close corporations amendment bill, 2005 chief director policy and legislation 18 may 2005
TRANSCRIPT
CLOSE CORPORATIONS AMENDMENT BILL, 2005
Chief Director Policy and Legislation18 May 2005
1. Introduction
• The Department of Trade and Industry (the dti) piloted the Companies Amendment Bill in 2004.
• There was also a need to simultaneously pilot the Close Corporations Amendment Bill, 2005.
• There was some administrative bundle and the Close Corporations Amendment Bill, 2005 was not considered by Cabinet simultaneously with the Companies Amendment Bill, 2004.
• The same urgency which applied to the Companies Amendment Bill, 2004 apply to the need to amend the Close Corporation Act, 1984.
• Issues to be addressed by the Close Corporations Bill cannot wait for the Corporate Law Reform Project to be concluded.
Why a Need to effect the Amendments?
• The Bill intends to address two important issues:
- unfairness to a member or members in relation to termination of member’s liabilities on restoration (reregistration) of a close corporation.
- broadening of the definition of a firm so as to allow a corporation to perform the duties of an accounting officer.
• Member’s should not be exempted from their liabilities incurred during their tenure.
• Membership of inter vivos trusts of close corporation.
- the Act as it stands prohibit membership of a trust to be a member of close
corporation.- no reason exists why membership is
denied.- tax considerations only were the reasons
why membership is denied.
• The purported section intends to:
- allow a natural person (trustee of a trust inter vivos) to be a member of a close corporation.
- deny membership if beneficiaries of the trust is a juristic person.
- allow the trustee to have the obligations towards the close corporation like any
other member.
- allow the trustee to have rights like any other member.
- allow the close corporation not to observe obligations between the member (trustee) and the trust.
Which Economic principles does the Bill seek to address?
• Fairness to the prejudiced members.
• Good corporate Governance (no exemption to members’ liability)
• More opportunities created for CCs to participate as entities in the economy.
Conclusion
• The Bill will bring fairness to potentially prejudiced members of a restored CC.
• Good corporate governance will be created in the CC regime.
• Presentation of clause by clause follows:
Read the Bill.