Sections 45 and 48 of the Companies Act and the Impact of Recent Amendments and Case Law

On 27 December 2024 the Companies Act 71 of 2008 (hereafter the Companies Act) was amended. Section 45(2A) of the Companies Act now excludes financial assistance from a holding company to its subsidiaries from the requirements in sections 45(3) and 45(5). Section 48(8) of the Companies Act now requires a special resolution for all share buy-backs, except when these transactions take place on a recognised stock exchange or via a pro-rata offer to all shareholders. Both these amendments were made to promote the ease of doing business by making the Companies Act clearer, user-friendly, consistent with well-established principles, and not overly burdensome on the conduct of business. However, everything comes at a cost, and a lesser compliance burden could possibly lead to an increase in opportunities to commit fraud and a decrease in ways to detect it. Through a doctrinal research methodology, this article discusses the requirements and aspects of sections 45 and 48 relevant to this article. This includes the impact of recent amendments and case law such as the Capprec case, the Constantia Insurance case and the Trevo Capital case on the application of these sections, as well as the subsequent impact on the rights of shareholders and creditors. The article concludes that the amendments to section 45 have been well received, leading to business efficiency while sufficiently protecting shareholders and creditors. Unfortunately, the section 48 amendments seem to create a higher compliance burden, more uncertainty and less protection for shareholders and creditors. It is clear that the focus of the Amendment Bill has shifted from shareholder protection to efficiency with share buy-backs.