Companies Act 2008
Although the Act was signed into the statutes in 2008 and despite the fact that the final date for implementation was 1 April 2011 there was a further delay. This is, no doubt, largely due to the state of chaos at CIPC. The Act was finally implemented on 1 May 2011.
In order to read the new Act, one ideally needs two computer screens – one displaying the Companies Act 2008 and the other, the Companies Regulations 2011 which attempt to clarify the grey areas of the Act.
First, let’s take a look at whether you need an audit or review –
The regulations clarify the Annual Financial Statement and audit/review requirements for companies and CCs.
The new rules apply for every company (and to CCs whose PIS is 350 or more) whose financial year ends on or after 1 May 2011.
Calculate your Public Interest Score (PIS)
1 point for every R1m turnover (or part thereof) for the year
1 point for every employee (average for year)
1 point for every R1m in 3rd party liabilities at year end
1 point for every shareholder
Audits and Reviews (Regulations 28 and 29)
|Public Interest Score|
|0 to 99||Review by Professional Accountant ISRE 2400*|
|100 to 349||Review by Registered Auditor or CA(SA) ISRE 2400*|
* Unless all of the shareholders are directors in which case no review is required.
Annual Financial Statements (Regulation 27) – Companies Only, CCs still need AFS to IFRS for SMEs.
|Public Interest Score|
|0 – 99||Free choice|
|100 to 349||IFRS for SMEs or IFRS|
|350 plus||IFRS for SMEs or IFRS|
We have selected certain other matters which we feel will interest you most. The text is paraphrased rather than directly quoted.
s4 (1)(a) A company is solvent if its assets, fairly valued exceed its liabilities and
s4 (1)(b) it will be able to pay its debts in the normal course of business for the 12 months after the solvency test was applied.
s15 The old Memorandum and Articles are now replaced by a Memorandum of Incorporation.
Trap! During a two year grace period, your M&A takes precedence over certain matters. Since your M&A almost certainly states that your company must be audited, you need to replace it with a MoI in order to avoid a reportable irregularity (unless, of course, you still undergo an audit).
s19 (3) The old “Inc” incorporated professional practice is now called a “personal liability company”, still distinguished with “Inc”.
s22 (1)(b) A company must not trade under commercially insolvent circumstances.
s27 (4) The financial year end can be changed to any date falling after the date on which the notice is filed, can only be changed once during any financial year and no financial year may exceed 15 months.
Schedule 1 replaces s21 with regard to non-profit companies, whose names will now end with “NPC”
Sch 1 (1)(6) Incorporation as a non-profit company ………..does not necessarily qualify that non-profit company ……….. as exempt from tax.
s13 (1) three or more persons may incorporate a non-profit company and
Sch 1 (3)(a) they will be the first directors.
Sch 3 (1)(2) No registrations of CCs will be allowed from 1 May 2011. However, the Close Corporations Act has not been repealed – they will continue for the foreseeable future.
Trap! All Annual Financial Statements must be finalised within 6 months of the financial year end.
Trap! If the Annual Financial Statements are not prepared by an independent accountant, the above threshold levels drop dramatically.
The principal new forms for companies are in the following table, The CoR number corresponds with the paragraph of the Regulations. Close Corporation forms are mostly unchanged.
|Reservation of name||CoR 9.1|
|Notice of Incorporation||CoR 14.1|
|Initital Directors of Company||CoR 14.1 Annexure A|
|Initial Appointment of Secretaries and Auditors||CoR 14.1 Annexure D|
|Registration Certificate||CoR 14.3|
|Memorandum of Incorporation (profit companies)||CoR 15.1A or B|
|Memorandum of Incorporation (non-profit companies)||CoR 15.1C, D or E|
|Conversion of CC to Company||CoR 18.1|
|Registration Certificate CC converted to Company||CoR 18.3|
|Change of year end||CoR 25|
|Annual Return||CoR 30.1|
|Notice of pre-incorporation contract||CoR 35.1|
|Notice of change of Directors||CoR 39|
|Application for re-instatement of de-registered Company||CoR 40.5|
|Notice of change of Auditors or Secretaries||CoR 44|
A review of financial statements in accordance with the International Standards for Review Engagements consists primarily of making inquiries of management and others within the entity involved in financial and accounting matters, applying analytical procedures, and evaluating the sufficiency and appropriateness of evidence obtained. The practitioner reports on whether anything has come to the practitioner’s attention that causes him/her to believe that the financial statements, taken as a whole, are not prepared in all material respects in accordance with the applicable financial reporting framework. The procedures performed in a review are very different to those performed in an audit, and the practitioner does not express an audit opinion.
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