Pre-incorporation Contracts: Statutory Reform

South African company law is undergoing a major two-stage overhaul that will culminate in the coming into force of the Companies Act 71 of 2008. The first stage was completed with the coming into force of the Corporate Laws Amendment Act 24 of 2006 on 14 December 2007 (Proc 47 GG 30594 of 14 December 2007) and the second stage will be completed with the coming into force of the Companies Act, 2008. This Act has been assented to by the President and was published for information on 9 April 2009 (GN 421 GG 32121 of 9 April 2009). Section 225 of this Act provides that it will come into force on a dated fixed by the President by proclamation in the Gazette, which may not be earlier than one year following the date of presidential assent. The earliest that the Act can come into force is therefore 9 April 2010. This note examines certain aspects of the regulation of pre-incorporation contracts contained in s 21 of the Companies Act, 2008, read with the definition of the term ‘pre-incorporation contract’ contained in s 1. The policy considerations underlying the current provision regulating this issue (s 35 of the Companies Act 61 of 1973) and some of the difficulties of interpretation that section has presented will be considered, with a view to evaluating whether there is any policy shift evident in s 21, and whether its provisions represent an improvement on its predecessor. The formulation of s 21 draws on the provisions of its counterpart in the recently amended New Zealand Companies Act, 1993, and so consideration will also be given to those provisions