South Africans will have to wait about a year before a new regime to govern companies comes into effect, says trade and industry minister Mandisi Mpahlwa.
Addressing a media briefing on the Companies Bill, in Pretoria, yesterday, he said he expected the draft law to be tabled in Parliament by year-end and enacted by next March or April. Companies will have three years to align themselves with the new system and close corporations will have 10.
Department of Trade and Industry (DTI) director-general Tshediso Matona said the law recognises the value of ICT in speeding up decision-making in the boardroom and improving corporate governance, by allowing teleconferencing and electronic documents.
However, he scoffed at the idea of totally virtual companies, saying it ran contrary to public policy considerations. Therefore, companies will still have to maintain a corporeal registered office within SA.
DTI deputy director-general for consumer and corporate regulation Astrid Ludin said the department keeps track of about 1.7 million companies and close corporations. In addition, it believes there are 749 500 more unregistered entities in the informal economy and 699 166 sole proprietorships active in the South African economy.
Timelines
Mpahlwa said the Bill was approved in Cabinet on 7 February, published for comment on 12 February and the initial public comment period extends until 19 March. However, the DTI only plans to take the Bill back to Cabinet in about June.
Mpahlwa acknowledged the reform the Bill will bring about is long overdue. "It represents the first significant review of South African company law in over 30 years.
"Much has changed in the intervening years. Corporate structures and financial instruments have developed and evolved significantly. The political and economic landscape for SA has changed. Corporate failures here and elsewhere have raised questions about standards of governance. These factors all set the scene for a significant overhaul and modernisation of our company law."
Objectives
The minister sketched the objectives of the Bill as including reducing the cost of registering and maintaining a company, and the regulatory burden and compliance costs for small and medium businesses, while at the same time enhancing corporate governance, transparency and accountability of large and widely-held (publicly held) firms.
It will also result in improved regulatory oversight and better redress for shareholders, he noted.
Once law, company suffixes will change. The names of Section 21 companies will be followed by "NPC" for Non-Profit Company, (Pty) Ltds and Close Corporations will become "CHCs" (Closely-Held Companies) and JSE Securities Exchange-listed companies will become known as "WHCs" or Widely-Held Companies.
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