BuaNews (Tshwane)
Oupa Segalwe
19 March 2007
Johannesburg — Recent events surrounding the financial services company Fidentia have raised questions on whether providing and writing off loans to company directors should be permitted by law.
Speaking at the start of a two day conference on the Companies Bill on Monday, Director General of the Department of Trade and Industry Tshediso Matona said government recognised that such loans had serious repercussions for the investing public.
"It poses the question whether such loans should be permitted by law, as is currently the case in our Companies Law and in the proposed Bill or whether a general prohibition should be billed," Mr Matona said.
The Cape based company Fidentia was placed under curatorship last month after investigations by the Financial Services Board found that hundreds of millions of rands at the company could not be accounted for.
Most of the amount was part of funds invested with the company's subsidiary Fidentia Asset Management, through a trust which administrated savings for windows and orphans of deceased mine workers.
Executive Chairperson of the company, J. Arthur Brown and the company's former accountant Graham Maddock were later arrested on charges by the Scorpions on fraud and theft totalling R200 million.
The two were granted bail of R1 million each on Monday afternoon and ordered to surrender their passports to the Scorpions, report to the police twice a week and tell the Scorpions before disposing of any assets worth more than R100 000.
Magistrate Eric Louw said in his bail ruling that the charges were "of a very grave and serious nature."
Mr Matona said events at Fidentia had surfaced at an opportune moment for government to be able to "identify weakness in it's cooperate governance regime" as part of the Company Law Reform.
The conference marked the beginning of the formal consultation process on the new proposed Companies Law which has been published for public comment.
The Bill seeks to enhance and promote cooperate governance, transparency and the accountability of large and widely held companies.
It also promises a world of convenience for business people and those who wish to start companies by cutting down on the cost of establishing and maintaining their companies.
It also simplifies the process of starting a company in efforts to promote entrepreneurship, stiff competition and enterprise diversity in the local economy.
The Bill further introduces a new Business Rescue Scheme that will facilitate the turn around of struggling firms that face liquidation.
Mr Matona said the current Companies Law which is governed by the Companies Act of 1973 had been found to be outdated, highly formalistic and had "unnecessarily burdensome information requirements".
"So there is a need to tidy up the law," he said.
In terms of corporate governance he said, clarity and enhanced accountability were of the utmost importance in terms of the Company Law Reform.
"Company Law Reform in the area of corporate governance should be preceded by the acknowledgement of the fact at the moment, directors' duties are set out in 250 years of case law, and not surprisingly the message is not getting through."
Deputy Director General for Consumer and Cooperate Regulations at the Department, Astrid Loudin said the debate on the Bill would end when Parliament adopted the final draft in a year's time.
She said in the period leading up to the adoption, there would be intensive engagement with all stakeholders.
"This will include the evaluation of public comments, the redrafting of difficult sections of the law, amendments to the technical omissions and the resubmission to key stakeholders for further input," Ms Loudin said.
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