The deadline of 1 May 2013 for incorporated companies to amend their set of articles of association and memorandum of association to a Memorandum Of Incorporation (MOI) free of charge is fast approaching, warned the South African Institute of Chartered Accountants (SAICA).
Juanita Steenekamp, Project Director: Governance SAICA, said the Companies Act, 2008 which became effective on 1 May 2011 introduced a number of changes to the South African business landscape. “One of the most significant changes is that the requirements for incorporated companies were amended and what were previously known as the articles and memorandum, were changed to the new MOI”.
As per the Act, all incorporated companies have to comply with the new law. The transitional provisions provided that for a period of two years after 1 May 2011, a company could amend its MOI free of charge to bring it in line with the requirements of the Act.
Steenekamp observes that there seems to be uncertainty from companies on the implications of them not amending their articles and memorandum. “During the 24 months, from 1 May 2011 to 1 May 2013, the old articles and memorandum remain in effect for companies unless there are specific transitional provisions that override the articles and memorandum of association.”
“After the 24 months period (from 1 May 2013), the previous articles and memorandum will continue as the MOI of the company. If there is any requirement in the articles and memorandum that is in conflict with the Act, then those requirements will automatically be void from 1 May 2013,” Steenekamp confirms.
The transitional provisions are captured in Schedule 5 of the Act and include requirements such as the duties, conduct and liabilities of directors as well as approval of financial assistance or distributions. “It is imperative that companies are aware that the requirements set out in Schedule 5 therefore apply to companies with effect from 1 May 2011, even if the articles and memorandum had stated any other requirements”, Steenekamp advises.
It is the responsibility of companies to review their memorandum and articles and identify any possible conflicting provisions. The decision to amend the articles and memorandum is ultimately the company’s and should be based on the review of the company documents.
An example that companies need to consider is the fact that the current articles and memorandum require a company to prepare annual financial statements that are required to be audited at the end of each financial year. However, in terms of the Act, not all companies require an audit of their annual financial statements.
Companies should therefore take note that this is one of the requirements included in their articles and memorandum that should be adhered to. Although this is not in conflict with the Act, nor a requirement of the Act, it should still be adhered to post 1 May 2013. “It is also important to note that companies can alter their MOIs to impose a higher restriction or more onerous requirements on the company, which it has to adhere to”, says Steenekamp.
Steenekamp states that companies should take note that it is not compulsory to amend their articles and memorandum which will now be known as the MOI, but it would be a prudent business decision to review the current articles and memorandum requirements in line with the requirements of the new Act and to take note that any conflicting provisions, not already included in the transitional provisions, will not be valid after 1 May 2013.