Added Legal Value Newsletter Volume 3 Number 2

June 2010

The New Companies Act

The New Companies Act, initially set to commence in October 2010, will most probably only come into full operationation during April 2011.

Company Disposals

Currently, the (old) Companies Act requires a special resolution by shareholders for a company to dispose of more than half of its assets in a contract.  The current section is s228.  Its equivalent in the Close Corporations act is s46 which requires the written consent of members holding at least 75% of the members interest for a CC to validly dispose of more than half of its asset or to acquire or dispose of land.  The corresponding section in the New Companies Act is s112 which also requires a special resolution.  The requirements for a special resolution are set out in s115.

Solvency and Liquidity

The (old) Companies Act initially placed a high premium on capital maintenance in order to protect creditors.  For the past couple of years this requirement for companies has been watered down by the deppartment of trade and industry in favour of a stronger emphasis on the solvency and liquidity of companies.  Hence the requirement of solvency and liquidity if a company pays dividends to shareholders or if a company wanted to loan money to someone for the purchase of its shares.  The new act takes this approach even further and the requirements of solvency and liquidity are defined in s 4 of the act.

business rescue

The new act introduces a whole new concept of Business Rescue which places emphasis on the rehabilitation of an ailing business.  This will drastically impact on our laws of Insolvency in years to come.

Consumer Protection Act (CPA) and prior representations

One of the ways to make sure parties do not end up in a legal dispute over verbal promises before a contract was entered into, is to build in a clause stating that no party is able to rely on any representations made before the contract was signed.  This clause will no longer be valid in contracts subject to CPA scrutiny.

The CPA also specifically states that one may not contract out of its requirements.

Greetings from the 2010 Soccer Word Cup jurisdiction.

Go Bafana Bafana!!

THIS IS YOUR YEAR!!!

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