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The CIPC to Intensify Compliance Enforcement

The Companies and Intellectual Property Commission (CIPC) Compliance Checklist was implemented by CIPC from 1 January 2020.

Companies will be required to complete the Compliance Checklist, prior to submitting their annual returns.

The Compliance Checklist is applicable to all companies, including state-owned companies, non-profit companies, private companies, personal liability companies and public companies. The checklist currently does not apply to close corporations.

The CIPC has, as one of its functions, the monitoring of compliance with the Companies Act 71 of 2008. As part of the monitoring the CIPC is implementing the compliance checklist. The CIPC states that the objectives of the Compliance Checklist are:

  • To ensure compliance with the mandatory requirements of the Companies Act;
  • To serve as an educational tool for the director and company secretaries, in guiding them with regards to their responsibilities in terms of the Companies Act;
  • To utilise the Checklist to monitor and regulate proper compliance with the Companies Act and, if trends of non-compliance appear, to act accordingly.

The Compliance Checklist comprises of 24 questions with “yes”, ”no” or “not applicable” answer options. Companies are prompted to indicate if they complied with a particular section during the previous calendar year. The questionnaire does not allow respondents an opportunity to explain their responses. The CIPC has indicated that further correspondence regarding particular answers may be e-mailed to COR135.1complaints.co.za@cipc.co.za. (The COR135.1 is prescribed when reporting an alleged contravention of the Companies Act, but we understand that an e-mail submitted to the proposed address will reach the correct recipients at the CIPC)

What is the questionnaire?

You are asked to state whether you comply with a list of important areas of the Companies Act (for smaller companies, you can mark quite a few of these as non-compliant).

The main areas covered are:

  • Have you satisfied yourself that the company meets liquidity and solvency requirements?
  • Does your Memorandum of Incorporation, or changes to one, or changes to company rules comply with the Act?
  • Have you compiled Annual Financial Statements in line with the Act’s requirements?
  • Do you handle financial assistance to directors correctly?
  • Is your shareholders register compliant?
  • Do directors run the company along stipulations set out in the Act?
  • Do you have a company secretary?

Who is responsible?

The Companies Act states that the business and the affairs of a company must be managed by or under the direction of the board and the directors take responsibility for compliance with the Companies Act. Directors need to ensure that they are aware of their compliance obligations as the questionnaire only refers to sections of the Companies Act with no further detail or guidance provided on what the compliance requirements(s) in the relevant section is.

When completing the questionnaire companies are reminded in terms of section 215(2)2 a person commits an offence if the knowingly provide false information to the Commission and that if a person is convicted on an offence they could be liable to a fine, imprisonment not exceeding 12 months or both a fine and imprisonment in terms of section 216(b).

Compliance Sections in Question?

In this Compliance checklist that CIPC issued, there are certain sections to which CIPC would like to know you have complied.

For instance, when you look at Section 4 of the Act, Solvency and Liquidity, have you applied this correctly when it comes to your company? Do you know when this requirement needs to be complied with? Do you have the correct paperwork in place to confirm that you are compliant? If not, what will it take for you to be compliant with this section?

Another Section CIPC would like to check for compliance is Section 30, Annual Financial Statements. Have you prepared your financials within six months after your financial year-end?

These are a few sections in which CIPC would like to know your compliance status.

Calendar year

This checklist will only be applied to your previous calendar year and will be submitted to CIPC when you submit your annual return.

For example

If you submit your 2019 CIPC annual return, then your questionnaire and answers will be based on your previous calendar year i.e. 2018.

Way forward

Speak to our Companies Secretarial division at Newtons and we will guide your through the Compliance Checklist introduced by CIPC for your business.

NEWTONS

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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