Companies Amendment Bill: Amendment to a memorandum of incorporation
The Minister of Trade and Industry published the Companies Amendment Bill, 2018 (the “Bill”) for public comment on 21 September 2018. The Bill proposes a number of amendments to the Companies Act, 2008 (the “Companies Act”) in order to align the Companies Act with global trends and to close loopholes identified during the implementation phase of the Companies Act. This article serves as the first of five instalments dedicated to addressing the five most significant amendments proposed by the Bill and the writer’s comments thereon.
One of the proposed amendments the Bill introduces is the amendment to section 16 of the Companies Act, specifically the effective date of the amendment of a company’s memorandum of incorporation (“MOI”). Such an amendment seeks to clarify the issue many practitioners have faced and been divided on in respect to the definition of ‘file’ in the Companies Act. The proposed amendment states that the amendment of a company’s MOI will take effect 10 business days after the receipt of the notice of amendment, if the Companies and Intellectual Property Commission (“CIPC”) after the expiry of the 10 business days has (i) not endorsed the notice of amendment; or (ii) failed to deliver a rejection of the notice of amendment to the company with reasons.
It will thus be clear that the CIPC has 10 business days after receipt of the notice of amendment to accept or reject the notice of amendment. It is interesting to note from the proposed amendment that simple rejection of the notice of amendment is not enough, the CIPC must supplement the rejection with reasons. So if the CIPC does not respond to the notice of amendment within 10 business days, it will be deemed that the MOI amendment is effective and the CIPC will be precluded from rejecting the MOI amendment after the 10 business days has elapsed (even if material grounds exist to do so).
The writer believes the different schools of thought over when an amendment to a company’s MOI takes effect will be resolved by the proposed amendment and provides much needed clarity as to the exact timing of a company’s amendment to its MOI. Such a proposed amendment is welcomed. Based on the proposed amendment, drafting of any conditions precedents in transaction documents, in so far as the effective date of the MOI, needs to be considered and attention as to the time lines taken cognisance of.