In terms of recent amendments to the Companies Act, as many as one million private companies actively trading in SA will have to file annual financial statements with the Companies and Intellectual Property Commission (CIPC) when submitting their annual returns.
CEO of the SA Institute of Business Accountants (Saiba), Nicolaas van Wyk, says companies should expect the CIPC to police and monitor compliance with this new requirement, and to impose penalties on those companies failing to submit financial statements.
In June last year the CIPC slapped three companies with fines equivalent to 10% of turnover for failing to file annual financial statements within six months of the yearend. CIPC brought the three cases after receiving irregularity reports from the Independent Regulatory Board for Auditors (IRBA). The Auditing Profession Act requires auditors to report irregularities, such as failure to file annual financial statements or failure to register for VAT.
“In the past only companies that were audited, listed on the stock exchange or state-owned companies were required to file their financial statements with the CIPC,” says van Wyk. “We can expect the CIPC to start charging penalties for non-compliance as a way to fund itself – which is a possible stealth tax.”
Business Rescue amendment benefits big cats
Amendments to Section 135 of the Companies Act deal with business rescue. In future, amounts owing to landlords by companies under business rescue will become part of “post-commencement finance”. This separates rentals from debts that are owed at the moment business rescue commences.
“That’s another win for the big cats,” says van Wyk. “Currently, shopping malls don’t charge bigger retailers such as Checkers the same rent as smaller shops. The smaller shops in effect subsidise the bigger retailers. Should something go wrong and the company falls into financial difficulties, business rescue is an option. The idea is to get creditors to reach a compromise on debt so the business can continue trading. This new amendment seems to protect the landlord from any compromise on debt, so the rent is still payable even after business rescue.”
Other amendments include:
- Empowering the courts to validate the irregular creation, issue or allotment of shares provided it is just and equitable
- Exempting companies from restrictions applying to financial assistance between the company and its subsidiaries
- Exempt companies buying back their own shares from requiring shareholder approval in certain instances
- Limit regulation on private companies
- Regulate the composition of the social and ethics committee and its functions.