Abstract:
The Companies Act, 71 of 2008 repealed the Companies Act, of 61 of 1973, the former Act came into operation on the 1st May 2011.The repealing of the 1973 Act meant that a new legal dispensation was ushered in, these changes obviously affected the manner in which the law worked prior to the 1st May 2011. The repurchase of shares by the company is just but one of the many aspects which were affected by the new act. In order to understand the thought process of the legislature when enacting the current law, the history and evolution of section 48 is imperative. Section 80-90 and 46 together with 48 of the old and the new act respectively are the legislative framework behind the South African share repurchases rule. This research investigates the genesis of share repurchases in South Africa and thereafter observes the exodus from the original principle to the status quo. Prior to 1999, share repurchases were governed through the capital maintenance rule which was imported from England and other foreign jurisdictions. In terms of the capital maintenance rule the reduction of contributed share capital in any manner was prohibited. The issued share capital of the company was perceived as a guarantee fund intended for the payment of the claims of the creditors of the company in the event that the company defaults on its payments or is liquidated. In 1999, the Companies Amendment Act introduced sections 85 to 90 which was a paradigm shift from the out dated and superfluous share capital maintenance rule, this paradigm shift spared no sub rule within the capital maintenance rule and it is from these legal developments where we saw share repurchase rules including other sub-rules (which are beyond the scope this work) emerging. Section 48 of the new companies act read with other relevant sections the Act thereof prescribes the procedure and requirements for share repurchases, these sections further prescribe the consequences and remedies for non-compliance with the prescribed procedure and requirements. It is against this background that section 48 effects, impact as well as the interpretation thereof are investigated. In terms of section 48, the company may purchase shares issued by it under certain circumstances provided that it complies with the requirements laid down in the Act, furthermore section 48 transactions may under certain circumstances trigger tax liability for the parties involved. Copyright
