If you’ve been slack in complying with the Companies Act of 2009, the April 2013 deadline probably has you sweating bullets, but according to attorney Adrian Dommisse, there’s no need to get hysterical. Dommisse Attorneys’ Tracy Hockly says companies who are in the process of becoming compliant have nothing to worry about, but should use the opportunity to review their founding documents.
Since the Act was passed in 2009, companies were granted a two-year grace period to ensure that provisions in their founding documents, such as shareholders’ agreements, are in accordance with the 2009 Act. According to Hockly this means that information in your founding documents that conflicts with the new Act is null and void. “Perhaps most importantly, anything in your shareholders agreement that is inconsistent with the Act or the MOI is null and void,” she said.
While Hockly believes owner-managed private companies aren’t really affected by the ghosts of deadlines passed, the deadline is a good reminder to “get your house in order”. “The end of the grace period doesn’t mean you can no longer amend your MOI, or that you’ll be charged any penalty for failing to do so (aside from a nominal fee for the amendment, payable to the CIPC). But you do need to know that the assumptions you’re operating under are correct,” she warns.
The situation is more urgent for those who have two or more shareholders, especially if there is a difficult relationship between shareholders. If you aren’t completely confident that your rights under old founding documents are adequately protected under the new Act, it’s wise to
check with an attorney how best to deal with this as soon as possible.
Hockly advises preparing a good brief, should you decide to approach an attorney to review founding documents to keep costs down.
“As well as your existing documents, be sure to include exact details of all your current shareholders and directors, how directors are appointed, how decisions should be made, and any agreements you currently have in place around transfers of shares, loan accounts and soon. If you’re thinking of bringing in an outside investor or selling shares, mention it; and also point out any red flags or areas of actual or potential conflict. Write down all the questions you have before any meeting, and don’t be afraid to ask what might seem like stupid questions.
The new Act is in many ways intended to be less onerous and better for business than the old version, so it’s to your benefit to develop a good grasp of the basics.”