Major Corporate Law Changes in South Africa: What Companies Need to Know

Significant amendments to South Africa’s Companies Act have officially come into effect, impacting key areas of corporate law. President Cyril Ramaphosa proclaimed that sections of the Companies Amendment Act and the full Companies Second Amendment Act are in force as of 27 December 2024.

Described as a milestone by the Department of Trade, Industry, and Competition (DTIC), these changes aim to simplify, clarify, and strengthen corporate governance while enhancing the ease of doing business in the country.

Key Changes in Effect

1. Share Buybacks

All share buybacks now require approval through a special resolution by shareholders, except for:

• Pro-rata offers to all shareholders
• Buybacks conducted on the stock exchange by listed companies

This simplifies compliance, as one-on-one buybacks are no longer classified as schemes of arrangement.

2. Social and Ethics Committee (SEC) Appointments

Members of the SEC in public and state-owned companies must now be elected by shareholders at the Annual General Meeting (AGM). Additionally:

• A majority of SEC members must be non-executive directors.
• Each member must have at least three years of experience.

3. Employee Share Ownership Plans (ESOPs)

The statutory definition of ESOPs has expanded to include plans involving share purchases, qualifying them for specific exemptions related to financial assistance and public offer rules.

4. Business Rescue Proceedings

Landlords gain stronger legal standing, as claims for utilities, rates, and taxes are now treated as “post-commencement finance,” giving them priority over pre-commencement claims, except employee claims.

5. Memorandum of Incorporation Amendments

Changes to a company’s Memorandum of Incorporation now take effect 10 business days after submission to the Companies and Intellectual Property Commission (CIPC), unless the CIPC intervenes sooner.

6. Financial Assistance Within Groups

Financial assistance provided to subsidiaries is now exempt from Section 45 requirements, streamlining administrative processes for group companies.

7. Accountability for Directors

The time limit for filing a court application to declare a director delinquent or under probation has been extended from 2 years to 5 years, with retroactive application.

Amendments Still Pending

While many changes are now in effect, significant amendments will only commence after regulations are finalised in 2025. These include:

• Public access to financial statements of certain private companies
• Requirements for public companies to publish remuneration policies and reports
• Updated definitions of “regulated companies” impacting Takeover Regulations

What This Means for Companies

Legal experts urge businesses to review the changes and adjust internal processes accordingly. Updates to AGM notices, SEC member elections, and share buyback protocols are among the immediate priorities.

Although some provisions are delayed, companies are advised to prepare for their eventual implementation to ensure smooth compliance.

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