Title page for ETD etd-11222011-124709

Document Type Master's Dissertation
Author Dlamini, Bongiwe Gcinekile
Email dlaminibongiwe8@gmail.com
URN etd-11222011-124709
Document Title Capital rules in terms of the Companies Act No. 71 of 2008
Degree LLM
Department Mercantile Law
Advisor Name Title
Prof P A Delport Supervisor
  • company law
  • Companies Act No. 71 of 2008
  • capital
Date 2011-09-08
Availability unrestricted
This paper entitled Capital Rules in terms of the Companies Act no.71 of 2008 is submitted in partial fulfillment of the requirements for the degree of Master of Laws (LLM) majoring in Corporate Law.

The topic is motivated by the recent change in our company law ushered by the new Companies Act no.71 of 2008. The new Act sets forth to repeal, in the near future, the Companies Act no.61 of 1973. It is trite that the 1973 Act, which has regulated our company law for over thirty (30) years, was old and outdated. Several attempts were made to resuscitate it so as to bring it to par with prevailing international trends in company law. This is evidenced by the numerous amendments to the 1973 Act over the years, particularly between the years 1998 and 1999 when company law trends were experiencing a dimensional shift through out the world. However, these attempts boiled down to ‘pouring new wine into an old skin’. Ultimately, it became imperative that the entire Act be reviewed and hence the enactment of the Companies Bill which later became the new Companies Act of South Africa.

The new Act comes with major changes in the company law system. Like any new legislation, some of these changes still need to be revisited while others still need time to settle into our legal system. This paper, as the title depicts, focuses on the changes introduced by the new Act in the sphere of Capital Rules.

To a great extent, the new Act is clear on its position regarding the principle of capital maintenance. Capital rules no longer apply as exceptions to the common law rule as was the case under the 1973 Act. The rules are unambiguously stated in the new Act in sections 45, 46 and 48. The Board of Directors is endowed with power to authorize a company to, inter alia,

  • provide financial assistance to a related or inter-related company,
  • acquire its own shares or those of a related or inter-related company,
  • issue shares at a discount and
  • declare and pay out dividends.

All things done in terms of the new Act are subject to the company’s solvency and liquidity. Any act done that is inconsistent with the Act is void and to be deemed void, the court has to declare such act void (section 218 of the Companies Act no.71 of 2008). This paper seeks to highlight the problems anticipated in light of the changes imported by the new Company law dispensation. Some positive changes have also been observed and these too are highlighted herein. The findings herein are not conclusive as this paper addresses only one specific aspect, Capital Rules, the Act itself is much broader and covers a wide aspect of company law.

It is my wish to see other areas of research develop from this paper and more importantly, to see amendments on the Act being implemented in due course.

© 2011, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Dlamini, BG 2011, Capital rules in terms of the Companies Act No. 71 of 2008, LLM dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd- 11222011-124709 / >


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