Company Regulations 2010 clarifying the New Companies Act have been released for comment.

Company Regulations 2010 released for comment.

In December 2009 the Regulations to the New Companies Act (Act 71 of 2008) were published for comment (comments close on 28the February 2010).

There are some significant items outlined in these regulations:

1. There is a lot of flexibility provided to companies in terms of Reporting Standards – which are based on a few key factors that determine whether your business falls into one of 3 broad categories (remember that these are INDEPENDENT of what form your business takes – since all forms (Companies and Closed Corporations) fall under the same regulations once the act comes into full effect);
a. Audited Financials
b. Independently Reviewed Financials (broken down further into 3 categories)
c. Exempt from either Audit of Independent Review

2. One challenging area in the Regulations is the very much expanded definition/description of who would be deemed to be a “prescribed officer” in a company – this is important since the roles and responsibilities (and potential liability) of directors that have been codified in the New Companies Act apply to everyone who will be seen a s a prescribed officer. The regulations identify 4 key areas of significant influence in a business as;
a. General Management
b. Financial Management
c. Legal Affairs
d. Operations
The regulations essentially define a prescribed officer as anyone exercising responsibility or authority within any of these areas – regardless of their title. There is also a “catch all” clause that includes everyone else who “otherwise directly or indirectly exercises or significantly influences the exercise of control over the general management and administration of the whole or a significant portion of the business and activities of the company, irrespective of any title assigned by the company to an office held by that person, or function performed by that person”.

3. Memorandum of Incorporation Templates (long and short forms) have been included in the Regulations – every company needs to submit these within a 2 year period after the implementation of the Act. This is a Strategic opportunity for all companies in clarifying exactly how they wish to operate as well as building a foundation for their Corporate Strategy and their application of the King II Codes of Corporate Governance;

In addition to these key areas the regulations do spell out more detail in terms of:
- The Regulating Bodies
- Business Rescue
- Share Structure and Fundamental Transactions

This is another step in the direction of a complete transformation of the business landscape that all businesses (companies, close corporations etc) operate in. The New Companies Act (Act 71 of 2008) fundamentally challenges many of what have become “standard business practices” in South Africa – most for the better, but not without challenges for all businesses who wishj to continue to thrive and prosper

For more information on these (and the other) changes brought about by the new Companies Act (Act 71 of 2008), the KING III Code of Corporate Governance for South Africa and related legislation BOOK YOUR SEAT on the SINK or SWIM New Companies Act (is it still s... or contact us me on roger@sinkorswim.co.za.

All the very best for the challenging year that lies ahead.

Roger Hitchcock
Specialist Advisor: Strategy – Governance – Knowledge
HONEYLANE Consulting (Pty) Ltd