New Companies Act signed
17/04/2009

Act not yet in force

The long-awaited new Companies Act has now been signed. The President assented to the Act on 8 April 2009 and the final version was published in the Government Gazette on 9 April 2009. The Act is called the Companies Act, 2008 and will replace the current 1973 version.

Although the new Act has been signed and published, it is not yet in force. It will only take effect on a date announced by the President in the Government Gazette. However, that date may not be earlier that one year following the date on which the President signed the Act. Accordingly, the Act will not come into force before 9 April 2010. However, it is expected that the effective date will only be in the second half of 2010 in order for regulations to be put into place and for CIPRO to make the necessary preparations.
Types of companies
The Act refers to the “right to incorporate a company” and makes a broad distinction between profit companies and non-profit companies. It retains the following existing private companies:

• Private companies – “(Proprietary) Limited” or “(Pty) Ltd”
• Personal liability companies – “Incorporated” or “Inc”
• Public companies – “Limited” or “Ltd”

However, the novel “state-owned” company will also be introduced by the Act. State-owned companies will be identified by the abbreviation “SOC Ltd” at the end of their names.

The Act also simplifies the regulation of non-profit companies. After the Act has come into force, the names of such companies will end with “NPC”.
Impact on close corporations
The Act has a significant effect on close corporations (“CCs”). Once it takes effect, it will no longer be possible to register new close corporations or convert existing companies into close corporations. Nevertheless, the current Close Corporations Act will remain in force indefinitely. It will therefore not be necessary for existing close corporation to convert into companies. However, the Close Corporation Act may be repealed at a later stage – which will then require such a conversion.
New founding document for companies
The new Companies Act replaces the current memorandum and articles of association of a company with a single memorandum of incorporation (“MOI”). The MOI will have significant importance, since a company may alter or exclude certain provisions of the new Act in its MOI or even include additional provisions.

In contrast with the current Companies Act, the new Act provides for much more flexibility and leaves a number of matters in the hands of companies to be regulated in their MOIs.
Steps to be taken by companies
Since the new Act is not yet in force, companies are not obliged to take any steps to change their company documents at this stage. However, once the Act takes effect, there will be a grace period of two years during which companies can change their MOIs to bring them in line with the new Act. If, after that period, an MOI still contains provisions that are inconsistent with the new Act, those provisions will be void.

It is therefore important that companies start reviewing their current constitutions to identify any provisions that will conflict with the new Act so that those provisions can be altered. Further, companies should use the opportunity to revisit their current articles of association and consider the alterable provisions of the new Act to benefit from the greater flexibility that will be provided by it once it takes effect.