Deadline for complying with new Companies Act drawing near

If you are a director of a previously known Section 21 Homeowners’ Association (now called a Non-Profit Company (NPC)), you have until the 30th April 2013 to bring your shareholder agreements and your company’s Memorandum of Articles of Association (now called Memorandum of Incorporation) in line with the requirements of the new Companies Act, said Michael Bauer, general manager of IHFM, the property management company.

What you should know is that all old Section 21 companies’ names must now end with NPC. Therefore, directors need to start using “NPC” on the company letterhead and official correspondence as part of the official name and show the stakeholders that all are aware of the new Companies Act. The old memorandum and articles is now one document called the Memorandum of Incorporation (MOI).

According to Schedule 5 of the new Companies Act, despite anything to the contrary in a company’s MOI, the provisions of the new Companies Act already apply. This means:

· that current directors’ duties, conduct and liability as per the new Act already applies to each director and prescribed officer. This means you have to let your board know what directors duties, conduct and liability comprises and you need to establish what a prescribed officer is (Section 66 – 75).

· directors that are not eligible, according to the new Companies Act are regarded as having resigned on the effective date.

· a NPC needs to have a minimum of three directors. If this is currently not the case, the vacancy has to be filled as soon as possible, according to the new Act.

· members are granted rights with regards to access to information and receiving notices for meetings. This has to be implemented immediately.

Except for the provisions that apply immediately as discussed above, Government has given a two year transition period to comply in full with the provisions of the new Companies Act. From the 1 May 2011 the new Companies Act of 2008 came into effect and on the 1 May 2013 the “grace” period ends.

Therefore, on 1 May 2013, all companies must comply with all the provisions of new Act. (Companies registered after 1 May 2011 must comply with the new Act from their inception).

“Although the deadline is only in May 2013, this does not mean that the directors can sit back and relax,” said Bauer. “The changes that need to be made before then will take time to implement. The most important action the directors have to take is to ensure that its governing documents are in order and that it complies with the provisions of the new Companies Act by 1 May 2013.”

From 1st May 2013, all unchanged existing Memorandum of Articles of Association will be invalid and might go so far as to contravene or breach provisions of the new Companies Act.

“This will have serious consequences for the company, directors, and members,” said Bauer.

“It is important that you do not wait too long to restructure your MOI to avoid legal issues but also to avoid more costs and delays in submitting your amended MOI, as your attorneys and the CIPC will end up with a bottleneck if everyone waits until month of the deadline,” he said. “The other thing to consider is that it might not be necessary for the scheme to have an HOA but rather to change over to a body corporate. This way the costs and complications of the NPC are avoided.”

The CIPC documents are available for downloading from this link: Download Now

Article By: www.ihfm.co.za

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