Executive and Non-Executive director’s fiduciary duty: beware!

The rewarding and prestigious benefit that generally comes out of holding numerous executive and non-executive directorships is fast becoming a gain which directors will seek to avoid as it contributes to increased vulnerability on the part of directors who do not have the requisite experience or time to devote to their fiduciary obligations to companies on whose boards they participate. There is no distinction between the liability of executive and non-executive directors. South African common law has always imposed on directors a separate and distinct fiduciary duty to the company. In this fiduciary capacity, a director assumes two roles, as an “agent” acting on behalf of the company, and as a trustee who controls company assets. Continue reading “Executive and Non-Executive director’s fiduciary duty: beware!” »

Doing business in Africa, forthcoming changes

Africa has been considered as a notoriously difficult place to conduct business in. However, as a result of the drive by three regional trading groupings being the South African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) regional integration will be deepened. SADC, COMESA and EAC are aiming to create a free trade area with 26 Members States from Egypt to South Africa termed the COMESA-EAC-SADC Tripartite Free Trade Area. Continue reading “Doing business in Africa, forthcoming changes” »

Derivative actions in terms of the Companies Act

A derivative action is an action which can be brought on behalf of another. A derivative action is a remedy which is effective and which is unfortunately sometimes overlooked. The derivative action was only available to shareholders in terms of the 1973 Act. The ambit of interested parties has been extended in the New Companies Act to directors, officers, and trade unions. Even employees can bring a derivative action against a company. Continue reading “Derivative actions in terms of the Companies Act” »

Competition law on joint ventures & special purpose vehicles

With regards to any joint venture in whatever form – a company, partnership or in any other form, it is prudent to consider the application of competition law on the joint venture and/or special purpose vehicles.  We provide herewith an Update issued by the Competition Commission regarding these matters. While this Update is not binding on the Commission, it sets out the approach the Commission is likely to adopt in respect of certain transactions and may be updated from time to time to account for future developments. Continue reading “Competition law on joint ventures & special purpose vehicles” »

Escrow agreements

We have been involved with a series of escrow arrangement the past weeks. An escrow is an arrangement made under contractual provisions between transacting parties, whereby an independent trusted third party receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfilment of contractually-agreed conditions by the transacting parties. The word derives from the Old French word escrow, meaning a scrap of paper or a roll of parchment; this indicated the deed that a third party held until a transaction was completed. In my experience escrow arrangements were usually entered into between two parties and an escrow agent in terms of which the escrow agent is keeping software source code in escrow (in trust) and to make it available to the user -party in the case for instance of liquidation of the provider party. Continue reading “Escrow agreements” »

Public interest score in terms of the Companies Act

The Public Interest Score ("PIS") is to be determined at the end of each financial year by each Company. PIS= a+b+c+d Where:   a  =  average number of employees during the financial year   b  =  one point for every R1m in 3rd party liability at the financial year end   c  =  one point [...]

Why it was necessary for a new Companies Act

Why change? Political changesGlobal changes in how businesses function and operateNeed for higher standards in corporate governanceIncrease in international trade emphasisThe need to modernize company law New features •   MOI •   Director’s liability •   Director to be declared delinquent •   Remedy for oppressive and prejudicial conduct •   Audit requirements •   No Par value Shares •   Regulation •   Business [...]

New Companies Act – Mergers and Aquisitions

 Merger Two or more  profit companies including a holding and subsidiary companies may amalgamate or merge if upon implementation if the amalgamation or merger  will satisfy the liquidity and  solvency test Scheme of arrangement Continue reading “New Companies Act – Mergers and Aquisitions” »

Offences relating to financial statements in terms of the Companies Act

A person is guilty of an offence in terms of the Companies Act if the person: is a party to the falsification of any accounting records of a company;with a fraudulent purpose, knowingly provided false or misleading information inany circumstances in which the Act requires the person to provide information or give notice to another person; was knowingly a party to an act or omission by a company calculated to defraud a creditor or employee of the company, or a holder of the company’s securities, or with another fraudulent purpose; or is a party to the preparation, approval, dissemination or publication of a prospectus or a written statement that contains an “untrue statement”. Continue reading “Offences relating to financial statements in terms of the Companies Act” »

Companies Act: Delinquency of directors

A court must declare a person delinquent if:  he or she has consented to act as director while ineligible or disqualified –has acted as a director in a manner contrary to an order of probation; or has acted as a director in a manner amounting to gross negligence, wilful misconduct or breach of trust. The following may apply to a court for an order declaring a person delinquent or under probation: A company; A shareholder; A director; A company secretary or prescribed officer of a company; Continue reading “Companies Act: Delinquency of directors” »

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