Answer to Question #180354 in Law for Lesedi

Question

Ntombi is a director in a private company, Gangnam's tile (pty) ltd. She approaches you for information on distributions. Explain to her with reference to the companies act 71 of 2008 what a distinction by a company entails.

Answer 1

The Companies Act 71 of 2008 aims: to provide for the incorporation, registration, organization and management of companies, the capitalization of profit companies, and the registration of offices of foreign companies carrying on business within the Republic to repeal the Companies Act, 1973.

According to The Companies Act, 71 of 2008, as amended, distribution can be broken up into three categories, namely, the direct or indirect:

(i)                transfer by the company of money or other property (other than its shares) to or for the benefit of one or more of its shareholders;

(ii)               (ii) the incurrence of a debt or other obligation by the company for the benefit of one or more of its shareholders; and

(iii)             (iii) Forgiveness or waiver by the company of a debt or other obligation owed to the company by one or more of its shareholders.

Distributions by a company of its assets to its shareholders, whether in cash or otherwise, are carefully regulated by the Act. It is clearly to protect the interests of creditors and minority shareholders of the company. Distributions as per the Act do not require distinct private and public company, but it applies to all companies.