In recent times, the business landscape has witnessed significant changes. A noteworthy transformation introduced by the Companies and Intellectual Property Commission (CIPC), the organisation responsible for overseeing company-related matters, implemented a new process for director amendments. This change sparked discussions and concerns within the private sector as it means a more complex and time-consuming process.

Understanding the need for change

Let us first explore why there was a need to introduce these changes. In the past, the authentication process for making changes, referred to as "single-factor" authentication, encountered difficulties coping with the growing volume of director amendments. Given the escalating instances of criminal activities, the CIPC determined that depending solely on this method was no longer adequate. The primary goal is to enhance security and prevent unauthorised director amendments, addressing potential vulnerabilities that could lead to corruption and corporate crime.

In a broader context, it's essential to understand the backdrop against these changes. South Africa found itself on the Financial Action Task Force's greylist in March 2023 due to concerns about the government's compliance with international standards related to money laundering, terrorist financing, and proliferation financing.

In response, there was a rush to pass and implement legislation to tighten controls and enhance security measures. One significant legislative change was the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, which impacted various acts, including the Companies Act.

The multi-factor authentication approach

So, what exactly is this new "identity verification and multi-factor authentication" process? In simple terms, it's a more robust and secure way of confirming the identity of individuals making amendments. Instead of a single authentication step, the process now involves multiple factors to ensure higher assurance.

Directors themselves are now the key players in making amendments. Each director receives a one-time pin number (OTP) individually. This adds an extra layer of security, as only the director possessing the OTP can initiate the changes. If a director shares login details with a third-party service provider, the CIPC absolves itself of responsibility for any amendments made to the company's account.

Challenges and slowdowns

While the intention behind these changes is commendable, the implementation has not been without challenges. Secretarial practitioners managing administrative tasks for large, listed companies have reported a noticeable slowdown in successfully lodging amendments.

Several factors contribute to this slowdown. Issues range from incorrect contact details in the CIPC database to directors not receiving OTPs or failing to respond within the specified time frame. Additionally, the Department of Home Affairs plays a role in verifying the issue date of the filer's

amendment and the directors' IDs. Unfortunately, the department's systems are reported to be offline frequently, causing further delays.

This isn't the first time the CIPC has faced challenges implementing changes. In January of the previous year, a migration to upgraded e-services and Bizportal platforms, intended to comply with legislative requirements and improve the ease of doing business, encountered numerous problems. The migration was eventually halted and rolled back due to these challenges.

The ongoing efforts to streamline processes adhering to international requirements created persistent frustration within the private sector. Secretarial practitioners and other stakeholders lament the lack of engagement and consultation when government entities introduce systems or processes directly affecting their businesses.

Conclusion

In conclusion, the recent changes in the director amendment process by the CIPC reflect a broader trend of adapting to evolving circumstances and international requirements. While the intention is to bolster security and prevent unauthorised amendments, the implementation has faced practical challenges. The private sector, especially secretarial practitioners, seeks better engagement and collaboration to address these concerns. As we navigate these changes, understanding the context and the reasons behind them becomes crucial for businesses and individuals alike.

Source:

https://www.moneyweb.co.za/news/south-africa/cipc-again-gives-companies-a-new-year-headache/