Companies Amendment Bill: deliberations

Meeting report

Companies Amendment Bill [B40B-2010]: deliberations
The Chairperson said that it would not be possible for the Committee to adopt the Companies Amendment Bill (the Bill) at that session. She said that it had become apparent that it was necessary to amend the principal Companies Act No 71 of 2008 (the Act). Legal advice had been sought and given on the amendments, and the context was outlined.

Mr T Harris (DA) said that his party was concerned about the principle of amending the legislation without holding public hearings on the Bill.

The Chairperson said the issue of public hearings had been discussed. She had checked on the rules and procedures. She was given the assurance that this was acceptable as all the amendments were being done in context.

Ms C Kotsi (COPE) was concerned that the Committee should avoid setting a precedent which might later be challenged, as this would undermine the process. She requested a copy of the documentation underpinning that decision.

The Chairperson reiterated that the Committee was not setting a precedent.

Ms S van der Merwe (ANC) said that as the issues outlining why the principal Act required to be amended had been fully aired in public hearings, it was not necessary to have public hearings again on the amendments themselves, which were addressing the same issues.

The Committee then turned to the document entitled “Portfolio Committee Amendments to Companies Amendment Bill: B40A-2010”, and went through the document clause by clause.

Clause 1: Item 4
Mr J Smalle (DA) asked where the definition of “director” would be found if paragraph (j) was omitted.

Mr Rory Voller, Director: Legal and Regulatory Services, Department of Trade and Industry, replied that paragraph (j) was not deleting the definition of director, but rather was dealing with the definition of a creditor.

Clause 2
Mr Harris said the Department had agreed to a liquidity test, yet it appeared that the amendment was a reversion back to the original text.

Ms Zodwa Ntuli, Deputy Director General, Department of Trade and Industry, replied that the Department had discussed the use of the words “consolidated” and “aggregate”. The use of “consolidated” implied a group whereas “aggregate” implied a company.

Mr Harris said the word “aggregate” was not sufficient.

Mr Voller said the liquidity test was done at the company level, and so “aggregate” was the appropriate word.

Clause 3:  
The Chairperson assured Mr Harris that the National Treasury had agreed and given their full assurance on the issues, and this was on record.

Clause 6
Mr Voller said that SWIFT had contacted him and assured him in writing that symbols were allowed and used. These included the seven symbols that the Department of Trade and Industry (dti) proposed to use.

New clause 14 amending Section 22 of the Act  
The Chairperson noted that a new clause 14 was proposed by the Committee, amending Section 22 of the Act, and dealing with trading under insolvent circumstances.

Mr Johan Strydom, Legal Advisor, Department of Trade and Industry, said the clause related to restrictions on trading while a company was technically or commercially insolvent. It had been argued that a company should not be penalised for being technically insolvent, when it could still conduct business and pay its debts. There had been an amendment to the proposal set out in Document [C]. The first subsection now dealt with trading in a reckless or grossly negligent manner. The second subsection referred to trading while the company was insolvent, but he pointed out that if a company could satisfy the Company Commission that it was, in the normal course of business, able to pay its debts, then the investigation into the trading would not proceed.

The Chairperson said that there had been a difference of opinion between the Department of Trade and Industry (dti or the Department) and the Committee’s independent consultant, Ms Kathy Idensohn. The Committee would consult further with its advisor and would then take a final position.

Mr B Radebe (ANC) said he was comfortable with the Department’s position.

New Clauses: Clause 21 amending Section 31 of the Act, and Clause 27, amending Section 39 of the Act
The Chairperson drew attention to the new clauses 21 and 27, in Document [D].

The Chairperson noted that the originally numbered Clause 29 had therefore been renumbered as Clause 32 in Document [D].

Originally numbered Clause 43: renumbered as Clause 46 in Document [D]
Mr Harris said this clause removed the prior restriction that a person convicted of a certain kind of offence would be disqualified from serving as a company director. He thought that the wording of the 1973 Act was better and should be reproduced in these amendments.

Mr Radebe said that the current wording took cognisance of the principle that people should not be “permanently punished” for their misdemeanours. He indicated that the conviction would result in the person being banned from taking a directorship for a period of five years. He thought that this was sufficient.

The Chairperson said that the wording had been drafted after lengthy discussion, and that Members generally felt that the amendments provided sufficient safeguards. She noted that Mr Harris could object to it when it came to adoption of the Bill and Committee report.

New clause amending Section 99 of the Act
The Chairperson noted that clause 61 in Document [D] was amending Section 99 of the Act.

Clause 65
The Chairperson noted that there was a need to correct the spelling mistaken in Document [C], to read “fairly valued”.

Original Clause 80
The Chairperson indicated that the originally numbered Clause 80 now appeared as Clause 84 in Document [D].

Original Clause 83
The Chairperson pointed out that the clause originally numbered as Clause 83 now appeared as Clause 87 in Document [D]. She also noted a slight change in wording.

Mr Strydom explained that the Department had agreed to Ms Idensohn’s proposal regarding (originally numbered) Clause 83, at item 2, and had also adopted her suggestion on item 4. The dti, when discussing the matter, had come to the conclusion that this should be limited to specific cases, and the wording chosen took account of the legal consequences.

Mr Smalle thought that the Committee had already agreed to follow Ms Idensohn’s wording. However, in light of this explanation, he would be happy to agree to the Department’s proposals.

New Clauses
The Chairperson drew attention to a new clause amending section 140 of the Act, which appeared as clause 90 in Document [D].

She further pointed out that clause 91 in Document [D] was another new clause, amending section 141 of the Act.

A further new clause, amending section 169 of the Act, appeared as clause 107 in Document [D].

Original Clause 86
The Chairperson indicated that the originally-numbered clause 86 was reflected as clause 92 in Document [D].

Clause 113
The Chairperson pointed out that the Committee had rejected the original clause 113, relating to voiding agreements. Instead, the matter was dealt with by a new clause that amended section 218 of the Act, reflected as clause 120 in Document [D].

Clause 121
The Chairperson pointed out that clause 121 of Document [D] dealt with the implementation date of the Act.

Mr Strydom said that the original clause in the 2008 Act dealing with date of implementation had fallen away since the period had already passed.

He explained that the effect of the second subsection was that if the President were to proclaim that the Act would be implemented on 1 April 2011, then the implementation of the symbols must be done within the next three years, up to 1 April 2014.

Original Clause 118
The Chairperson noted that the originally-numbered clause 118 now appeared as clause 126 in Document [D].

Long title
The Chairperson noted an additional insertion to the long title of the Bill, which explained the reasons for the amendments more fully. The long title appeared on page 2 of Document [D].

Mr Harris said that there had been a lot of changes made during the process, as evidenced by a comparison of the original Bill with the current version. He was concerned that there had not been enough time for business to absorb the changes in the proposals.

The Chairperson said that the amendments were requested following a study of the 2008 legislation. The dti had engaged with the concerns and reservations of business as expressed on the Act. The Bill was practical and implementable, and had taken account of more than 90% of the issues raised.

Mr Harris asked about getting more time for a possible redrafted proposal for section 4 of the Act.

The Chairperson said he should put his request in writing.

Mr Lionel October, Acting Director General, Department of Trade and Industry, said that the dti was convinced that enough time had been allocated to the process. The date of 1 April 2011 had been in the public domain for some time. He was persuaded that business was ready to implement the Act. He added that nothing in the amendments would affect the day-to-day operations of businesses. The Department’s own systems were in place and there was enough time for symbols to be introduced. He was satisfied that no adverse implications would be suffered from implementing this Act on 1 April.

Ms van der Merwe added that the Committee had engaged in an exhaustive and transparent process, and that everyone had agreed that this was desirable, if not urgent. She agreed that there did not seem to be a need to change the implementation date.

Ms Kotsi said that the stakeholders’ concerns had been met. She wanted to see the Bill implemented as soon as possible.

The meeting was adjourned.