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The Corporate Laws Amendment Act, 24 of 2006
Finally, the Corporate Laws Amendment Act, 24 of 2006 is coming into force.
The Corporate Laws Amendment Act was assented to by the President and
published in Government Gazette no. 29804, Notice no. 348 of 17 April
2007. The effective implementation of the Act was nevertheless reserved
for a later date to be proclaimed by the President. The Minister and the
President approved the President's Minute and the Proclamation on 12 November
2007. The Proclamation now comes into legal force on the date of publication
in the Government Gazette.
The Amendment Act provides, among others, for a legal backing of financial
reporting standards by introducing bodies such as the Financial Reporting
Standards Council and its investigative wing, the Financial Reporting
Investigations Panel. The Council and the Panel would respectively have
the authority to review the application of such standards by South African
companies and the power to enforce compliance on a consistent basis from
period to period. The Act further amends sections 38 and 228 of the Companies
Act, 61 of 1973. Section 38 prohibits a company from making loans or providing
other financial assistance to any person in connection with a purchase of shares
of the company (with certain exceptions). The Amendment Act recognises that
modern corporate practice is not to prohibit the power of a company to provide
financial assistance to purchasers of shares from the company, particularly since
the solvency and liquidity requirements, coupled with the requirement for an
appropriate shareholder resolution, can provide the necessary protections to
companies. This amendment will further advance black economic empowerment
initiatives employed within the South African corporate environment.
In so far as s288 is concerned, the Amendment Act will now require disposals
of all or greater part of the assets of the company to be allowed only pursuant
to a special resolution, as opposed to an ordinary resolution currently required
by the 1973 Act.
Click here
to download a copy of the Government Gazette no. 30594
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