S38A Validation of irregular creation and allotment of shares

Section 38A – Validation of Irregular Creation, Allotment, or Issuing of Shares

The addition of Section 38A to the Companies Act permits a court to validate (with or without conditions) the creation, allotment, or issue of shares that were invalidly created or issued in terms of the Companies Act after receipt of an application by the company or a person with an interest in the company.
This could occur where a company potentially failed to increase its authorized share capital or issued shares in excess of the number of shares that it is authorized to issue, as currently Sections 38 and 36 of the Companies Act only permit such issuance of shares to be retroactively authorized by special resolution of the shareholders within 60 business days after the transaction.

The Companies Act Amendments 2024:

Pertinent changes were made to our South Africa Companies Act recently after the Companies Amendment Act 2024, No. 16 and the Companies Act Second Amendment, 2024 No. 17 were ascended into law on 25 July 2024.

The amended provisions are not yet operational and will come into effect after President Cyril Ramaphosa makes proclamation in the Gazette as to the effective date.

Statucor continues to unpack the amendments and the effect that they may have on our valued clients, and we look forward to publishing further communications on our observations in future. Click here for a full summary of all changes made to the Companies Act through the 2024 Amendments or view our News page for our latest articles on the Companies Act, Governance and Compliance matters that may be pertinent to you.