Chairperson, the DA supported the 2008 Companies Act in this House in that year, because it represented a progressive redrafting of our company law that set out to cut red tape, enhance transparency and help with business failure.
Unfortunately, despite these good intentions, the 2008 Companies Act had several technical and other errors that left it open to legal challenge, and to this day the Act has not commenced. However, the Bill before us today sets out to correct these errors.
Our committee conducted several rounds of public hearings on the Bill last year, when it became clear that there were additional amendments to be made to the underlying Act. Approval to further amend the Act was granted by the House last week. The committee process therefore became our last chance to fix any remaining problems in the legislation and ensure that South Africa would have a world-class legal framework for the business sector. So, with the final draft of the Bill before us, we can assess how we did on that score and, Chairperson, the record is mixed.
On the positive side, the committee was ably chaired by the hon Fubbs, who helped to facilitate many of the progressive amendments to the Bill. She was supported in this by our competent committee staff. In addition, the leadership and the officials of the Department of Trade and Industry, DTI, were technically competent and accommodating on many requests for amendments from stakeholders. Amendments included re-establishing the stand-alone rights to company registers, removing the provision that a convicted fraudster can establish directorships if he or she is the sole shareholder of a company, and expanding the set of contracts protected from suspension by business rescue practitioners.
Furthermore, during final deliberations on the Bill last Wednesday night, neither the department nor the ANC members of the committee objected to two important proposals from the opposition. The first was an important amendment to section 4 of the Act to restrict the application of the solvency and liquidity test to individual companies rather than groups. The second restricted the prohibition of insolvency to technical insolvency in section 22, as the Chairperson has explained.
Unfortunately, despite these important concessions in the final period of the deliberations, the ANC members of the committee argued passionately and at length against the amendments that would protect South Africans from fraudsters, cut red tape, and allow business reasonable time to comply with the legislation.
Their reasoning betrays the ANC's attitude towards the role of business in South African society because, as we approach the elections, we will begin to hear more and more promises from the ANC, especially on jobs. The part where policy rubber hits the legislative road, however, is when the parliamentary committee sits late into the night and debates the clauses of a Bill.
The ruling party can say what they like on the campaign trail, but the way their members argued in favour of something we call "the Yengeni clause"- which limits the disqualification of fraudulent directors to five years, instead of leaving it as a lifetime ban subject to judicial review - raises serious questions about that party's attitude towards fraud and corruption. [Applause.]
It is hard not to reach a conclusion that the ANC is taking such a soft stance against fraudsters serving as directors because of pressure from senior party members who find their business interests inconveniently constrained by the current company law.
However, while the ANC is not afraid to argue in favour of fraudsters serving as directors, they have a curious lack of insight into how businesses actually function daily. Section 45 of the Act introduces an onerous requirement that the approval of intercompany loans requires a special resolution by the shareholders. This provision is designed to prevent round-tripping using loans to companies controlled by directors, but it throws the net too wide by including all intercompany loans. The ANC members in the committee appeared not to appreciate how many businesses use valid intercompany loans on a daily basis, because they voted against an opposition proposal to amend this. In so doing, they effectively threw up another loop of red tape.
They also refused to consider a short extension in the implementation date to allow South African businesses time to understand the amendments that are on the table today. Members of the committee only received the final draft of the Bill at 15:00 yesterday, and it is still subject to review by the National Council of Provinces and the President. Yet, without any extension of the date, business will be expected to comply with the Act in two weeks' time, something business leaders have already objected to in the press. The ANC's refusal to consider even a short extension is irresponsible and exposes the ruling party's lack of understanding of business realities.
Mr Minister, there is a difference between the teething problems referred to by Mr Katz and hundreds of South African companies suddenly being made illegal in two weeks' time by legislation we haven't even finished working on yet.
Beyond compliance, we also have concerns about the department's ability to enforce this law. My colleague, hon Jacques Smalle, met yesterday with the Companies and Intellectual Property Registration Office, Cipro, which is about to become a new companies commission. He reported that there is currently two-thirds of the staff capacity required to enforce the law, and there are still doubts over systems as critical as the controversial electronic content management system and something as fundamental as the office space required to house the commission.
So, in the final analysis the DA strongly supports the broader effort to reform our corporate law. We also commend the Chair of the committee, and we commend the committee members, the staff and the department on a very positive legislative process. We are, however, unable to support the Bill because the ANC members of the committee failed at a critical time to stand up to fraudsters in business, cut red tape when given a logical chance to do so, and allow business time to understand the changes that we are only voting for today. Thank you. [Applause.]