Chairperson, hon members of this House, colleagues and compatriots, people of South Africa, today before this hon House is a piece of legislation that truly seeks to transform the economic and structural imbalances. The Companies Act, 2008, soon to be joined by its sister, the Companies Amendment Act, is only the third since 1926 and 1971.
Chairperson, we also note that the 2008 Act was not yet implemented, as the government in its wisdom heard the reasonable voices of our countrymen and women in business - small, medium and large, some large enough to be considered conglomerates. We as a committee, and as the ANC, searched for the balance that takes account of small businesses that generate significant jobs and the captains of large companies, including internationally ranking financial houses, among them the four big banks.
For the first time in South Africa companies, whether small, medium or large, will with their employees, their creditors and indeed their shareholders all benefit from a balanced, fair and reasonable approach. This will enable companies that are technically insolvent but commercially solvent to continue trading. That is, companies that are able to pay their day-to-day debts when they become due and payable, will be allowed to continue.
The committee grappled with certain sections here, and I'm happy to say that, in fact, the FF Plus in this case put forward a compromise that actually enabled us to have a clear understanding of the intention in this area. So, what we have here is what we have under section 22 of the new clause 14. We have something that benefits the country in general, employees, shareholders, and even creditors; another win-win situation.
However, we cannot forget that when the new Companies Act comes into effect, with the amendments proposed and put before this House for adoption today, it is only the third such law since 1926. We are looking for a democratic arrangement in our economy, good governance progress and socio- political transformation. Indeed, we cannot delay legislation purely on the principle that there will be no case law. We must not be sidetracked and put the cart before the horse.
One of the key issues, business rescue, finally offers companies in South Africa a constructive option and not simply liquidation, with nobody benefiting out of it, or something different. Companies that are basically sound but only technically insolvent will obtain the support they require. In this way jobs are retained, shareholders are satisfied and, indeed, creditors are met.
However, there is a need to ensure responsible use of this clause and this measure in the legislation. Therefore cancellation of contracts has been subjected to a court process, and suspension depends on analysis by the business rescue practitioner on the basic viability of a company to turn around and rise above its current financial difficulties; once again a win- win situation.
There are so many issues to look at, and so little time to look at them, but the Insolvency Act must, I think, really be tackled again and something be said. Employment contracts truly became quite a big issue in the committee, and they will now have to be subject to sections 35A and 35B under the Insolvency Act if the company has been liquidated. This will protect employees and at the same time ensure market stability and also ensure that, as contracts are subject to netting arrangements, those that are will remain unaffected.
Once again the ANC-led government in this case gives us a win-win victory for all stakeholders concerned. Provisions for this business rescue have also been amended to ensure this. The committee actually grappled with this and came to the position that the enforcement and compliance roles of regulatory authorities remain unhindered during the business rescue process.
Sections 133, 140 and 142 deal with this. What we have here is prudence with progress. Internationally it is now accepted by many countries that minority shareholders must be taken into account. Under existing legislation they won't. Hope must let me grab my cut and the devil take the hindmost. Minority shareholders will no longer be forced to accept transaction terms that are supported by a 75% majority. Instead they will be offered and given a fair cash payout for their shares. This is already operating effectively in Canada and the United States.
Another issue, of course, in a developmental state is that this piece of legislation marks a decisive shift from a monopoly-dominated and driven economy to a broader, more inclusive democratised economy.
As we strive to concretise the spirit and letter of our Constitution, with issues such as fairness, equity, rights and responsibilities - another win- win situation - one issue our country cannot afford is reckless trading. No country can, as the United States learned to its cost. It is still reverberating with the sub prime damage which engulfed the industrialised countries and actually threatened the livelihoods of people in developing countries.
Our eminent commercial law consultant, Ms Kathy Idensohn, put it this way: "Companies should be expressly prohibited from trading recklessly or with gross negligence." She went on to equate this with fraudulent business activities and/or intent.
Let me say that many parties contributed. I remember the DA raising the issue and saying, "Surely we can have copies of this," and so on. This was not necessarily the DA as a party, but people with an interest. We said we didn't have a problem and we should put this in the amending Bill. We should ensure you can get your copy.
Implicit in the Bill before the House today is the need for government-wide economic planning and implementation that will align policies to achieve the objectives set out in the economic transformation resolutions that are needed in our country, led by the ANC government.
I wish through the Chairperson to indicate that all members of the committee certainly contributed here. Indeed, when we look at the directors who have been found guilty of dishonesty, we accept that we cannot have them running around loose. So, that will be only five years after their sentence has been served. If necessary, there can be an action through the court for a further five-year extension, or ten years. In this way we protect society, and also bring them in through a process of rehabilitation.
Chairperson, may I say we wish to thank all members of the committee, the staff and the Department of Trade and Industry for their constructive engagement, and people in the IFP for also working with us. As the ANC we support this legislation, which we believe will contribute to economic transformation. I would like to urge members of this House to put the greater good of society first and remember our country's reputation internationally. Let us not fail them in our hour of need. I thank you. [Applause.]