On July 26, 2024, a significant milestone was achieved in South Africa’s corporate governance with the President’s signing of the long-anticipated Companies Amendment Bill 2023 into law.
One significant change is the abolition of the “5% buy-back rule” under section 48(8)(b). This rule created procedural hurdles for companies when repurchasing shares. The new regime requires companies to obtain a special resolution for repurchases involving certain parties, except for pro-rata offers to all shareholders or transactions on a recognised stock exchange. Moreover, financial assistance regulations under section 45 have been relaxed, no longer applying to financial aid provided by a company to its subsidiaries.
An important amendment will benefit landlords of companies undergoing business rescue. It classifies payments for public utility services, rates, and taxes as post-commencement financing, giving landlords priority in recovering these costs and ensuring that critical operational expenses are covered during the business rescue process.
The Bill places a strong emphasis on promoting transparency within corporate operations. Amendments to section 26(1) expand the right of access to company records, including the register of beneficial interests. This is a significant move towards greater visibility into company ownership and control structures.
Section 26(2) now grants individuals without a beneficial interest the right to inspect and copy various company records, including the Memorandum of Incorporation (MOI), director records, and annual financial statements (AFS). However, access to AFS is restricted for private companies, non-profit companies, and personal liability companies with a public interest score (PI Score) below specified thresholds.
The amendments introduce new disclosure requirements for directors and prescribed officers’ remuneration in audited AFS, enhancing accountability.
The remuneration report must now include detailed information on the “wage gap,” disclosing the total remuneration of the highest and lowest-paid employees, as well as the average and median remuneration across the company. This data aims to provide a clearer picture of income disparity within organisations.
Complementing these changes, the Companies Second Amendment Bill 2023 extends the period to declare a director delinquent from 24 to 60 months. This aligns with recommendations from the Zondo Commission of Inquiry into State Capture, strengthening measures to hold directors accountable for misconduct.
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