Specific developments and comparisons / Spesifieke ontwikkelings en vergelykings : caput 2

• Date: 01 January 2010
• DOI: 10.10520/EJC74118
• Published date: 01 January 2010
• Pages: 58-81

58

CAPUT 2

SPECIFIC DEvELOPMENTS AND COMPARISONS /

SPESIFIEKE ONTWIKKELINgS EN vERgELyKINgS

2.1 South Africa

2.1.1 Simplif‌ication of close corporations by the Amendment Act

of 19971

2.1.1.1 Introduction

Compared to the Companies Act of 1973, the Close Corporations Act

has proved to be relative free of teething troubles.

The SAC is responsible to make recommendations from time to time

for the amendment of the Close Corporations Act 69 of 1985 and to

assist the Minister on matters he refers to it. A Standing Sub-com-

mittee on Close Corporations (SSCC) is appointed by the SAC for

advice on all matters referred to it by the SAC. In this way provision

is made for the observation of the operation and development of the

Close Corporations Act and for shaping suggestions for reform.

A three year reform and development programme of the SSCC on

the following aspects was approved by the SAC: Replacing the sec-

tion 72 composition; eliminating anomalies in group context; regula-

tion of debentures and prohibition of offers to the public; jurisdiction

in liquidation; membership by disqualif‌ied persons; effective enforce-

ment of maximum membership; liability for the delay of subsequent

members’ contributions; use of the name, abbreviations and expla-

nations with the name of a corporation; participation of disqualif‌ied

persons other than members in the management of the corporation;

period of reprieve for f‌illing a vacancy for the off‌ice of accounting of-

f‌icer; duties of accounting off‌icer and sanctions for non-compliance;

abuse of separate legal personality of corporation; power of a mem-

ber to bind the corporation; close corporations not for gain.

The following further aspects were also being researched by the

Standing Sub-Committee in 1993: The attachment and transfer of

members’ interests; liability of members on deregistration of a close

corporation; extending the jurisdiction of the Small Claims Court to

cover internal disputes between the members of close corporations.

A comprehensive draft Close Corporations Amendment Bill was ap-

proved by the SAC and recommended for enactment in late 1994.

This draft (with minor amendments effected during the committee stage

concerning the use of abbreviation of the term “close corporation”

1 Based on paper submitted to the CRIC International Conference on

the Future Development of SA Corporate Law on 30 July 1993 in Jo-

hannesburg, see 1 CLDS 176.

59

in the ten other off‌icial languages) was eventually enacted as the

Close Corporations Amendment Act 26 of 1997.2

2.1.1.2 SSCC press release: Recommendations and developments

2.1.1.2.1 Press release of 28 October 1992

[NOTE: The original text of the press release of 28 October 1992 ap-

pears in normal print and the recommendations accepted by the SAC

in italics].

“A. SCHEDULE AND COMMENTARy

The Standing Advisory Committee on Company Law (SAC)

maintains a Standing Sub-Committee on Close Corporations

(SSCC) in terms of section 11 (2) of the Close Corporations Act

69 of 1984. The SSCC is responsible for considering all mat-

ters on close corporations referred to it by the SAC and advis-

ing the SAC accordingly.

Various matters have been referred to the SSCC for consid-

eration and advice. A three-year work schedule on the as-

pects mentioned below has been approved by the SAC. It is

hereby published for general notice.

The SSCC wishes to consult as widely as possible on the

future development of close corporations law. It should be

stressed that the SSCC does not view the identif‌ied problem

areas in this schedule as a numerus clausus. Commentary

on further problems will be welcomed and these could be in-

corporated into the work schedule.

B. ORDER OF PRIORITy OF IDENTIFIED PROBLEM AREAS

1. REPLACINg THE SECTION 72 COMPOSITION WITH

A PRACTICAL, MORE ATTRACTIvE AND EFFECTIvE

ARRANgEMENT

It was decided at a meeting of the SAC in February 1992 that:

a) in order to clarify present uncertainties, section 66 of the

Close Corporations Act should expressly provide that

section 311 of the Companies Act does not apply to close

corporations.

b) the composition provisions contained in section 72 of the

Close Corporations Act should be amended to rectify

present shortcomings.

c) opportunity should be given for further research on a sim-

plif‌ied procedure based on section 311 of the Companies

2 See Henning (ed) “Close Corporations” in The Law of South Africa

(First Re-Issue 1996) Vol 4.3 par 501.