New laws for businesses in South Africa – taking aim at corruption, red tape and CEO pay

 ·14 Aug 2023

The Department of Trade and Industry and Competition has gazetted its intention to submit the Companies First and Second Amendment Bills to parliament in August 2023.

The two bills aim to shift the dial significantly on red tape and inequality in doing business in the country, while also addressing issues identified by the Zondo commission on State Capture around delinquent directors and corruption recoveries.

Broadly, the laws aim to:

  • Cut red tape and improve the ease of doing business in South Africa;
  • Force companies to disclose the pay gaps between executives and workers;
  • Force companies to disclose their ultimate shareholders;
  • Increase the period in which former directors can be declared delinquent, and allow courts to extend it further;
  • Empower courts to extend the period in which former directors can be held liable for loss and damages.

More specifically, the Companies First Amendment Bill wants to improve the ease of doing businesses in South Africa by cutting “unnecessary red tape”, the department said.

“In this regard it is important that company law should, among other factors, be clear, user friendly, consistent with well-established principles and not be over burdensome on the conduct of business,” it said.

By implementing the amendments, the government hopes to attract investors and also make the local economy more effective and efficient so it can create more jobs.

The other big change in the laws is addressing inequality. The main focus here is exposing the inequality between directors and senior management on one hand and shareholders and workers on the other hand, the department said.

Proposals in the amendments would see it become compulsory to disclose the pay gaps between top executives and lowest-paid workers, and interrogate the reasonableness of remuneration.

The third major focus of the proposed laws is greater disclosure of the ultimate owners of shares in a business. This is part of the state’s wider push to combat corruption and money laundering and came as a result of the General Laws Amendment Act that was passed at the end of 2022.

Through consultation with senior executives and with assistance from the Specialist Committee on Company Law, the amendments have been altered to address administrative issues, enhance regulatory efficiency and tidy up drafting deficiencies.

Other changes

The second bill making its way to parliament this month has a greater focus on the findings of the Zondo Commission in to State Capture, where it was recommended that the Companies Act be amended to address issues around delinquent directors.

The current Companies Act makes provision for an application to a court for an order declaring a person a delinquent or under probation, however, this is only allowed if that person was a director at the company within the past 24 months.

Given the testimony and long trail followed by the Commission in investigating the decades-long State Capture saga, it recommended that this be changed to allow for an application to be brought against those who had been out of the company for longer than 24 months, if good cause was shown.

After conducting research and looking at similar laws abroad, the department is now proposing the term be extended to five years.

In some rare cases, this limit can be extended further, it said.

“In certain circumstances, even the time bar of five years may be insufficient and the Courts should be empowered on good cause shown to extend that time period in a specific case.

“Furthermore, when good cause is shown to the Courts to extend the time bar, such power of the Court should include the right to extend the time period even in respect of any of the circumstances…which may have occurred in the period before the extension.

“In exercising its powers in this regard the Court will take into account the interests of justice and fairness.”

Similarly, the laws will change other provisions in the companies act that allows directors to be held liable for loss, damages and costs only within a three-year window. The amendments empower the courts to extend this, where appropriate.

The summaries of the laws that will be submitted this month can be red below.


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