A case for excluding foreign companies from the application of the Companies Act of 2008 is unconvincing
Author: Iram Hayath
Affiliations: Attorney of the High Court of South Africa and LLM Candidate (Wits University)
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 67 – 85
The approach adopted in the Companies Act 71 of 2008 (2008 Companies Act) is to significantly limit the regulation of foreign companies conducting business (or non-profit activities) in South Africa that meet the registration requirements of the Act. The rationale behind this approach is understood as being s 7(c) of the Act – to promote innovation and investment in South African markets. This article argues that the general exclusion of external companies from the 2008 Companies Act inadvertently impedes the furtherance of several stated purposes of the Act – which, in turn, adversely impacts the ability to achieve innovation and investment in South African markets. This article also argues that external companies are effectively excluded from certain provisions that may benefit them (including corporate governance and business rescue provisions). The current position also results in some uncertainty and unpredictability in relation to the determination of whether a foreign company is required to adhere to the registration requirements in terms of s 23 of the Act, application of certain provisions, and conflict of laws on matters that remain ungoverned by the 2008 Companies Act regarding external companies. The general exclusion of external companies from the Act is a matter that requires future reconsideration (in a manner that ensures that the stated purposes of the Act are met and that the framework within which external companies operate in South Africa is not disregarded).