Draft Companies Amendment Bill: Some good news for companies undertaking share buy-backs

22 November 2021
Accounting
South African Accounting Academy

It seems that the Companies Amendment Bill could finally put to bed an issue that has, for over a decade, created a great deal of uncertainty with respect to share buy-backs. Section 48 of the Companies Act makes provision for the reacquisition by a company of its shares.

The Draft Amendment Bill takes heed of and confirms the position in the Capital Appreciation judgment in so far as it relates to a section 48 buy-back not being a “scheme of arrangement”, as the proposed amendment makes it very clear that there is a distinction between a “voluntary” share buy-back in terms of section 48 and an expropriation share buy-back in terms of a scheme of arrangement contemplated in section 114 by virtue of the fact that there is no longer any mention of compliance with section 114 and 115.

This is certainly a welcomed amendment as it removes a substantial layer of compliance such as the requirement to prepare an independent expert’s report as set out section 114(2) and the appraisal right provisions set out in section 164 (read with 115(8)).

Click here to download the full discussion article:

https://www.cliffedekkerhofmeyr.com/export/sites/cdh/en/news/publications/2021/Corporate/Corporate-Comercial-10-November-2021.pdf

How does this affect you and your clients?

Relevance to Auditors, Independent Reviewers & Accountants:

The Companies Act and related amendment bills are crucial pieces of legislation that your clients must comply with, and which you must assess compliance with.

If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.

Relevance to Your clients:

A company or CC has a duty to comply with the Companies Act and related amendment bills – in this case when conducting share buy-backs.

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