Companies Act: Corporate laws should be properly designed and not muscled through Parliament

The Democratic Alliance is strongly supportive of the Companies Amendment Bill and its broad approach of cutting red tape and making it easier to do business in South Africa. We are absolutely insistent, however, that the correct and proper parliamentary processes must be followed in the finalisation of the legislation.

Today it became clear that some officials from the Department of Trade and Industry may be playing fast and loose with South Africa's corporate legislation by pressurising Parliament to finalise the law before 1 April 2011.

As it stands, it is almost impossible that Parliament will be able to process the Bill in a proper and prudent way before the end of the month. Even if the Portfolio committee were to rush through the voting on and debating of the bill next week, it would still need to go to the National Council of Provinces for consideration, and the President would have to apply his mind before signing it.

There will be no benefit to muscling this law through Parliament, and doing so may impose serious costs on the business sector. The Bill is a vast improvement from the draft on the table when we began this process, but it still requires work in several key areas. Tomorrow in the Portfolio Committee the Democratic Alliance will be presenting, amongst others, several critical amendments required to:

• Allow South African companies enough time to understand the legislation before they have to abide by it (Section 225)
• Ensure the public is properly protected from convicted fraudsters who may try to use company directorships to commit additional crimes (Section 69)
• Clarify the extremely sensitive distinction between a company that is technically insolvent, perhaps because of the nature of their trading operations; and one that is commercially insolvent, and therefore a risk to the economy (Section 22)
• Clear up the fact that the "Solvency and Liquidity Test" should only apply to an individual company as distinct from a group of companies (Section 4).

We trust that cool heads will prevail and that the Portfolio Committee will be given every chance to make sure this legislation can end up a truly world-class example of corporate law. There is nothing to be gained by rushing to meet an imaginary deadline.

Statement issued by Tim Harris MP, DA Shadow Minister of Trade and Industry, March 9 2011

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