LAW: Is Your Business Ready for Next Week’s Companies Act 2008?
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Many companies are under the mistaken impression that they still have two years to comply with the changes to be introduced by the new Companies Act which comes into operation next Friday, 1 April 2011. While pre-existing companies do have two years from then to ensure the compliance of their constitutional documents and shareholders’ agreements with the provisions of the Act, many provisions of the Act will nonetheless apply to companies with immediate effect on 1 April 2011, irrespective of the content of a company's constitution.
This is according to Candice Meyer, partner at Webber Wentzel.
Provisions with immediate application include:
the duties, conduct and liability of directors, prescribed officers and board committee members;
the rights of shareholders to receive any notice or access to any information;
the conduct of meetings of shareholders and directors and the adoption of resolutions;
the approval of any distribution, financial assistance, insider share issues, or options, even if any such action had been approved by a company's shareholders before the effective date;
fundamental transactions (amalgamations, mergers, schemes of arrangement and the disposal of all or the greater part of the assets or undertaking), unless exempted.
This means that, for example, notices of meetings and agendas must comply with the Act despite that a pre-existing company's constitution and shareholders agreements may contain conflicting provisions.
Directors, prescribed officers and board committee members must ensure that they, and their staff, are up-to-speed with the changes which are due to take effect on 1 April 2011.
Meyer says every company should review its memorandum of association, articles of association, shareholders' agreements, contracts with directors and any other document that relates to the rights, duties and responsibilities of shareholders, directors and others in terms of which that company was structured and governed.
“It is critical to identify the provisions which conflict with the Act and harmonise these documents sooner rather than later, despite the two year grace period. This will provide clarity for companies as to their legal obligations and will help to avoid liability arising during the grace period from non-compliance with the requirements of the Act which are of immediate effect.”
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