The new Companies Bill, to replace the ageing Companies Act, will promote transparency and corporate governance and align us with international best practice. Rudolph du Plessis, partner at Bowman Gilfillan, says the incorporation of companies will be simplified. "The bill cuts down on the number of statutory forms required to incorporate a company. Current legislation requires filing a certificate of incorporation, a certificate to commence business, and lodging a memorandum of association and articles of association with the Registrar of Companies. The bill proposes a memorandum of incorporation and filing of a notice of incorporation," he says.

"Upon incorporation, the Commissioner, who will replace the Registrar of Companies, issues a registration certificate."

He says not all companies would have to file their memorandum of incorporation with the Commissioner. "Certain categories of companies will keep their constitutional documents in-house. This will alleviate the Commissioner's administrative functions and make it easier to request and review the company's constitutional documents."

The board of directors can change the memorandum of incorporation to correct an obvious error without going through cumbersome formal procedures.

The bill provides that an act of a company is not void solely because it or its directors did not have the relevant authority.

Another new provision, he says, is that if the memorandum of incorporation limits or restricts a company's powers or activities, the shareholders may pass a special resolution to con firm and approve any action that was inconsistent with such limits or restriction.

He says companies can now make certain governance rules themselves. The board can formulate and give shareholders these governance rules, which become permanent rules regulating the company's governance after they are ratified at the next general meeting of shareholders. "This gives companies flexibility to determine their own rules on specific governance issues.”

Du Plessis says one of the bill's most important innovations is the application of different rules to different categories of companies. "This approach recognises that smaller private companies should not have the same corporate governance and financial reporting burdens as large companies."

The bill categorises companies as nonprofit and profit. Profit companies either do not contain restrictions on transfer ability of their shares and do not prohibit offers to the public (larger public companies); or they contain restrictions on transferability of their shares that prohibit offers to the public (smaller private companies). Different responsibilities would apply, he says.

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