Companies Amendment Act 2024: What Directors Must Know

The Companies Amendment Act 2024 (Act 16 of 2024) introduces the most significant changes to South African corporate law since the Companies Act 71 of 2008 came into full effect on 1 May 2011. Every director, shareholder, and company secretary operating in South Africa must understand these amendments because they fundamentally alter the compliance landscape for both public and private companies.

The amendments address longstanding gaps in the principal Act. They strengthen beneficial ownership transparency requirements, expand the mandate of social and ethics committees, reform business rescue procedures, enhance the powers of the Companies and Intellectual Property Commission (CIPC), revise financial reporting obligations, and tighten the rules governing deregistration and reinstatement of companies. For directors in particular, the amendments introduce heightened personal liability exposure, expanded duties of care, and more rigorous record-keeping obligations.

This article, prepared by Martin Kotze, attorney at MJ Kotze Inc, provides a comprehensive analysis of the Companies Amendment Act 2024. It sets out each major area of reform, explains the practical implications for directors and shareholders, and identifies the steps that companies should take now to achieve compliance. For readers who require a foundational understanding of the principal Act, our practical guide to the Companies Act 71 of 2008 provides a detailed overview.

The Companies Act 71 of 2008 replaced the Companies Act 61 of 1973 and represented a complete modernisation of South African corporate law. Since its commencement in 2011, the Act has provided the legal framework for the incorporation, governance, and dissolution of companies in South Africa. It introduced concepts such as the Memorandum of Incorporation (MOI) as the single constitutive document, the business rescue regime as an alternative to liquidation, and a comprehensive framework of director duties codified in sections 75 to 77.

However, over fourteen years of operation, several deficiencies in the Act became apparent. International standards evolved — particularly in the areas of beneficial ownership transparency and anti-money laundering — and South Africa's regulatory framework needed to keep pace. The Financial Action Task Force (FATF) mutual evaluation of South Africa, completed in 2021, identified significant shortcomings in the country's beneficial ownership regime and recommended legislative reform. Concurrently, practitioners and the courts identified practical difficulties with the business rescue provisions, the deregistration and reinstatement procedures, and the enforcement capabilities of the CIPC.

The Companies Amendment Bill was introduced in Parliament in 2023, underwent extensive public consultation and committee deliberation, and was signed into law by the President in July 2024 as the Companies Amendment Act 16 of 2024. Certain provisions came into effect immediately upon publication in the Government Gazette, while others require further regulations to be published by the Department of Trade, Industry and Competition (the DTIC) before they can be proclaimed into force. This phased approach means that companies face both immediate compliance obligations and prospective requirements that they must prepare for.

The amendment process also produced the Companies Second Amendment Act 17 of 2024, which addresses additional matters including remuneration disclosure and pay gap reporting. Together, these two Amendment Acts constitute a comprehensive reform of the corporate regulatory framework. Directors who fail to engage with these changes risk personal liability, regulatory sanctions, and reputational damage.

The Companies Amendment Act 2024 introduces changes across seven principal areas of corporate law. Each area represents a distinct compliance obligation for companies and their directors.

Enhanced Transparency and Beneficial Ownership Disclosure (Section 56 Amendments)

The amendments to section 56 of the Act represent the single most consequential reform for the majority of South African companies. Every company registered under the Act is now required to establish and maintain a register of beneficial owners. A beneficial owner is defined as the natural person who ultimately owns or controls the company, whether directly or indirectly, including through a chain of ownership or control involving other legal entities or arrangements.

The beneficial ownership register must record the full name, date of birth, nationality, residential address, and identity number (or passport number for foreign nationals) of each beneficial owner. It must also record the nature and extent of the beneficial interest held, including the percentage of voting rights and the percentage of economic interest. Companies must update the register within a prescribed period whenever there is a change in beneficial ownership, and must file the register — and any updates — with the CIPC.

This reform directly responds to the FATF's recommendations and aligns South Africa with international best practice on corporate transparency. It is designed to prevent the misuse of corporate structures for money laundering, tax evasion, and the financing of terrorism. The practical burden on companies is significant: directors must identify all natural persons who hold beneficial interests, verify their identities, and ensure that the register is accurate and current at all times. Failure to comply attracts both administrative penalties from the CIPC and potential criminal liability.

Social and Ethics Committee Expanded Mandate

The social and ethics committee, required for every company that meets the thresholds in regulation 43 of the Companies Regulations, 2011, has been given an expanded mandate under the amendments. The committee's monitoring responsibilities have been broadened to include a more detailed assessment of the company's standing in respect of transformation and broad-based black economic empowerment (B-BBEE), environmental sustainability, and ethical supply chain management.

The committee must now present a substantive report at the company's annual general meeting. This report must address each of the committee's statutory monitoring areas and must include the committee's findings and recommendations. Shareholders are entitled to engage with the committee on the contents of its report. The amendment removes any ambiguity that existed under the previous wording of section 72(8) regarding whether the committee's report needed to be tabled at the AGM as a formal agenda item.

For companies that have treated the social and ethics committee as a compliance formality — constituting the committee on paper but failing to convene meetings or conduct meaningful monitoring — the amendments create a material risk. A committee that cannot demonstrate active monitoring and reporting will expose the company and its directors to regulatory scrutiny and potential penalties.

Business Rescue Amendments

The business rescue provisions in Chapter 6 of the Act have been subject to extensive judicial interpretation since 2011, and several practical difficulties have been identified. The 2024 amendments address three core issues: practitioner qualifications, procedural timelines, and the rights of affected persons.

First, the amendments introduce stricter qualification requirements for business rescue practitioners. Practitioners must now demonstrate specified levels of experience and expertise, and the CIPC is empowered to prescribe additional qualification criteria by regulation. This responds to concerns that inexperienced or underqualified practitioners were being appointed in complex business rescue proceedings, to the detriment of creditors and employees.

Second, the amendments tighten the timelines within which key steps in the business rescue process must be completed. The practitioner must publish a business rescue plan within a prescribed period (previously 25 business days, with the possibility of extension), and the amendments introduce consequences for practitioners who fail to meet these deadlines, including the potential for automatic termination of the proceedings.

Third, the amendments strengthen the rights of affected persons — particularly employees and creditors — to participate in the business rescue process. Affected persons are given clearer rights to receive information, to be consulted on the business rescue plan, and to challenge decisions of the practitioner that affect their interests. These changes are intended to improve the outcomes of business rescue proceedings and to restore confidence in the process as a viable alternative to liquidation.

Enhanced CIPC Powers and Enforcement Mechanisms

The CIPC has been given significantly enhanced powers under the amendments. These include expanded authority to investigate suspected non-compliance with the Act, to issue compliance notices, and to impose administrative penalties without the need for court proceedings. The CIPC may also refer matters to the Companies Tribunal for adjudication and can apply to the court for orders compelling compliance.

The practical effect is that the CIPC can now act more swiftly and decisively against companies that fail to meet their statutory obligations. Previously, the CIPC's enforcement options were limited, and many instances of non-compliance went unaddressed. The amendments give the CIPC the tools to proactively enforce the Act, including in respect of the new beneficial ownership disclosure requirements, financial reporting obligations, and social and ethics committee mandates.

Directors should be aware that the enhanced enforcement regime means that non-compliance is more likely to be detected and sanctioned than under the previous framework. Companies that have historically taken a relaxed approach to compliance with the Act's administrative requirements — such as filing annual returns, maintaining statutory records, and updating company information with the CIPC — should urgently review their compliance status.

Changes to Financial Reporting Obligations

The amendments introduce new requirements for the content and presentation of annual financial statements. Companies that are required to be audited must now include individual, name-by-name disclosure of director and prescribed officer remuneration in their annual financial statements. This disclosure must include all components of remuneration: base salary, bonuses, share-based payments, restraint of trade payments, severance payments, pension contributions, and all other benefits.

In addition, qualifying companies must include a remuneration report comprising a remuneration policy and an implementation report showing how the policy was applied during the financial year. For listed companies, the remuneration policy and implementation report are subject to non-binding advisory shareholder votes at the AGM, with a mandatory engagement obligation triggered when 25% or more dissenting votes are recorded.

The pay gap disclosure requirements introduced by the Companies Second Amendment Act 17 of 2024 further expand the financial reporting obligations of listed companies and state-owned enterprises. These companies must calculate and disclose the ratio between the total remuneration of the highest-paid individual and the median remuneration of all employees, as well as the ratio between the highest-paid and lowest-paid employees.

Deregistration and Reinstatement Procedures

The procedures for deregistration and reinstatement of companies have been revised to address practical difficulties that arose under the existing framework. The CIPC may deregister a company that has failed to file annual returns for a prescribed period, and the amendments clarify the process by which a deregistered company may apply for reinstatement. The grounds for reinstatement have been expanded, and the timeframes within which reinstatement applications must be made have been adjusted.

Importantly, the amendments also address the consequences of deregistration for third parties. Where a company is deregistered while it holds assets, is party to contracts, or is involved in litigation, the rights and obligations of third parties are now more clearly defined. Directors of companies that are at risk of deregistration — for example, because annual returns have not been filed — should take immediate steps to regularise the company's status with the CIPC.

Record-Keeping and Compliance Requirements

The amendments strengthen the record-keeping obligations imposed on companies under the Act. Companies must maintain accurate and complete records of all meetings of the board and of shareholders, all resolutions passed, all declarations of interest by directors, and all financial transactions. The amendments specify minimum retention periods for these records and introduce penalties for failure to maintain them.

The enhanced record-keeping requirements operate in conjunction with the extended prescription periods for director liability claims. Under the amendments, claims against directors under sections 77(2) and 77(3) of the Act are now subject to a five-year prescription period, extended from the previous three years. This means that the records of board deliberations and decision-making from up to five years ago may be relevant to a liability claim. Directors who rely on informal or undocumented decision-making processes are particularly exposed under the new regime.

The Companies Amendment Act 2024 materially increases the personal liability exposure of directors in South Africa. Directors must understand four key areas of impact: extended prescription periods, the enhanced duty of care, record-keeping obligations, and compliance timelines.

Extended Prescription Periods

The extension of the prescription period for claims under sections 77(2) and 77(3) from three years to five years is the most immediate and consequential change for directors. Claims for breach of fiduciary duty, breach of the duty of care, skill and diligence, reckless trading, gross negligence, and fraud can now be pursued for a full five years from the date on which the claimant became aware of the conduct giving rise to the claim.

In practice, this means that directors who left a board three years ago may still face personal liability claims for decisions made during their tenure. Liquidators investigating the affairs of a company in business rescue or liquidation now have a substantially longer window to identify and pursue claims against former directors. The extended period also applies to delinquency declarations under section 162, meaning that a wider range of historical conduct is now potentially subject to scrutiny.

Enhanced Duty of Care

The amendments reinforce the duty of directors to act in the best interests of the company and with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same functions as those carried out by the director, and having the general knowledge, skill and experience of that director. While the statutory formulation of the duty of care in section 76(3)(c) has not been substantively altered, the expanded compliance framework — including beneficial ownership registers, enhanced financial reporting, and social and ethics committee obligations — effectively raises the standard against which director conduct will be measured.

A director who was unaware of the company's beneficial ownership obligations, or who failed to ensure that the social and ethics committee was functioning, may be found to have breached the duty of care. Ignorance of the amended requirements will not constitute a defence. Directors must proactively educate themselves on the changes and ensure that the company's governance framework reflects the new requirements.

Record-Keeping Obligations

The enhanced record-keeping requirements create a direct nexus between governance discipline and personal liability protection. Comprehensive, contemporaneous records of board deliberations, resolutions, conflict of interest disclosures, and the rationale for significant business decisions are now essential. If a claim is brought against a director four years after the relevant conduct, the director's ability to demonstrate compliance with their duties will depend on the quality of the records maintained at the time.

Directors should insist on detailed board minutes that record the information considered, the alternatives evaluated, the advice obtained, and the reasons for the decision taken. Where independent professional advice was obtained, this should be recorded and retained. A well-documented decision-making process is the director's primary defence against a personal liability claim.

Compliance Timelines

Certain provisions of the Amendment Act are already in force, having been proclaimed on 27 December 2024. These include the extended prescription periods and the social and ethics committee reporting requirements. Other provisions — including the beneficial ownership disclosure requirements, the remuneration disclosure obligations, and the revised takeover thresholds — are awaiting further proclamation and are expected to come into effect progressively during 2025 and 2026 as the DTIC finalises the necessary regulations. Directors must not wait for proclamation before taking action. The preparation required to comply with the beneficial ownership and remuneration disclosure requirements is substantial, and companies that begin preparation only upon proclamation will face significant compliance risk.

Private companies (Pty) Ltd have historically operated under a lighter regulatory burden than public companies under the Companies Act. The 2024 amendments significantly narrow this gap, and directors of private companies must take the changes as seriously as their counterparts in listed entities.

The beneficial ownership disclosure requirements apply to every company registered under the Act, regardless of whether it is public or private, large or small. Every (Pty) Ltd company must establish a beneficial ownership register, identify its beneficial owners, verify their identities, and file the register with the CIPC. For simple ownership structures where the shareholders are natural persons, this may be straightforward. However, for companies with complex ownership chains involving trusts, nominee arrangements, or holding company structures, identifying the ultimate beneficial owners requires careful analysis.

The extended prescription period for director liability claims applies to all companies. Directors of private companies now face a five-year window during which liability claims can be brought, up from three years. This applies to all claims under sections 77(2) and 77(3), including breach of fiduciary duty, negligence, reckless trading, and fraud. For owner-managed private companies where the director and the majority shareholder are the same person, this may appear to have limited practical consequence. However, in companies with multiple shareholders or in situations involving minority shareholder disputes, the extended period is highly significant.

Private companies that are required to be audited — either because they exceed the thresholds in regulation 28 of the Companies Regulations or because their MOI requires an audit — will be required to disclose individual director remuneration by name once the relevant provisions are proclaimed. This is a fundamental change for many private companies where director remuneration has always been treated as confidential. Directors should consider whether the company's MOI or shareholders agreement needs to be amended to address the implications of mandatory disclosure.

The revised takeover regulation thresholds may bring more private companies within the jurisdiction of the Takeover Regulation Panel (TRP). Directors contemplating mergers, acquisitions, share buybacks, or schemes of arrangement should assess whether their company is likely to fall within the scope of the revised thresholds and plan accordingly.

Finally, every private company should review its MOI in light of the amendments. An MOI that references sections of the Act that have been amended, or that was drafted on the assumption that certain provisions would not apply to the company, may need to be updated. Under section 15(1) of the Act, any provision of the MOI that is inconsistent with the Act is void to the extent of the inconsistency. Directors should commission a comprehensive MOI review and, where necessary, adopt a new or amended MOI by special resolution.

Beneficial ownership transparency is the centrepiece of the Companies Amendment Act 2024. The new requirements are designed to ensure that the natural persons who ultimately own or control South African companies can be identified by regulators, law enforcement agencies, and other competent authorities. This section explains the obligations in detail.

Who Is a Beneficial Owner?

A beneficial owner is defined as any natural person who, directly or indirectly, ultimately owns or controls the company. Ownership is determined by reference to the holding of shares or voting rights — a natural person who holds or controls, directly or indirectly, a prescribed percentage of the company's shares or voting rights is a beneficial owner. Control is determined by reference to the ability to exercise significant influence over the management or policies of the company, whether through the holding of shares, the exercise of voting rights, contractual arrangements, or otherwise.

Where the company's shares are held by another legal entity (such as a holding company or a trust), the obligation is to look through the intermediary entity and identify the natural person who is the ultimate beneficial owner. This "look-through" requirement may involve tracing ownership through multiple layers of legal entities and requires companies to obtain information from their shareholders and from any intermediary entities in the ownership chain.

Maintaining the Beneficial Ownership Register

Every company must establish and maintain a beneficial ownership register at its registered office or at such other place as may be prescribed. The register must contain the following information for each beneficial owner: full name, date of birth, nationality, residential address, identity number or passport number, the date on which the person became a beneficial owner, the nature and extent of the beneficial interest (including the percentage of shares or voting rights held, directly or indirectly), and the date on which the person ceased to be a beneficial owner (if applicable).

The register must be updated within a prescribed period whenever there is any change in the information recorded. This includes changes arising from the transfer of shares, changes to the intermediary entities in the ownership chain, changes to the personal details of a beneficial owner, and the cessation of a beneficial interest. Companies must take reasonable steps to identify their beneficial owners and to keep the register current, and directors are personally responsible for ensuring compliance.

Filing with the CIPC

The beneficial ownership register — and all subsequent updates — must be filed with the CIPC within the prescribed timeframes. The CIPC will maintain a central register of beneficial ownership information, which will be accessible to competent authorities including the Financial Intelligence Centre (FIC), the South African Revenue Service (SARS), law enforcement agencies, and such other persons as may be prescribed.

The filing obligation is separate from and additional to the obligation to maintain the register at the company's registered office. Failure to file, or filing inaccurate or incomplete information, constitutes a contravention of the Act and attracts administrative penalties and, in certain circumstances, criminal liability. The CIPC's enhanced enforcement powers under the amendments mean that non-compliance is more likely to be detected and sanctioned than under the previous regime.

Practical Challenges

The beneficial ownership requirements present practical challenges, particularly for companies with complex ownership structures. Companies held through trusts, nominee arrangements, or multi-layered holding company structures will need to trace ownership to the level of the natural person. This may require requesting information from shareholders and intermediary entities that are reluctant to disclose their own beneficial owners. Directors should establish procedures for obtaining and verifying beneficial ownership information, and should consider including appropriate provisions in shareholders agreements requiring shareholders to provide beneficial ownership information on request.

The intersection of beneficial ownership disclosure with B-BBEE compliance is also noteworthy. Companies that rely on black ownership for the purposes of their B-BBEE scorecard must ensure that the beneficial ownership information filed with the CIPC is consistent with the ownership claims made for B-BBEE verification purposes. Any discrepancy between the two could trigger regulatory investigation by both the CIPC and the B-BBEE Commission.

The following steps are recommended for directors of both public and private companies. These represent the minimum actions that prudent directors should take to prepare for the full implementation of the Companies Amendment Act 2024.

1. Conduct a Comprehensive Compliance Audit

Directors should commission a thorough review of the company's current compliance status against the requirements of the amended Act. This audit should identify all areas where the company is not yet compliant, assess the resources required to achieve compliance, and establish a prioritised action plan. The audit should cover beneficial ownership records, board governance practices, statutory record-keeping, financial reporting obligations, and the status and functioning of the social and ethics committee (where applicable).

2. Establish the Beneficial Ownership Register

If the company has not yet established a beneficial ownership register, this should be done immediately. Identify all natural persons who hold beneficial interests in the company, verify their identities, and compile the register with all required information. For companies with complex ownership structures, engage professional advisers to assist with the identification and verification process. Ensure that the register is filed with the CIPC within the prescribed timeframes.

3. Review and Update the MOI

Review the company's MOI against the amended provisions of the Act. Identify any provisions that are inconsistent with the amendments or that need to be updated to accommodate the new requirements. Where amendments to the MOI are required, prepare a draft amended MOI and arrange for its adoption by special resolution of the shareholders.

4. Strengthen Board Governance and Record-Keeping

Implement or enhance procedures for recording board deliberations, resolutions, and decision-making rationale. Ensure that board minutes are comprehensive and contemporaneous. Establish a document retention policy that reflects the five-year prescription period for director liability claims. Ensure that all conflict of interest declarations are properly recorded and filed.

5. Prepare for Remuneration Disclosure

Companies that are required to be audited should begin preparing for individual remuneration disclosure now. Document all components of director and prescribed officer remuneration. Formalise any informal remuneration arrangements. Ensure that accounting systems can produce the required disclosures. Develop a draft remuneration policy and implementation report framework.

6. Activate the Social and Ethics Committee

Companies that are required to have a social and ethics committee should ensure that the committee is properly constituted, meets regularly, and conducts substantive monitoring activities. The committee should prepare a report for the next AGM that addresses all of its statutory monitoring areas. Directors should attend at least one committee meeting to ensure they understand the committee's work and can respond to shareholder questions.

7. Review Directors and Officers Insurance

Review D&O insurance policies to ensure that coverage is adequate, that the policy period aligns with the new five-year prescription period, and that exclusions do not leave directors exposed to the categories of liability that have been expanded by the amendments. Where coverage is insufficient, renegotiate the policy or obtain supplementary cover.

8. Obtain Specialist Legal Advice

The amendments are complex and their impact varies significantly depending on the type of company, its size, its ownership structure, and its current governance practices. Directors should obtain legal advice tailored to their company's specific circumstances. For specialist corporate and commercial law advice, Martin Kotze, attorney at MJ Kotze Inc, advises directors, shareholders, and businesses across Pretoria and Johannesburg on all aspects of the Companies Amendment Act 2024.

The Companies Amendment Act 16 of 2024 represents the most significant reform of South African corporate law since the Companies Act 71 of 2008 commenced in 2011. The amendments introduce mandatory beneficial ownership transparency, expand social and ethics committee mandates, reform business rescue procedures, enhance CIPC enforcement powers, revise financial reporting obligations, and extend the prescription periods for director liability claims from three to five years.

For directors, the message is clear: the standard of compliance expected under the Act has been substantially raised. The beneficial ownership register is now a mandatory requirement for every South African company. Record-keeping must be rigorous and comprehensive. The social and ethics committee must function actively. And the personal liability exposure of directors extends over a longer period than before.

Companies that act proactively — establishing the beneficial ownership register, reviewing and updating the MOI, strengthening governance practices, and preparing for remuneration disclosure — will manage the transition effectively. Companies that wait for each provision to be proclaimed before responding will face compliance gaps, regulatory risk, and potential liability.

The amendments reflect a clear legislative intent to bring South African corporate law into line with international standards, strengthen accountability, and increase transparency. Directors who understand and embrace the new framework will be well-positioned to fulfil their duties and protect both their companies and themselves from the enhanced consequences of non-compliance.