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by Renier Kriek
A draft bill, to be known as the Companies Amendment Bill, was published for comment by the dti on 19 July 2010. According to the preamble of the Bill, it seeks to address significant errors, grammatical problems ambiguities and other issues in the Companies Act, 71 of 2008 (the New Companies Act). The Bill further seeks to better provide for the administration of the Act.
Of the 225 sections of the New Companies Act, 113 receive treatment by the Bill, ranging from the insertion of missing words and the correction of numbering, to more far-reaching and substantive changes. Notably, 30 amendments are made to section 1 of the New Companies Act, which contains the definitions that lay the groundowrk for the scheme of the Act. Among these amendments is the insertion of new definitions, likely in an attempt at clarifying a number of concepts and provisions introduces in the New Companies Act.
Keen followers of our newsletter articles on the New Companies Act will remember our objections to the business rescue provisions, particularly those provisions that would have allowed business rescue practitioners the power to cancel contracts to which the companies under their control are bound. The Bill amends the relevant section so that rescue practitioners will only be entitled to suspend a company’s obligations. This seems to dampen the authority of the practitioner, but it remains to be seen whether even the amended section is commercially realistic.
Another notable feature of the Bill is that it seeks to address concerns that the draft Regulations to the New Companies Act, published by Minister Rob Davies as early as July 2009, were ultra vires and therefore potentially invalid. That state of affairs would seriously have hampered the implementation of the New Companies Act.
The Bill is still in the early stages of the legislative process. After public comment has been received, considered and possibly incorporated, the Bill will still be liable to modification as it passes through parliament. This casts some doubt as to the precise content the New Companies Act will have once it is brought in to force, which probably indicates that the October 2010 due date for promulgation of the Act, which so far has been a dti priority, will no longer be met. The precise date for the implementation of the New Companies Act has now entered the domain of soothsayers, but it seems unlikely that the Act will be promulgated before the second quarter of 2011 at the earliest.
At this stage, it seems, preparing for the coming of the new companies dispensation is prematute, at least until the content of the New Companies Act has been settled by the legislature. What has hopefully become clear to all concerned is the clumsiness of the original drafting and the incompetence of a process which allowed such a flawed piece of legislation to be passed into law. At this early stage we have not undertaken a detailed study of the proposed amendments, but comment will follow shortly.
by Renier Kriek
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