Lecture 1 of 2024 UFS: Introduction to the 2008 Companies Act PDF

Learning unit 1 Introduction to the 2008 Companies Act T: +27(0)51 401 9111 | [email protected] | www.ufs.ac.za PURPOSE AND AIMS OF THE 2008 ACT Compliance with Bill of Rights Promote economical development Encourage transparency and a high standard of corporate governance (King Report) P...

Learning unit 1 Introduction to the 2008 Companies Act T: +27(0)51 401 9111 | [email protected] | www.ufs.ac.za PURPOSE AND AIMS OF THE 2008 ACT Compliance with Bill of Rights Promote economical development Encourage transparency and a high standard of corporate governance (King Report) Promote innovation and investment Balance rights and obligations of shareholders and directors Provide for efficient rescue and recovery procedures Alternative dispute resolution THE PURPOSES OF THE COMPANIES ACT OF 2008 The broad purposes of the new Companies Act (set out in section 7 of the Act) are to: promote development encourage entrepreneurship and enterprise efficiency create flexibility and simplicity encourage transparency and high standards of corporate governance T: +27(0)51 promote innovation and investment 401 9111 | [email protected] | www.ufs.ac.za achieve economic and social benefits. THE PURPOSES OF THE COMPANIES ACT OF 2008 The broad purposes of the new Companies Act (set out in (CONTINUED) section 7 of the Act) are to (continued): enhance economic welfare encourage productivity balance the rights and obligations of shareholders and directors encourage efficient and responsible management T: +27(0)51 provide for 401 9111 efficient| www.ufs.ac.za | [email protected] rescue and recovery of companies balance the rights and interests of all relevant stakeholders in rescue proceedings. INTERPRETATION Section 5 Interpretation of Act to give effect to section 7 Inconsistency between Co Act and other legislation: – Both apply concurrently if possible – 8 Acts that will apply and not Co Act – All other instances, Co Act will apply KEY CONCEPTS AND FEATURES OF 2008 ACT Davis listed 14 key concepts and features – P 19-21 3rd ed; P20-22 4th and 5th ed – SUMMARISE!! SOME KEY CONCEPTS OF THE COMPANIES ACT OF 2008 (1 OF 3) The right to form  Recognises the right of any person to form a company a company  Minimal legal requirements prescribed for company formation  Sole document that governs the affairs of the company The  Must meet certain core requirements Memorandum of  Beyond the minimum compulsory threshold, Incorporation the other requirements may be altered to meet the needs and interests of shareholders  T: +27(0)51 401 9111 | [email protected] | Flexible www.ufs.ac.za Principle of  Simplified regulatory system provided for flexibility and companies simplicity SOME KEY CONCEPTS OF THE COMPANIES ACT OF 2008 (2 OF 3) Liquidity and solvency test  Focuses on liquidity and solvency of the company  Provides for maximum protection of shareholders together with an increased Enlightened emphasis on minority shareholder protection shareholder and rights of other stakeholders value approach  Extended legal standing provided for some stakeholders  Aimed at rescuing financially distressed Business rescue companies instead of liquidating such T: +27(0)51 401 9111 | [email protected] | www.ufs.ac.za companies Avoidance of  Avoids over-regulation of company business over-regulation SOME KEY CONCEPTS OF THE COMPANIES ACT OF 2008 (3 OF 3) Partial codification of  Sets out the nature of the fiduciary duties of directors and the duty to exercise reasonable directors’ duties care  Instead of criminal penalties, provides for Decriminalisation administrative fines and remedies, but some forms of conduct still carry a criminal sanction  All companies formed under the Companies Companies Act of Act of 1973 deemed to have been formed in 1973 irrelevant terms of Companies Act of 2008  Recognises a wide range of companies T: +27(0)51 401 9111 | [email protected] | www.ufs.ac.za Types of  Draws a basic distinction between a profit companies company and a non-profit company 2008 CO ACT AND COMMON LAW Co Act 2008 = a rewriting of the Co Act in its entirety Co Act not codification of SA company law & does not contain all the rules and principles of company law Some rules and principles not in legislation Where Act is silent = common law will apply & common law may be used to supplement and interpret the Act, except in those instances where the Act explicitly ousts the common law Co law common law = English law (as analysed and adopted) and Roman-Dutch law (EXCEPTION) COMPANIES AND INTELLECTUAL PROPERTY COMMISSION (CIPC) Functions (assisted on http://www.cipc.co.za/index.php/about/our-functions/): Registration of companies, co-operatives and intellectual property rights (trade marks, patents, designs and copyright) and maintenance thereof Disclosure of Information on its business registers Promotion of education and awareness of company and intellectual property law Promotion of compliance with relevant legislation Efficient and effective enforcement of relevant legislation Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to Financial Reporting Standards Council (FRSC) Licensing of business rescue practitioners Report, research and advise Minister on matters of national policy relating to company and intellectual property law S168 enables any person to file a complaint with Commission where someone acts in a manner that is inconsistent with the act COMPANIES TRIBUNAL https://www.companiestribunal.org.za/about-us/about-the-c ompanies-tribunal/ The Companies Tribunal (the Tribunal) is an agency of DTI established ito the Co Act 2008 to provide speedy resolution of company disputes Has jurisdiction throughout South Africa. It is independent, and subject to the Constitution and the law. It exercises its functions in accordance with the Act and performs its functions fairly, without fear, favour or prejudice and in a transparent manner. COMPANIES TRIBUNAL https://nationalgovernment.co.za/units/view/390/companies -tribunal The functions of the Tribunal are i) to adjudicate applications made ito of the Co Act; ii) make orders in respect of such applications; iii) to provide voluntary dispute resolution through conciliation, mediation and arbitration iv) assist in the resolution of disputes; and v) perform any other function assigned to it by or ito the Act. COMPANIES TRIBUNAL Companies-_Tribunal_AR_2018-19.pdf Through its adjudicative mandate, the Tribunal plays a significant role in upholding and preserving the principles enshrined in the Constitution’s Bill of Rights. It has a direct impact on the following areas: Section 9: Equality: By remaining accessible to diverse groups of individuals and businesses, the Tribunal ensures that parties have the right to equal protection and benefits of the law. Additionally, the Tribunal strives, through its value system, to respect human diversity and ensures non-discrimination. Section 10: Human dignity: Through the adjudication process, the Tribunal ensures that prohibited conduct and related action do not impair human dignity. COMPANIES TRIBUNAL Companies-_Tribunal_AR_2018-19.pdf Section 14: Privacy: While adhering to its founding legislation, and as part of its adjudicative role, the Tribunal ensures that the privacy of persons is protected. Section 33: Just administrative action: The Tribunal hears both sides to a dispute and issues reasons for its decisions. Section 34: Access to courts: Everyone has the right to have any dispute that can be resolved by the application of law, decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum. COMPANIES TRIBUNAL Companies-_Tribunal_AR_2018-19.pdf Section 195: Democratic values and Principles Public entities must be governed by the democratic values and principles enshrined in the Constitution, which include: High standard of professional ethics; Efficient, economic and effective use of resources; Impartial, fair, equitable, unbiased delivery of services; Accountability; Transparency; Broad representation of South African people, with the need to address the imbalances of the past 2008 CO ACT AND HUMAN RIGHTS (1) States are no longer the only threat to human rights: co’s have increasingly become a threat over the years. The economic might of some co’s has eroded the power of States to protect their citizens, especially in developing countries. In some cases a strong nexus exists between corporations and the affected citizens, and ignoring this nexus may lead to fatal consequences. Co’s clearly exercise significant power over individuals in the most direct sense, controlling their well-being eg in SA the private sector is the biggest creator of employment, as opposed to the government. This supports idea that human rights obligations be regulated at co level. 2008 CO ACT AND HUMAN RIGHTS (2) Companies have more direct control over the well-being of the people than the State has. Before the Companies Act 2008 commenced the framework for companies and the realisation of human rights obligations was voluntary. CSR was non-binding. This was despite the fact that the SA Constitution in its Bill of Rights expressly provides for the direct application of fundamental rights to juristic persons. Co Act has attempted to remedy this situation eg ss 7; 76; 158; etc. Co Act expresses recognition of the constitutional imperative to bring co law within the constitutional framework eg s39(2); s8 and 8(2) S7 of the Co Act demands that HR concerns are placed at the centre of policy making within the co and be embedded in the holistic functioning of the co MY HOMEWORK FOR THE WEEK: Study the power point slides of Learning Unit 1 Make summary of p19-21 3rd ed / p20-22 4th / 5th of Davis and pp 10-13 Do the activities on Blackboard (it will help you to summarise the most important aspects of Learning Unit 1) Speedread the newspaper reports (this is just to give you a real-life in real-time overview of the process) Watch the 6 youtube clips (it will take you less than one hour) Study the power point slides Read chapter 1 in Davis Read the additional textbook extract on Blackboard (this is background to the Learning Unit) MUST DO FOR THE WEEK (1): SUMMARISE AND STUDY THE FOLLOWING: Gwanyanya “The South African Companies Act and the realisation of corporate human rights” 2015 Potchefstroom Elec LJ 3101; Katzew “Crossing the divide between the business of the corporation and the imperatives of human rights – the impact of section 7 of the Companies Act 71 of 2008” 2011 SALJ 686; Cassim “The Companies Act 2008: An overview of a few of its core provisions” 2010 SA Mercantile LJ 157; MUST DO FOR THE WEEK (2): Mongalo “An overview of company law reform in South Africa: From guidelines to the Companies Act 2008” 2010 Acta Juridica xiii; Mongalo “South Africanizing company law for a modern competitive global economy” 2004 SALJ 93; Singh v Companies and Intellectual Property Commission 2019 (5) 432 (SCA) especially 440-441 Davis Chapter 1 (read and use this to add to the power point summary). You must summarise the articles for questions of 10-15 marks. You will also be able to use the articles when answering other questions. Most of the articles are prescribed in more than one Learning Unit. Summarise what is applicable to the specific Learning Unit.