JCI, the once-great Johannesburg-based mining house that was stripped bare by the Kebbles (and others), was ordered this week by the high court to pay the Companies and Intellectual Property Commission (CIPC) an administrative fine of R1 million for failing to submit financial statements as required by the Companies Act and in accordance with International Financial Reporting Standards (IFRS).
The extent of the fine shows the consequences, particularly for public companies, of failing to comply with the requirements of the Companies Act to submit financial statements to the CIPC.
Section 30(1) of the Companies Act requires companies to prepare financial statements within six months of the end of the financial year, while Section 30(2) read with Regulation 27(4) requires the financial statements of public companies to be audited.
CIPC inspectors conducted an investigation and found JCI had contravened these regulations for the period 2011-2017. A Compliance Notice was issued to the JCI board ordering it to provide IFRS-compliant financial statements. JCI initially applied to the Companies Tribunal to review and set aside the Compliance Notice, in the belief that it would be able to product IFRS-compliant financial statements.
In terms of a settlement agreement reached in 2018, the CIPC and JCI agreed that JCI was objectively unable to prepare financial statements fully compliant with IFRS in respect of the various periods specified in the November 2018 agreement. JCI was therefore unable to meet the conditions of the Compliance Notice and the 2018 settlement agreement.
Despite its best efforts, JCI was objectively unable to produce fully compliant IFRS accounts.
Apart from payment of a R1 million administrative fine, and in light of its inability to produce IFRS-compliant financial statements, JCI agreed to take steps to convene a shareholders meeting to adopt a special resolution for the voluntary winding up of JCI.
This agreement, updated in 2020, was made an order of court.