)      a person who was a party to the preparation of the prospectus, or of the portion of it that contains the untrue statement; but

 

(ii)      does not include any person acting in a professional capacity for persons engaged in procuring the formation of the company or preparing the prospectus;

 

(k)      “registered prospectus” means a prospectus that complies with this Act and—

 

(i)      in the case of listed securities, has been approved by the relevant exchange; or

 

(ii)      otherwise, has been filed;

 

(l)       “rights offer” means an offer, with or without a right to renounce in favour of other persons, made to any holders of a company’s securities for subscription of any securities of that company, or any other company within the same group of companies;

 

(m)     “secondary offering” means an offer for sale to the public of any securities of a company or its subsidiary, made by or on behalf of a person other than that company or its subsidiary;

 

(n)     “specified shares” means shares, including options on shares, offered to employees of a company in terms of an employee share scheme;

 

(o)     “unit” means any right or interest in any securities; and

 

(p)     “untrue statement” includes a statement that is misleading in the form and context in which it is made, subject to subsections (3) and (4).

 

(2)     For the purposes of this Chapter, a person is to be regarded, by or in respect of a company, as being a member of the public, despite that person being a shareholder of the company or a purchaser of goods from the company.

 

(3)     An untrue statement is regarded to have been included in a prospectus, written statement, or summary directing a person to either a prospectus or written statement, if it is contained in any report or memorandum—

 

(a)     that appears on the face of the prospectus, written statement, or summary; or

 

(b)     that is incorporated by reference within, or is attached to or accompanies, the prospectus, written statement or summary.

 

(4)     An omission from a prospectus or written statement of any matter that, in the context, is calculated to mislead by omission constitutes the making of an untrue statement in that prospectus or written statement, irrespective of whether this Act requires that matter to be included in the prospectus or written statement.

 

(5)     A provision of an agreement is void to the extent that it—

 

(a)     requires an applicant for securities to waive compliance with a requirement of this Chapter; or

 

(b)     purports to affect an applicant for securities with any notice of any agreement, document or matter not specifically referred to in a prospectus or written statement.

 

(6)     Nothing in this Chapter limits any liability that a person may incur under this Act apart from this Chapter, or under any other public regulation, or under the common law.

 

(7)     The Minister may make regulations—

 

(a)     establishing general or specific requirements respecting the form and content of rights offers, letters of allocation and prospectuses;

 

(b)     prescribing the manner and form to be followed in filing and publishing of rights offers, letters of allocation and prospectuses; and

 

(c)      in respect of related or ancillary matters concerning the offering of company securities.

[S 95(7) ins by s 58(c) of Act 3 of 2011.]

 

96.     Offers that are not offers to public

 

(1)     An offer is not an offer to the public—

 

(a)     if the offer is made only to—

 

(i)      persons whose ordinary business, or part of whose ordinary business, is to deal in securities, whether as principals or agents;

 

(ii)      the Public Investment Corporation as defined in the Public Investment Corporation Act, 2004 (Act 23 of 2004);

 

(iii)     a person or entity regulated by the Reserve Bank of South Africa;

 

(iv)     an authorised financial services provider, as defined in the Financial Advisory and Intermediary Services Act, 2002 (Act 37 of 2002);

 

(v)      a financial institution, as defined in the Financial Services Board Act, 1990 (Act 97 of 1990);

 

(vi)     a wholly-owned subsidiary of a person contemplated in subparagraph (iii), (iv) or (v), acting as agent in the capacity of an authorised portfolio manager for a pension fund registered in terms of the Pension Funds Act, 1956 (Act 24 of 1956), or as manager for a collective investment scheme registered in terms of the Collective Investment Schemes Control Act, 2002 (Act 45 of 2002); or

 

(vii)    any combination of persons contemplated in paragraphs (i) to (vi);

 

(b)     if the total contemplated acquisition cost of the securities, for any single addressee acting as principal, is equal to or greater than the amount prescribed in terms of subsection (2)(a);

 

(c)      if it is a non-renounceable offer made only to—

 

(i)      existing holders of the company’s securities; or

 

(ii)      persons related to existing holders of the company’s securities; or

 

(d)     if it is a rights offer that satisfies the prescribed requirements, and—

 

(i)      an exchange has granted or has agreed to grant a listing for the securities that are the subject of the offer; and

 

(ii)      the rights offer complies with any relevant requirements of that exchange at the time the offer is made;

 

(e)     if the offer is made only to a director or prescribed officer of the company, or a person related to a director or prescribed officer, unless the offer is renounceable in favour of a person who is not a director or prescribed officer of the company or a person related to a director or prescribed officer;

 

(f)      if it pertains to an employee share scheme that satisfies the requirements of section 97; or

 

(g)     if it is an offer, or one of a series of offers, for subscription, made in writing, and—

 

(i)      no offer in the series is accompanied by or made by means of an advertisement and no selling expenses are incurred in connection with any offer in the series;

 

(ii)      the issue of securities under any one offer in the series is finalised within six months after the date that the offer was first made;

 

(iii)     the offer, or series of offers in aggregate, is or are accepted by a maximum of fifty persons acting as principals;

 

(iv)     the subscription price, including any premium, of the securities issued in respect of the series of offers, does not exceed, in aggregate, the amount prescribed in terms of subsection (2)(a); and

 

(v)      no similar offer, or offer in a series of offers, has been made by the company within the period prescribed in terms of subsection (2)(b) immediately before the offer, or first of a series of offers, as the case may be.

 

(2)     The Minister, by notice in the Gazette, may prescribe—

 

(a)     a value of not less than R100 000, to be the minimum value for the purposes of subsection (1)(b) and the maximum value for the purposes of subsection (1)(g)(iv); and

 

(b)     a minimum period for the purposes of subsection (1)(g)(v), which must not be less than six months.

 

97.     Standards for qualifying employee share schemes

 

(1)     An employee share scheme qualifies for exemptions contemplated in sections 41(2)(d), 44(3)(a)(i) or 45(3)(a)(i) or otherwise contemplated in this Chapter, if—

[Words preceding s 97(1)(a) subs by s 59(a) of Act 3 of 2011.]

 

(a)     the company has—

 

(i)      appointed a compliance officer for the scheme to be accountable to the directors of the company;

 

(ii)      states in its annual financial statements the number of specified shares that it has allotted during that financial year in terms of its employee share scheme; and

 

(b)     the compliance officer has complied with the requirements of subsection (2).

 

(2)     A compliance officer who is appointed in respect of any employee share scheme—

 

(a)     is responsible for the administration of that scheme;

 

(b)     must provide a written statement to any employee who receives an offer of specified shares in terms of that employee scheme, setting out—

 

(i)      full particulars of the nature of the transaction, including the risks associated with it;

 

(ii)      information relating to the company, including its latest annual financial statements, the general nature of its business and its profit history over the last three years; and

 

(iii)     full particulars of any material changes that occur in respect of any information provided in terms of subparagraph (i) or (ii);

 

(c)      must ensure that copies of the documents containing the information referred to in paragraph (b) are filed within 20 business days after the employee share scheme has been established; and

[S 97(2)(c) subs by s 59(b) of Act 3 of 2011.]

 

(d)     must file a certificate within 60 business days after the end of each financial year, certifying that the compliance officer has complied with the obligations in terms of this section during the past financial year.

[S 97(2)(d) subs by s 59(b) of Act 3 of 2011.]

 

98.     Advertisements relating to offers

 

(1)     As an alternative to any other manner of making or presenting an offer to the public, such an offer may be made or presented by way of an advertisement that—

 

(a)     satisfies all of the requirements of this Act with respect to a registered prospectus; and

 

(b)     is subject to every provision of this Act relating to the making of a prospectus.

 

(2)     In addition to making or presenting an offer to the public by publishing a prospectus, such an offer may be drawn to the attention of the public by an advertisement, but any such advertisement—

 

(a)     must include a statement—

 

(i)      clearly stating that it is not a prospectus; and

 

(ii)      indicating where and how a person may obtain a copy of the full registered prospectus relating to that offer;

 

(b)     must not contain any untrue statement or, by express statement, omission or reasonable implication, be such as would reasonably mislead a person reading the advertisement—

 

(i)      to believe that the advertisement is a prospectus; or

 

(ii)      as to any material particular addressed in the prospectus relating to that offer; and

 

(c)      is subject to sections 102 to 111, read with the changes required by the context.

 

(3)     An advertisement drawing attention to an offer to the public, as contemplated in subsection (2)—

 

(a)     that satisfies the requirements of subsection (2)(a) and (b) is not required to be filed, or registered with an exchange; or

[S 98(3)(a) subs by s 60 of Act 3 of 2011.]

 

(b)     that does not satisfy all of the requirements set out in subsection (2)(a) and (b) will, despite any statement to the contrary contained in the advertisement, be regarded as having been intended to be a prospectus issued by the person responsible for publishing or disseminating the advertisement, and is subject to every provision of this Act relating to such a prospectus.

[S 98(3)(b) subs by s 60 of Act 3 of 2011.]

 

99.     General restrictions on offers to public

 

(1)     A person must not offer to the public any securities of any person unless that second person—

 

(a)     is a company; and

 

(b)     in the case of a foreign company, a copy of its Memorandum of Incorporation or comparable governing document, and a list of the names and addresses of its directors, has been filed within 90 business days before the offer to the public is made.

[S 99(1)(b) subs by s 61 of Act 3 of 2011.]

 

(2)     A person must not make an initial public offering unless that offer is accompanied by a registered prospectus.

 

(3)     Except with respect to securities that are the subject of a company’s initial public offering, a person must not make a—

 

(a)     primary offer to the public of any—

 

(i)      listed securities of a company, otherwise than in accordance with the requirements of the relevant exchange; or

 

(ii)      unlisted securities of a company, unless the offer is accompanied by a registered prospectus that satisfies the requirements of section 100; or

 

(b)     secondary offer to the public of any securities of a company, unless the offer satisfies the requirements of section 101.

 

(4)     A person must not issue, distribute, deliver or cause to be issued, distributed or delivered a letter of allocation unless it is accompanied by all documents that are required, and have been—

 

(a)     filed, in the case of unlisted securities; or

 

(b)     approved by the relevant exchange, in the case of listed securities.

 

(5)     Subject to subsection (6), a person must not issue, distribute or deliver or cause to be issued, distributed or delivered, any form of application in respect of securities of a company, unless the form—

 

(a)     is accompanied by—

 

(i)      a registered prospectus in the case of a primary offering; or

 

(ii)      a written statement that satisfies the requirements of section 101, in the case of a secondary offering; and

 

(b)     bears on the face of it the date on which the prospectus in respect of those securities was filed.

 

(6)     Subsection (5) does not apply if the form of application was issued either—

 

(a)     in connection with a genuine invitation to enter into an underwriting agreement with respect to the securities; or

 

(b)     in relation to securities that were not offered to the public.

 

(7)     Despite anything contained in a company’s Memorandum of Incorporation, the company may exclude from any rights offer any category of holders of the company’s securities who are not resident within the Republic—

 

(a)     if the Commission has approved that exclusion in advance, on application by the company in the prescribed manner and form on the grounds that the number of those persons is insignificant relative to—

 

(i)      the number of existing holders of the company’s securities who are resident within the Republic; and

 

(ii)      the administrative cost and inconvenience of extending the rights offer to them; and

 

(b)     subject to any conditions attached to the approval contemplated in paragraph (a).

 

(8)     A person must not issue a prospectus or a document that purports to be a prospectus, or a document that may reasonably be misapprehended to be intended as a prospectus, unless it is a registered prospectus.

 

(9)     A prospectus may not be registered unless the requirements of this Act have been complied with and it has been filed for registration, together with any prescribed documents, within 10 business days after the date of that prospectus.

 

(10)   As soon as the Commission has registered a prospectus, it must send notice of the registration to the person who filed the prospectus for registration.

 

(11)   A prospectus may not be issued more than three months after the date of its registration, and if a prospectus is so issued, it is regarded to be unregistered.

 

100.   Requirements concerning prospectus

 

(1)     This section does not apply in respect of listed securities, except listed securities that are the subject of an initial public offering.

 

(2)     Every prospectus is subject to the requirements and provisions of sections 102 to 111 and, in addition, must—

[Words preceding s 100(2)(a) subs by s 62(a) of Act 3 of 2011.]

 

(a)     contain all the information that an investor may reasonably require to assess—

 

(i)      the assets and liabilities, financial position, profits and losses, cash flow and prospects of the company in which a right or interest is to be acquired; and

 

(ii)      the securities being offered and rights attached to them; and

 

(b)     adhere to the prescribed specifications.

 

(3)     The date of registration of a prospectus is the date of the issue of the prospectus unless the contrary is proven.

 

(4)     A prospectus must not be registered unless there is attached to it—

 

(a)     a copy of any material agreement as prescribed; or

 

(b)     in the case of an unwritten agreement, a memorandum giving full particulars of the agreement.

 

(5)     If any part of an agreement contemplated in subsection (4) is in a language that is not an official language, a certified translation, in an official language, of that part must be attached to the agreement.

 

(6)     A prospectus containing a statement to the effect that the whole or any portion of the issue of the securities offered to the public has been or is being underwritten may not be registered until a copy of the underwriting agreement has been filed, together with a sworn declaration stating that to the best of the deponent’s knowledge and belief the underwriter is and will be in a position to carry out the obligations contemplated in the agreement even if no shares are being applied for.

 

(7)     A declaration contemplated in subsection (6) must be sworn by the person named as underwriter or, if the underwriter is a company, by each of two directors of that company, or if it has only one director, by that director.

 

(8)     If an offer is made in respect of which no prospectus is required by this Act, the copy of the agreement and sworn declaration referred to in subsection (6) must be filed not later than the date of the proposed offer of shares.

 

(9)     The Commission, or an exchange in the case of listed securities, on application may allow required information to be omitted from a prospectus, if the Commission or exchange is satisfied—

 

(a)     that publication of the information would be unnecessarily burdensome for the applicant, seriously detrimental to the company whose securities are the subject of the prospectus, or against public interest; and

 

(b)     that users will not be unduly prejudiced by the omission.

 

(10)   An application under subsection (9) must be in writing and accompanied by the prescribed fee.

 

(11)   As long as an initial public offering or other primary offering to the public of unlisted securities remains open, any person responsible for information in the prospectus must, when that person becomes aware of it—

 

(a)     correct any error;

 

(b)     report on any new matter; and

 

(c)      report on any change of a matter included in the prospectus,

 

provided these are relevant or material in terms of this Chapter.

 

(12)   A correction or report under subsection (11) must be registered as a supplement to the prospectus, simultaneously published to known recipients of the prospectus and included in future distributions of the prospectus.

 

(13)   If a correction or report has been published, as contemplated in subsections (11) and (12)—

 

(a)     any person who subscribed for the issue of shares as a result of the offer, before the date of that publication, may withdraw the subscription by written notice within 20 business days after the date of publication;

 

(b)     the offeror, upon receipt of a notice in terms of paragraph (a), may either—

 

(i)      accept the withdrawal, and restore to the person any consideration already paid in respect of the subscription; or

 

(ii)      apply to the court for an order in terms of paragraph (c); and

 

(c)      the court, on an application in terms of paragraph (b)(ii), may make any order that is just and equitable in the circumstances including, but not limited to, an order—

[Words preceding s 100(13)(c)(i) subs by s 62(b) of Act 3 of 2011.]

 

(i)      negating the right of the subscriber to withdraw the offer; or

 

(ii)      to reverse any transaction, or restore any consideration paid or benefit received by any person in terms of the offer and subscription.

 

101.   Secondary offers to public

 

(1)     This section does not apply in respect of securities that are—

 

(a)     listed on an exchange; or

 

(b)     in respect of which an exchange has granted permission to deal.

 

(2)     Subject only to subsection (3), a person making a secondary offering of the securities of a company must ensure that the offer is accompanied by either—

 

(a)     the registered prospectus that accompanied the primary offering of those securities, together with any revisions required to address changes in any material matter since the date the prospectus was registered; or

 

(b)     a written statement that satisfies the requirements of subsections (4) to (6).

 

(3)     Subsection (2) does not apply—

 

(a)     if the offer is made or the material is published—

 

(i)      by a person acting in the capacity of an executor or administrator of a deceased estate or a trustee of an insolvent estate or a liquidator or trustee referred to in the Administration of Estates Act, 1965 (Act 66 of 1965); or

 

(ii)      for the purpose of a sale in execution or by public auction or by public tender.

 

(4)     If an offer contemplated in this section is in respect of securities of a public company, a person publishing or making the offer must—

 

(a)     file a copy of the written statement for registration before it is issued, distributed or published; and

 

(b)     not issue, distribute or publish the statement more than three months after the date on which it is registered.

 

(5)     The written statement referred to in subsection (3) must be dated and signed by—

 

(a)     the person making the offer or issuing, distributing or publishing the material; and

 

(b)     if that person is a company, by every director of the company.

 

(6)     The written statement referred to in subsection (3) must—

 

(a)     not contain any matter other than the particulars required by this section;

 

(b)     not be in characters smaller or less legible than any characters used in—

 

(i)      the written offer, if any; or

 

(ii)      any document that accompanies the statement;

 

(c)      be accompanied by a copy of the last annual financial statements of the company, together with any subsequent interim report or provisional annual financial statements of that company; and

 

(d)     contain particulars with respect to the following matters—

 

(i)      whether the person making the offer is acting as principal or agent and, if as agent—

 

(aa)   the name of the principal;

 

(bb)   an address in the Republic where that principal can be served with process; and

 

(cc)    the nature and extent of the remuneration received or receivable by the agent for the services provided;

 

(ii)      the date on which and the country in which the company was incorporated and the address of its registered office in the Republic or, if there is no such address, the address of its principal office outside the Republic;

 

(iii)     the classes and number of securities in each class that have been authorised, and with respect to each class of securities—

 

(aa)   the preferences, rights, limitations and other terms associated with the class, with respect to capital, dividends and voting;

 

(bb)   the number of securities that have been issued for cash, and the total cash consideration received by the company for those issued securities of that class; and

 

(cc)    the number of securities that have been issued for consideration other than cash, and the value of the consideration received by the company for those issued securities of that class;

 

(iv)     the dividends, if any, paid by the company on each class of securities during each of the five financial years immediately preceding the offer, and if no dividend has been paid in respect of securities of any particular class during any of those years, a statement to that effect;

 

(v)      the total amount of any securities other than shares issued by the company and outstanding at the date of the statement, together with the rate of interest payable thereon;

 

(vi)     the names and addresses of the directors of the company;

 

(vii)    whether or not the securities are listed on an exchange, or permission to deal in those securities has been granted by an exchange, other than that referred to in subsection (1), and—

 

(aa)   if so, a statement naming that exchange; or

 

(bb)   if not, a statement that they are not so listed or that no such permission has been granted;

[S 101(6)(d)(vii) subs by s 63 of Act 3 of 2011.]

 

(viii)   if the offer relates to units, particulars of the names and addresses of the persons in whom the securities represented by the units are vested, the date and the parties to any document defining the terms on which those securities are held, and an address in the Republic where that document or a copy of it can be inspected;

 

(ix)     the dates on which and the prices at which the securities offered were originally issued by the company, and were acquired by the person making the offer or by that person’s principal, giving the reasons for any difference between those prices and the prices at which the securities are being offered;

 

(x)      if any securities were issued by the company as partly paid-up shares under the Companies Act, 1973 (Act 61 of 1973), to what extent they are paid up; and

 

(xi)     the date of registration of the written statement by the Commission.

 

(7)     In subsection (6), the expression ‘company’ refers to the company that issued the relevant securities.

 

102.   Consent to use of name in prospectus

 

(1)     In any prospectus relating to securities of a company, a person must not—

[Words preceding s 102(1)(a) subs by s 64(a) of Act 3 of 2011.]

 

(a)     name a second person as a director or proposed director of that company unless, before the registration of that prospectus—

 

(i)      in the case of a company incorporated in the Republic, the second person consented in writing to act as a director before the prospectus was filed, and has not withdrawn the consent; and

 

(ii)      the prescribed return reflecting the relevant particulars in regard to that second person has been filed; or

[S 102(1)(a)(ii) subs by s 64(b) of Act 3 of 2011.]

 

(b)     include any statement made by an expert, or reference to any statement purporting to be made by an expert, unless—

 

(i)      the expert consented in writing to the use of that statement before the prospectus was filed, and has not withdrawn the consent;

 

(ii)      the written consent is endorsed on or attached to the copy of the filed prospectus; and

 

(iii)     the prospectus includes a statement that the expert has consented to the use of the statement and has not withdrawn that consent.

 

(2)     A prospectus must not name any person as the auditor, attorney, banker or broker of a company, unless it is accompanied by the written consent of the named person, agreeing to—

 

(a)     be named to act in the stated capacity; and

 

(b)     the use of that person’s name in the prospectus.

[S 102(2)(b) subs by s 64(c) of Act 3 of 2011.]

 

103.   Variation of agreement mentioned in prospectus

 

(1)     Subject to subsection (2), within one year after the date of filing a prospectus, a company must not vary or agree to vary any material terms of an agreement referred to in the prospectus, other than in the ordinary course of business.

 

(2)     A variation in the terms of an agreement, as contemplated in subsection (1), may be made or agreed by a company only if—

 

(a)     the variation was contemplated and set out in the prospectus; or

 

(b)     the specific terms of the variation are authorised or ratified by an ordinary resolution adopted at a general shareholders meeting.

 

104.   Liability for untrue statements in prospectus

 

(1)     If securities are offered to the public for subscription or sale pursuant to a prospectus, every—

 

(a)     person who becomes a director between the issuing of the prospectus and the holding of the first general shareholders meeting at which directors are elected or appointed;

 

(b)     person who has consented to be named in the prospectus as a director, or as having agreed to become a director either immediately or after an interval of time;

 

(c)      promoter of the company; or

 

(d)     person who—

 

(i)      authorised the issue of the prospectus or, under this Act, is regarded as having authorised the issue of the prospectus; or

 

(ii)      made that offer to the public,

 

is liable to compensate any person who acquired securities on the faith of the prospectus for any loss or damage the person may have sustained as a result of any untrue statement in the prospectus, or in any report or memorandum appearing on the face of, issued with, or incorporated by reference in, the prospectus.

[S 104(1) subs by s 65(a) of Act 3 of 2011.]

 

(2)     The liability contemplated in subsection (1) is in addition to the liability of a director of the company, as set out in section 77(3)(d)(ii).

 

(3)     Liability contemplated in this section does not attach to a person if—

 

(a)     with respect to every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, that person had reasonable grounds to believe, and did up to the time of the allotment of the securities or the acceptance of the offer, as the case may be, believe that the statement was true;

 

(b)     with respect to every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or extract from the report or valuation of an expert—

 

(i)      the untrue statement fairly represented the statement or was a correct and fair copy of or extract from the report or valuation; and

 

(ii)      the person had reasonable grounds to believe and did up to the time of the issue of the prospectus believe that the expert who made the statement was competent to make it, and consented, as required by this Act, to the issue of the prospectus or the making of the offer and had not withdrawn that consent—

 

(aa)   before the prospectus was filed; or

 

(bb)   to that person’s knowledge, before any allotment under the prospectus, or before the acceptance of the offer;

 

(c)      any untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document was a correct and a fair representation of the statement or copy of or extract from the document;

 

(d)     that person consented to become a director of the company, but subsequently withdrew that consent before the issue of the prospectus, and it was issued without that person’s consent;

[S 104(3)(d) subs by s 65(b) of Act 3 of 2011.]

 

(e)     the prospectus was issued without the knowledge or consent of that person and, on becoming aware of its issue, that person forthwith gave reasonable public notice that it was issued without the knowledge or consent of that person; or

 

(f)      after the issue of the prospectus and before allotment or acceptance thereunder, that person, on becoming aware of any untrue statement in it, withdrew any consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason for it.

 

(4)     If a prospectus contains the name of a person as a director of the company, or as having agreed to become a director of that company, and that person has not consented to becoming a director, or has withdrawn consent before the issue of the prospectus, and has not authorised or consented to the issue of the prospectus, the directors of the company, except any without whose knowledge or consent the prospectus was issued—

 

(a)     are liable to the extent set out in section 77(3)(d)(ii); and

 

(b)     any other person who issued the prospectus or authorised the issue of it, is liable, together with the directors, to indemnify any person incorrectly named as a director against any damage, cost or expense arising as a result of that person having been so named in the prospectus, or incurred in defending against any action or legal proceedings brought in respect of having been so named in the prospectus.

 

(5)     Subsection (4), read with the changes required by the context, applies equally in respect of any other person whose consent is required in terms of this Act in connection with any thing contained in a prospectus, and who has either—

 

(a)     not given that consent; or

 

(b)     has withdrawn it before the issue of the prospectus.

 

(6)     A person who, by reason of—

 

(a)     being a director, or having been named as a director;

 

(b)     having agreed to become a director;

 

(c)      having authorised the issue of the prospectus; or

 

(d)     having become a director between the issue of the prospectus and the holding of the first general shareholders meeting at which directors are elected or appointed,

 

has satisfied any liability under this section by making a payment to another person, may recover a contribution, as in cases of contract, from any other person, who, if sued separately, would have been liable to make the same payment, unless the person who has satisfied such liability was, and that other person was not, guilty of fraudulent misrepresentation.

 

105.   Liability of experts and others

 

(1)     If a person has consented to the use of their name, or the inclusion of any material in a prospectus, as contemplated in this Chapter, that consent does not make the person liable as one who has authorised the issue of the prospectus under section 104(1)(d), either—

 

(a)     to compensate persons purchasing on the faith of the prospectus, except in respect of any untrue statement purporting to be made by that person as an expert; or

 

(b)     to indemnify any person against liability under section 104(6).

[S 105(1) subs by s 66 of Act 3 of 2011.]

 

(2)     Despite subsection (1), a person contemplated in that subsection is liable under section 104 in respect of any untrue statement purporting to be made by that person as an expert unless—

 

(a)     the expert person withdrew that consent in writing before the prospectus was filed for registration;

 

(b)     between the filing of the prospectus for registration and any allotment in terms of it to a complainant, that expert person became aware of the untrue statement, withdrew the consent in writing and gave reasonable public notice of the withdrawal and of the reason for it; or

 

(c)      the expert person—

 

(i)      was competent to make the statement; and

 

(ii)      had reasonable ground to believe and did up to the time of the allotment of the securities or the acceptance of the offer, as the case may be, believe that the statement was true.

 

(3)     The defences available to a person in this subsection are in lieu of any applicable defence available in terms of section 104(3).

 

106.   Responsibility for untrue statements in prospectus

 

(1)     If a prospectus contains a statement that is untrue, every person referred to in section 104(1) or (2) is equally responsible in terms of the enforcement provisions of this Act, for that untrue statement, subject to the provisions of subsections (2) and (3).

 

(2)     If—

 

(a)     a published prospectus contains or is accompanied by a report of an expert, or an extract from such a report;

 

(b)     the report or extract contains a statement that is untrue; and

 

(c)      the expert has consented to the inclusion of the statement in the prospectus in the form and context in which it appears,

 

the expert person is solely responsible for that statement, subject to the provisions of subsection (3).

 

(3)     A person is not responsible for an untrue statement contemplated in this section if—

 

(a)     the untrue statement was immaterial; or

 

(b)     liability for the untrue statement does not attach to that person for any reason set out in section 104(3).

 

107.   Time limit for allotment or acceptance

 

A company that has offered securities to the public must not allot any of those securities or accept any subscription for any of those securities, more than four months after filing the prospectus for that offer.

 

108.   Restrictions on allotment

 

(1)     A company that has offered securities to the public must not allot any of those securities or accept any subscription for any of those securities unless—

 

(a)     the subscription has been made on an application form that has been attached to or accompanied by a prospectus; or

 

(b)     it is shown that the applicant, at the time of the application, was in fact in possession of a copy of the prospectus or was aware of its contents.

 

(2)     A company that has offered securities to the public must not allot any of those securities unless the amount stated in that prospectus as the minimum amount which in the opinion of the directors of the company concerned must be raised by the issue of securities in order to provide for the matters prescribed to be covered by minimum subscription and the amount so stated has been paid to and received by the company.

 

(3)     For the purposes of subsection (2)—

 

(a)     an amount stated in any cheque received by the company must not be regarded to have been paid to it until the amount of the cheque has been unconditionally credited to its account with its bankers; and

 

(b)     any amount paid to and received by the company must be reduced by the amount of any money, bill, promissory note or cheque that it has at any time delivered to the payer otherwise than in discharge of a debt bona fide due by the company.

 

(4)     The minimum amount contemplated in subsection (2) must be reckoned exclusively of any amount payable otherwise than in cash.

 

(5)     Until the minimum amount contemplated in subsection (2) has been made up, any amount paid on an application contemplated in this section must—

 

(a)     be paid into a separate account with a banking institution registered under the Banks Act; and

 

(b)     not be used or made available for the purposes of the company or for the satisfaction of its debts.

 

(6)     If the circumstances contemplated in subsection (2) have not been realised within 40 business days after the issue of the prospectus, all amounts received from applicants must be repaid to them promptly without interest.

 

(7)     If any money required to be repaid to an applicant in terms of subsection (6) has not been repaid within 55 business days after the issue of the prospectus, each director or prescribed officer of the company is jointly and severally liable, with all other such directors and prescribed officers of the company, to repay that money with interest, in accordance with the Prescribed Rate of Interest Act, 1975 (Act 55 of 1975), from the expiration of the 55th business day, unless the default in payment was not due to any misconduct or negligence on the part of that director or prescribed officer.

[S 108(7) subs by s 67 of Act 3 of 2011.]

 

109.   Voidable allotment

 

(1)     If an allotment made by a company to an applicant, or the acceptance of an offer made by an applicant, is in contravention of section 108(2), and the relevant offer was not subsequently subscribed to the minimum extent contemplated in that section—

 

(a)     that allotment is voidable at the instance of the applicant concerned, irrespective of whether the company concerned may be in the course of being wound up; and

[S 109(1)(a) subs by s 68 of Act 3 of 2011.]

 

(b)     every director of the company concerned and, if the offeror is a company, every director of that company, is liable to the extent set out in section 77(3)(e)(vii), if the allotment or acceptance is declared void under paragraph (a).

[S 109(1)(b) subs by s 68 of Act 3 of 2011.]

 

(2)     Proceedings to recover any loss, damages or costs contemplated in this section may not be commenced after the earlier of—

 

(a)     20 business days after the applicant discovers the contravention; or

 

(b)     three years after the date of the relevant allotment or acceptance.

 

110.   Minimum interval before allotment or acceptance

 

(1)     No allotment of securities or acceptance of an offer in respect of securities of a company may be made in pursuance of a prospectus, and no proceedings may be taken on applications made in pursuance of a prospectus, until the beginning of the third day after that on which the prospectus is first issued or such later time, if any, specified in the prospectus.

 

(2)     The reference in subsection (1) to the day on which a prospectus was first issued—

 

(a)     is a reference to the day on which it is first issued as a newspaper advertisement; or

 

(b)     if it is not issued as a newspaper advertisement before the third day after the day on which it is first issued in any other manner, is a reference to the day on which it is first issued in that other manner.

 

(3)     A contravention of subsection (1) does not affect the validity of an allotment or acceptance.

 

111.   Conditional allotment if prospectus states securities to be listed

 

(1)     A prospectus containing a statement to the effect that application has been or will be made for permission for the securities offered thereby to be listed on an exchange must not be issued unless—

 

(a)     an application has in fact been made in accordance with the requirements of the relevant exchange on or before the date of issue of that prospectus; and

 

(b)     the prospectus names the particular exchange to which the application has been made.

 

(2)     Any allotment of securities in pursuance of a prospectus referred to in subsection (1) is subject to the condition that—

 

(a)     the application contemplated in subsection (1)(a) is granted; or

 

(b)     an appeal against a refusal of such an application is upheld.

 

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

 

(1)     This section and section 115 do not apply to a proposal to dispose of all or the greater part of the assets or undertaking of a company, if that disposal would constitute a transaction—

 

(a)     that is pursuant to or contemplated in a business rescue plan adopted in accordance with Chapter 6;

 

(aA)   to which section 166S of the Financial Sector Regulation Act, 2017 (Act 9 of 2017), applies;

[S 112(1)(aA) ins by s 28 of Act 23 of 2021 wef 1 June 2023.]

 

(b)     between a wholly-owned subsidiary and its holding company; or

 

(c)      between or among—

 

(i)      two or more wholly-owned subsidiaries of the same holding company; or

 

(ii)      a wholly-owned subsidiary of a holding company, on the one hand, and its holding company and one or more wholly-owned subsidiaries of that holding company, on the other hand.

 

(2)     A company may not dispose of all or the greater part of its assets or undertaking unless—

 

(a)     the disposal has been approved by a special resolution of the shareholders, in accordance with section 115; and

 

(b)     the company has satisfied all other requirements set out in section 115, to the extent those requirements are applicable to such a disposal by that company.

 

(3)     A notice of a shareholders meeting to consider a resolution to approve a disposal contemplated in subsection (2)(a) must—

 

(a)     be delivered within the prescribed time, and in the prescribed manner, to each shareholder of the company, subject to section 62 read with any changes required by the context; and

[S 112(3)(a) subs by s 69(a) of Act 3 of 2011.]

 

(b)     include or be accompanied by a written summary of—

 

(i)      the precise terms of the transaction or series of transactions, to be considered at the meeting; and

 

(ii)      the provisions of sections 115 and 164,

 

in a manner that satisfies the prescribed standards.

 

(4)     Any part of the undertaking or assets of a company to be disposed of, as contemplated in this section, must be fairly valued, as calculated in the prescribed manner, as at the date of the proposal, which date must be determined in the prescribed manner.

[S 112(4) subs by s 69(b) of Act 3 of 2011.]

 

(5)     A resolution contemplated in subsection (2)(a) is effective only to the extent that it authorises a specific transaction.

[S 112(5) subs by s 69(b) of Act 3 of 2011.]

 

113.   Proposals for amalgamation or merger

 

(1)     Two or more profit companies, including holding and subsidiary companies, may amalgamate or merge if, upon implementation of the amalgamation or merger, each amalgamated or merged company will satisfy the solvency and liquidity test.

 

(1A) This section does not apply to an amalgamation or merger to which section 166S of the Financial Sector Regulation Act, 2017 (Act 9 of 2017), applies.

[S 113(1A) ins by  s 29 of Act 23 of 2021 wef 1 June 2023.]

 

(2)     Two or more companies proposing to amalgamate or merge must enter into a written agreement setting out the terms and means of effecting the amalgamation or merger and, in particular, setting out—

 

(a)     the proposed Memorandum of Incorporation of any new company to be formed by the amalgamation or merger;

 

(b)     the name and identity number of each proposed director of any proposed amalgamated or merged company;

 

(c)      the manner in which the securities of each amalgamating or merging company are to be converted into securities of any proposed amalgamated or merged company, or exchanged for other property;

 

(d)     if any securities of any of the amalgamating or merging companies are not to be converted into securities of any proposed amalgamated or merged company, the consideration that the holders of those securities are to receive in addition to or instead of securities of any proposed amalgamated or merged company;

 

(e)     the manner of payment of any consideration instead of the issue of fractional securities of an amalgamated or merged company or of any other juristic person the securities of which are to be received in the amalgamation or merger;

 

(f)      details of the proposed allocation of the assets and liabilities of the amalgamating or merging companies among the companies that will be formed or continue to exist when the amalgamation or merger agreement has been implemented;

 

(g)     details of any arrangement or strategy necessary to complete the amalgamation or merger, and to provide for the subsequent management and operation of the proposed amalgamated or merged company or companies; and

 

(h)     the estimated cost of the proposed amalgamation or merger.

 

(3)     If the securities of one of the amalgamating or merging companies are held by or on behalf of another of the amalgamating or merging companies, the agreement required by subsection (2) must provide for the cancellation of those securities when the amalgamation or merger becomes effective, without any repayment of capital in respect thereof, and no provision may be made in the agreement for the conversion of those securities into securities of an amalgamated or merged company.

 

(4)     Subject to subsection (6), the board of each amalgamating or merging company—

 

(a)     must consider whether, upon implementation of the agreement, each proposed amalgamated or merged company will satisfy the solvency and liquidity test; and

 

(b)     if the board reasonably believes that each proposed amalgamated or merged company will satisfy the solvency and liquidity test, it may submit the agreement for consideration at a shareholders meeting of that amalgamating or merging company, in accordance with section 115.

 

(5)     Subject to subsection (6), a notice of a shareholders meeting contemplated in subsection (4)(b) must be delivered to each shareholder of each respective amalgamating or merging company, and must include or be accompanied by a copy or summary of—

 

(a)     the amalgamation or merger agreement; and

 

(b)     the provisions of sections 115 and 164 in a manner that satisfies prescribed standards.

 

(6)     The requirements of subsections (4) and (5) do not apply to a company engaged in business rescue proceedings, in respect of any transaction that is pursuant to or contemplated in the company’s business rescue plan that has been adopted in accordance with Chapter 6.

 

114.   Proposals for scheme of arrangement

 

(1)     Unless the company is in liquidation, in the course of business rescue proceedings in terms of Chapter 6 or the arrangement is one to which section 166S of the Financial Sector Regulation Act, 2017 (Act 9 of 2017), applies, the board of a company may propose and, subject to subsection (4) and approval in terms of this Part, implement any arrangement between the company and holders of any class of its securities by way of, among other things—

[Words preceding s 114(1)(a) subs by s 70(a) of Act 3 of 2011 and by s 30 of Act 23 of 2021 wef 1 June 2023.]

 

(a)     a consolidation of securities of different classes;

 

(b)     a division of securities into different classes;

 

(c)      an expropriation of securities from the holders;

 

(d)     exchanging any of its securities for other securities;

 

(e)     a re-acquisition by the company of its securities; or

 

(f)      a combination of the methods contemplated in this subsection.

 

(2)     The company must retain an independent expert, who meets the following requirements, to compile a report as required by subsection (3)—

[Words preceding s 114(2)(a) subs by s 70(b) of Act 3 of 2011.]

 

(a)     The person to be retained must be—

 

(i)      qualified, and have the competence and experience necessary to—

 

(aa)   understand the type of arrangement proposed;

 

(bb)   evaluate the consequences of the arrangement; and

 

(cc)    assess the effect of the arrangement on the value of securities and on the rights and interests of a holder of any securities, or a creditor of the company; and

 

(ii)      able to express opinions, exercise judgment and make decisions impartially.

 

(b)     The person to be retained must not—

 

(i)      have any other relationship with the company or with a proponent of the arrangement, such as would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by that relationship;

 

(ii)      have had any relationship contemplated in subparagraph (i) within the immediately preceding two years; or

 

(iii)     be related to a person who has or has had a relationship contemplated in subparagraph (i) or (ii).

 

(3)     The person retained in terms of subsection (2) must prepare a report to the board, and cause it to be distributed to all holders of the company’s securities, concerning the proposed arrangement, which must, at a minimum—

 

(a)     state all prescribed information relevant to the value of the securities affected by the proposed arrangement;

 

(b)     identify every type and class of holders of the company’s securities affected by the proposed arrangement;

 

(c)      describe the material effects that the proposed arrangement will have on the rights and interests of the persons mentioned in paragraph (b);

 

(d)     evaluate any material adverse effects of the proposed arrangement against—

 

(i)      the compensation that any of those persons will receive in terms of that arrangement; and

 

(ii)      any reasonably probable beneficial and significant effect of that arrangement on the business and prospects of the company;

 

(e)     state any material interest of any director of the company or trustee for security holders;

[S 114(3)(e) subs by s 70(c) of Act 3 of 2011.]

 

(f)      state the effect of the proposed arrangement on the interest and person contemplated in paragraph (e); and

 

(g)     include a copy of sections 115 and 164.

 

(4)     Section 48 applies to a proposed arrangement contemplated in this section to the extent that the arrangement would result in any re-acquisition by a company of any of its previously issued securities.

[S 114(4) ins by s 70(d) of Act 3 of 2011.]

 

115.   Required approval for transactions contemplated in Part

 

(1)     Despite section 65, and any provision of a company’s Memorandum of Incorporation, or any resolution adopted by its board or holders of its securities, to the contrary, a company may not dispose of, or give effect to an agreement or series of agreements to dispose of, all or the greater part of its assets or undertaking, implement an amalgamation or a merger, or implement a scheme of arrangement, unless—

 

(a)     the disposal, amalgamation or merger, or scheme of arrangement—

 

(i)      has been approved in terms of this section; or

 

(ii)      is pursuant to or contemplated in an approved business rescue plan for that company, in terms of Chapter 6; and

 

(b)     to the extent that Parts B and C of this Chapter and the Takeover Regulations, apply to a company that proposes to—

 

(i)      dispose of all or the greater part of its assets or undertaking;

 

(ii)      amalgamate or merge with another company; or

 

(iii)     implement a scheme of arrangement,

 

the Panel has issued a compliance certificate in respect of the transaction, in terms of section 119(4)(b), or exempted the transaction in terms of section 119(6).

[S 115(1)(b) subs by s 71(a) of Act 3 of 2011.]

 

(2)     A proposed transaction contemplated in subsection (1) must be approved—

 

(a)     by a special resolution adopted by persons entitled to exercise voting rights on such a matter, at a meeting called for that purpose and at which sufficient persons are present to exercise, in aggregate, at least 25% of all of the voting rights that are entitled to be exercised on that matter, or any higher percentage as may be required by the company’s Memorandum of Incorporation, as contemplated in section 64 (2); and

[S 115(2)(a) subs by s 71(b) of Act 3 of 2011.]

 

(b)     by a special resolution, also adopted in the manner required by paragraph (a), by the shareholders of the company’s holding company if any, if—

 

(i)      the holding company is a company or an external company;

 

(ii)      the proposed transaction concerns a disposal of all or the greater part of the assets or undertaking of the subsidiary; and

 

(iii)     having regard to the consolidated financial statements of the holding company, the disposal by the subsidiary constitutes a disposal of all or the greater part of the assets or undertaking of the holding company; and

[S 115(2)(b)(iii) subs by s 71(c) of Act 3 of 2011.]

 

(c)      by the court, to the extent required in the circumstances and manner contemplated in subsections (3) to (6).

 

(3)     Despite a resolution having been adopted as contemplated in subsections (2)(a) and (b), a company may not proceed to implement that resolution without the approval of a court if—

 

(a)     the resolution was opposed by at least 15% of the voting rights that were exercised on that resolution and, within five business days after the vote, any person who voted against the resolution requires the company to seek court approval; or

[S 115(3)(a) subs by s 71(d) of Act 3 of 2011.]

 

(b)     the court, on an application within 10 business days after the vote by any person who voted against the resolution, grants that person leave, in terms of subsection (6), to apply to a court for a review of the transaction in accordance with subsection (7).

[S 115(3)(b) subs by s 71(d) of Act 3 of 2011.]

 

(4)     For the purposes of subsections (2) and (3), any voting rights controlled by an acquiring party, a person related to an acquiring party, or a person acting in concert with either of them, must not be included in calculating the percentage of voting rights—

 

(a)     required to be present, or actually present, in determining whether the applicable quorum requirements are satisfied; or

 

(b)     required to be voted in support of a resolution, or actually voted in support of the resolution.

[S 115(4) subs by s 71(e) of Act 3 of 2011.]

 

(4A)   In subsection (4), “act in concert” has the meaning set out in section 117(1)(b).

[S 115(4A) ins by s 71(f) of Act 3 of 2011.]

 

(5)     If a resolution requires approval by a court as contemplated in terms of subsection (3)(a), the company must either—

 

(a)     within 10 business days after the vote, apply to the court for approval, and bear the costs of that application; or

[S 115(5)(a) subs by s 71(g) of Act 3 of 2011.]

 

(b)     treat the resolution as a nullity.

 

(6)     On an application contemplated in subsection (3)(b), the court may grant leave only if it is satisfied that the applicant—

 

(a)     is acting in good faith;

 

(b)     appears prepared and able to sustain the proceedings; and

 

(c)      has alleged facts which, if proved, would support an order in terms of subsection (7).

 

(7)     On reviewing a resolution that is the subject of an application in terms of subsection (5)(a), or after granting leave in terms of subsection (6), the court may set aside the resolution only if—

 

(a)     the resolution is manifestly unfair to any class of holders of the company’s securities; or

 

(b)     the vote was materially tainted by conflict of interest, inadequate disclosure, failure to comply with the Act, the Memorandum of Incorporation or any applicable rules of the company, or other significant and material procedural irregularity.

 

(8)     The holder of any voting rights in a company is entitled to seek relief in terms of section 164 if that person—

 

(a)     notified the company in advance of the intention to oppose a special resolution contemplated in this section; and

 

(b)     was present at the meeting and voted against that special resolution.

 

(9)     If a transaction contemplated in this Part has been approved, any person to whom assets are, or an undertaking is, to be transferred, may apply to a court for an order to effect—

 

(a)     the transfer of the whole or any part of the undertaking, assets and liabilities of a company contemplated in that transaction;

 

(b)     the allotment and appropriation of any shares or similar interests to be allotted or appropriated as a consequence of the transaction;

 

(c)      the transfer of shares from one person to another;

 

(d)     the dissolution, without winding-up, of a company, as contemplated in the transaction;

 

(e)     incidental, consequential and supplemental matters that are necessary for the effectiveness and completion of the transaction; or

 

(f)      any other relief that may be necessary or appropriate to give effect to, and properly implement, the amalgamation or merger.

 

116.   Implementation of amalgamation or merger

 

(1)     Subject to subsection (2), after a resolution approving an amalgamation or merger has been adopted by each company that is a party to the agreement—

[Words preceding s 116(1)(a) subs by s 72(a) of Act 3 of 2011.]

 

(a)     each of the amalgamating or merging companies must cause a notice of the amalgamation or merger to be given in the prescribed manner and form to every known creditor of that company;

 

(b)     within 15 business days after delivery of a notice required by paragraph (a), a creditor may seek leave to apply to a court for a review of the amalgamation or merger only on the grounds that the creditor will be materially prejudiced by the amalgamation or merger; and

 

(c)      a court may grant leave contemplated in paragraph (b) only if it is satisfied that—

 

(i)      the applicant for leave is acting in good faith;

 

(ii)      if implemented, the amalgamation or merger would materially prejudice the creditor; and

 

(iii)     there are no other remedies available to the creditor.

 

(2)     Subsection (1) does not apply to a company engaged in business rescue proceedings, in respect of any transaction pursuant to or contemplated in the company’s business rescue plan adopted in accordance with Chapter 6.

 

(3)     A notice of amalgamation or merger must be filed after the transaction has satisfied all the applicable requirements set out in section 115, and—

[Words preceding s 116(3)(a) subs by s 72(b) of Act 3 of 2011.]

 

(a)     after the time contemplated in subsection (1)(b), if no application has been made to the court in terms of that subsection; or

 

(b)     in any other case—

 

(i)      after the court has disposed of any proceedings arising in terms of subsection (1)(b) and (c); and

 

(ii)      subject to the order of the court.

 

(4)     A notice of amalgamation or merger must include—

 

(a)     confirmation that the amalgamation or merger—

 

(i)      has satisfied the requirements of sections 113 and 115;

 

(ii)      has been approved in terms of the Competition Act, if so required by that Act;

 

(iii)     has been granted the consent of the Minister of Finance in terms of section 54 of the Banks Act or obtained the approval of the Registrar of Securities Services in terms of section 64 of the Financial Markets Act, 2012, if so required by that Act; and

[S 116(4)(a)(iii) subs by s 111 of Act 19 of 2012.]

 

(iv)     is not subject to—

 

(aa)   further approval by any regulatory authority; or

 

(bb)   any unfulfilled conditions imposed by or in terms of any law administered by a regulatory authority; and

 

(b)     the Memorandum of Incorporation of any company newly incorporated in terms of the agreement.

 

(5)     After receiving a notice of amalgamation or merger, the Commission must—

 

(a)     issue a registration certificate for each company, if any, that has been newly incorporated in terms of the amalgamation or merger agreement; and

 

(b)     deregister any of the amalgamating or merging companies that did not survive the amalgamation or merger.

 

(6)     An amalgamation or merger—

 

(a)     takes effect in accordance with, and subject to any conditions set out in the amalgamation or merger agreement;

 

(b)     does not affect any—

 

(i)      existing liability of a party to the agreement, or of a director of any of the amalgamating or merging companies, to be prosecuted in terms of any applicable law;

 

(ii)      civil, criminal or administrative action or proceeding pending by or against an amalgamating or merging company, and any such proceeding may continue to be prosecuted by or against any amalgamated or merged company; or

[S 116(6)(b)(ii) subs by s 72(c) of Act 3 of 2011.]

 

(iii)     conviction against, or ruling, order or judgment in favour of or against, an amalgamating or merging company, and any such ruling, order or judgment may be enforced by or against any amalgamated or merged company.

[S 116(6)(b)(iii) subs by s 72(c) of Act 3 of 2011.]

 

(7)     When an amalgamation or merger agreement has been implemented—

 

(a)     the property of each amalgamating or merging company becomes the property of the newly amalgamated, or surviving merged, company or companies; and

 

(b)     each newly amalgamated, or surviving merged company is liable for all of the obligations of every amalgamating or merging company,

 

in accordance with the provisions of the amalgamation or merger agreement, or any other relevant agreement, but in any case subject to the requirement that each amalgamated or merged company must satisfy the solvency and liquidity test, and subject to subsection (8), if it is applicable.

[S 116(7) subs by s 72(d) of Act 3 of 2011.]

 

(8)     If, as a consequence of an amalgamation or merger, any property that is registered in terms of any public regulation is to be transferred from an amalgamating or merging company to an amalgamated or merged company, a copy of the amalgamation or merger agreement, together with a copy of the filed notice of amalgamation or merger, constitutes sufficient evidence for the keeper of the relevant property registry to effect a transfer of the registration of that property.

 

(9)     If, with respect to a transaction involving a company that is regulated in terms of the Banks Act or the Financial Markets Act, 2012, there is a conflict between a provision of subsection (7) and a provision of section 54 of the Banks Act or section 64 of the Financial Markets Act, 2012 Act, as the case may be, the provisions of those Acts prevail.

[S 116(9) subs by s 111 of Act 19 of 2012.]

 

Part B

Authority of Panel and Takeover Regulations

 

117.   Definitions applicable to this Part, Part C and Takeover Regulations

 

(1)     In this Part, Part C, and in the Takeover Regulations—

 

(a)     “acquisition” includes an acquisition by a regulated company of its own securities as contemplated in section 48, but does not include the return of any securities of a regulated company to that company pursuant to the exercise of appraisal rights in terms of section 164;

 

(b)     “act in concert” means any action pursuant to an agreement between or among two or more persons, in terms of which any of them co-operate for the purpose of entering into or proposing an affected transaction or offer;

 

(c)      “affected transaction” means—

 

(i)      a transaction or series of transactions amounting to the disposal of all or the greater part of the assets or undertaking of a regulated company, as contemplated in section 112, subject to section 118(3);

 

(ii)      an amalgamation or merger, as contemplated in section 113, if it involves at least one regulated company, subject to section 118(3);

 

(iii)     a scheme of arrangement between a regulated company and its shareholders, as contemplated in section 114, subject to section 118(3);