![Amendments to Companies Act [Amendment Act 16 of 2024 and Second Amendment Act 17 of 2024]](https://www.nexia-sabt.co.za/wp-content/uploads/2025/02/compliance.jpg "compliance")
In a previous issue, we discussed amendments made to section 30 of the Companies Act relating to a remuneration policy and report. From 27 December 2024, other sections proposed in the Companies Amendment Act 16 of 2024 and the entirety of the Companies Second Amendment Act 17 of 2024 became effective.
These amendments include Memorandum of Incorporation changes; requirements for providing financial assistance to subsidiaries; appointment of Social and Ethics Committee and matters around auditor appointments.
The amendments set out below are now effective and companies are required to take action to implement these new provisions:
Memorandum of Incorporation (MOI) – Section 16
MOI amendments will be effective within 10 business days of filing with the Companies and Intellectual Property Commission (CIPC) unless a later date is elected or the CIPC rejects the filing during that 10-business day period. This is a departure from previous timing of filings, and it is important to consider these timing changes when finalising transactions or implementing time-sensitive corporate document modifications.
Financial Assistance – Section 45
The giving of financial assistance to, or for the benefit of, an entity’s subsidiary is now excluded from the requirements of section 45. The requirements that previously had to be met before a company may give financial assistance to related or inter-related companies (shareholder special resolution; solvency and liquidity; fairness and reasonableness) no
longer apply where the financial assistance is given by a holding company to a subsidiary. However, it is important to note that these amendments do not exempt approval requirements for certain intra-group financial assistance given (such as the acquisition of shares in that company or a related company; financial assistance provided in 30/30/40 structures or to offshore subsidiaries).
Share Buy Backs – Section 48
Previously, when a company repurchased more than 5% of a particular class of its shares, it had to meet strict requirements that are no longer necessary. These included needing independent expert reports, 164 appraisal rights, and the requirement for a special resolution if the buyback involved more than 5% of any class of shares. Now, a special resolution is required for a buyback in the following situations: (i) if shares are to be acquired from a director, a prescribed officer, or a person related to either; or (ii) if the
acquisition involves shares that are not part of a pro rata offer made to all shareholders of that class or a transaction conducted on a stock exchange licensed under the Financial Markets Act. Other requirements for buybacks, such as compliance with solvency and liquidity criteria, remain unchanged.
Social and Ethics Committee (SEC) – Section 72
SEC membership requirements will be unchanged for all companies except public or state-owned companies. The members of the SEC of a public company or state-owned company must now be elected by shareholders at the AGM, as opposed to being appointed by the board (sections 72 and 61). Furthermore, in the case of public and state-owned companies, the majority of the members of the SEC must be non-executive directors and must have been non-executive directors for at least the past three financial years.
Auditor Appointments – Section 90
At present the Companies Act requires that auditors be appointed at an AGM. The amendment reiterates that auditors must be reappointed each year at the shareholders’ meeting, replacing the previously stated “Annual General Meeting”. The amendments also reduce the cooling-off period for appointment of auditors from five to two years (such that to be appointed as auditor, the person or firm must not for two years have been a director or prescribed officer; an employee or consultant engaged for more than one year in maintenance of financial records or statements; a director, officer or employee of a person appointed as company secretary; or a person alone or with a partner or employees who habitually performs the duties of accountant, bookkeeper or related secretarial work).
It is important to note that the following significant amendments are
still to come but are not yet in force:
- Public access to annual financial statements, including those of certain private companies;
- The requirement for public companies to publish remuneration policies and reports for shareholder approval (sections 30A and 30B). This includes the proposed “two-strike” rule for remuneration committee members if the implementation report is voted down. Refer to the issue of SAB&Tip in November 2024.
- The updated definition of a “regulated company,” particularly concerning private companies. This affects whether the Takeover Regulations apply to certain transactions.
