The CIPC Compliance Checklist Part 2

It’s true that there is a lack of company law knowledge in the accounting profession...

By: Mark Silberman B.Acc. C.A.(SA) Accfin Software (Pty) Ltd

I know this for a fact as I have been teaching company law to company Secretarial Practitioners and Partners in accounting firms for the last 15 years. Directors of medium and small sized companies know even less. Facts are facts and we need to deal with this lack of knowledge and come to grips with it.

The compliance checklist is the CIPC’s right to ensure that compliance takes place. Many companies in South Africa if they don’t have a company secretary, certainly the bigger ones employ the company secretarial department of the accounting firm to carry out the company secretarial duties who should know if there is compliance or not. We have to do this anyway so why are we complaining about a form that helps us comply, and helps South Africa.

The most amazing thing about the compliance form is the amount of complaints about it. In my last webinar on the 6thMarch, 60% of the attendees polled said that it was overregulation, of course I don’t agree.

Let’s deal with a few of the complaints. In short some of what has been published by various sources is summarised for convenience: –

  • SAIBA – It’s their principal concern that the compliance checklist will raise the cost of compliance for smaller business.
  • Osidon CEO Hennie Ferreira said it would undermine the country’s drive for investment as it will look like we are over-regulated and most of the burden would fall on accountants and cost businesses about R1,2 billion per year in fees.

Various articles talk about cost for smaller companies

The failure of small business will cause decline in RSA, one company at a time and is already doing so. We see this daily. If one job is lost because of non-compliance that’s a family affected, or if a creditor loses money because of non-compliance then there is another loss of jobs that needs to be addressed. Company insolvencies are on the increase as smaller companies go into decline? Cash flow problems in small business is the biggest reasons for failure, and we all know the reasons for this. The bad economy, big companies not paying on time, government not paying on time or at all!

What about a distribution in terms of the companies act that is missed and the company is liquidated because of it and the directors are sued by a shareholder or creditor, who is to blame? Sorry it can’t be the accountant who compiled the financial accounts because at that time the balance sheet looked ok. Insolvency happened well after the balance sheet was presented. They did not do a compliance checklist and they were not even aware of a distribution or company law problems.

The compliance checklist is also educational which gives an opportunity for every small company to learn and correct what is wrong and make small business a better place. We all know that small business is a way to grow the economy, in fact right now it’s the only way.

Signing Financials Statements which are late don’t help at all as they are based on history, doing a cash flow for the future year is about the future and will be more helpful and is compulsory when triggered by a distribution in the companies act when certain distribution events occur. Most of these events in many instances when they occur are sure to cause a cash flow problem in smaller companies.

Claim of R1,2 billion in fees to accountants

There must be a serious question over the amount claimed as a cost to the country as one of the complaints. Let’s examine this statement from a small business perspective:

I refer to SARS 2019 statistics that states that the expected company tax returns are 991,207 of which 814,151 returns have been assessed. Now we have been told that CC’s outnumber Companies by 8 to 1. This means that there are only 110,135 active company returns which includes all size companies. CC’s don’t do the checklist. Let’s say that 80% of these companies are small companies. This means that the compliance checklist only applies to 88,108 companies. Say the fee is R750 per checklist per submission which comes to a R82 million charge to the economy.

This is nowhere near R1,2 billion. Whatever the fees charged it does create jobs in the profession and teaches accountants and directors about company law and improves compliance in the country.

For more information, visit: www.accfin.co.za

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