1. Widely held versus limited interest companies

The Act now provides for widely held companies and limited interest companies. The existing definition of Public and Private Companies remains intact, but there are important implications extending for the new criteria.

A widely held company is defined as such if:

• Its shares are available to the public
• It decides by special resolution (75% of shareholders present and voting) to be widely held
• it is a subsidiary of (50% or more owned by) any of the above

Based on this all public companies will be widely held, while some private companies may be by special resolution.

2. Financial assistance

The old Companies Act restricted the ability of a Company to finance the acquisition of its own shares (Section 38). The new Act does away with this and now requires the company to be solvent and able to settle its debts in the ordinary course of business after such financing.

3. Audit committees

Widely held companies must now have an audit committee made up of 2 non-executive directors. The Act provides that a non-executive Director is not a full time employee of the Company or Group. This may prove problematic for many Companies who will have to engage non-employees to fulfil their commitments herein.

4. Auditors

Auditors will be specified by reference to an individual registered auditor, who will rotate every 5 years in the case of widely held companies. The audit requirement remains for all Companies, although this is expected to change for limited interest Companies under the new Act. The auditor must attend every annual general meeting of the Company to answer questions about the accounts.

5. Disposal of a major part of the business

Up to now Section 228 has allowed Companies to dispose of a major portion of their business by passed a resolution in general meeting (50% approval). This has been changed to a special resolution, being 75% approval.

6. Financial Standards Reporting Council

A new body will be set up to review and develop financial disclosure standards for Companies.

7. Financial statements

Widely held Companies must comply with the financial disclosure statements of the current APC, soon to be the FSRC, which effectively means International Financial Reporting Statements.

Limited interest Companies must comply with the framework until the FSRC come up with a suitable set of standards for these companies. They must also comply with Schedule 4 of the Companies Act.

8. Group Accountants

Group, or Consolidated, accounts are no longer required for limited interest Companies.

9. Misleading or false accounts 

Anyone issuing false or misleading accounts or statements will now be guilty of an offence.

10. Financial Reporting Investigations Panel

The Department of Trade and Industry will set up a FRIP to investigate complaints from the public into incomplete or incorrect disclosure.

11. Prospectus

The requirements for a Prospectus have been made more specific and have been brought in line with the JSE requirements.