South Africa’s corporate landscape has seen important amendments to the Companies Act, 2008, with new rules aimed at streamlining processes related to financial assistance and share buybacks. These updates, which come into effect once proclaimed by the President, could have significant implications for businesses, particularly in their dealings with subsidiaries and share acquisitions.
The Companies Amendment Act, 2024 introduces a notable shift in the requirements for financial assistance. Under the revised Section 45, companies are no longer required to pass a special resolution for providing financial assistance to subsidiaries. Previously, such assistance had to be approved by shareholders, either for a specific recipient or within a broader category of recipients. The new amendment eases this process, allowing the board of directors more autonomy in these decisions without needing shareholder approval each time, as long as the company’s memorandum of incorporation permits it.
However, the solvency and liquidity test outlined in Section 46 still applies. This test ensures that a company must prove it remains financially stable after making any proposed distribution, safeguarding creditors and the company’s own financial health.
On the other hand, Section 48, which governs share buybacks, has also undergone changes. Traditionally, a special resolution was required when a company sought to acquire its own shares, especially if the transaction involved directors or their related parties. The amended law removes this requirement for share buybacks conducted as part of a pro-rata offer to all shareholders, including directors and prescribed officers. Additionally, share buybacks on a recognized stock exchange will no longer require a special resolution.
The amendments also touch upon provisions related to independent expert reports and shareholder dissent rights. Previously, when acquiring a significant number of shares (more than 5% of any class), companies were required to appoint an independent expert to assess the transaction, with the report distributed to all shareholders. While these regulations remain under Section 114, the latest amendment removes the cross-references to Section 115, easing procedural burdens for many companies.
As these amendments aim to simplify corporate governance, businesses should remain vigilant and seek legal counsel to ensure compliance with the latest regulatory landscape, particularly if the Takeover Regulations could affect specific buyback transactions.
