New Companies Act supports honest directors

COMPANY directors who act honestly and reasonably while performing their duties under new company laws could have a valid defence if they face possible legal and criminal action, says a legal expert at Werksmans Attorneys.

Eric Levenstein, a director at Werksmans, said last week that directors who met their obligations and were able to show that they had discharged their obligations, would be able to defend themselves by showing they acted on the company’s behalf in a “reasonable” way.

“Personal liability is becoming an increasingly emotive issue for directors. They need to be aware of the circumstances in which they can be held responsible for company debts,” Mr Levenstein said.

The new Companies Act, which came into effect on May 1, penalises directors and holds them personally responsible for any losses incurred through knowingly carrying on business recklessly, or with the intent to defraud creditors and other stakeholders. It also created criminal liability for directors trading in a manner calculated to defraud creditors, Mr Levenstein said.

However, a director who meets his obligations under the new legislation would be seen as discharging his duties to the company.

George Tweedy, audit risk leader and national professional practice director at Deloitte, said the new laws also contained defence mechanisms for directors who had made bad decisions at board level.

Mr Tweedy said the new “business judgment” rule would give directors more protection from civil actions unless they were guilty of fraud or other unlawful activities.

“The Companies Act provides that a director will have satisfied his duties if he took reasonably diligent steps to become informed about the matter, does not have a personal financial interest, and has made a decision rationally in the belief that it was in the best interests of the company,” he said.

Mr Levenstein said: “Embracing honest, reasonable standards and meeting the requirements of the Companies Act would ensure that decisions made were defensible.”

via BusinessDay – New act ‘supports honest directors’.

Register your "trading as" name now

That does not pose a problem now, but we need to consider what will happen when Schedule 2 section 5 (3) of the Consumer Protection Act is implemented. It deals with the enforcement of business names and is likely to have an impact on those who need to use a trading name of some sort while awaiting their company name’s approval.

Those who are awaiting approval of company names before April 2012, and who are using a business name in the interim, will be exempted from registering their “trading as” business name. However, those companies using a trading name less than a year before the implementation of this schedule will be in a tight spot should both the company name and business name be refused by the CIPC.

For companies which do not engage in marketing or deal largely with consumers, this registration process could work, as a commercially friendly name is not necessary. However, for those who need to use a consumer-friendly trading name that is more inspiring than the equivalent of a 10 digit combination lock, the process of obtaining a company name is likely to turn into a long-term headache.

via The problems with trading without a registered name – Soapbox | Moneyweb

Register your “trading as” name now

Financial Services Board

The Directorate of Market Abuse is a committee of the Financial Services Board with the statutory mandate to investigate cases of Market abuse and to enforce the prohibitions against market abuse in the Securities Services Act, 36 of 2004 (SSA).

Market abuse consists of insider trading (prohibited in section 73 of the SSA), market manipulation (prohibited in section 75 of the SSA), and false reporting (prohibited in section 76 of the SSA).

If the DMA is of the opinion that the SSA has been contravened, it will take enforcement action against the offender. Such cases could be referred to the Enforcement Committee of the FSB, or handed over to the prosecuting Authorities.

The prohibitions against market abuse, the penalties and the DMA’s powers to investigate are set out in Chapter VIII (sections 72 to 87) of the SSA.

The DMA makes a media release after every meeting to update the public on its current investigations. every enforcement action is published once it is completed.

The Johannesburg Stock Exchange, in consultation with the DMA, published a booklet on insider Trading and Other Market Abuse, including the effective management of price sensitive information An electronic version of the booklet is available on this page.

Financial Services Board Internet Site

New Companies Act and email signatures

The provisions of section 32 (4) of the new Companies Act, 2008 (new Act), which addresses the use and publication of a company’s name, provide for similar obligations to those imposed under the previous Companies Act, 1978 (previous Act), with the notable exception of the requirements for including directors’ names and nationalities in business letters and business emails.    

Both new and previous Acts require that a company’s name and registration number be mentioned in legible characters in all notices and other official publications of the company, including notices or other official publications in electronic format. The requirement extends to all bills of exchange, promissory notes, endorsements, cheques, and orders for money and goods purporting to be signed by or on behalf of the company in all letters, delivery notes, invoices, receipts, and letters of credit of the company.  

However, the new Act does not include the requirement contained in section 171(1) of the previous Act, which obliged companies to incorporate and display the full names and nationalities of each of its directors on trade catalogues, trade circulars and business letters of the company.

The provisions of the previous Act meant that companies were required to include the names of its directors (or a link to its website on which these names were listed) on all business email correspondence, which in general practice are included in a corporate email signature.

While this requirement is not provided for under the new Act, our view is that the exclusion was an oversight that could be corrected in an amendment to the new Act. We, therefore, would advise companies still to display the initials and surnames of all directors and the nationalities of any non-South African directors on all business letters, trade catalogues and trade circulars, including those in electronic format wherein a link to the company website containing this information would suffice.

By failing to comply with this requirement, should the relevant section in the new Act be amended, companies may be faced with compliance issues.

via New Companies Act and email signatures – Lexology

ASSOCIATION AGREEMENT between the Members and a Close Corporation

There are still over 1.5m valid, active CC’s in SA, so it is important to get your ASSOCIATION AGREEMENT in order.

Note
Association Agreements are made between a CC and its members. It is not compulsory for you have a written Association Agreement, but it can be helpful in “keeping things clear” if there is more than one member in a CC.

Disclaimer
This sample Association Agreement is provided as a guide only. It should not be substituted for current legal counsel on this matter. No responsibility shall be taken by eCC, its servants or associates for the misuse or misapplication hereof.

Copyright
This contract is the property of Kaltan Trust (South Africa), who holds the Copyright © 1999-2011. This copyright is effective 50 years after the death of the author. Permission: You may use one copy of the agreement per order.

Click here to order a sample Association Agreement

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What does Pty Ltd stand for?

  • What does “PTY” stand for?

    “PTY”, usually used in conjunction with “Ltd”, thus “(Pty) Ltd”, stands for “(Proprietary)”. “PTY” representing “Proprietary” means “private ownership”. This illustrates one of the main features of PTY LTD Companies: that is, their shareholders are not publically declared, only their directors. Thus the ownership is private.

  • What does “Ltd” stand for?

    “Ltd” as used in the designation of a private or public company, for example, either “Bilkovo (Pty) Ltd” or “Bilkovo Ltd”, stands for “Limited” and refers to the limitation on the liability of company shareholders and directors.