LAW: Regulate First Please Mr Minister!
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South African businesses should have every right to expect that the Department of Trade and Industry (dti) releases final Regulations accompanying the new Companies Act well in advance of the Act coming into effect.
That’s the view of Grant Thornton SA’s national chairman, Leonard Brehm.
Much of the detailed legislation is contained in the Regulations, which are issued by the dti, rather than in the Act itself. These final Regulations have not been released yet.
“If the Act becomes effective on 1 May, companies will be asked to comply with legislation, aspects of which they know very little about,” says Brehm. “The dti should seriously consider giving businesses a three month window from the release of the final Regulations before bringing the Act into effect. This will provide SA businesses with reasonable time to absorb, review and understand what the Regulations are about and to carry out the requirements according to the new Act.”
Some of the Regulations expected to accompany the Companies Act will have far-reaching implications for corporate SA. Legal documents need to be amended. Companies will need to review and revise these very quickly should the dti decide not to give companies a window between releasing the Regulations and implementing the Act.
It remains to be seen what the dti’s new timetable is for implementing the new Companies Act after the much talked-about 1 April 2011 deadline was missed. The Companies Act was originally passed in 2008 but never came into effect. About half of its provisions were changed by the Companies Amendment Act which only went through Parliament on 24 March 2011.
With only a few days available between 24 March and the 1 April deadline, the Presidency didn’t have with enough time to process the Bill before signing it into law. “This didn’t stop the dti from insisting, until the last minute, that it would come into effect on 1 April” says Brehm.
“A consolidated version of the Act is also essential,” added Brehm. “It’s confusing for anyone to try to understand the 2008 Act and the 2011 amendments, when these two documents are still entirely separate.”
Brehm says that while companies have been preparing themselves since 2008 for the new Act and its implications, the detail in the Regulations is still unknown. “It’s impossible to implement the changes effectively when the full implications are not known.”
The Regulations will provide details about the following issues, to name only a few:
- Registering company names
- Incorporating a company
- Information about directors
- Maintaining accounting records
- The financial reporting standards which companies must apply
- Which companies need to be audited and which need to be reviewed
- Who will be a prescribed officer under the new Act
- Fundamental transaction requirements and
- Regulations relating to Business Rescue
Another long-awaited Act – the Consumer Protection Act (CPA) – did come into effect on 1 April this year. However, businesses affected by the CPA are having to deal with extreme time pressures to comply with the regulations under that Act. The Regulations were only made public on the same day as the 1 April enforcement date.
Brehm points out, for example, that the CPA authorised the Minister to prohibit certain terms in contracts which are deemed to be unfair to consumers. In effect, businesses were faced with the fact that large parts of their standard agreements became unenforceable, although they had no idea which parts until the very day the CPA became effective.
“These regulations have massive legal repercussions for businesses. Many legal departments are desperately amending their documents in an effort to comply as quickly as possible with an Act which is already in force,” says Brehm. “It’s completely unacceptable to have to run a business in this back-to-front manner.”
Brehm hopes that the debacle experienced with the Consumer Protection Act and accompanying Regulations will be taken to heart and that a more structured approach will be implemented for the Companies Act.
Despite this experience, the Minister has recently repeated his determination to bring the Companies Act into effect on 1 May.
“We’ve been waiting since 2008 for this new Act and I’m certain a few more months won’t make much difference, especially if this delay results in a smoother, more orderly process,” Brehm concludes.
Business News Sector Tags: Local Government|