n South African Law Journal - The maintenance of capital and the Companies Bill 2007 : note

Volume 124, Issue 4
  • ISSN : 0258-2503
  • E-ISSN: 1996-2177



The Companies Amendment Act 37 of 1999 brought about a significant mind-shift in relation to the concept of the maintenance of capital of a company. Prior to this Act, in an attempt to protect shareholders and minority shareholders, an extremely tight rein was kept on the ability of a company to part with its capital other than in the course of its business operations. Before the Amendment Act came into force this meant that, generally, a company could not acquire its own shares, a subsidiary could not acquire shares in its holding company, and dividends could not be paid out of capital. As a result of the 1999 Amendment Act all these transactions are now allowed subject to the basic requirement that the solvency and liability of the company must not be affected (see ss 85, 89 and 90 of the Companies Act 61 of 1973).

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