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Mandatory Compliance Checklist For All Companies

Mandatory Compliance Checklist For All Companies – From 1 January 2020 all companies (large or small, trading or dormant, private, public, incorporated, etc.) must complete the CIPC’s new compliance checklist prior to filing its annual return.

Annual Returns

All companies are compelled to file its annual returns within 30 business days after the anniversary date of its incorporation. The annual return is an administrative fee for maintaining your company’s registration with CIPC. The fee is calculated based on the company’s annual turnover (it will range from R450 per year for small private companies, to R4 000 for larger private companies). If you were to file your annual returns late, a penalty fee will apply.

Should you fail to file your company’s annual returns, CIPC automatically places your company in a process of deregistration. Should you again fail to faile the annual return after a notice period, your company will be deregistered.

Trading under the name of a deregistered company (it often happens that companies aren’t even aware of the deregistration) can have serious consequences. And to have the deregistration reversed takes some additional effort and costs.

So, make sure you file your annual returns on time – you can contact us to assist you with that process.

Compliance Checklist

Although it used to be a simple task to file your annual returns, CIPC as now made it a little bit more complicated: From 1 January 2020, you will only be able to file your company’s annual return after you have completed the compliance checklist.

The checklist has 24 questions to test your company’s compliance with the provisions of the Companies Act. Should you answer “no’ to any of these questions, it will raise a red flag and CIPC may take action.

Companies should take note of these questions and ensure that you are complaint with each of them, in order to avoid problems or delays when the time comes to submit your annual returns.

Companies can simply reply “Yes”, “No” or “not Applicable” on the questionnaire. Should an instance arise where you have to reply “No”, you will not be able to explain the circumstances or reasons for the apparent non-compliance. It is advisable to keep proper record of your submissions and any reasons why you may have replied “No”, in case CIPC raises a query.

Here are the questions with some explanatory comments. Note that these comments do not cover the full extent of the compliance obligation, and companies should take care to read the applicable section and seek legal advice if the requirements aren’t clear:

Q1: Did the company comply with section 4 during the previous financial year?
  • Did the company satisfy the solvency and liquidity test at all relevant times as required in section 4?  This is particularly required whenever a distribution is declared to the shareholders.
  • If no actions were taken which required the solvency and liquidity test to be applied, this question is not applicable.
Q2: Did the company comply with section 15 during the previous financial year?
  • Is the company’s Memorandum of Incorporation (MOI) compliant with the Act? This is particularly important for older companies that were registered in terms of the old Companies Act with memorandum and articles of association, and who haven’t registered a new, compliant MOI.
  • Section 15 also deals with the registration of amendments to the MOI and registration of rules of the company.
Q3: Did the company comply with section 26 during the previous financial year?
  • Are the company’s records (such as its shareholders register, its MOI, etc.) open to inspection by members/shareholders at no cost and to non-members at a prescribed fee?
Q4: Did the company comply with Section 27 during the previous financial year?
  • Is the company’s current financial year end in compliance with Section 27 in that it began when the previous financial year ends and it ends on the date as specified in the company’s notice of incorporation.
Q5: Did the company comply with Section 28 during the previous financial year?
  • Did the company keep accurate and complete accounting records in one of the official languages of the Republic (including any prescribed accounting records) as necessary to enable the company to satisfy its obligations in terms of the Act or any other law with respect to the preparation of financial statements. 
  • Are the company’s financial records kept at, or accessible from, the registered office of the company?
Q6: Did the company comply with Section 29 of the previous financial year?
  • Does the company’s financial statement satisfy the financial reporting standards and are they a true reflection of the affairs of the company?
  • The financial statements must also show the company’s assets, liabilities and equity, its income and expenses and any other prescribed information; it must set out the date on which the statements were published and the accounting period to which the statements applies; it must indicate whether or not it was audited; it must not be false or misleading in any material respect and it must not be incomplete. 
Q7: Did the company comply with Section 30 during the previous financial year?
  • Were the annual financial statements of the company prepared and signed off within 6 months after its financial year end or such shorted period as to provide for the required notice of an annual general meeting?
  • Were the annual financial statements audited, if so required in terms of Section 30?
  • There are various other technical requirements set out in Section 30 and care must be taken to ensure that the company is compliant with those requirements, as far as they may be applicable to your company.
Q8: Did the company comply with Section 32 during the previous financial year?
  • The name and registration number of the company must be used correctly and appropriately and must be stated in legible characters in all notices and other official publications of the company (including notices and publications in electronic format, all letters, delivery notes, invoices, receipts, etc.)
Q9: Did the company comply with Section 33 during the previous financial year?
  • Every company must file an annual return in the prescribed form with a prescribed fee and within the prescribed period after the end of the anniversary of the date of incorporation, including in that return a copy of the annual financial statements if it is required to have such statements audited, and any other prescribed information.
  • The company must designate a director, employee or other person who is responsible for the company’s compliance with Part C of the Chapter 2 of the Act. 
Q10: Did the company comply with Section 44 during the previous financial year?
  • If the company provided financial assistance to any person to subscribe to securities of that company, that provision of financial assistance must have been done in compliance with Section 44. 
  • If no such financial assistance was provided to any person, this question is not applicable. 
Q11: Did the company comply with Section 45 during the previous financial year?
  • If the company provided loans or other financial assistance to directors to subscribe to securities of that company, that loan or financial assistance must have been done in compliance with Section 44.
  • If no such financial assistance was provided to any person, this question is not applicable.
Q12: Did the company comply with Section 50 during the previous financial year?
  • Does the company have a securities register and is it maintaining its securities register in accordance with the prescribed standards?
Q13: Did the company comply with Section 61 during the previous financial year?
  • Did the Board of the company comply with the company’s Memorandum of Incorporation and Rules with regard to shareholders meetings?
Q14: Did the company comply with Section 66 during the previous financial year?
  • Does the company have the correct number of directors and prescribed officers in terms of the Act and in terms of the its Memorandum of Incorporation? For private companies and personal liability companies, this is at least one director, except where a higher number of directors is specified in the MOI; for public companies and non-profit companies at least three directors are required, unless higher number is specified in the MOI.
  • Does the MOI provide for the election of at least 50% of his directors by the shareholders?
Q15: Did the company comply with Section 69 in the previous financial year?
  • Can it be confirmed that none of the company’s directors or prescribed officers are ineligible or disqualified to act as such?
Q16: Did the company comply with Section 70 during the previous financial year?
  • Was the correct procedure followed whenever it was required to fill a vacancy on the Board?
  • If there were no vacancies on the board during the previous financial year, this question is not applicable.
Q17: Did the company comply with Section 71 during the previous financial year?
  • Did the company comply with the Act and its MOI when directors were removed (directors can be removed by the shareholders or by the fellow directors, different requirements apply to each scenario)?
  • If no directors were removed, this question is not applicable.
Q18: Did the company comply with Section 86 during the previous financial year?
  • Is the company required to appoint a company secretary? If so, was one appointed?
  • If not, the question is not applicable.
Q19: Did the company comply with Section 90 during the previous financial year?
  • Is the company required to appoint an auditor? If so, was an eligible person/firm appointed?
  • If not, the question is not applicable.
Q20: Did the company comply with Section 92 during the previous financial year?
  • If an auditor was appointed, is there a rotation of auditors every five years?
  • If it is not required to have an auditor appointed, this question is not applicable.
Q21: Did the company comply with Section 94 during the previous financial year?
  • Is the company required to appoint an audit committee? If so, do the members of the audit committee comply with the requirements of the Act?
  • If it is not required, this question is not applicable.
Q22: Did the company comply with Regulation 21 during the previous financial year?
  • Did the company notify the commission of any change in the location in any company records that are not located at the company’s registered office?
  • If there was no such change, this question is not applicable.
Q23: Did the company comply with Regulation 43 during the previous financial year?
  • Is the company required to appoint a social and ethics committee? If so, was one appointed?
  • If not, the question is not applicable.

(The following question only applies to non-profit companies)

Q24: Did the company comply with Schedule 1 during the previous financial year?
  • Various requirements are set out in Schedule 1. Most important are that all the non-profit company’s assets and income must be applied to advance its stated objectives, as set out in its Memorandum of Incorporation. Those requirements must be studied carefully to ensure proper compliance.

Should you require any further assistance with regard to your company’s compliance with the Companies Act, completion of the Compliance Checklist, the filing of annual returns or any other company related matter, you are welcome to send an email to info@mamelodibiz.co.za or contact us now.

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