Companies Amendment Bill, Madrid Protocol and Geneva Act of Hague Agreement: briefing

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Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
24 August 2004.
COMPANIES AMENDMENT BILL, MADRID PROTOCOL AND GENEVA ACT OF THE HAGUE AGREEMENT: BRIEFING

Chairperson: Ms N Ntwanambi (ANC)(WP).

Documents handed out:
Department of Trade and Industry briefing on the Companies Amendment Bill.
Companies Amendment Bill [B10 - 2004]
Companies Amendment Bill (B10A-2004)
Companies Act 63 of 1973
Presentation on the Madrid Protocol and Geneva Act of the Hague Agreement
Memorandum on Ratification of Madrid Protocol and Geneva Act of Hague Agreement

SUMMARY:
The Department of Trade and Industry (DTI) briefed the Committee on the Companies Amendment Bill, the Madrid Protocol and the Geneva Act of the Hague Agreement, after which the Members raised various concerns. It was agreed that the DTI should be recalled on 31 August (10.00 am) to further discuss the Companies Amendment Bill. As both the Madrid Protocol and the Geneva Act of the Hague Agreement had to be referred to Provincial Legislatures in terms of Section 231(2) of the Constitution, Members required time to consult with their constituencies before the Accords could be finalised in the Committee.

MINUTES:
The Members agreed that, as the NCOP had programming meetings on Tuesdays, the Committee should reschedule its starting time to 10 a.m.

Companies Amendment Bill`
Mr Netshitenzhe (Director: DTI) and Mr Strydom (Chief Law Advisor: DTI) then briefed the Members on Version B10B of the Companies Amendment Bill as approved by the Portfolio Committee on Trade and Industry on 18 August 2004.

Discussion
The Chairperson requested clarity on "delinquent directors" and inquired whether the Department intended to table further amendments to the Companies Act.

Mr D Mkono (ANC)(EC) further asked about the implications of the Bill with regards to the "blacklisting" of individuals.

Mr D Gamede (ANC)(KZN) raised a query concerning the consequences of the Bill for delinquent individuals who were not directors.

Mr Netshitenzhe responded that the Bill sought to prohibit individuals who had been convicted of fraudulent activities from managing the affairs of a company. As a consequence of the Corporate Law Reform Project, the Department would be submitting further amendments.

Mr Strydom pointed out that Section 218 of the principal act described those circumstances which would lead to an individual being considered delinquent and consequently being disqualified from holding office as a director or official of a company. Mismanagement of companies adversely affected public confidence. The Bill required any company employing a delinquent director, to notify its shareholders of misdealings. Along with the delinquent director, any individual who had knowledge of the deceit would be liable for debts incurred by the company for the period when the delinquent was holding office.

Mr Gamede requested clarity on the phrase "or not" as it appeared in Clause 3 of the Bill.

The Chairperson raised a query concerning the provision in Section 218(d)(3) of the principal act that disqualified individuals from holding the office of director if convicted of a crime and sentenced to a fine exceeding R100.

Mr Mkono inquired about the period of sanction and asked whether the Bill had any implications in terms of decisions reached by a company during the period in which a delinquent was serving as a director.

Mr Strydom responded that the phrase "or not" allowed for those legal imperatives not referred to in common law, such as Parliamentary Statutes. There was an existing Act that provided for the adjustment of fines.

Mr Netshitenzhe explained that the period of sanction varied depending on the nature of the crime. Although decisions reached by a company during the period in which a delinquent was serving as a director would not necessarily be affected by the conviction of that individual, such issues would be addressed in greater detail by the Corporate Law Reform Project.

The Chairperson queried the tagging of the proposal as a Section 75 Bill. She asked the Department how the provinces would be involved in the implementation process.

Mr Strydom said that the Joint Tagging Mechanism (JTM) had formally classified the proposal as a Section 75 Bill and that the Department had been in contact with various provinces concerning the impact of the Bill especially in terms of the sharing of information.

The Committee agreed that the Department be recalled on 31 August (10:00am) to further discuss the Bill.

Hague and Madrid sytems
Mr Netshitenzhe introduced the Hague and Madrid Systems on the registration of intellectual trademarks. He showed how the Accords functioned as well as how ratification of the agreements would benefit South Africa. The Chairperson pointed out that, as the Accords fell under Section 231(2) of the Constitution's "International Agreements", the Committee would have to consult with the Provincial Legislatures before the matter could be finalised.

Ms M Themba (ANC)(Mpumalanga) requested that copies of the agreement be sent to the provinces so that they could proceed with deliberations.

The Chairperson said that she would liaise with the Chief Whip's Office in order to clarify procedures with regards to notifying the provinces.

The meeting was adjourned.

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