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lOMoARcPSD|10435457Law of Busisness Enterprise Units 1 to 9
Law of Business Enterprises (University of the Free State)
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1
LAW OF BUSINESS ENTERPRISE
UNIT 1 – INTRODUCTION TO THE COMPANIES ACT 2008
Explain the historical development of the Companies Act of 2008.
• 1926 Companies Act
• 1973 Companies Act
• 2008 Companies Act (effective from 1 May 2011)
A new Act was necessary because it was generally accepted that the 1973 Act was
old and needed to be replaced.
The process before the 2008 Act:
1) policy paper May 2004 – Department of Trade and Industry published policy
guidelines for a new SA Companies Act with emphasis on social responsibility
2) NEDLAC
3) Chaotic four years follow and two draft Acts
4) Department of Trade and Industry drafted the Act itself with help from American
and Canadian advisors, and at a later stage, a small group of South African
specialists got involved in the process
5) With the 1973 Act the Van Wyk De Vries Commission report gave
comprehensive information; the 2008 Act was not such a comprehensive
report, it was only a brief memorandum of objectives/purposes and a brief
summary
6) Final draft of Companies Act in June 2008 shows strong foreign influence,
especially from the USA, Canada and New Zealand
7) November 2008 – parliamentary approval
8) 9 April 2009 – signed by the President Act 71/2008
9) there was such a huge number of errors and wording problems in the approved
Act that 115 sections changed in amendment Act approved late March by
parliament
10) announced date of commencement was the middle of April 2010 which was
postponed to 1 April 2011, and then on 31 March 2011 it was announced that
it will commence on 1 May 2011
11) draft regulations in November 2010 published for commentary and only
finalized end of April
12) prescribed forms were only available on 28 April 2011
13) there was very little time for professions to prepare and study these forms
Please note: You need not know the history in detail.
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2
Identify and discuss the key objectives as agreed upon with NEDLAC.
OBJECTIVES EXPLANATION
1) Simplification: simplification of the a) The law should provide for a
procedures for forming company structure reflecting the
companies and a reduction in the characteristics of a CC as one of
costs of company formation and the available options.
maintenance. b) The law should establish a simple
and easily maintained regime for
non-profit companies.
c) Co-operatives and partnerships
should not be addressed in the
reformed company law.
2) Flexibility: providing for flexibility a) Company law should provide for
in the design and organization of “an appropriate diversity of
companies. corporate structures”.
b) The distinction between listed and
unlisted companies should be
retained.
3) Corporate efficiency: promoting a) Company law should shift from a
the efficiency of companies and capital maintenance regime
their management. based on par value to one based
on solvency and liquidity.
b) There should be clarification of
board structures and director
responsibilities, duties and
liabilities.
c) There should be a remedy to
avoid locking minority
shareholders into inefficient
companies.
d) The mergers-and-takeovers
regime should be reformed so
that the law facilitates the creation
of business combinations.
e) The judicial management system
for dealing with failing companies
should be replaced by a more
effective business rescue system.
4) Transparency: encouraging a) Company law should ensure the
transparency and high standards proper recognition of director
of corporate governance. accountability, and appropriate
participation of other
stakeholders.
b) Public announcements,
information and prospectuses
should be subject to similar
standards for truth and accuracy.
c) The law should protect
shareholder rights, advance
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3
shareholder activism, and provide
enhanced protection for minority
shareholders.
d) Minimum accounting standards
should be required for annual
reports.
5) Predictable regulations: company a) Company law sanctions should
law should be compatible and be decriminalized where possible.
harmonious with best-practice b) Company law should remove or
jurisdictions internationally. reduce opportunities for
regulatory arbitrage.
c) Company law should be enforced
through appropriate bodies and
mechanisms, either existing or
newly introduced.
d) Company law should strike a
careful balance between
adequate disclosure and over-
regulation.
Discuss the purpose of the Companies Act of 2008.
Section 7: The purposes of this Act are to—
(a) promote compliance with the Bill of Rights as provided for in the
Constitution, in the application of company law;
(b) promote the development of the South African economy by—
(i) encouraging entrepreneurship and enterprise efficiency;
(ii) creating flexibility and simplicity in the formation and maintenance of
companies; and
(iii) encouraging transparency and high standards of corporate governance as
appropriate, given the significant role of enterprises within the social and
economic life of the nation;
(c) promote innovation and investment in the South African markets;
(d) reaffirm the concept of the company as a means of achieving economic and
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