SAPPI LIMITED

South African Companies Act, 2008
A new Companies Act, the Companies Act, 71 of 2008 (the ‘‘Act’’), was promulgated in April 2009,
but has not yet entered into force. The Act will come into operation on a date fixed by the President by
proclamation in the Government Gazette, which date may not be earlier than one year following the date
on which the President assented to the Act (April 9, 2009). According to the latest notice from the
Department of Trade and Industry the Act will take effect on 1 April 2011. Once the Act takes effect, the
Act will replace the current Companies Act, 1973 (as amended), in its entirety.
The aims and purposes of the Act, are to provide for, inter alia, the incorporation, registration,
capitalization, organization and management of for-profit, and not-for-profit, companies; to define the
relationships between companies and their respective shareholders or members and directors; to
provide for equitable and efficient mergers, amalgamations and takeovers of companies, and for
efficient rescue of failing companies; to provide appropriate legal redress for investors and third parties
with respect to companies; to establish a commission and a takeover regulation panel to administer the
requirements of the Act with respect to companies, and a Companies Tribunal to facilitate alternative
dispute resolution and to review decisions of the commission and the takeover regulation panel, and a
Financial Reporting Standards Council (‘‘FRSC’’) to advise on requirements for financial record keeping
and reporting by companies and to repeal the existing Companies Act and to provide for incidental
matters.
The Act introduces a number of new requirements that public companies, such as Sappi, need to
comply with. In addition to the accountability requirements applicable to all companies, as set out in the
Act, public companies are, required to comply with additional and more onerous accountability
requirements. These include inter alia:
(a) the appointment of a company secretary, who must have the requisite knowledge of, or
experience with, relevant laws and who must be a permanent resident of South Africa;
(b) the appointment, at its annual general meeting, of an auditor who must, in the opinion of the
company’s audit committee, be ‘independent’ of the company. The same individual is
prohibited, from serving as the auditor (or designated auditor, as the case may be) for more
than five consecutive years. An auditor whose appointment endures for two or more
consecutive years and then terminates are prohibited from being appointed as the auditors of
that company again for a period of at least two further fiscal years;
(c) the appointment, at every annual general meeting of an audit committee, which must comprise
of at least three members who are independent directors of the company and who will be
required to comply with minimum qualification requirements as prescribed by the Minister of
Trade and Industry, from time to time. The main functions of the audit committee are, inter alia,
to: nominate for appointment the auditor of the company, who in the opinion of the committee,
is ‘independent’ of the company; determine the auditor’s fees and terms of engagement and to
make submissions to the company’s Board concerning the company’s accounting policies,
financial control, records and reporting.
Financial Statements
The Act provides that all financial statements provided by a company, (including annual financial
statements) must, inter alia, comply with the standards prescribed by the Minister of Trade and Industry,
after consultation with the FRSC, a body established in terms of the Act. The Act stipulates that the
financial statements of public companies must comply with IFRS. Financial reporting standards,
applicable to public companies, may be issued by the Minister of Trade and Industry by publication in
the Government Gazette from time to time on the advice of the FRSC. The financial reporting standards
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