Being aware of company legislation is critical for South African business owners as constitutional acts impact the way in which businesses are handled and seen in the eyes of the law. Whether you are an entrepreneur who wishes to form a small business or a CEO of a medium-sized enterprise, remaining clued up on the ways in which government acts and organizational bodies regulate companies should be of a priority in your agenda.
Even in older instances, such as the formation of the Companies Act 71 of 2008, the laws remain relevant today and will dictate various components of one’s business. To help inform entrepreneurs and current business owners, we have compiled an extensive guide outlining the background of the Companies Act, the primary features of the Companies Act, and the aims of the Companies Act.
Background to the Companies Act
The development of the Companies Act began over five years ago, and its formation has been directly attributed to the South African Company Law for the 21st Century: Guidelines for Corporate Law Reform. This policy document developed by the Department of Trade and Industry would inspire the repeal of the Companies Act, No. 61 of 1973, and organizational bodies that would introduce the Companies Act 71 of 2008 to ensure enterprises of all sizes supported growth, employment, innovation, stability, good governance, confidence, and international competition.
The act was officially introduced in 2008 and has since received numerous comments and representations which have determined the content of the Bill which was eventually approved by the Committee and Parliament in November 2008. Due to various factors including the seal of approval by the President in 2009 as well as the fact that it could not be integrated until one year after promulgation, the Act only became public legislation in 2011.
Primary Features of the Companies Act
There are several primary features of the Companies Act that have impacted its rollout in business in recent years, with these being its modernisation and simplification.
Modernisation of the Companies Act
The Companies Act, since its formation, has been brought in line with international best practice in order to support companies operating in the international marketplace. Public companies, communications, and corporate companies have been uplifted through the modernisation of the Companies Act and it has also been harmonised with other legislation such as the Promotion of Access to Information Act (PAIA) and the Electronic Communications and Transactions (ECT) Act to uphold ideals.
Simplification of the Companies Act
In order to create a cohesive and concise Companies Act that is easier to understand and implement, it was simplified in these ways and more:
The number of sections was reduced significantly
Any person may enter into a pre-incorporation contract due to simplified rules
Companies are eligible to change certain requirements unique to their circumstances
Different types of companies are required to follow different rules
The modernisation and simplification of the Companies Act may have made it viable business legislation and may promote its success in achieving desired goals.
The Aims of the Companies Act
The Companies Act 71 of 2008 serves several functions and we have outlined them below for your convenience:
To incorporate, register, organize, and manage the formation of companies in the South African market as well as foreign companies carrying on business from within the Republic
To stipulate the relationships between companies and their shareholders or members and directors
To facilitate the effective amalgamation, mergers, and takeovers of companies in the marketplace
To support and rescue companies that are in a state of financial distress
To offer appropriate legal support to investors and third parties relevant to companies
To develop a Financial Reporting Standards Council for the proper regulation of business finances, which may be done through third parties such as MBS
The formation of the Companies Act has helped create rules and standards that serve corporate and company legislation. Companies seeking further guidance on the Companies Act may obtain professional advice from representatives of reputable companies such as MBS. The introduction of the Act may promote better business within South Africa through the implementation of clear and concise parameters. As such, the Companies Act is a critical piece of law all business owners should be aware of as it impacts certain company operations at various enterprise levels.
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Claudette Shepherd A Year Ago
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Thank you to MBS Accounting Services for assisting with my company registration. They made - what seemed like a daunting task - a streamlined, convenient and pleasant adventure. A big thanks to Dylon who offered friendly, punctual and efficient service throughout.