The Greatly Debated Companies Amendment Bill Signed Into Law
Companies Act Second Amendment Bill
October 23, 2023
Corporate Commercial Law
The Companies Second Amendment Bill, 2023 which was introduced by Government Gazette No. 49116 published in August 2023 by the Minister of Trade, Industry and Competition of South Africa, sets out to amend the Companies Act 71 of 2008, following the recommendations received from the Zondo Commission of Enquiry into State Capture.
One of the Commission’s notable recommendations was to extend the time bar provided for in section 162 (2) and (3) of the Companies Act, where provision is made for an application to a court for an order declaring a person delinquent or to be placed under probation.
Section 162(2) currently states that:
“A company, a shareholder, director, company secretary or prescribed officer of a company, a registered trade union that represents employees of the company or another representative of the employees of a company may apply to a court for an order declaring a person delinquent or be placed under probation if-
(a) the person is a director of that company or, within the 24 months immediately preceding the application, was a director of that company; and
(b) any of the circumstances contemplated in— (i) subsection (5)(a) to (c) apply, in the case of an application for a declaration of delinquency; or (ii) subsections (7)(a) and (8) apply, in the case of an application for probation.’’
Section 162(3) currently provides as follows:
“the Commission, or the Panel may apply to a court for an order declaring a person delinquent or under probation if—
(a) the person is a director of a company or, within the 24 months immediately preceding the application, was a director of a company; and
(b) any of the circumstances contemplated in— (i) subsection 5 apply, in the case of an application for a declaration of delinquency; or (ii) subsections (7) and (8) apply, in the case of an application for probation.’’
As mentioned above, the current positions in both subsections (2) and (3) of section 162 of the Companies Act, an application in terms of those sections may be brought if the person concerned is a director of that company, or within the 24 months immediately preceding the application, was a director of that company.
The recommendation emanating from the Zondo Commission is that this time bar should be extended to 60 months (5 years), in order to provide for an application to be made in terms of section 162 of the Companies Act even after the two-year period provided for, if good cause is shown.
In addition to the abovementioned proposed amendment, clause 1 of the Companies Second Amendment Bill, 2023 proposes a time bar amendment to section 77(7) of the Companies Act which deals specifically with the liability of directors and breaches of their fiduciary duties.
Section 77(7) currently provides that:
“Proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of this section may not be commenced more than three years after the act or omission that give rise to that liability.’’
The Companies Second Amendment Bill, 2023 now aims to provide courts with the authority to extend the time bar of three years in section 77(7) if good cause is shown and on the basis that such extended period may also cover acts or omissions that occurred during the period before the extension.
This amendment seeks to hold those who have been involved in malfeasance accountable and notwithstanding the passage of time. To this end, it is worth noting that the proposed amendments will have retrospective effect.
Post Tags:
Share This :
Get in touch
To reach out to MVR Attorneys, please contact our experienced team. We pride ourselves on taking care of our clients.
