On 27 December 2024, Government Gazette Number 51837 (“Government Gazette”) was published, in terms of which the Minister of the Department of Trade, Industry and Competition determined 27 December 2024 as the date of commencement for:

1. certain amendments stipulated in the Companies Amendment Act 16 of 2024 (“First Companies Amendment Act”); and 
2. the amendments stipulated in the Companies Second Amendment Act 17 of 2024 (“Second Companies Amendment Act”). 

Background preceding the publication of the Government Gazette

On 26 July 2024 the President signed into law the First Companies Amendment Bill and the Second Companies Amendment Bill with effect from a date (or dates) to be fixed by the President by notice in the Government Gazette, which marked substantial reforms to the Companies Act 71 of 2008 (“Companies Act”).

The amendments stipulated in the First Companies Amendment Act and the Second Companies Amendment Act are part of the government's effort to alleviate business constraints, ensure accountability for delinquent directors and officers, and address income inequality. The amendments also seek to balance the interests of directors and senior management with those of shareholders and employees.

Our summary of the proposed amendments and the policy objectives which informed the First Companies Amendment Bill and Second Companies Amendment Bill can be accessed here.

Amendments stipulated in the First Companies Amendment Act which commenced on 27 December 2024 

Pursuant to the publication of the Government Gazette only certain amendments stipulated in the First Companies Amendment Act have become operational on 27 December 2024. 

We set out below the most notable amendments which have become operational on 27 December 2024:

1. Amendment to provisions regulating shares issued for future consideration as contained in section 40 of the Companies Act: The concept of creating a trust arrangement when shares are issued for future consideration has been done away with. The new position is that those shares must be transferred to a so-called independent stakeholder (being an independent third party, who has no interest in the company or the subscribing party, and may be an attorney, notary public or escrow agent) under a written stakeholder agreement and later transferred to the subscribing party.
2. Amendment to financial assistance provisions contained in section 45 of the Companies Act: The requirements that a company is required to meet before giving of financial assistance to or for the benefit of a company’s subsidiaries (as determined in accordance with section 3(1) of the Companies Act) have been removed, resulting in the reduction of administrative burdens for group companies.
3. Amendment to share buy-back provisions contained in section 48 of the Companies Act: Previously, there were certain onerous requirements that had to be complied with where a company bought back its own shares (e.g. the requirement to have a special resolution if the buy-back pertains to more than 5% of the issued shares of any particular class of the company’s shares and to comply with the independent expert report requirement stated in section 114). Following the amendment all share buy-backs now only require a special resolution of the shareholders, unless it’s a buy-back in terms of a pro rata offer to all shareholders or a buy-back effected on a recognised stock exchange on which the shares of the company are traded.
4. Amendment to employee share scheme contained in section 95 of the Companies Act: The definition of “employee share scheme” in section 95(1)(c) has been amended to now include the purchase of shares in the company. Previously, an employee share scheme only contemplated a grant of options or issues of shares.  

The amendments contained in the First Companies Amendment Act dealing with (amongst other things) the publication of the location of company records, and annual financial statements if specific thresholds are met, and the disclosure of remuneration and remuneration policies, will only commence on a date (or dates) to be fixed by the President by notice in a government gazette which is anticipated during 2025. 

Amendments stipulated in the Second Companies Amendment Act which commenced on 27 December 2024

Furthermore, in accordance with the Government Gazette, all of the amendments stipulated in the Second Companies Amendment Act become operative on 27 December 2024.  

The amendments consist of the following:

1. Amendment to the time barring provisions contained in section 77(7) of the Companies Act: Previously, section 77 of the Companies Act provided that the commencement of proceedings to recover any loss, damages or costs for which a person is or may be held liable in terms of section 77 of the Companies Act may not be commenced more than three years after the act or omission that give rise to that liability. Now, pursuant to the amendments, a Court is empowered, on good cause shown, to extend the time-barring period of three years for the recovery of losses, damages, or costs after the occurrence of an act or omission giving rise to liability under section 77.
2. Amendment to the period to apply to declare a director delinquent as contained in section 162 of the Companies Act: In relation to delinquency, the period to apply to declare a director delinquent under section 162 is now extended from 24 to 60 months after such person ceased to be a director, with the possibility of further extension at the discretion of the Court. 

Of import, these provisions apply retrospectively and will therefore apply to director conduct that took place prior to the amendment becoming effective.

Comments

It will be important to closely monitor consequential changes to the regulations issued under the Companies Act to give effect to the remaining amendments stipulated in the First Companies Amendment Act which amendments will only commence on a date (or dates) to be fixed by the President by notice in a government gazette which is anticipated during 2025.

In addition, companies should consider whether the amendments will necessitate changes to their memorandum of incorporation, and the introduction of new company policies such as a remuneration policy.  
Moreover, companies should review their directors’ and officers’ liability policies to assess the potential increased liability risk.

For more information on the amendments, the potential increased liability for directors, and practical implications of the amendments for companies and directors, please reach out to Clyde & Co’s Corporate and Regulatory team.