‘More time needed for Companies Act’

Published Dec 1, 2010

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Business has called for a further postponement of the implementation of the new Companies Act, for as long as 12 months, because of the inability of the poorly capacitated Companies and Intellectual Property Registration Office (Cipro) to play the pivotal role required by the new act.

It also emerged at parliamentary hearings yesterday that implementation of the new act in its current form could cost each of the large banks up to R100 million to adjust information technology systems to deal with the new symbols in the text of the act.

During yesterday’s public hearings on the Companies Amendment Bill before the portfolio committee on trade and industry, representatives from Business Unity SA (Busa), the SA Institute of Chartered Accountants and the Banking Association of SA (Basa) acknowledged that the new act was an improvement on the current act but said that the April 1 implementation date was not feasible.

“A functional Cipro is essential to this act and the committee must take into consideration that Cipro is not yet ready… its information technology systems are not ready,” Busa representative Simi Sawusa told the committee.

She noted that implementation of the act had been delayed for more than a year “due to serious errors in the legislation”. Despite this delay Busa supported Basa’s suggestion that there be a further postponement of the implementation.

Members of the committee questioned whether the calls for a one-year postponement were due to the inefficiency and incapacity of various government departments or due to inefficiencies within business.

Zodwa Ntuli, the deputy director-general at the Department of Trade and Industry responsible for the new legislation, told Business Report that the department was keen to listen to input from business.

After consideration of this input, the department would determine if a postponement was necessary and whether this was because of inefficiencies within the department or within business. However, she said the final decision would be taken by the committee.

It was pointed out to the committee that the current inefficiency and incapacity of Cipro was already causing considerable problems for companies. One of the business representatives attending the meeting described Cipro as the “glue” that is expected to hold together the implementation of the new act. He also described the new act as the equivalent of a constitution for companies and stressed that it was crucial that implementation difficulties were kept to a minimum.

Basa suggested that the committee might consider providing for a phased or staggered commencement of the act in a similar manner to the provisions of the Consumer Protection Act.

The committee was told that under the new act about 90 percent of South African companies would not be subject to an audit or independent review.

The committee hearings continue today. - Business Report

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