From the dti: "The Companies Bill, assented to by the then President Motlanthe on 9 April 2009, became an Act of Parliament (although it is yet to be proclaimed, so as to be in operation).  Minister Davies subsequently issued regulations to the Companies Act in July 2009.  During the consultation process, sections of the Act were found to be imbued with errors, while some of the regulations were considered ultra vires (beyond the powers), due to their not empowering provisions in the Act, nor enabling the Minister to issue them in order to achieve the Act's objectives.  Amendments were thus required to rectify these provisions and ensure improved administration of the Act, hence the publication of the Companies Amendment Bill, 2010.

Link to the Companies Amendment Bill, 2010.

Link to Chapter 6 of the Companies Amendment Bill, 2010.

 

Of interest to TMA-SA members is the following:

Qualifications of practitioners

“138. (1) A person may be appointed as the business rescue practitioner of a company only if the person––

(a) is a member in good standing of––

(i) a legal, accounting or business management profession that is subject to regulation by a regulatory authority; or

(ii) has been [prescribed] licensed as such by the [Minister] Commission in terms of subsection (2);

(2) For the purposes of subsection (1)(a)(ii), [The Minister] the Commission may [designate one] license any qualified person [or association within the Republic to regulate the practice of persons] to practice as a practitioner[s] in terms of this [Act] Chapter, and may suspend or withdraw any such licence in the prescribed manner...

It therefore appears that a turnaround professional can be licensed by the Commission without having to belong to a regulated profession.

 

Below follows comment from Francis Newham on Business Report 29th July 2010 on the Companies Amendment Bill:

"On December 22 last year, the Department of Trade and Industry announced its intention to address certain “grammatical errors, incorrect reference and cross referencing, missing of words, inconsistency of provisions and incorrect spelling” in the new Companies Act.

While this was seen as a welcome acknowledgement of shortcomings in the act, many legal practitioners and academics wondered openly whether the fundamental flaws contained in the act in its extant form were capable of repair at all.

These doubts were reinforced with the publication of the draft regulations under the act on the same day. It seemed that in some cases the regulations were being used as the means to address shortcomings in the act and, as such, ran the risk of being challenged as ultra vires.

After much speculation, the department published the draft Companies Amendment Bill on its website yesterday.

It is now quite clear that there is recognition that the act in its present form is significantly deficient and the proposed changes certainly go a lot further than dealing with mere grammatical and other formal issues.

The bill, which runs to some 102 pages, seeks to amend no less than 110 of the 225 sections of the act, with many of the sections being amended in several different respects. No less than 21 of the definitions in section 1 are to be changed and nine entirely new definitions are to be added, some to add clarity and others, such as the definition of a “domesticated company”, to introduce concepts not currently contemplated in the act.

Public hearings of Parliament’s committee on trade and industry to discuss the bill are scheduled to commence on September 7, with the bill to be formally considered by the committee on September 22.

No indication has been given as to when the amended draft regulations might be expected. All of this makes it clear that the (amended) act will not come into operation on October 1 as was most recently anticipated by the department. Pending the finalisation of the bill, the following are among the important changes that are now proposed:

• The bill seeks to deal with the uncertainty regarding the provisions of shareholders’ agreements of existing companies. The wording of the act seemed to suggest that not only the articles of association of “existing companies” but also their shareholders agreements would continue to prevail over the act (save in respect of certain specific matters) for the twoyear transitional period after the act comes into force. The draft regulations, although not clear, suggested that this might not be the case. It was therefore thought that there would be a need to migrate shareholder agreement provisions into articles of association prior to the act coming into operation if it was intended to keep these alive for the two-year period.
• The bill makes it clear this will not be necessary and both articles of association and existing shareholders’ agreements will live on for the transitional period (by the end of which the latter must be incorporated in the company’s memorandum of incorporation or else be rendered void to the extent that they conflict with the act or the memorandum of incorporation).
• The bill provides for a foreign company to “transfer” its registration to South Africa, subject to certain specific requirements, including the fact that the whole or greater part of its assets are situated in the republic, the majority of its shareholders are resident in the republic and the majority of its directors are or will be South African citizens. Such a “domesticated company” will cease to be registered in the foreign jurisdiction where it was originally registered and will continue life as a South African company without affecting the rights of any person or the rights and obligations of the company itself.
• The act currently has a curious provision in section 218(1), which in effect says that even if the act provides for any resolution, provision of an agreement or the like to be void, it will not be void until a court declares it void – which is a legal nonsense. The bill has addressed this and now makes it clear that the section has in mind only matters which are voidable or prohibited.
• The act allows the board to make loans or grant other financial assistance to directors in section 45, subject to certain conditions. These include a special resolution of shareholders and the fact that the company must, after the granting of the loan or financial assistance, satisfy the solvency and liquidity test in the act. The bill has introduced a further requirement, namely that the terms under which the financial assistance is to be given are “fair and reasonable to the company”.
• Under the act, a company can acquire its own shares subject to compliance with certain requirements. The bill introduces the requirement of a special resolution of shareholders where the shares are to be acquired from a director or prescribed officer.
• The bill now provides for an increase in the minimum number of directors (currently one for private and three for public companies) by providing that the stated minimums exclude “the minimum number of directors that a company must have to satisfy any requirement… to appoint an audit committee or a social and ethics committee”. The act requires an audit committee of at least three non-executive directors and the draft regulations contemplate a social and ethics committee of a further three. Those companies that are obliged to have such committees may need to increase the size of their boards to comply.
• The provisions contained in the draft regulations in terms of which companies may apply to the Companies Tribunal for exemption from the requirement of having to appoint a social and ethics committee have been moved to the bill. This should deal with the ultra vires issue that might have arisen in this case.
• The controversially wide powers given to a business rescue practitioner in section 136(2) of the act to “cancel or suspend entirely, partially or conditionally any provision of an agreement to which the company is a party” other than an employment agreement have been tempered in the bill, which proposes that a practitioner may suspend (but not cancel) obligations of the company “for the duration of the business rescue proceedings”.
• The final shape of the act will be determined during the course of the parliamentary process but it is probably unlikely that further significant changes will be made before the act comes into force. Whether or not the bill addresses all of the shortcomings in the act remains to be seen."

USAID is currently supporting a project in the form of a Financial Sector Program policy reform initiative to assist the authorities in connection with amendments to key areas of the financial sector, including the Company Act, National Credit Act and Insolvency Act.  The ultimate aim of the project will be to prepare a mapping of the current legal frameworks pertaining to business rescue, liquidation, and insolvency, with a view to developing policy recommendations to strengthen these systems.    

In short, it means amendments to the Companies Act, and new draft regulations, which will be available for public comment in September 2010.  Interaction with the advisors led us to believe that the proposed Business Rescue Practice Regulatory Board will be replaced by a new body, and that new admission requirements for business rescue practitioners will be set. 

The most comprehensive press report, which summarises the information gathered by TMA-SA, is by Ann Crotty of Business Report, dated 29th June 2010, which follows below:

"The Department of Trade and Industry (dti) is adamant that the Companies Act 2008 will be implemented in the final quarter of this year, about 20 months after the statute was signed into law by former president Kgalema Motlanthe.  However, business groups are equally adamant a more realistic deadline for implementation is the first half of 2011.

It now appears that there will be further opportunity for the public to provide input on proposed amendments to the act, as well as to comment on proposed changes to the regulations accompanying the act.

The dti is reviewing the amendment act, which is a 66-page document containing a lengthy list of proposed amendments to the act that was signed by Motlanthe.

According to a website announcement, the SA Institute of Chartered Accountants (Saica) said that the dti had only recently obtained the amendment act and was considering the proposed amendments "against the policy background of the act".

Saica's website announcement followed meetings between Saica, the Cape Chamber of Commerce, Cape Law Society, representatives of Business Unity SA and dti minister Rob Davies and members of the dti.

At the meetings Davies made it clear that he considered the new act to be a vast improvement on the existing act and that it was imperative to introduce the new act soon, notably because of the provisions for business rescue.

Because of time constraints only a limited number of issues were raised at the meetings. The key concerns of the business delegation related to sections 4, 22, 23 and section 136 of the act. These sections deal respectively with solvency and liquidity tests, reckless trading, registration of external companies and business rescue proceedings.

Saica's announcement stressed that the discussions intended "to highlight why closer, detailed engagement was required with the dti to allow business to assist in crafting solutions that were workable and not contrary to the policy objectives of the act".

Once the dti had completed its review of the proposed amendment act it would be subject to due process. This process will include a 30-day public comment period involving open hearings. In addition to the proposed amendments to the act, the dti has also received substantial comments on the draft regulations, which are to accompany the act."

The draft Company Regulations, 2010 addresses business rescue regulations in its Chapter 6.  Of interest are:

• Business Rescue Practice Regulatory Board.
• Qualifications for persons to be admitted as business rescue practitioners.

Business rescue legislation is contained in Chapter 6 of the Companies Act No. 71, 2008.

The Companies Act 2008 was signed by the president on the April 8 2009 and gazetted Thursday, April 9 2009, in Gazette No. 32121 (Notice No. 421). 

The Companies Act 2008 comes into operation on a date fixed by the president by proclamation in the Gazette, which may not be earlier than one year following the date on which the president assented to this Act.  The Minister of Trade and Industry announced in March 2010 that the implementation date is the 3^rd quarter 2011.

The Certified Turnaround Professional (CTP) credential was designed in the USA to encourage professional excellence, provide an objective measure and recognition of expertise, and provide evidence of an individual’s commitment to the turnaround and corporate renewal industry.   To this end, the Turnaround Management Association - Southern Africa has commenced with activities to launch the Certified Turnaround Professional programme in South Africa under license from TMA, and in partnership with Services SETA.

The Turnaround Certification Governance Board (TCGB), will be independent from the Board of Directors of TMA-SA.  The TCGB consists of an Academic Subcommittee, responsible for the body of knowledge and exams, and a Standards Subcommittee, responsible for admitting individuals based on having passed the exam, and possessing certain prescribed education and experience. 

While the timeline is very tentative at this stage, the goal is to have the first exams written in late 2011.

The Disqus commenting system allows any one to comment or ask questions about each web page at the bottom of that page.

One can sign in with one's Facebook, Yahoo, Twitter, etc. identities, which is preferable. 

For the time being, however, any one can sign in by supplying an email address too.  Should the latter method lead to too much spam it will be discontinued.