Companies Amendment Bills: deliberations & adoption

Meeting report

Opening Remarks

The Chairperson welcomed everyone and wished those observing a Happy Ramadan.

The Chairperson confirmed the attendance.

The Chairperson asked the Committee Secretary to remind the Committee where they left things in last Tuesday’s meeting.

Ms Mahdiyah Solomons, Committee Secretary, said in the last meeting, the Department was still busy responding to the submissions on the Companies Amendment Bills.

The Chairperson asked the Department of Trade, Industry, and Competition (DTIC) not to repeat the responses of the stakeholders but to stick to its responses. After DTIC concludes its presentation, the Committee will afford the Parliamentary Legal Advisor an opportunity to make final comments. Finally, the Committee will use the submission matrix to deliberate and vote on the clauses.

The Deputy President is answering Questions in the House, and the Committee could not be excused from this sitting. If the Committee does not conclude, it will continue next week.

DTIC Briefing

Dr Evelyn Masotja, DDG: Consumer and Corporate Regulations, DTIC, greeted everyone. She noted the request to present for an hour and will try to be faster. As requested, she will focus on the DTIC response rather than the public submissions.

She commenced by quickly recapping where she left off last Tuesday at sections 30(a) and (b). She concluded the previous meeting by informing the Committee on public comments and responses.

She highlighted that some issues appear repeated in different sections due to how the matrix is categorised.

She informed the Committee that Prof Michael Katz will be joining the meeting.

Concerning sections 30(a) and (b), DTIC is not recommending any changes to the bill because the issues mainly clarified the Department’s policy position and the importance and rationale behind the disclosure requirements for remuneration. When stakeholders suggested that the Department look at changing the definitions, such as the remuneration policy committee, the DTIC took that wording as commonly used and applied by similar measures, such as the King IV Code.

For comments relating to the binding vote, that there should be a voluntary approach, the DTIC clarified why the voting should be binding given society's inequality and income disparities.

The new suggestions, including the gender pay gap ratio and others, require further consultation and further work.

This was an overview of some of the issues presented last week.

Some suggestions related to the effective implementation date in terms of the commencement of the Act. This will not be done through regulations as the Bill did not make provisions for regulation. They will engage with the President on implementation dates for the different sections of the Bill, including sections 30 (a) and (b).

For suggestions about the role of the board versus the role of shareholders in electing remuneration committee members, she clarified that the remuneration committee is not a statutory committee. It is a board committee referenced in sections 30 (A) and (B). It is an important committee where members will be elected during the strike two approach after the report is not approved for the second time and the explanation is given and not approved. Overall, most of the issues were highlighted last week.

She said she would move on to the responses not dealt with last week.

DTIC Submission Matrix (Cont.)

Companies Amendment Bill

Clause 7, Section 33

The Centre for Environmental Rights (CER) suggested the wording (“after the end of the anniversary of the date of its incorporation”) is unclear.

The DTIC’s response is that the proposed wording is not part of the amendments to the Bill. This was not raised as a concern before, so the department takes it that the legislation is generally clear. Companies have dates of incorporation. The concept of an anniversary date is commonly used, which would mean after the year. See pg41-42 for other submissions.

Clause 10, Section 45

Law Society of South Africa (LSSA) suggested that the proposed amendment in clause (b) does not go far enough. It should cover financial assistance to any group companies.

The DTIC responded that the purpose of section 45 is to protect minority shareholders in a company. When a company gives financial assistance to its own subsidiary, there is no conflict involving its minority shareholders. Accordingly, the prohibition in section 45 against giving financial assistance to a company’s own subsidiary is not required. For other submissions see pg42-45.

Clause 11, Section 48

The LSSA restates the view that if a pro rata offer is made pursuant to subsection (8)(b)(i), there should be no need to get a shareholders’ resolution for the directors since they are participating on a pro rata basis.

The DTIC responded that the exemption in the proposed amendment will apply when the acquisition of shares from directors occurs pursuant to a pro-rata offer. For other submissions see pg45-47.

Clause 13, Section 72

Webber Wentzel stated that proposed section 72(8A)(a)(ii) is not clear from the wording what the application referred to in this proposed subparagraph relates to, but presumably, it is an application in terms of subsection (5) for the exemption from the requirement to appoint a social and ethics committee. This needs to be clarified in the Bill.

The DTIC responded that the exemptions from establishing a Social and ethics committee are in the Act and have been in practice since 2011. Section 8A provides for the establishment of the Social and ethics committee; part of the considerations includes the application for exemption from establishing an SEC. For other submissions, see pg47-50.

Clause 16, Section 118

Cliffe Dekker Hofmeyer suggested that two material aspects of the proposed new definition/test for when a private company qualifies as a "regulated company" for takeover law purposes require clarification and refinement.

The DTIC responded that the reference to indirect shareholding is designed to cover not only shares that are directly owned but also those that are, for example, held by a subsidiary or trust of the securities holder. For other suggestions, see pg52.

Clause 17, Section 135

Webber Wentzel suggested it is unclear whether rent is intended to be included in the proposed new section 135(1A).

The DTIC responded that the rent amount is not included in any amounts due to the landlord. The amounts are related to municipal utilities. For other suggestions, see pg53-56.

Clause 21, Section 194

The Western Cape Government noted that the proposed section 194(1A)(b) states that the chairperson may appoint a Chief Operating Officer and one or more senior managers to the Tribunal. It is submitted that the chairperson has been granted unfettered discretion here, and guidelines need to be provided regarding the qualifications and experience of the appointees.

The DTIC responded that the chairperson has been granted unfettered discretion here and that guidelines need to be provided regarding the qualifications and experience of the appointees. Section 194, when read in total, has safeguards that include consultation with the Minister and the Minister of Finance. No amendment is recommended.

Clause 22, Section 195

The CER suggested his amendment seems to limit the referral of issues to the Tribal by the B-BEE Commission only. This seems unduly and arbitrarily narrow.

The DTIC responded that the B-BBEE matters are a special dispensation that will expand its mandate and that is currently not provided for because the B-BBEE Commission is established in terms of the B-BBEE Act.

Clause 23, Section 204

The CER suggested that there is a conflict between the Financial Reporting Standards Council (FRSC), which seems to exclude public companies from adherence to its standards. The CER, therefore, suggest that this be explicitly stated to provide clarity. They do not see why public companies should be excluded, so long as they aren’t in conflict with other stock exchange agencies’ listing requirements (like the JSE Listing Requirements) – since these listing requirements should be IFRS compliant, we do not see why public companies should be excluded.

The Department’s response is that the FRSC functions do not exclude public companies. Section 204 addresses the functions of the FRSC in issuing international financial reporting standards and adoption in the local context.

Companies Second Amendment Bill

Clause 1, Section 77

IODSA and King Committee disagree with the proposed new changes under Section 77(7) and propose that the matter can be dealt with without limiting the general applicability of the Prescription Act, 1969. Their proposed drafting changes (recommended below) will avoid placing the onus on the claimant to bring a court application in circumstances when the Prescription Act provides for an interruption or stay in prescription.

Clause 2, Section 162

IODSA and King Committee support the changes to Sections 162 (2A) and (3A) regarding the courts’ powers to extend the time frame for bringing an application to declare a director delinquent or under probation.

The DTIC takes note of the submissions received. No amendments are recommended for the provisions in the Companies Second Amendment Bill.

(See Presentation)

The Chairperson asked if Prof Katz would like to come in at this stage

Dr Masotja replied that they would hear from the Committee and that Prof Katz could come in then.

The Chairperson thanked Dr Masotja and invited the PLA to comment.

Parliamentary Legal Advisor (PLA) Input

Ms Fatima Ebrahim, PLA, thanked the Chairperson and greeted members. She reminded Members that she had taken them through the constitutional issues last week, and the Committee needs to satisfy itself, particularly on the issue of the right to privacy. The Committee must be satisfied that those rights can be limited per section 36 of the Constitution.

Regarding general drafting issues, she reminded the Committee that a spelling error was picked up. That will be corrected; it does not need to go back to the National Assembly Committee. That was the word “contemplated”.

Furthermore, they are considering amending a numbering issue. On page 8, line 48 of the Companies Amendment Bill, it seeks to amend sections 10 (a) and (a) in section 72 of the Principal Act. The public commented that this should be changed to read subsections 11 and 12. From a drafting perspective, it made sense because subsection 10 was the last subsection in section 72. This will be corrected before adoption.

The Western Cape Government also made a comment to change “stipulate” to “contemplate” in keeping with the language in the Principal Act. She is of the view that nothing prevents them from making this change without going back to the Portfolio Committee because it is not a content change. She is waiting on the Bills Office to confirm this. If they confirm that this is fine, she proposed they do this in two other places: page 3, lines 45 and 52. If the Bills Office is in agreement, they will make that change. If no changes are going back to the Portfolio Committee, these can be left as they won’t have any impact on content. It is just a drafting style.

The Chairperson said they will now use the same matrix for their deliberations and voting. He requested that they be alerted when they reach clauses that need those administrative changes.

Ms Ebrahim advised the Committee that even where there were no public comments, it must be clear that it is satisfied with the content of a particular provision, and it is adopted before they move to the next. There were certain clauses where no comments were received.

The Chairperson said his approach would be to deal with the clauses with comments from stakeholders and responses from the Department and then adopt the whole Bill with all the rest of the clauses.

Ms Ebrahim said this was in order.

Companies Amendment Bill: deliberations

Clause 1

The Chairperson said that members may agree, oppose, or abstain from voting on a clause as it is contained in the Bill. Members are free to deliberate on the clauses as they are voting.

Mr M Mmoiemang (ANC) sought clarity on the Department’s view on changing “stipulated” to “contemplated” on page 3 of the Bill.

Dr Masotja said the Department’s view on the proposed amendment is expressed on page nine of the Matrix. They agree with the advocate. If there is space for them to be addressed, they can be addressed. The DTIC looked at it from the principle that the Minister presented. The amendment can be retained because it does not change the Bill substantively. They support the change in wording for the sake of better alignment with the Principal Act.

The Chairperson checked with Mr Mmoiemeng if he was happy with the explanation.

Mr Mmoiemeng confirmed that he was.

The Chairperson proposed Clause 1 for consideration. Ms M Mamaregane (ANC), Mr M Dangor (ANC), Ms M Moshodi (ANC), Mr Mmoiemang, and Mr Rayi voted in favour. No one opposed. Ms H Boshoff (DA) and Mr J Londt (DA) abstained.

Clause 1 was adopted.

Clause 2

The clause was put forward for consideration.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. No one opposed. Ms Boshoff and Mr Londt abstained.

Clause 2 was accepted.

Clause 3

The Chairperson reminded members they were free to deliberate as they went through the clauses and asked questions for clarity

The clause was put forward for consideration.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt voted against the clause. There were no abstentions.

Mr Londt registered that during the legislative process in the National Assembly and the National Council of Provinces, good points were made, but none were incorporated or taken on board. This was the same with other legislation. It will be taken further at the appropriate platforms.

The Chairperson said the next administration will consider the valid points raised during the process. He sought clarification on whether the Member was referring to those issues or what they are currently busy with.

Mr Londt said they had long deliberation processes, the same as previous legislation. Why defer these issues to the next administration when they can be dealt with now? If something can be improved through legislation, it must be done now. If it is deferred to the next administration, many people will not come back, and they will have to start again from scratch. We have debated this before.

The Chairperson said he heard Mr Londt’s point. The challenge is that the Department has to implement the Act. Without thorough research, impact assessments, and consultations before acting on completely new proposals that are not part of the Bill, it will be difficult for them, as good as these proposals may be. When these new points are parked for the next administration, the Department and other entities must consult, research, and assess.

The Chairperson agreed that good proposals are being made, but they are new and need to be subjected to public participation.

Clause 3 was adopted.

Clause 4

The Chairperson asked if there was any deliberation on Clause 4.

Ms Ebrahim said she wanted to go through the administrative changes so that they are captured in the report. Clause 4 seeks to change the word “stipulated” to “contemplated” on page 3, line 45, in Section 24(3). Also, the word “mentioned” will be changed to “contemplated” in line 52 on page 3. The Clause seeks to change the word “referred” to “contemplated” on page 4, line 17.

Ms Ebrahim received a message from the Bills Office that these changes were all in order and did not need to go back to the Portfolio Committee. The last change is to correct the spelling mistake in line 22.

The Chairperson moved to adopt Clause 4, taking into account the administrative amendments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt voted against. There were no abstentions.

Clause 4 was accepted.

Clause 5

The Chairperson asked if there were any deliberations.

Mr Mmoiemang said the principle that no right in the Constitution is absolute must be reiterated, particularly in the policy imperative of openness and transparency. These are the values contained in the Constitution. The Constitution is the supreme law, and it makes sense where shareholders and the public need to understand the disparities in income of employees, directors, and CEOs. This will help ensure that we bridge the inequality scale. This clause must be applauded for its effort in this regard.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of Clause 5. There were no votes against. Ms Boshoff and Mr Londt abstained.

The clause was accepted.

Clause 6

The Chairperson asked if there were any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt voted against. There were no abstentions.

Clause 6 was adopted.

Clause 7

The Chairperson asked if there were any deliberations.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of Clause 7. None were against. Ms Boshoff and Mr Londt abstained.

Clause 7 was adopted.

Clauses 8 and 9

Clauses 8 and 9 had no public comments. The Chairperson indicated that these clauses will be dealt with went they put the whole bill for adoption or rejection.

Clause 10

The Chairperson asked if there were any deliberations.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of Clause 10.

Mr Mmoiemang sought clarity about a situation in which the shareholders of the subsidiary are not the same as those of the holding company in the context of the protection that Clause 10 Section 45 provides.

The Chairperson asked the DDG or Prof Katz to respond.

Prof Michael Katz, Chairperson, SCCL, said this was a good question that has been raised by many people. The philosophy of Section 45 is to protect the minority shareholders of the company. When a holding company owns 70% of a subsidiary and the other 30% is owned by minorities, and the subsidiary gives financial assistance to the holding company or a subsidiary of its holding company, the minority shareholders need protection. When a company gives financial assistance to its subsidiary, there is complete alignment between a company and its minority shareholders and there is no need for protection. That is the reason for the proposed amendment to Section 45.

The Chairperson noted that there were no votes against Clause 10. Ms Boshoff and Mr Londt abstained. The clause is accepted without amendments.

[The Committee had a brief comfort break].

Clause 11

The Chairperson asked if there were any deliberations.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. There were no votes against. Ms Boshoff and Mr Londt abstained.

The clause was adopted.

Clause 12

The Chairperson noted that there were no public comments. As agreed, this provision will be considered when the whole bill is put to vote.

Clause 13

The Chairperson asked if there were any input.

Ms Ebrahim noted that this was the last administrative matter, which concerns the numbering of page 8, line 48. It is proposed that subsections 10(a) and (b) be changed to subsections 11 and 12.

The Chairperson thanked Ms Ebrahim.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of clause 13. There were no votes against. Ms Boshoff and Mr Londt abstained.

The clause was accepted.

Clauses 14 and 15

The Chairperson noted that there were no public comments. As agreed, this provision will be considered when the whole bill is put to vote.

Clauses 16

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. There were no votes against. Ms Boshoff and Mr Londt abstained.

Clause 16 was adopted.

Clauses 17

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of Clause 17 section 135. There were no votes against. Ms Boshoff and Mr Londt abstained.

The clause was accepted.

Clauses 18

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of Clause 18 section 160. There were no votes against. Ms Boshoff and Mr Londt abstained.

Clause 18 was adopted.

Clauses 19 and 20

The Chairperson noted that there were no public comments. As agreed, these provisions will be considered when the whole bill is put to vote.

Clause 21

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt abstained. There were no objections.

Clause 22

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt abstained. There were no objections.

Clause 23

The Chairperson asked if there was any input.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt abstained. There were no objections.

Voting on Bill

The Chairperson sought clarity if they could put the entire bill for a vote, mindful of the clauses that stakeholders did not comment on. These will be adopted along with the entire Bill instead of going through them clause by clause. Alternatively, they can go through the bill clause-by-clause. He offered members an opportunity to comment on those clauses

Adv Shamara Ally, NCOP Procedural Officer, said the process proposed by the Chairperson earlier is correct. The full Bill can be put to a vote, and Members can raise any objections.

Mr Mmoiemang said they must follow the process as initially outlined. Mr Dangor seconded the proposal.

There was no counter view.

The Chairperson put forward B27B-2023 for adoption.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour. Ms Boshoff and Mr Londt voted against. There were no abstentions.

The Bill was adopted.

The Chairperson asked Ms Ebrahim for comments on the process going forward.

Ms Ebrahim said that because this is a section 75 bill, there will be no C-list and no need for it to go back to the National Assembly committee. The Bill will go to the Bills Office for the final changes before it goes to the Council.

The Chairperson thanked Ms Ebrahim.

Companies Second Amendment Bill

Clause 1

The Chairperson asked if there were any comments from members.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of the clause. There were no votes against. There were two abstentions from Ms Boshoff and Mr Londt.

The clause was adopted.

Clause 2

The Chairperson asked if there were any comments from members.

There were no comments.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of the clause. There were no votes against. There were two abstentions from Ms Boshoff and Mr Londt.

The clause was adopted.

Voting on Bill

The Chairperson noted they are done with the Companies Second Amendment Bill clauses.

He put forward the Bill itself for adoption or rejection.

Ms Mamaregane, Mr Dangor, Ms Moshodi, Mr Mmoiemang, and Mr Rayi voted in favour of the Bill [B26B-2023]. Ms Boshoff and Mr Londt were against. There were no abstentions.

The Bill was agreed to without any amendments.

The Chairperson noted that a report will be developed for both bills, which will be tabled at next week’s meeting.

The Chairperson thanked the members, the DTIC, the Minister, the DDG, Prof Katz, the stakeholders, the legal advisors, and everyone on the platform. He said the team from the department is free to leave the platform.

Dr Masotja thanked the Chairperson and the committee members for their engagement. She also thanked Ms Ebrahim, the State Law Advisors, the team from the DTIC, the Minister, Prof Katz, all the experts on the Specialist Committee on Company Law, and all the stakeholders who contributed throughout the process.

Ms Ebrahim thanked the committee and the Department, with whom they’ve worked closely in the past few months.

Committee Minutes

The Chairperson moved on to the adoption of the minutes of meetings of 27 February 2024 and 5 March 2024. He asked if members wanted to make any corrections to the minutes.

Ms Moshodi and Mr Mmoiemang moved to adopt the minutes.

The minutes were adopted without amendments.

The Chairperson said on 19 March, the Committee will start with finalising the Companies Amendment Bills.

He thanked members for their attendance and participation.

The meeting was adjourned.