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CIPC to abolish compliance checklist for small business after lobbying by the accounting profession

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The Companies and Intellectual Property Commission (CIPC) this week took steps to abolish the mandatory compliance checklist for small businesses, which came into effect on 1 January 2020, after lobbying by the accounting profession.

The SA Institute of Business Accountants (Saiba) raised its concerns with the CIPC, as we wrote here. Saiba’s official advice to members on the compliance checklist can be read here.

“It is a credit to the CIPC that it is receptive to the voice of the stakeholders. It has indicated that it will abolish the compliance checklist for small businesses after listening to the concerns of the accounting profession,” says Saiba CEO Nicolaas van Wyk. “This is a great example of our constitutional democracy at work that we are able to engage and interact in a positive way with regulators to bring about an outcome that is to the benefit of everyone.”

Saiba’s principal concern with the compliance checklist was that it would raise the costs for small businesses, which do not have the resources of larger enterprises. “We understand the CIPC’s need to focus on risk in light of corporate scandals at Steinhoff and elsewhere, but we felt this was an over-reaction, and we are pleased that the CIPC agreed,” says van Wyk.

When the list was first introduced, digital accounting firm Osidon CEO Hennie Ferreira said it would undermine the country’s drive to attract investment. “Overregulation flies in the face of government’s plan to turn the economy around. Investors will look at the over-regulated environment and decide to invest elsewhere.”

Following a meeting between Osidon and the CIPC Commissioner Advocate Rory Voller and his management team, the CIPC agreed to abolish the mandatory compliance checklist for small businesses that do not require audits, says Ferreira.

The abolition also conforms with President Cyril Ramaphosa’s commitment in last week’s State of the Nation Address to make it simpler to do business in SA. “As we work to fix the capabilities of the state, we know that growth and job creation will in large measure be driven by private enterprise. We are therefore building an operating environment that is favourable to doing business,” said Ramaphosa. “Through the Bizportal platform one can now register a company in one day, register for UIF and SARS and even open a bank account,”

The CIPC compliance checklist required all companies to answer a 24-question compliance list when they submit their annual returns. This list would increase accounting fees as the average business owner does not have adequate knowledge of the Companies Act, leaving accountants to complete the list on their clients’ behalf. Most of the burden would have fallen on accountants. Ferreira estimates the abolition of the mandatory compliance checklist will save businesses about R1.2 billion a year, based on the amount of hours accountants would have billed their clients for this service.

In an email to Osidon, CIPC Commissioner Adv Rory Voller confirmed the decision to abolish the checklist for small businesses: “Only Audited and IR (Independent Review) companies will complete the checklist..not all companies. Our IT department will programmatically attend to the system changes as guided by enforcement.”

Ferreira said the abolition of the mandatory checklist represents a massive feat for entrepreneurs in South Africa: “Small businesses are drowning in compliance and red tape and cannot be subjected to any more regulation. Entrepreneurs and small business need to be empowered to boost our economy and create job opportunities. They need to be de-regulated and encouraged”.

Ferreira praised the CIPC for their responsiveness. “After our meeting, they agreed to abolish this new requirement for small businesses, saving SMMEs millions of rand. We fought and won a major victory for small business. I want to thank the CIPC for being open minded, approachable and eager to find solutions,” Ferreira said.

Van Wyk says it is important to note that the CIPC has not as yet issued an official notice abolishing the compliance checklist. A media statement issued by Saiba indicates that discussions are still ongoing:

“One option on the table was to make the checklist only applicable to companies with a particular public interest risk measured by its Public Interest score or reporting status as either subject to an audit or independent review. 

“As far as we understand these talks are still ongoing and we will continue to engage CIPC and motivate for a less onerous checklist. We support the proposal to limit the checklist to companies that pose a significant risk to the economy due to their size, complex transactions that impact pension funds and the broader investment sector. 

“We wish to inform our members and their clients that the possible changes are still in discussion phase with the CIPC expected to issue an amended notice soon.” 

Adds van Wyk: “It is a credit to the CIPC that is was able to quickly apprehend the likely impact on small businesses of introducing more compliance obligations, and the attendant costs, and chose to do whatever it could to remove this obstacle. We have an excellent working relationship with the CIPC.

Osidon this week launched their #FightForSmallBusiness campaign to take on over-regulation and red tape in the South African business environment. “This is a movement of action, that will work with government and other role players in the private sector to boost small businesses to the benefit of all. We, along with our partners, will bring government and the private sector together to solve problems, that will remove obstacles that hinder small business,” Ferreira said.

Interested parties can follow the #FightForSmallBusiness campaign here: https://www.facebook.com/osidoninternational/.

This article was amended on 20 February 2020. The original version stated the CIPC had “climbed down” after initially requiring small businesses to complete the compliance checklist, and that this was after intense lobbying by members of the accounting profession. Rather than being a climb-down, it was a cooperative and collegial outcome of engagement between the CIPC and a broad range of voices from the profession.