Trade and industry minister Rob Davies has delayed the implementation of the new Companies Act until April next year.
This gives the Companies and Intellectual Property Registration Office (Cipro) at least another six months to overhaul its IT systems in order to cope with new responsibilities under the legislation.
Implementation of a new electronic content management (ECM) system is vital for Cipro to fulfil its mandate under the Act. However, execution of the project stalled earlier this year after the Department of Trade and Industry (DTI) canned a R153 million contract with Valor IT, when a forensic investigation revealed irregularities in the tender process.
Yesterday, the department issued a statement saying the implementation of the Companies Act and the Consumer Protection Act would be delayed until 11 April. It says the postponement is to “enable the department to finalise all processes required to effectively administer these two pieces of legislation”.
Changes to the Companies Act were initially expected to come into force next month. Cipro would not have been able to fulfil its mandate in terms of the Act as it is using legacy IT systems that cannot cope with the new requirements.
Vital system
The new ECM system is required to implement a range of electronic functions that are contained in several sections of the new Act. These sections deal with business aspects such as the formation, administration and dissolution of companies, mergers and acquisitions, business rescues, and converting closed corporations to companies.
The IT overhaul, which is also vital to prevent further fraud and hijacking of companies, has stalled, with Valor IT heading to court to have the contract declared valid. The DTI has repeatedly said it would only clarify the status of the system implementation when the court matter is wrapped up.
In its statement, the DTI says it “believes that this postponement will also give business and the public sufficient time to prepare themselves for compliance with the new laws”. It says it is in the process of wrapping up regulations that “will give effect to both pieces of legislation, and the postponement will allow time for more consultation with stakeholders before finalisation”.
In addition, the DTI notes that both pieces of legislation have significant impact on business operations, which justifies the “postponement to allow affected stakeholders to adjust business practices and behaviour”.
Sidwell Medupe, DTI director of media and public relations, says the delayed implementation of the Act “has nothing to do with Cipro”. He says “Cipro is not an issue for now”.
Ready in time?
Cipro head of communications Elsabie Conradie says the delay in implementing the Act is “good news” for Cipro. She explains that it will give the office more time to get certain functions in place, such as the Companies and Intellectual Property Commission.
She adds that the court case will hopefully be wrapped up by the time the Act comes into place, and Cipro will have clarity over the way forward in terms of implementing the ECM system. “It makes perfect sense.”
Democratic Alliance shadow minister of trade and industry Andricus van der Westhuizen previously expressed concerns that Cipro would not be ready in time even if implementation of the Act is delayed. He expected the process to go back to tender stage, which would set the ECM system implementation back by at least a year.
Lance Michalson, a partner with Michalsons Attorneys, explains that the DTI has delayed implementation of the Act to facilitate a proper implementation of its requirements, and is an acknowledgement that the process has been “far too rushed”.
Michalson adds that the delay is a temporary reprieve for Cipro to get its electronic processes into place so that it can fulfil its mandate. He explains that Cipro would not have been able to implement several aspects of the Act had it come into force next month as originally expected.
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