SOUTH AFRICA Law and Practice Contributed by: Ulrike Naumann, Alison Mellon, Joshua Janks and Aneria Bouwer, Bowmans
Section 45 of the Companies Act, 2008 regu- lates the granting of financial assistance to a related or inter-related company as well as loans or other financial assistance to directors. Both Sections 44 and 45 of the Companies Act, 2008 impose largely the same requirements for the grant of financial assistance to be valid. Indirectly securing the obligations of a related party falls within the meaning of financial assis- tance as contemplated in Section 45. As of 27 December 2024, the much-anticipated Companies Amendment Acts 16 and 17 of 2024 (the “Companies Amendment Acts” ) excluded the grant of financial assistance to or for the ben- efit of a company’s subsidiary from the scope of Section 45 of the Companies Act. Accordingly, Section 45 approvals are not required for this limited category of intra-group financial assis- tance. This is a welcomed development. 5.6 Other Restrictions Corporate Benefit Directors breach their fiduciary duties, and may be held liable, if they allow the company to enter into a transaction (such as the issue of a guar- antee or grant of security) which is not in the best interests of the company (Section 77 of the Companies Act, 2008). This is not usually prob- lematic in downstream guarantees (guarantees made by a holding company to its subsidiary), as the holding company can usually show that it derives some benefit from its subsidiary’s increased financial strength. Application of the National Credit Act, 2005 The National Credit Act, 2005 governs the exten- sion of credit by credit providers. Notably, a transaction is exempt if the consumer is a juristic person that, inter alia, meets one of the following thresholds:
• has asset value or annual turnover, together with the combined asset value or annual turnover of all related legal persons, at the time the agreement is made, that equals or exceeds ZAR1 million; or • is party to a credit agreement for a princi- pal sum in excess of ZAR250,000, and has asset value or annual turnover, at the time the agreement is made, below ZAR1 million. Given the low threshold amounts, the National Credit Act is highly unlikely to be applicable to acquisition finance transactions. Exchange Control Where a South African resident is to grant securi- ty over movable or immovable property in favour of a non-resident or an affected person (each as defined in the Exchange Control Rulings), the prior approval of the Financial Surveillance Department of the SARB (or in some cases, the authorised dealer bank directly) is a prerequisite for a valid grant of security. The prior approval of an authorised dealer bank (and in some cases the Financial Surveillance Department of the SARB) is also required before: • creating a loan from a foreign lender to a South African resident; • creating a loan from a South African resident to a foreign borrower; and • granting a guarantee from a South African resident in favour of a non-resident, or grant- ing a guarantee from a non-resident in favour of a South African resident. Payments to foreign creditors arising from loan agreements, guarantees or security documents require exchange control approval at the time the loan or guarantee is granted, or the secu- rity is given. Where exchange control approval
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