The new Corporate Law Amendment Act (CLA) came into effect on 17 December 2007, which made a number of changes to your company's responsibilities in terms of audits and financial reporting. Important for the smaller private company (and bigger) you may now also be regarded as a widely held company!
The CLA added two new categories, namely a WIDELY HELD company and a LIMITED INTEREST company.
A widely held company is one which either chooses to be one or one where there is that this restriction must be in the articles and not as is commonly done, governed by a shareholders agreement.
OK, SO WHAT'S THE IMPLICATION OF BEING A WIDELY HELD COMPANY?
The company must:
- comply with IFRS (International Financial Reporting Standards);
- rotate its audit partner every 5 years;
- have an independent, non executive audit committee ;
- may be subject to review by the FRSC or investigation by FRIC (still being set up).
HOW DO I CHECK WHETHER MY COMPANY IS WIDELY HELD?
You need to read your articles - look for the restrictive provision which must apply to all classes of shares.
CAN THE COMPANY CHANGE TO A LIMITED INTEREST COMPANY?
Yes, the company can change. To do this, it would need to amend its articles to include such a restriction. The company will also need to pass a special resolution at an AGM and the directors will need to certify that the company will not seek to be nor is likely to become, a widely held company in the next year.
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