What is all the fuss about? The CIPC changed the requirements of the Compliance checklist on the 6th March 2020 which became compulsory for all companies to complete starting on 1 January 2020.
By: Mark Silberman B.Acc. C.A.(SA) Accfin Software (Pty) Ltd
The CIPC in its latest notice has suspended companies who are not audited or whose financials are not independently reviewed from doing the checklist, it appears because of all the complaints. The checklist requires directors to confirm if they have complied with 24 sections of the companies act, by ticking Yes, No or N/A. e.g. Have you complied that with S4?
Why are there so many complaints about a form that should take less than 10 minutes. Why has the company secretarial community fussed about the compliance checklist for small companies? Is this because they have not complied with company law provisions or because they think it’s too much work. Don’t professionals want to earn fees?
The new companies act has made many things easier and has reduced auditing for smaller companies. It is also more flexible for different types of companies with custom-built Memorandums of Incorporation or MOI’s. Most companies in South Africa don’t need to be audited because they have a low Public Interest Score which is calculated on set criteria contained in the company regulations, mostly based on size. Some companies volunteer to be audited or financiers insist that they are audited. The act has modernised many things and has provisions that try and protect all stakeholders in a company, not only shareholders but employees and creditors. There are also provisions that protect minorities against abuse. It’s not perfect but certainly better than we have had before.
Corruption is endemic and has been carried out by everyone, government, big business and of course small business. In order for our country to grow and create jobs, corruption has to be stamped out. I don’t have to tell about the effect of corruption on all citizens, we see it daily in South Africa.
Let me be clear, it does not matter what type of company you have, the companies act applies to your company no matter how small or how large.
Let’s deal with the situation before we knew about the compliance form checklist. The new 2008 Companies Act which came into being on 1 May 2011, the provisions of which are quite easy to read and easy to understand. Before the compliance checklist, directors should have still understood the companies act and should have made sure that their company was compliant according to the companies act, and if they were not able to, they should have sought the help of their accountants or the accountant’s secretarial practitioners. Good company secretarial practitioners made sure their clients complied.
Let’s take this a step further, during this prior period (before 1 January) did accountants not advise their clients accordingly about company law? Did they not advise them about a distribution when one took place? Did they know what a distribution was? Did they not advise them about a share register that they didn’t have and did they not help them fix it? What did they do about directors’ debit loans, did they just leave them because they did not think it was a distribution? What was the position where there was a fundamental transaction and the fact that a small private company could be defined as a regulated company? Did they not know these facts and ignored their compliance responsibilities? It seems that many of them did know about all these things, that is the only explanation that I have for this furore.
The point I am making is what is the big deal about doing a check list to test a company’s company law compliance that would take less than 10 minutes, or is it because the accountants and secretarial practitioners did not do their jobs for smaller companies? It can only be a big deal if there was no compliance in the past as no one was checking.
The real issue is that the compliance form is just the tip of the iceberg and points to various aspects of company law that no one knows about.
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