The long-awaited
review of SA’s company law is progressing “rapidly”, says
the South African Institute of Chartered Accountants (Saica).
The first
draft of the bill heralding the new Companies Act is expected
shortly, Saica’s senior executive of standards, Linda de Beer,
said yesterday.
The review
of the Companies Act is the first in 30 years and will bring
about major changes to the environment in which companies
operate, says a Saica public practice document.
“The policy
makes it clear that the overriding principles of corporate
law reform should be simplicity of formation and flexibility
of businesses.”
In June
last year government took the first steps to embark on a project
to review SA’s company law by releasing a policy document
on corporate law reform.
The new
law is expected to not only address potential abuses in the
corporate sector, but also seek to restore investor confidence
because SA’s existing legislative framework was more than
30 years old.
The present
Companies Act dates back to 1973.
Over the
years, only piecemeal amendments to the act were introduced.
De Beer
said that the policy document would hasten the process. It
includes suggestions to end the distinction between close
corporations, private companies and public companies.
It recommends
more reporting requirements for companies, including reporting
on remuneration, black economic empowerment, as well as environmental
and labour issues.
The document
also includes proposals for bringing company legislation into
line with the constitution and international developments.
It proposes the creation of a companies commission, with a
companies tribunal to adjudicate on legal matters relating
to the Companies Act.
Saica,
having been asked to conduct research on behalf of the trade
and industry department drafting team, said that relief may
be in sight on three fronts for small to medium-sized enterprises
(SMEs) from having to comply with the onerous requirements
of international financial reporting standards.
Proposed
changes to the act will alleviate the burden on limited purpose
companies, defined as companies without a public interest
element.
Certain
small entities with no external public interest may not require
an audit, so compliance with international financial reporting
standards would not be an issue.
The International
Accounting Standards Board is also likely to produce international
standards that are designed to relax reporting requirements
for SMEs.
On the
vexed issue of auditor rotation, Saica said: “The same individual
may not serve as the nominated auditor of a public company
for more than four consecutive financial years.”
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