Company laws set for total overhaul in 2024

As the country gears up for a radical revision of its corporate laws, the Close Corporations Act and Companies Act are set to undergo a total renewal by 2024.

The changes are poised to shake up the business landscape, with the government aiming to streamline the formation and maintenance of companies by transitioning from a manual paper-based system to a digitised process.

Speaking at the Namibia Corporate Law Reform Summit on Thursday, Sikongo Haihambo, the executive director in the Ministry of Trade and Industrialisation, said the new legislation seeks to align with the increasingly digitised global landscape, keeping pace with modern technological advancements.

“The new legislation aims to conform to the digitised landscape. The current legislation is outdated and highly legalistic, making it quite burdensome and costly to form and manage a company,” he said.

He said this has created significant hurdles for entrepreneurs and businesses, leading to cumbersome processes and inflated costs for forming and managing a company in the country.

Haihambo said the transformation is designed to provide a more efficient and cost-effective framework, conducive to fostering a thriving business environment in Namibia.

Meanwhile, one of the most contentious aspects of the proposed reform is the potential elimination of close corporations (CCs).

While many jurisdictions worldwide have done away with this business entity structure, Namibia has continued to register and regulate close corporations, which have long been favoured by small and medium-sized businesses due to their flexible governance and limited liability features.

“Namibia is one of the key jurisdictions that still registers and regulates close corporations, whereas other jurisdictions have done away with this practice,” Haihambo said.

However, critics argue that eradicating close corporations could have significant repercussions for the entrepreneurial ecosystem in Namibia.

Tiaan Bazuin, the chief executive of the Namibian Stock Exchange, highlighted the complexities and financial burden this reform would impose on the country, particularly due to the large number of businesses currently registered as close corporations.

Bazuin said authorities should instead direct their efforts towards rectifying the shortcomings of the act.

“We have a lot of CCs, and a lot of them have to be converted. It will come at great cost and effort – as it was in South Africa – to those CCs which are least in a position to make the amendments and incur those costs,” he said.

Bazuin said the majority of CCs in South Africa faced severe financial challenges and struggled to recover after converting their businesses into unlimited liability companies.

The summit was aimed at fascilitating discussions on the impact of the reform of the Close Corporations Act and Companies Act on the local business sector.

Finalisation of a draft act is slated for 31 August and has been sent to the Business and Intellectual Property Authority.
It is expected to be implemented by 30 November.

“The summit is aimed at educating our members and corporate Namibia on the incoming changes to the act, while also creating discussions around the opportunities and implications of the proposed changes,” Ciba chief executive Nicolaas van Wyk said.

The summit brought together an array of industry experts and professionals to engage in comprehensive discussions on company formation, governance, shareholding, auditing, mergers and acquisitions, and corporate social responsibility.