Softline VIP place new act, which will affect all existing companies under the spotlight

South Africa's new Companies Act, 71 of 2008, which is expected to be come into operation on 1 July 2010, brings changes which will affect every existing company, its directors, and shareholders. Softline VIP has been at the forefront of educating businesses about the new Act through a series of seminars across the country, facilitated by the author of The New Companies Act Manual, Piet Delport.

Delport says the new Act is the most important company law development since 1973. It replaces the current Companies Act, No 61 of 1973, and amends the Close Corporation Act, No 69 of 1984. Amongst the most significant changes is that close corporations will cease to exist as a new form of enterprise. While existing close corporations can retain their status, no new close corporations will be registered after the Act comes into operation.

New types of companies under the Act include the Non Profit Company (NPC), the "RF" company and the State Owned Company (SOC).
The duties of directors are extensively regulated under the new Act. However, Delport points out that the provisions apply in addition to the present common law duties. "The liability of directors towards the company, shareholders and creditors, including trade unions, is much more extensive and a proper understanding of the duties and possible liability is of critical importance to every director of a company and member of a close corporation. The possibility of the exclusion of duties of directors and the limits of the exclusion and indemnification of directors are totally different from the present situation."

The Act gives more extensive rights to shareholders in respect of meetings and governance of companies. These rights will not only enhance the control of shareholders over management but will also place management under the spotlight in the execution of their duties. These principles are, therefore, of great importance not only for shareholders but also for management, says Delport.

"The problems with the present section 38 (financial assistance to people to acquire shares) have been rectified in the new Act, but the ambit of the new section 44, and also the other 'corporate capital' provisions, such as in respect of distributions (dividends) and loans to companies in a group, are much wider, which creates a new set of problems. It is also now possible to issue shares if the full consideration has not been received by the company (and also for work to be performed for the company). These rules are also subject to amendment by the company and a proper analysis of these rules will help to make the financing of the company less complicated."

It is Delport's opinion that the new Act should simplify company formation. Instead of the Memorandum and Articles of Association, a company's constitutional documents have been consolidated into one document, the Memorandum of Incorporation. This document sets out the rights, duties and responsibilities of shareholders, directors and others in relation to the company.

The compulsory reservation of company names falls away. If the name in the Notice of Incorporation is the same as that of a registered company, or a reserved name, the Commissioner may use the registration number as the company name in the interim. Reservation of a name prior to registration is allowed, but it is not compulsory. If the company does not respond, the registration number becomes the company name. However, the practice of "trading as" under a name different from the registered name will cease.

"The introduction of the new Companies Act signals a considerable shift in company law in South Africa. Businesses need to be prepared; equip themselves with a thorough understanding of the full implications of this Act on their operations. The Act affects everyone involved in business today, from senior management, owners and auditors, to legal advisors, credit agencies and trade unions," Delport concludes.

Some other important considerations of the new Companies Act:

The Act has a new category of transactions known as "fundamental transactions". While some of these are complicated restructurings that will not be used in the life of a small company, the sale of the assets of business of a company is also such a transaction.

If a company enters into certain transactions or takes certain resolutions, the dissenting shareholder has a right to demand the company to purchase his/her shares ("appraisal rights"). This is a totally new system and philosophy and every company and director must know the details of this process and must be aware of the possibility of the initiation of this process.

A new "intensive care" process for ailing companies, called "business rescue" is also introduced. This system can be used not only for the benefit of the creditors but also to the benefit of the company if it is initiated and applied correctly.

For more information:
Yvette Venter
Training and Seminars: Softline VIP
Tel: 012 420 7437
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

About Softline VIP

Softline VIP is a leading supplier of payroll and human resource management solutions in South Africa, Namibia and Botswana. The company now boasts more than 24,000 clients.

With three payroll and human resource management products, Softline VIP is able to meet the needs of any size company. Coupled with an extensive service offering, Softline VIP is the only payroll and HR solution geared to meet the challenges of the modern payroll office.
The VIP Products are synonymous with ease of use, stability and reliability, with the flexibility to cater to the unique needs of every client. VIP promises long-term sustainability over and above legislative compliance. VIP understands the Human Resources and Payroll environment and offers the client peace of mind by providing a total solution.
Softline VIP products include:

VIP Premier - Softline VIP also supplies leading technology to service large and corporate clients. VIP Premier is geared towards increasing the functionality of payroll systems and provides an uncomplicated solution for medium to large organisations. One of the key features of this product is that it is quick to implement in comparison to similar solutions. Meeting the needs of any payroll office and supplying the most suitable solution is important for Softline VIP as it strives to ensure practical solutions for all users. Our products are easy to use and reliable and the information produced is accurate and complies with all statutory requirements.

VIP Classic - VIP Classic is the perfect solution for clients with bigger operations than the one-man business. VIP Classic provides the same flexibility as larger systems but is aimed at the small to medium sector. This software offers a total solution to users.

VIP Essentials - VIP Essentials is geared to small businesses and contains the same ease of use and stability of all VIP's products. VIP Essentials is an affordable product making it an ideal solution for the small business paying less than 30 employees.

Softline has a solid track record of profitability and cash generation.  The group delivers quality accounting, payroll and CRM software solutions that improve the efficiencies of businesses around the world.

About Softline

Softline is a leading provider of accounting, payroll, CRM and ERP software solutions to small, medium and large sized companies. Founded in 1988 by Ivan Epstein, Alan Osrin and Steven Cohen, Softline was established during the formative years of the software industry and listed on the JSE Securities Exchange South Africa in February 1997. Softline expanded to establish a strong position within its area of focus in South Africa and Australia. Focused on the development of accounting, payroll, CRM and ERP software solutions, Softline has a 20 year track record as a market leader. The group has a broad range of products offering users a variety of software solutions to run their businesses efficiently. Softline's leading brands include Softline Accpac, Softline Pastel (Accounting and Payroll) and Softline VIP. The combination of the group's product offerings provide Softline customers with comprehensive, well-branded accounting, payroll, CRM and ERP software solutions. In November 2003, Softline was acquired by the Sage Group plc, a FTSE 100 company. The software group includes market-leading businesses throughout the United Kingdom, Europe, North America, South Africa and Australia, supplying business software to the small, medium and large sized business community. Softline has a solid track record of profitability and cash generation. The group delivers quality accounting, payroll, CRM and ERP software solutions that improve the efficiencies of businesses around the world.

About the Sage Group plc

The Sage Group plc is a leading global supplier of business management software solutions and related products and services, principally for small to medium-sized enterprises. Formed in 1981, Sage was floated on the London Stock Exchange in 1989. Sage has 5.8 million customers and more than 14,500 employees worldwide. We operate in over 26 countries covering the UK, Europe, North America, South Africa, Australia, India and China. For further information please visit www.sage.com.