New Companies Act to be implemented on 1 April 2011

Trade and Industry Minister, Rob Davies speaking in the National Assembly earlier this week announced that despite a lack of capacity at the Companies and Intellectual Property Registration Office (CIPRO) and a delay in the finalisation of the regulations framed in accordance of the new Act, the process is to go ahead and the new Act is to be implemented on 1 April 2011 replacing the current 1973 Companies Act.

Long in the making, the Minister said the department "had engaged over and above the call of duty " and eventually such engagement had to cease and the legislation had to be implemented. The Minister added, "If we detect problems as we move, we will fix them". Last minute changes to the bill addressed many of the concerns raised by the accounting and legal profession and there is a guarded view that larger companies would be able to implement and comply with the new Companies Act on 1 April but small companies may face some challenges. Some of the late amendments to the regulations eases the thresholds for audits and reviews. There has also been considerable concern about CIPRO not operating at its full capacity. CIPRO has a significantly increased role in the functioning of the new Companies Act. The nagging question is whether it has the resources and capacity to carry out these important functions?

Small companies will be facing considerable challenges regarding compliance after 1 April 2011 as they would need time to become familiar with the late, yet to be published, amendments to the regulations. It means that a significant percentage of business enterprises in South Africa will be required to comply with legislation which it has not have had much time to digest.

From all accounts it appears that the yet to be completed 222 pages of regulations and the already amended new Companies Act read together, will present a major challenge to those affected by it..

Pieter Rautenbach