The Corporate Laws Amendment Act, which became law at the end of last year, has introduced a number of changes to company legislation.
“The Act has introduced the concept of a ‘widely held’ company and described certain compliance requirements which must be met,” says Stephen Kennedy-Good, a Deneys Reitz associate.
A company will be ”widely held” if its articles provide for the unrestricted transfer of its shares. This means the shares of the company are not subject to pre-emptive rights in favour of all shareholders in every proposal to sell to a third party; or it is permitted by its articles to offer shares to the public; or it decides by special resolution to be a widely held company; or if it is a subsidiary of a company in one of the previous categories.
As all public companies must be permitted by their articles to offer shares to the public, it follows that public companies will be classified as “widely held”. But private companies will need to review their company’s articles of association to see whether they contain the pre-emptive rights described above or whether they are a “limited interest” company.
Kennedy-Good says the Act stipulates that “widely held” companies must meet additional compliance requirements.
For example, the company will have to appoint an audit committee which will be responsible for the appointment of an auditor, auditor independence and the approval of fees to be paid to the auditor.
The company will also have to report financial information in accordance with international financial reporting standards.
“We recommend that senior management review the articles of association of their company and, if necessary, take steps to ensure compliance with the Act or evaluate whether it would be desirable, and in fact possible, to amend their company’s articles for that company to fall outside the definition of a “widely held” company,” Kennedy-Good says.