SA Companies Act 61 of 1973 and SA Companies Act 71 of 2008

The South African Companies Act, 61 of 1973 has a lot of shortcomings and does not meet all the requirements of modern companies. The most important deficiencies in it relate to capital maintenance rules, corporate governance and shareholder protection. Corporate governance has largely been regulated by common law and codes of corporate practice rather than by statute. This has created uncertainty and imprecision, especially with regard to directors’ fiduciary duties. Another downside of the 1973 Companies Act is that it lacks effective enforcement mechanisms, which has the result that directors and senior management become, in a big sense, immune to their wrongdoing and negligence. Litigation by the offended party is expensive and protracted, while class actions and attorneys’ contingency fees are still relatively novel and immature. Another problem is that the public institutions tasked with investigating wrongdoing and negligence and enforcing the 1973 Act lacked adequate resources and power. The objective of the new Act, 71 of 2008, is to make company law more easily understandable and to make it simpler by containing as few mandatory rules and prohibitions as possible.