The new Companies Act and future of the Close Corporation
The new Companies Act, 71 of 2008, was signed by the President on 8 April and
published in the Government Gazette No. 32121 (Notice No. 421) on 9 April 2009 and
replaces the current Companies Act, No 61 of 1973. It will also amend the Close
Corporation Act, No 69 of 1984. The Companies Act 2008, will probably come into
operation on 1 June 2010.
The biggest changes of the Act will the removal of the close corporation as a form of
ownership as well as the removal of the requirements for compulsory auditing for smaller
companies and stricter guidelines for directors of companies.
The Companies Act will simplify the incorporation of companies. Instead of the
Memorandum and Articles of Association, a company’s constitutional documents have
been consolidated into one document, the Memorandum of Incorporation. This document
sets out the rights, duties and responsibilities of shareholders, directors and others in
relation to the company.
The Companies Act 2008, provides for two types of companies namely profit companies
and non profit companies. A company is a profit company if it is incorporated for the
purpose of financial gain for its shareholders and it may be incorporated by more than one
person. There is no maximum.
The new Act makes provision for two kinds of for profit-companies: widely held companies
and closely held companies.
Widely held companies
• may offer its shares to the public and
• the transferability of its shares is unrestricted.
Widely held companies, not for profit companies and certain closely held companies for
example, those who contribute to public health, may be categorised as public interest
companies. Public interest companies are subject to more stringent accounting, disclosure
and transparency requirements.
Close Corporations
The Act recognises that existing close corporations should be free to retain their current
status and will not be obliged to convert to a company. The Act therefore provides for the
indefinite continued existence of close corporations.
If the members of a close corporation want to convert to a company it can be done under
the new Act.
Close Corporations can still be registered until the new Companies Act is enacted
thereafter no new Close Corporations will be registered.
Sources:
http://jv.news24.com/Die_Volksblad/Bloemnuus/0,,5-2259_2509543,00.html Apr 30 2009
http://www.saibr.org/faqs.aspx
www.moneyweb.co.za
http://www.mg.co.za/article/2008-09-03-the-end-of-close-corporation 3 Sept 2008