June 25, 2019
June 25, 2019

The Companies Act 71 of 2008 (“Companies Act”) addresses various aspects not adequately dealt with in the old Companies Act 61 of 1973, including the use of:

  • information in electronic form;
  • electronic communications; and
  • technology.

The Companies Act recognises electronic communications as defined in the Electronic Communications and Transactions Act 25 of 2002 (“ECT Act”), to be a “communication by means of data generated, sent, received or stored by electronic means and includes: (a) voice, where the voice is used in an automated transaction; and (b) a stored record.”

The Companies Act provides for electronic compliance. In many ways, it eases the administrative burden by enabling people to use technology and the electronic form of documents and communications.

The Companies Act requires that companies retain certain documents, records or statements. Examples of these include:

  • a copy of its Memorandum of Incorporation, and any amendments or alterations;
  • a record of its directors with certain specified details; and
  • accounting records.

In terms of this section, it is sufficient if any electronic original or reproduction of the document is retained as provided for in section 16 of the ECT Act. In terms of section 16 of the ECT Act, a company will meet the requirement of the Act to retain information if:

  1. the information is accessible “so as to be usable of subsequent reference”;
  2. it is in the format in which it was generated, sent or received, or in a format which can be demonstrated to accurately represent the information generated, sent or received; and
  3. the origin and destination of that data and the date and time it was sent or received can be determined.

Where the Companies Act requires a document to be signed or initialled, the person may sign or initial by using an electronic signature as provided for in the ECT Act. For example, a Memorandum of Incorporation can now be signed electronically as well as resolutions passed by the board of directors and shareholders of a particular company – no more posting resolutions around the country, or printing, signing and scanning them. Once Annual Financial Statements have been approved by the Board, an authorised director may sign the statements with an electronic signature.

In terms of section 63 (2) of the Companies Act, a company can now conduct shareholder meetings by electronic communication, as long as the Memorandum of Incorporation does not prohibit it. The entire meeting can be conducted electronically, alternatively, certain shareholders can participate through electronic means. In case of the latter, all persons must be able to communicate concurrently without an intermediary. Shareholders must also receive notice that electronic participation will be available.

According to section 73(3) and 74(1) of the Companies Act, board meetings can occur by way of electronic means, as long as the Memorandum of Incorporation does not provide otherwise. A decision to be voted on at a board meeting can now also be adopted through written (including “electronic writing”) consent of the majority of directors, provided that all directors have been notified of the matter and the Memorandum of Incorporation does not prohibit it. Therefore, an email vote will suffice.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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