Articles on: Cosec

What is the general anti-avoidance provision of business legislation in relation to companies act 2008?

Written by Dr. Adv. Leigh Hefer & Jayne Hunter-Rhys. COMPANY SECRETARY’S HANDBOOK (2021). Published by Genesis Corporate Services.

Section 6(1) of the Act underscores the fundamental principle that a company is prohibited from contracting out of the Act, unless the Act stipulates otherwise.

It gives the Companies and Intellectual Property Commission (CIPC) (k/a the Commission), the Takeover Regulation Panel and a Stock Exchange in respect of a company listed on that Exchange, the right to apply to a Court for an Order declaring any agreement, transaction, arrangement, resolution or provision of a company’s MOI or Rules:
2.1 to be primarily or substantially intended to defeat or reduce the effect of a prohibition or requirement established by or in terms of an unalterable provision of the Act;
2.2 to be null and void, therefore unenforceable in terms of the Act.

There are four elements to section 6(1):
3.1 no one other than the Commission, the Takeover Regulation Panel, or a Stock Exchange may make the Court application;
3.2 section 6(1) is restricted in its application to the unalterable provisions of the Act;
3.3 the word “defeat” or “reduce” are capable of a wide scope of interpretations, and there is uncertainty about the scope of application of section 6(1)(a);
3.4 rights are now given to Stock Exchanges to invoke and enforce section 6(1) which evidences the vital role played by the Johannesburg Stock Exchange (JSE) Limited in the regulation of listed companies.

Source: Section 6(1) of Companies Act 71 of 2008

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Updated on: 23/05/2023

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