PRESENTED BY: Lerato Sebata – SAIPA Chairperson subcommittee: Corporate Law

1. COMPANY BILL, 2008SAIPA PRESENTATION, 13 AUGUST 2008PARLIAMENT PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY PRESENTED BY: Lerato Sebata – SAIPA Chairperson subcommittee: Corporate Law Nicolaas van Wyk – SAIPA Technical and Standards Executive Prof. Farouk Cassim - Corporate law expert

2. INTRODUCTION • About SAIPA • Contributors: • Committee members • Mias Strauss – Chairperson SAIPA Technical Committee • Lerato Sebata – Sub committee chairperson: Corporate Law • Nicolaas van Wyk – Technical Executive SAIPA • Consulted experts • Prof. Farouk Cassim - Corporate law expert • Prof. Piet Delport – Corporate law expert • Flip Dwinger – Corporate law expert • Pieter Stassen – Corporate law expert • Corrie Cloete – SAIPA practicing member • Prof. David Venter – Management expert • Josef Tshiwilowilo – SAIPA chairperson and member of ABASA • Saleem Kharwa – International Accounting Education Standards Board of the International Federation of Accountants

3. INTRODUCTION • Our submission: • specific discussion on relevant sections of the Bill and • general conceptual discussion of relevant issues in the Bill.

4. SPECIFIC PROPOSALS • FINANCIAL STATEMENTS (Page 12 – 14) • Mandatory financial statements • Establish differential financial reporting • Business Rescue provisions • Define and determine scope of accounting records • Fair presentation and financial reporting standards • REPORTS ON FINANCIAL STATEMENTS (Page 14 – 22) • Mandatory appointment of report provider • Registered auditors – IRBA • Professional accountants - IFAC • Audit, Independent review, factual findings • Offences associated with preparation • Reliance on accountant

5. SPECIFIC PROPOSALS • FINANCIAL REPORTING STANDARDS COUNCIL (Page 22 – 25) • Effective and efficient issuing process • Independent regulator or agency • Voluntary association • CLOSE CORPORATIONS (Page 26 – 28) • Different philosophical approach between small private company and close corporations • Flexibility and simplicity – Different but equally valid approaches • Variety of choice • Unfettered future existence of the close corporations act • No consequential amendments • Only a change of policy is required

6. SPECIFIC PROPOSALS • PENALTIES (Page 28 – 30) • Strong deterrent against fraudulent activity • Make preparers liable for misrepresenting financial statements • Concepts of materiality, bona fide, gross negligence should apply

7. SPECIFIC PROPOSALS - MODEL

8. GENERAL PROPOSALS • Harmonisation with other legislation (Clause 1) • Related and inter-related persons and control (Clause 1) • Purpose of the bill (Clause 7) • Names of companies (Clause 11) • Legal status of companies (Clause 19(5)) - Constructive notice • Pre-incorporation contracts (Clause 21) • Reckless trading (Clause 22 and 218) • Board and directors (Clause 66(8)) • Standards of directors conduct (Clause 76(3)) • Business rescue (Chapter 6) • Protection of whistle blowers (Clause 159) • Application to declare director delinquent or under probation (Clause 162)

9. GENERAL PROPOSALS • Derivative actions (Clause 165) • Commission objectives (Clause 186) • Functions of panel (Clause 201) – Securities Regulation Panel • Finances (Clause 210) • Civil actions (Clause 218)

10. CONCLUSION • APPENDIX 1: Proposed amendments to clause 1: interpretation • APPENDIX 2: Proposed amendment to clause 28: accounting records • APPENDIX 3: Proposed amendment to clause 28: financial statements • APPENDIX 4: Proposed amendment to clause 28: financial reporting standards • APPENDIX 5: Proposed amendment to clause 28: annual financial statements • APPENDIX 6: Proposed amendment to clause 28: annual financial statement report providers • APPENDIX 7: Proposed amendment to clause 28: regulatory agencies • APPENDIX 8: Proposed amendment to clause 28: financial reporting standards council • APPENDIX 9: Proposed amendment to schedule 5: close corporations • APPENDIX 10: Article on the history of the close corporation act • APPENDIX 11: Article on differential reporting