Business Day, 1 December 2010 - Wyndham Hartley
Cape Town — Representatives of the banking and accounting industries called for the scrapping of two sections of the long-awaited Companies Act yesterday.
Banking Association of SA managing director Cas Coovadia, representatives of the South African Institute of Chartered Accountants and Deloitte called for section 22 of the Companies Act to be scrapped in its entirety.
They made submissions on the Companies Amendment Bill to Parliament’s trade and industry committee yesterday.
The bill seeks to correct a host of mistakes in the Companies Act of 2008. Its promulgation has been delayed until April next year.
Section 22 of the act is intended to stop reckless trading and provides that companies "may not trade under insolvent circumstances", and if their liabilities exceeded assets they would have to cease trading.
"Currently the commercial reality is that the majority of companies trade under technically insolvent circumstances but are commercially solvent being co-funded by shareholder loans," Mr Coovadia said.
"If the act is not amended, 80% of companies that are currently technically insolvent, but commercially solvent may have to cease trading."
Johan Erasmus from Deloitte said the section should be removed from the act as it may lead to unintended consequences.
The committee also heard that the use of symbols such as "+, &, #, @, %, =" in the names of new companies will cost the South African economy and the banking sector millions of rands because IT associates them with computer functions.
A section of the act allows companies to be named in any language and allows the symbols to be used in company names.
Mr Coovadia appealed to the committee to prohibit the use of the symbols in company names.
"The banking and national payments systems operate through a platform of interconnected IT systems that receive, store and process information; open, operate and close secure bank accounts," Mr Coovadia said.
"These systems are not programmed to capture symbols such as those listed in section 11, because symbols in a computer software programme are recognised as further computer programme instructions as opposed to data to be captured," he said , adding that the system was not able to capture, store or process company names containing symbols.