The Companies Act 2008: An Overview of a Few of its Core Provisions
| Jurisdiction | South Africa |
| Published date | 25 May 2019 |
| Date | 25 May 2019 |
| Author | FHI Cassim |
| Pages | 157-175 |
| Citation | (2010) 22 SA Merc LJ 157 |
Articles
The Companies Act 2008:An Overview of a
Few of its Core Provisions
FHI CASSIM*
University of Johannesburg
1 Introduction
Company law has a significant impact on the economy in general and on
commercial activity in particular. It can promote and facilitate commercial
enterprise and economic growth or it can restrict and retard it.
1
It is
consequently vital for corporate law to be clear, certain and accessible. But
our current corporate law regime is bulky, complex and full of conflict in its
underlying philosophy and policy, and this is due directly to the fact that
the Companies Act 61 of 1973 has been amended some forty-two times in the
thirty-five years of its existence. This sort of patchwork and piecemeal reform
has inevitably led to conflict in the policy and the objectives underpinning our
company law regime.
In addition to this, during those thirty-five years, both the domestic and
global environment have changed dramatically. Many of the traditional
company law doctrines and concepts inherited from nineteenth-century
English law have been abandoned or substantially modified and new
corporate law concepts have been developed, such as solvency and liquidity,
delinquent directors, corporate governance, new standards of accountability
and transparency, market manipulation, and new ideas and approaches to
corporate rescue, mergers and amalgamations and shareholder appraisal
rights.
Our present company law system is based largely on English company law,
but ironically in the United Kingdom, which has only recently modernised its
company law regime, it is now widely acknowledged that English company
law had become a source of competitive disadvantage caused by its failure to
keep up with modern trends in other jurisdictions. This applies with even
more force to South African company law, which has yet to adapt to the
twenty-first century.
* LLB LLM (Lond) HDip Co Law (Witwatersrand).Advocate of the High Court of South Africa.
Professor, Faculty of Law, University of Johannesburg.
1
See Modern Company Law for a Competitive Economy; Final Report (July 2002)(CM553-1) vol 1
at 11.
157
(2010) 22 SA Merc LJ 157
© Juta and Company (Pty) Ltd
The Department of Trade and Industry (DTI) policy paper South African
Company Law for the 21st Century: Guidelines for Corporate Law Reform
2
likewise states that we now live in a world of greater globalisation, increased
electronic communication, and greater sensitivity to social and ethical
concerns, and we cannot afford to be left behind. This paper also emphasises
the importance of an investor-friendly corporate system compatible with
best-practice jurisdictions internationally. Our company law regime must be
harmonised with the corporate law systems of our main trading partners and
competitors internationally. This becomes even more important when one
bears in mind the recent increased mobility of capital combined with the
growth in foreign trade and concomitant foreign investment.
Apart from an investor-friendly corporate law regime, the DTI policy paper
emphasises as other major themes of the corporate law reform programme,
the importance of a corporate law system that is flexible, simplified,
modernised and transparent. Equally important objectives are high standards
of corporate governance and ensuring a predictable and effective regulation of
companies that is not as excessively dependent as the present Companies Act
is on criminal sanctions. Criminal penalties are not appropriate for
non-compliance with many of the provisions of the Companies Act.
3
The
object of decriminalising company law is not to trivialise the importance of
effective sanctions for non-compliance but rather to ensure more effective
enforcement.
The five pillars of the DTI policy paper outlining the objective of a new
company law regime are stated to be:
4
(1) to simplify the procedure for company formation and reduce the costs of
forming and maintaining a company;
(2) to promote flexibility in the design and the organisation of companies
and to ensure a predictable and effective regulatory environment;
(3) to promote the efficiency of companies and their management;
(4) to encourage transparency and high standards of corporate governance;
(5) to harmonise our company law with best practice jurisdictions
internationally.
While these objectives are undeniably worthy and laudable goals and while
they may properly be expounded in a policy document or in a preamble to an
Act of Parliament, it is quite another matter for such broad objectives to be
inserted in the Companies Act itself. Section 7 of the Companies Act 71 of
2008
5
(the ‘Companies Act’ or the ‘Act’) read with s 5(1), which requires the
2
GN 1183 in Government Gazette 26493 of 23 June 2004.
3
To mention just two instances, s 189 of the Companies Act 1973, which entitles members of a
company to appoint a proxy, imposes in s 189(2)(b) a criminal sanction on directors and officers of
a company who fail to comply with s 189. Section 50(4) of the Companies Act 1973 similarly makes it a
criminal offence for a company not to state its name and registration number in legible characters in all
notices and officialpublications of the company. A criminal sanction is not appropriate here; nor does it
make any sense to render the company itself liable for non-compliance.
4
See the Memorandum on the Objects of the Companies Act, 2008 B 61D – 2008 in par 1 at 186.
5
Companies Act 71 of 2008 (GN 421 in Government Gazette 32121 of 9April 2009) in par 1 at 186.
(2010) 22 SA Merc LJ158
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