Johannesburg — THE Department of Trade and Industry yesterday released the latest copy of the amended Companies Act, which has addressed significant grammatical errors and concerns about flaws in the legislation.

However, company law experts said yesterday that the Companies Act of 2008 had been "commercially flawed" and a "source of embarrassment" to start with.

"A series of grammatical errors and typos was used as an excuse to play down the real reasons for the rectification process," said Nicolaas van Wyk, technical and support executive of the Association of Chartered Certified Accountants SA.

Mr van Wyk said that the act had contained a number of unworkable commercial provisions relating to insolvency issues, such as the new-business rescue provisions.

The latest amendments come after the government initiated a rectification process in December.

Madelein Burger-Van der Walt, a partner at commercial law firm Webber Wentzel, said the intention of the amendments was to correct the act, where it was "fundamentally flawed" and to tighten up the legislation, particularly regarding the use of language and grammatical errors.

Ms Burger-Van der Walt said one of the most contentious amendments to the legislation was the right of the business-rescue practitioner to "cherry pick" which agreements a company should honour during business-rescue proceedings.

The provision had far-reaching consequences for any party to an agreement in business-rescue proceedings, and in particular on funding arrangements, she said.

For instance, a loan may be suspended for the duration of the proceedings, she said. The obligation of a company may only be cancelled if the practitioner applies to the court and the court is satisfied that such a cancellation would be just and reasonable.

Ms Burger-Van der Walt said one of the most surprising provisions in the Companies Act had always been that shareholders could, by special resolution, approve actions by the directors of the company even when they had fraudulently or negligently acted outside the scope of their authority.

"It was hoped that the act would be amended by deleting the ability of shareholders to ratify this action. Unfortunately the amendments exacerbate the position by providing that actions which are undertaken knowingly, willfully or intentionally can also be ratified."

She said that minority shareholders would be exposed to a board which could undertake ultra vires actions.