Companies Amendment Bills: deliberations
Trade, Industry and Competition
07 November 2023
Chairperson: Ms J Hermans (ANC)
Meeting Summary
Presentation on Companies Second Amendment Bill (B26- 2003)- redraft, Presentation of the Companies Amendment Bill (B27 -2003) and Duty to prepare and present company’s renumeration policy and remuneration report (awaited documents)
The Portfolio Committee on Trade, Industry and Competition met on a virtual platform for a briefing by the parliamentary Legal advisor and the Department of Trade, Industry and Competition on the Companies Amendment Bill 2023 and Companies Second Amendment Bill 2023.
The Legal Advisor presented a re-draft of the Companies Second Amendment Bill which contained the Amendment of section 77 of Act 71 of 2008 and the Amendment of section 162 of Act 71 of 2008. The Bill amended section 77 of the Act which dealt with the liability of directors and prescribed officers for breaching their fiduciary duties as well as breaching certain statutory duties. In the current Act, one could not claim such damages after a period of three years. Following the recommendation from the Zondo Commission that the period of three years be extended on good cause shown and upon application to the court to enable consequence management in such cases, even if the acts or omissions were discovered at a later period. The Bill made it clear that such actions of directors did not fall under the Prescriptions Act. Section 162 sought to amend two subsections that dealt with declaring a person delinquent or under probation. The time bars would be increased from the original 24 months to 60 months. A director could be declared delinquent, even if he were no longer a director and the actions occurred more than 60 months previously, provided that a court extended the period on good cause shown, following an application. So, a director could be declared delinquent, even if he were no longer a director. The legislation made it very clear that it could apply retrospectively. The A-list of the Second Amendment Bill would be prepared where the retrospectivity matter would be presented to the Committee for an in-principle agreement on the clauses at the next meeting.
The Committee went through the Companies Amendment Bill clause-by-clause, finding agreement with all proposed changes, a number of which were merely consequential changes. There were two constitutional issues on which the Chairperson had requested that legal opinion be sought. The Department was in possession of an external legal opinion on a previous draft version of the Bill which had indicated that there were enough reasons for the disclosure of the annual financial statements to be considered constitutional. However, the Department was in the process of securing another external legal opinion as a matter of urgency. The Committee proceeded on the basis that those two clauses were indeed constitutional as they could easily be deleted should they not pass constitutional muster. They were they isolated and did not have consequential consequences for other clauses in the Bill.
The Committee unanimously gave in-principle agreement to all proposed changes. One Member queried the potential for conflict of interest in the composition of the social and ethics committee and abstained from supporting the clause. The Committee requested Legal Services to prepare the A-list for the next meeting.
Meeting report
Opening Remarks
The Chairperson indicated the purpose of the meeting. On Wednesday, 1 November 2023, the Committee deliberated on the DTIC's matrix relating to submissions made on the Bills. Members sought clarity on specific clauses and requested the DTIC and the Parliamentary Legal Adviser to submit a possible wording to resolve some of the concerns. The Chairperson had submitted a request to the Department of Trade, Industry, and Competition (DTIC) to obtain a legal opinion on the constitutionality of the proposed Amendment to section 26 of the Act, clause four in the Bill, which sought to give the right to any person to inspect and copy the Annual Financial Statements of a private company, a non-profit company and a personal liability company above a certain threshold, the right of access to information and the right to privacy. Secondly, to obtain legal advice on the constitutionality of the proposed Amendment to section 30 of the Act, i.e. clause five, which provided for the naming of directors and prescribed officers in relation to their remuneration, specifically the right of access to information and the right to privacy. The Committee had, at the last meeting, resolved to take the Bills to their respective caucuses to get a clear party position on them.
She stated that the Committee needed to consider several matters:
- the redraft with respect to the Companies Second Amendment Bill as it related to the retrospective application of clauses one and two and if they should be retained in the Bill
-the Committee had to give clear instructions to the DTIC and the parliamentary Legal Advisor to prepare an A-Bill and a B-Bill for in principle consideration at its next meeting
-with respect to the Companies Amendment Bill, the Committee was to give a clear in principle position on each clause where concerns of clarity were raised at the previous meeting and the DTIC and the parliamentary Legal Advisor would provide the clarity required
-to consider any matters beyond the scope of the Bill; if none, the Legal Advisor and the DTIC would brief the Committee during the following quarter on its intention to incorporate those matters in a further Amendment to the Act for the Seventh Parliament
The Chairperson invited the Legal Advisor to brief the Committee.
Companies Second Amendment Bill (B27-2023) Redraft
(Refer to: Amendment of Section 77 of Act 71 of 2008)
Ms Fatima Ebrahim, Parliamentary Legal Advisor, Constitutional and Legal Services Office, presented a new draft of both of the clauses in the Companies Second Amendment Bill. The Bill amended section 77 of the Act which dealt with the liability of directors and prescribed officers for breaching their fiduciary duties as well as breaching certain statutory duties. As it appeared in the Act, one could not claim such damages after a period of three years. The intention was to allow the court, on good cause, to extend that period of three years and to make the legislation clearer. Legal Services had not touched the content: proceedings should be brought for loss or damages within the three years of the actual matter occurring, but proceedings could be brought on an extended timeframe longer than three years, if good cause was shown and upon application to the court. The proceedings could also be brought in respect of Acts or omissions that occurred prior to the Amendment. So in that case, if something happened in the three years prior to the Amendment coming into force, one would not simply be able to proceed but would have to apply to the court. It also made it very clear that the section was not subject to the Prescription Act, which was a very old 1969 Act that dealt with the prescription of various matters, including claims for debt so that a director could not raise a defence of prescription because the original three year period would have been in line with the Prescription Act, which says one needed to claim within three years of an act or omission occurred. Legal Services had removed subsection seven in the principal Act, replacing it with a new subsection seven. The court could, on good cause shown, extend the period referred to in paragraph (a) regardless of whether such period had expired or not.
Ms Ebrahim indicated that the citation of the Act number was blank and would only be inserted once the Act was passed. She added that there was a slight error in (c) that should say, “the period referred to in paragraph b”. One could approach the court whether the period had expired or not. So in other words, even if a company or a person were only to discover after three years that there had been an act or omission, somebody could be held accountable and one would still be able to approach the court.
She said that section 162 sought to amend two subsections that dealt with declaring a person delinquent or under probation. That came from recommendations in the Zondo Commission and the courts. The Department explained that the Commission had indicated that the time bars should be increased from the original 24 months to 60 months or five years. The Department was also of the view that it would apply if a person were still a director, even if the circumstances giving rise to the matter had happened in the last 60 months. But the exception would be that the director could be declared delinquent, even if he were no longer a director and it was more than 60 months previously, provided that a court extended the period on good cause shown, following an application. So, a director could be delinquent, even if he were no longer a director, and the circumstances applied. The legislation made it very clear that it could apply retrospectively.
If the Committee were happy with the re-draft, it would be put this in the form of an A-list to show exactly where the introduced Bill had been amended. Based on that A-list, Legal Services would draft the B-Bill.
Discussion
Mr M Monakedi (ANC) expressed his support for the changes to the Bill. He aligned himself with the presentation. Those two sections were empowering enough for action to be taken against directors or prescribed officers where necessary. The way the clauses had been drafted made them very clear and very specific.
Mr F Mulder (FF+) said that silence meant that people were in agreement. He also stated his desire for the Committee to meet in person for such an important meeting.
The Chairperson stated that she had seen and understood his request but that no venues had been available until late in November 2023. She requested the Committee Secretary to explain the processes to be followed in relation to the Bill.
The Committee Secretary explained that voting on clauses would only take place when the A and B Bills were available to the Committee. next week, we will be able to formally consider them in that way we will go out for more consideration. The committee had to give instructions to Legal Services and the Department to complete the A and B Bills so that the Committee could look at it and take an in principle position on the matter.
The Chairperson stated that the Committee agreed with the proposal from Ms Ebrahim.
Ms Ebrahim explained that what would be presented first was just a list and once members were satisfied and gave the go-ahead, the Bill went to Creda (the company that prints the gazettes) to put the B-Bill in the proper format. That would be presented the following week.
The Secretary clarified the way forward. The previous week, a number of issues were raised by Members. The Department would provide some clarity and maybe address those issues. The Committee could then go through clause by clause and indicate, following discussion where need be, whether each Amendment and clause was approved in principle.
Clause-by-clause discussion on the Companies Amendment Bill (B27-2023)
Ms Ebrahim stated that she would lead the discussion on the Bill.
The first thing was to deal with the two constitutional issues, mentioned at the start of the meeting, on which legal opinion was being sought. The Department had confirmed that it was in possession of an external legal opinion on a previous draft version of the Bill. That legal opinion had indicated that there were enough reasons for the disclosure of the annual financial statements to be considered constitutional. Dr Masotja, Deputy Director-General for Consumer and Corporate Regulation at the Department of Trade, Industry and Competition (DTIC), had indicated that the Department was in the process of securing another external legal opinion and should receive it in the next two weeks. That did not need to delay processes. She advised that the Committee proceed on the basis that those two clauses were indeed constitutional. If the Committee took a decision to the contrary, Legal Services could delete the clauses because they were isolated and did not have consequential consequences for other clauses in the Bill.
Clause 1 - Section 1
Ms Ebrahim stated that the purpose of clause one was to insert definitions of the B-BBEE Act and the Commission as well as the definition of Treasury regulations. As indicated to the Committee the previous week, from a drafting perspective, the definition of Treasury regulations should be deleted because where reference was made to a principal Act, it would, by default, include regulations; the Department had agreed to that. The second issue, raised by the public, was that the Committee should consider including a definition of the term “debentures”. She had looked at various other legislation that used the term “debentures” and could confirm that the term was not defined in other Acts as it was considered a term that was commonly understood. She maintained her view that it was not necessarily to add the definition; the Department was of the same view that the definition should not be added. She awaited instructions from the Committee.
Mr S Mbuyane (ANC) did not know if the Members could vote on the matter as they were waiting for the final draft of the Bill.
Ms Ebrahim explained that Legal Services required agreement with the proposed deletion and omission or further instruction for amending the Bill.
Resolution: Deletion of Treasury Regulations and omission of “debentures”.
Clause 2 – Section 16
The section was being amended by providing that a Notice of Amendment of a company's Memorandum of Incorporation took effect 10 business days after receipt of the notice by the Commission. If, after the expiry of the 10 business days, the Commission had not endorsed the notice, or had failed to deliver a rejection of the notice, it would then come into force on the date set out in that notice or on the date on which it was rejected, whichever would be earlier. There were quite a few public submissions on the issue of whether the term ‘receipt” should be changed to “filing”. It was about being able to know what that date was in order to calculate the 10-day period that the section referred to. Having consulted with the Department as well as the Commission extensively on the issue, her understanding was that when the notice was received, an automated email would acknowledge receipt, and then the company would receive a formal notification with a number that would be assigned to the particular request and it would be from that date that the calculation would start. There was a concern that the Commission might not necessarily have received something despite the company having said that it had sent it. However, the Commission was fairly confident that its processes were strong enough and firm enough that the receipt notices would be sent. The Commission had pushed for that, from a practical perspective, because it would make things easier for them. CLSO had no objection to the term “receipt”. The department was willing to accept either term but receipt was favoured.
Mr W Thring (ACDP) was in agreement with the proposal.
Mr Mbuyane agreed to the retention of “receipt”.
Mr Mulder was also in agreement.
Ms Ebrahim stated that Legal Services was going to consider re-drafting to see if they could make it easier to read.
Clause 3 – section 25
The clause required the Commission to publish the notice filed by the company in a prescribed manner. There were no proposed changes.
The Members were in agreement with the drafting change.
Clause 4 – section 26
The clause dealt with any person having the right to inspect the Annual Financial Statements of companies above a certain threshold and was subject to a legal opinion so she was not proposing any changes, other than a drafting issue that arose in public submissions. The word “mentioned” appeared twice in the section; it was proposed to amend it to say “contemplated” because that was a term that was used in the rest of the principal Act.
There were two other drafting issues: (d) “no more than the prescribed maximum charges” was redundant as there would be a standard fee. In (g) to replace “providing the opportunity to inspect or copy the register or the records concerned to the person making such request” with “the requester”.
The Members were in agreement with the drafting changes.
Clause 5 – section 30
The naming of the directors or prescribed officers was subject to the legal opinion about the constitutionality of the matter. It also provided that the remuneration policy and the background statement of the report would not be made subject to an audit. In addition, the clause referred to a director or prescribed officer but it could be both, so to avoid confusion, the word “or” would become “and”. Replace “and such individual” with “who”.
Mr Mbuyane asked what ruling would apply in the interim should the remuneration policy not be approved.
The Chairperson stated that the point was addressed in the following section.
The Committee approved the change.
Clause 6 – inserted after section 30
The clause had aroused much public reaction and needed redrafting because, having regard to the submissions, the Minister had proposed that the consequences for directors who did not obtain approval for the remuneration report would be, effectively, given two strikes and not just one strike. He also suggested that there should be a reduction in the time period for which a person cannot serve on the remuneration committee. That was a policy change.
There was quite a bit of re-drafting to be done based on those changes. 30A (i) and (ii) were tautologous and that made it confusing.
Ms Ebrahim suggested that the DTIC address the proposed policy changes.
Dr Masotja presented the case for changing the policy. The provision received a lot of submissions and many comments. A few stakeholders were concerned with the voting in terms of the decision around the remuneration policy and the implementation report. The concerns were that their votes on both were binding in terms of their ordinary resolutions that had to be tabled at the Annual General Meeting of the company. That was the main one. Another category of comments was about the rights of shareholders to be able to articulate on the issues in terms of their reservations. Stakeholders were also of the view that shareholders had greater powers and that affected the power of the directors on the board who made decisions and who were actively involved on a day-to-day basis. They should be able to speak when they have dissenting views. And there were suggestions that the Bill be amended to make it a requirement that when a shareholder had a dissenting view, or where they did not approve a particular report or policy, they should be required to explain why. However, there were difficulties in getting shareholders to indicate where they were not happy. There was a group of comments around the nature of the remuneration. Who approved changes to the policy? There seemed to be a lack of clarity around the consequences, i.e. the one-strike rule was not approved; the standing down of directors and the implications of that in terms of the skill sets that were required on a remuneration committee were not clarified.
Dr Masotja said that other questions related to what would happen if the remuneration policy was not approved. Did one use the previous policy in the vacuum created? Taking into account all the concerns that were raised and the drafting concerns about repetition and conflict of certain terminologies, the Department then recommended that in recording progress in public companies or state-owned companies, the remuneration report had to include a policy for directors and prescribed officers for presentation and approval at the Annual General Meeting. It had to comprise a background statement, a remuneration policy and implementation report, and as well as categories of remuneration from the total remuneration, which included salary, benefits, employer contributions to benefit funds and others, as well as the total for the highest remuneration in the company. It had to present the total remuneration for employees who were under the Labour Relations Act of 1995, taking into account the lowest total remuneration in the company, and show various ratios, for example, the average remuneration of employees, the median, the pay gap of the 5% highest paid employees and the total remuneration of the bottom 5% of the lowest paid employees of the company, etc.
She added that the next category was specific to the remuneration policy in terms of what happened regarding the policy. At each AGM, the remuneration policy had to be approved by shareholders by an ordinary resolution, and if such approval was obtained, it would remain in force for three years. If there were any material changes to be made, then they would have to be approved by shareholders by an ordinary resolution, before the policy could change. If it were not approved, it had to be presented at the next meeting, or at the shareholders meeting until it was approved. In such an interim, the previous policy should prevail, so there should not be a vacuum. Many companies already had remuneration policies because the King Four Code recommended it while the JSE listing requirements required such a policy. The only difference was that those were voluntary measures. Now they would be regulated in terms of the Companies Act and its regulations.
As to the report, it had to be approved by an ordinary resolution separately. Both of them held their own weight in terms of the approval that was required for them as separate documents. Most of the comments suggested that the consequences were very harsh. They had implications for skills, competent remuneration, committees, professionals would be disrupted, etc. Many submissions called for the two-strike approach, where there could be consequences, but not after just one lack of approval.
If the ordinary resolution was not approved, Dr Masotja explained that in the next meeting, the remuneration committee had to present an explanation on the matter in which the shareholders’ concerns had been taken into account and, as from the date of the first annual general meeting at which the report was not approved by the ordinary resolution of shareholders, the non-executive directors who served on the committee responsible, be required to stand down for re-election as directors at the following annual general meeting. If at that meeting in the preceding year, the report was also not approved by an ordinary resolution, the non-executive directors who served would continue to serve as directors but would not be eligible to serve as directors on the remuneration committee for a period of two years. At the first strike, there was a consequence: in the following year, one’s name had to go forward again for re-election. If the Remco report was again rejected in the second year, the members would be required to stand down for a period of two years, but the provisions affecting Remco members would only apply to those members who had served a full year or more at the time that the vote was taken.
Ms Ebrahim stated that she had to do some re-drafting as the clause was confusing in places and the total remuneration, for example, was a little bit confusing, but the drafters would tighten that up and perhaps add a definition for the purposes of the section. It wasn't clear why the remuneration report had to be dealt with separately to the policy because it seemed to create confusion that they were voted on separately, but she had heard the Department and would make it as clear as possible.
Members agreed to the re-drafting of the consequences.
Clause 7- section 33
The clause required public companies, state-owned companies, and companies with a public interest score above a certain threshold to file their annual returns and a copy of the company's latest financial statements.
There was only a drafting concern which was to simplify it to say that “it must be in the manner and form as prescribed”.
Mr Monakedi agreed with the proposed action.
Clause 8 - section 38A
The clause proposed the insertion of a new section 38A, which would empower a court to validate the creation, allotment, or issue of shares that would otherwise be invalid. There were no proposed changes.
Members were in agreement.
Clause 9 - section 40
The section referred to a trusted stakeholder and also gave some details about the nature of the stakeholder agreement. The matter had been discussed previously with the Committee that the word “trusted” be substituted with the words “such as an independent” third party to remove the confusion between trust deeds and the role of an independent person in overseeing a particular agreement. There was also agreement from the Department that the agreement should be in writing. The drafters would need to say a stakeholder agreement meant a written contract and would remove the terms “arrangement” or “understanding” because an arrangement or understanding would not have to be in writing. Those were the two proposed changes.
Mr Thring asked when, at what stage, would the changes be inserted to make it very clear that the contract with the stakeholder agreement had to be in writing.
Ms Ebrahim was unsure of the question but stated that when the A-list was drafted, the necessary changes would be included to show that an agreement had to be a written contract.
Mr Thring was satisfied that the Committee would vote on the clause only once it stipulated the agreement was a written document.
Clause 10 – section 45
The Amendment prohibited the giving of financial assistance by a company to its holding company and its subsidiaries. Many stakeholders recommended incorporating financial support between companies and foreign subsidiaries, but international subsidiaries adhered to the laws of the country in which they were based and could not be included in the legislation. There were no proposed changes by the Legal Advisor.
The Committee concurred.
Clause 11 - section 48
This clause related to share buyback and the only comment submitted was based on a misreading of the Bill. No changes were recommended.
The Committee concurred
Clause 12 - section 61
The clause provided for the appointment of the social and ethics committee at the Annual General Meeting and also that the social and ethics committee report and remuneration report had to be presented at the AGM. There were no proposed changes to that clause.
The Chairperson noted that the Committee accepted the clause.
Clause 13 – section 72
The clause provided for an amendment to section 72 of the Act by providing for public companies or state-owned entities and categories of companies that were required to appoint a social and ethics committee but who wished to apply for an exemption from that requirement. An application could be lodged with the Companies Tribunal. The clause also listed the requirements for granting such an extension and provided for the appointment and composition of that social and ethics committee, the manner in which a vacancy would be filled and the presentation at the AGM or shareholders meeting of their social and ethics committee.
There were some drafting issues that could be simplified. Paragraph (b) (ii) was a little confusing. It was about moving “consideration of public interest” so there was confusion about when the test as to whether companies should have an ethics committee or not had to be applied. Other drafting issues included subsection B(a), following section 6A, where it said: “and the existing social and ethics committee will perform …” to be replaced by “which will perform...” Instances of tautology would be changed.
Ms Ebrahim stated that the only matter of substance was raised by the Minister. The Bill stated that only non-executive directors could sit on the social and ethics committee, but following public submissions, there was agreement that should be changed and that the majority of members had to be directors who were not involved in day-to-day management because there was a suggestion that there would be some benefit in having some directors that were involved in day-to-day management on that particular committee. The Portfolio Committee would have to indicate whether it was happy with that particular change.
The Chairperson said that the Committee agreed to change from “all members of the committee must be non-executive directors” to “the majority of members of the committee had to be non-executive directors”.
Mr Thring referred to his experience with some of the matters, particularly when it came to social and ethics committees, where they dealt with issues such as where the company was bought into disrepute and a director might have acted improperly and would need to appear before the social and ethics committee. One would not want a conflict of interest where a director, or directors, had already been involved in a particular case with that director, perhaps taking a particular side or position, and then have to deal with that director in the ethics committee. Mr Thring’s challenge was how to avoid such a conflict of interest. How did one avoid a conflict of interest in such a case?
Ms Ebrahim stated that it was a policy issue and handed over to Dr Masotja.
Dr Masotja said that the issue of conflict of interest was very important but it was not always easy to establish because it was based on many factors, for example, who was involved, what the level of interest was, etc. The policy thinking was that if a mixture of directors was involved, some of whom were not involved in the day-to-day management, then there would be some objectivity. So the question was quite a difficult one to answer, but the composition would create an element of objectivity and there would be various views and expertise in the committee to deal with issues arising from a conflict of interest.
Prof Michael Katz, Chairperson of the Specialist Committee on Company Law, made two observations. Before addressing Mr Thring’s concern about conflict, he noted that Dr Masotja had addressed the reason for including executive directors. A lot of the submissions from the public requested that their executive directors could also serve on the social and ethics committee as those people knew a lot about the company and as the remit of the social and ethics committee was wide, it was going to have to know a lot about the workings of the company, its policies and virtually everything. So it made sense to have executives as part of the composition, subject only to the majority being non-executive directors.
Regarding Mr Thring’s concern about conflict, Prof Katz pointed out that the function of a social and ethics committee was not adjudicatory; the committee did not deal with conflicts. It was a reporting and advising committee, so there could never be a conflict or need to adjudicate. That was not the remit of the social and ethics committee.
Mr Mbuyane agreed that the clause should indicate that the majority of the committee should be non-executive directors.
Mr Thring suggested that maybe Professor Katz had misunderstood him. He did indicate that the social and ethics committee would be dealing with conflict. His concern was when a member of that committee, a director, might be in a position of compromise or be conflicted in terms of a particular position that he or she should take, not that the committee would actually deal with conflict.
Mr Thring indicated that he would abstain from supporting the clause at that stage.
The Chairperson noted Mr Thring’s abstention and indicated that the majority of the Committee was in favour of the amendment to clause 13.
Ms Ebrahim noted a drafting issue in line 31 paragraph (c)(b) the word “not” had been inadvertently omitted and would be added. Further on in the clause, in line 44, the Bill referred to the need to “appoint its first members”. That was unnecessary because when a committee was constituted, by implication, the members were appointed.
Clause 14 - section 90
The clause determined that the appointment of an auditor should take place annually at the shareholders' meeting. It also reduced from five years to two years the cooling off period arising from an auditor’s involvement in aspects of the company. There were no proposed changes unless Members had input on the reduction of the time period from five years to two years.
Mr Monakedi agreed on behalf of Members, with the clause as it stood, reducing the cooling-off period to two years.
Clause 15 – section 95
The Bill referred to the purchase of shares in a company by the employees' share scheme. There were no proposed changes to the clause.
The Committee agreed.
Clause 16 – section 118
The clause provided a new definition of a private company for the jurisdiction of the take-over regulation panel over private companies. It provided that such a private company had to have 10 or more shareholders with direct or indirect shareholding in the company and meet or exceed the financial threshold of annual turnover or asset value, which would be prescribed by the Minister in consultation with the panel. Public submissions indicated that the term “indirect” was vague and the Department proposed, after consulting the panel, that an “indirect” company be changed to a company that “has 10 or more holders of securities in the company”.
Dr Masotja provided the Department’s point of view. She said that DTIC had noted the public submissions on the need to define indirect shareholders. The DTIC had consulted the takeover regulation panel which had proposed the wording. Even though the Department understood that there was a concern that it had to be defined, the Department still held the view that it was similar to the way that the DTIC had dealt with the issue of debenture. It was a commonly known term and used in practice. The DTIC had checked some of the public-listed companies’ records. There was referencing on the records to the indirect benefit. So, even though there had been comments to say it had to be defined, that particular term did not have to be defined. A person who held shares in a company that was direct could be a beneficial interest-holder. Then there was also the other side where there were funds in a trust and through that trust, they could also have shares in the company. So that was an example of indirect shareholding through a trust.
She said the DTIC would recommend retaining the provision. It had noted the comments of the takeover regulation panel that said both forms of shareholdings had to be retained in the provision, but the main emphasis had to be on shareholding. So the DTIC still recommends retaining it in the provision without necessarily defining it.
Prof Katz offered a practical example. The jurisdiction of the takeover regulation panel (TRP) required at least 10 shareholders. Assuming there was a group of people who did not want the TRP to regulate them, they would form a company, say three of them, and instead of each of them owning directly into the target company, which was to be regulated by the TRP, they formed a vehicle, a trust, or a company for the three of them and so there were fewer than 10 shareholders. In that way, parties could construct a mechanism to deprive the takeover regulation panel of jurisdiction. It was to prevent people from constructing a transaction to avoid jurisdiction by the TRP, so one needed the term “indirect”.
On the question of the definition, Prof Katz said the term “indirect shareholding” was used quite often in legislation for beneficial ownership; it was a well-known term and it really did not require a definition. In sum, the motive was to prevent people from constructing a transaction to avoid jurisdiction; the lack of a need to define was the second leg of the Department’s submission.
Ms Ebrahim said that Members would have to consider whether that was sufficient.
The Committee was in agreement with the retention of “indirect”.
Mr Monakedi, Mr Mbuyane and Ms R Moatshe (ANC) individually agreed.
Clause 17- section 135
The clause provided that any amounts due to the landlord by a company under business rescue in terms of a contract with the landlord that had paid to any third party during the business rescue proceedings, the cost of public utility services, including rates, electricity, water, sanitation and sewer charges, would be regarded as post-commencement financing with the appropriate ranking of preferences arising from that, would be created preferences. There were some public submissions relating to that particular clause which Dr Masotja had discussed with the Committee the previous week, but there were no proposals from the legal side or from the Department to make any changes.
The Committee was in agreement.
Clause 18 – section 160
The clause sought to amend section 160 of the principal Act, and it stipulated that where the Companies Tribunal issued an administration order for a company to comply with, it had to stipulate the date of that compliance before the applicant could approach the Commission to change its name. There were no proposed changes to the clause.
The Committee accepted clause 18 in principle.
Clause 19 - section
Clause 19 sought to amend section 166 of the Act by providing that, if the Tribunal had issued a certificate stating that a mediation process had failed, the affected person might refer the matter for arbitration.
Ms Ebrahim noted that there was a typing error in line 47. The Committee was alerted to it the previous week: the letter “b” appeared instead of “by”.
From a policy perspective, she had raised an issue with the Department: the clause stated that when a mediator had failed in the mediation and was then appointed to arbitrate, the parties could object, in which case that person would need to be replaced. She suggested a change: “that the person who presided over that failed arbitration process would not be the same person that then presided over an arbitration’’. But the Department was of the view that the clause was fine, as it stood. That was a policy issue, not a legal issue and her intention had been to avoid unnecessary applications. Ms Ebrahim had no further comments on that particular clause.
Mr Mbuyane stated that the Committee was in agreement.
Clause 20 – section 167
The only change was a consequential amendment to delete the obsolete provision in section 167(1).
Agreed.
Clause 21- section 194
The amendment was the insertion of a new section 1A which conferred certain powers on the chairperson of the Competition Tribunal to appoint a Chief Operating Officer and the responsibilities of such a person.
In line 53, it was stated that: (e) The Minister must, in consultation with the Minister of Finance, determine
the remuneration, allowances, benefits, and conditions of appointment of—
(i) members of the Tribunal; and
(ii) the Chief Operating Officer.’’.
Ms Ebrahim had a question for the Department because “in consultation” meant that the Minister would require the approval of the Minister of Finance to determine the remuneration, etc. of the members of the Tribunal and the COO. She explained that “after consultation” would mean that the Minister made the final decision. She requested that the Department confirm whether or not the wording should be “in consultation”.
Dr Masotja explained that similar wording existed in other legislation drafted by the Department of Trade, Industry and Competition where the approval of the Minister of Finance was required to determine fees. So it was a common practice for the entities that DTIC oversaw. Similar wording existed in the Companies Act. When DTIC determined key fees and remuneration, it was done in consultation or in concurrence with the Department of Finance or Treasury. So it was a normal practice for DTIC. If it was an issue of serious concern, she could ask the Department to look at it and come back with a response.
Ms Ebrahim had no problem with the term “in consultation”. She was merely ensuring that the Department was aware of the implications of the term.
The Committee agreed to the clause.
Clause 22 – section 195
The clause gave the Tribunal the powers to conciliate, mediate, arbitrate, or adjudicate on any administrative matters affecting a company regarding any matter referred to it by the B-BBEE Commission.
No changes were required.
Accepted by the Committee.
Clause 23 – section 204
The clause provided for the Financial Reporting Standard Council to issue financial reporting pronouncements. No changes were proposed.
Accepted by the Committee.
Clause 24
The clause was consequential in nature and allowed for the re-arrangement of sections of the principal Act,
30A and 38A, and to changes to headings. There were no policy or legal issues.
Accepted by the Committee.
Clause 25
The clause provided for the short title and the commencement. The date of commencement would be fixed by the President through a proclamation in the Gazette.
There would be consequential changes as a result of changes approved by the Committee. The removal of the definition for Treasury regulations would require an amendment to the long title of the Bill to remove the statement that a definition of Treasury regulations was included.
Ms Ebrahim stated that the A-list would allow the CLSO to make drafting changes and corrections but no policy changes. The A-list would show the changes made.
The Chairperson said that had brought the Committee to the end of its deliberations.
Concluding remarks
The Secretary stated that the matter of issues that fell outside the scope of the Bills had to be discussed and a decision had to be taken as to whether the Committee was in agreement that those matters being held over or whether Members wanted to pursue any of them in the current legislation. That could be attended to in the next meeting. The A-list of the Second Amendment Bill would be prepared where the retrospectivity matter would be presented to the Committee for an in-principle agreement on the clauses. Thereafter the B-Bill would be prepared.
With regard to the Companies Amendment Bill, he indicated that a significant redraft had to be undertaken and it was unlikely that the Department or the Legal Adviser would be in a position to present that to the Committee the following day. Most likely they would only be able to do so at the next meeting on 14 November 2023. The secretariat would supply copies of the A-list and the Amendments proposed by Dr Masotja.
The Chairperson suggested that the meeting arranged for the following day be postponed to 14 November 2023 when all matters would be ready.
Dr Masotja informed the Chairperson that, following interventions, that the legal opinion should be received in the current week. It would be forwarded to Parliament.
Ms Ebrahim agreed that a postponement would allow Legal Services the time required for redrafting and preparing the A-Bills. She concurred that both Bills could be addressed on the same day.
Mr Mbuyane seconded the proposal to deal with all the outstanding matters at the next meeting on 14 November 2023.
The Chairperson postponed the meeting for 8 November 2023.
The meeting was adjourned.
Audio
Documents
Present
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Hermans, Ms J Chairperson
ANC -
Bergman, Mr D
DA -
Hlonyana, Ms NKF
EFF -
Macpherson, Mr DW
DA -
Malematja, Mr C N
ANC -
Mbuyane, Mr S H
ANC -
Moatshe, Ms RM
ANC -
Monakedi, Mr M
ANC -
Mulder, Mr FJ
FF+ -
Ntwane, Dr JC
ANC -
Thring, Mr WM
ACDP
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