More time allowed to debate Companies Bill

The initial deadline for public comment was March 19. However, Parliament will also provide further opportunities for public participation before the Bill is passed into law, probably some time next year. Mpahlwa said: ‘This reform is long overdue. It represents the first significant review of SA company law in over 30 years.’ He said the objectives of the reform were to reduce the cost of registering and maintaining a company and the regulatory burden and compliance costs for small and medium-sized businesses. Full Business Day report

The Bill will make owners of small companies change the way they do business. According to another Business Day report, it makes provision for a 12-year period for the phasing out of the Close Corporation Act. If the Bill is promulgated into law, there will be fewer disclosure and transparency requirements imposed on small businesses. These businesses will no longer be required to prepare financial statements. The objective of the new law is to recognise the changes that have taken place in the SA economy since 1973 and to update the existing company law in line with international standards. Phillip Austin, a partner in audit and accounting at Deloitte, says close corporations will be retained for a period of at least 10 years as a parallel form of corporation. After eight years, the Trade and Industry Minister is required to complete a study to determine whether to retain this form of entity as an available choice. ‘So the close corporation form is with us for a good while to come.’ Nicholas van Wyk, technical executive at the SA Institute of Professional Accountants, says the changes will be far reaching. More than a million registered close corporations will have to convert to closely held companies or widely held companies. Full Business Day report

The Bill’s proposed new business rescue regime will replace the judicial management process. SA did not have a business rescue system, Mpahlwa is quoted as saying by Business Report. He added: ‘We move too quickly to liquidate companies, partly because the current company legislation is too creditor oriented.’ The new Bill recognises the interests of shareholders, creditors and employees and provides for their participation in the development and approval of a business rescue plan. The Bill proposes to protect the interests of workers by recognising them as creditors of the company with a voting interest to the extent of any unpaid remuneration. It requires consultation with them in the development of the rescue plan and gives workers the right to buy out any dissenting creditor opposing a rescue plan. Full report in Business Report