The new Companies Act

The Companies Act was passed into law in 2008. What does this mean for you? And what do you need to do/think about?

Generally speaking, and in very simplistic terms, the Companies Act will change the way you govern your company. The Memorandum and Articles of Association will be replaced by a prescribed Memorandum of Incorporation (MOI) and rules. This must contain certain proscribed information and further more will comprise of alterable and unalterable provisions.

Any Shareholders Agreement and any rule must be consistent with the MOI and the Act itself. Any shareholders agreement, to the extent it alters the MOI must also have such alterable provision altered in the MOI. If the MOI and the Shareholders Agreement conflict, the MOI will prevail. To a great extent the relevance of a Shareholders Agreement is in many instances negated due to the fact that many of the standard provisions of a Shareholders Agreement must now be stated in the MOI anyway.

During the transitional period, a grace period of 2 years from the general effective date will be granted to companies. During that period existing provisions relating to the governance of a company will continue to apply as is. Post the 2 year grace period such provisions will continue to apply but only to the extent that they do not conflict with 2008 Act.

All companies will be deemed to have an MOI which will consist of:

  1. The Memorandum and Articles of Association; and
  2. Any other document by which the company is structured and/or governed.

Where to from here? All companies operating under a “trading as” name should amend their registered name as this will no longer be compliant with the Act. Companies should furthermore review the following documents:

  1. The Memorandum and Articles of Association;
  2. The Shareholders Agreement;
  3. Contracts with Directors; and
  4. Any other document by which the company is structured and/or governed.

Following this review the company should then either make note of or amend the following:

  1. Any conflicts with the unalterable provisions of the MOI or conflicts with the Act should be noted due to the potential voidability thereof and the inability to enforce these provisions;
  2. Any conflicts with alterable provisions of the MOI should be amended and reflected in the same manner in any Shareholders Agreement;
  3. The Shareholders Agreement’s provisions which should be reflected in the MOI must be reflected in the MOI, any provisions which need to be altered should be altered to mirror the MOI.

Rationale for the Protection of Personal Information Bill

Constitutional and common law right to privacy currently exist in South Africa. It’s not an absolute right to privacy but rather one that is balanced against competing interests. The right to be left alone should be balanced with the interest of having an open and accountable society i.e. business can often only fulfil its functions properly if it has access to sufficient personal information. Information protection is an aspect of safeguarding a person’s right to privacy. Current legislative trends worldwide tend towards the drafting and enacting of legislation specifically designed at protecting privacy. This has come about due to concerns around the power and enhanced surveillance ability of computer systems. Thus the question is no longer whether information can be obtained but rather whether it SHOULD be obtained and where it has been obtained how it should be used. The underlying assumption is as follows: if the collection of personal information is allowed by law, then the fairness, integrity and effectiveness of such collection and use should also be protected. When information is provided in one context, it should not be used in another. The principles informing the legislation will be drawn from traditional delictual principles as influenced by the Constitution.

No longer is the issue of privacy a domestic problem. Most international instruments require that trans-border flows of personal information are restricted to countries that do not have a certain level of privacy protection, the “safe harbour” principle so-called (cf. OECD Guidelines Governing the Protection of Privacy and Trans-border Data Flows of Personal Data and the European Union Data Protection Directive). In most instances this requires at a minimum that countries enact legislation specifically intended to protect personal information. This will inter alia govern what is considered an appropriate means and purpose for the collection of personal information. Privacy is thus a critical issue in that it could potentially form a barrier to international trade. Remedying this problem by enacting legislation that complies with International Instruments will however require SA to follow similar stringent tests with regards to other countries with whom we exchange information. This would mean that trade with Africa could be made slightly more difficult in that any trans-border information flows would have to be assessed on a casuistic basis. Nevertheless, and with the intentions of creating a strong African trading block it would be in the interests of Africa to develop appropriate trading regulations and protections.

The enactment of this specific privacy legislation will result in amendments to other pieces of South African legislation, most notable the Promotion of Access to Information Act 2 of 2000, the Electronic Communications and Transactions Act 25 of 2002 and the National Credit Bill all of which contain interim privacy protection measures.

The right to privacy is such that a person should have control of their own personal affairs and be able to conduct their personal life free from unwanted intrusions. Data protection is one aspect of safeguarding the right to privacy. The threat to personality by the data user threatens the personality of the individual in two ways: compilation and distribution of personal information is a direct threat to privacy and disclosure of false or misleading information constitutes an infringement of identity.