The CIPC Compliance Checklist Part 3
By: Mark Silberman B.Acc. C.A.(SA) Accfin Software (Pty) Ltd
The new notice makes some substantial changes to the requirements. Companies who are audited or independently reviewed are now the only companies that need to complete the checklist. All the directors need to confirm the company status.
Once the checklist is submitted it will be emailed to all the directors by the CIPC.
The timing of the period under review for the compliance checklist is now aligned with the company’s incorporation date. Compliance will be tested from incorporation date to incorporation date that aligns with the annual return instead of the last calendar year.
The checklist now has a comments field to notify the CIPC of any comments the filer may need to make. I would assume that this is to justify something that is non-compliant.
I would like to deal with some of the issues that have come up in the complaints.
Over-regulation and investment in South Africa
In an Accounting Week article, it mentioned that “overregulation flies in the face of government’s plan to turn the economy around”. This is absolute nonsense in regard to this matter as this is not overregulation as this is a check to make sure that we are running our companies compliantly which we should have been doing anyway since 2011. What does this say for the accounting profession if we are complaining about this?
The compliance checklist itself should attract more investment into South Africa as investors want to see that their investments are safe and won’t be subjected to abuse by crooked directors, and we know that there are many.
SAICA says the checklist has interpretation problems
Let’s say you need to answer the question “did the company comply with Section 4”. Section 4 deals with the solvency and liquidation test which is triggered by distributions of the company. This means that the filer has to know what the distributions are. They are clearly visible in the act. If one knows the companies act there is no interpretation required. Many of the other questions can be dealt with on the same basis.
The CIPC can improve the checklist by having sub questions, like the company pay a dividend, make a buyback etc. I guess there will be complaints about this because of the extra time. I would be in favour of this as it makes everything clearer.
The core of the argument is small business
Let’s get to the core of what the argument is and that is too much compliance for small businesses. This is totally wrong as the companies that are not audited are precisely the companies that need to do the compliance check list because these companies don’t know any better and don’t know the law and need their accountants to help, but may not be getting any help at all. It’s about helping a small business survive.
Let’s take a smaller company as an example, the ones that are going to get a pass on this. Say a small company starting to grow, there are no secretarial transactions and there are no distributions during the course of the year. They keep a share register but there is no movement. In order to comply with most of the questions on the questionnaire the accountant does it in about 5 minutes – what’s the big deal and they even charge for it. Where is this over-regulation?
The question of risk
There is a question of risk for professionals, directors and for stakeholders. The directors are in fact responsible so if something is answered incorrectly this could be an offence. We need to do what we do in the tax environment and pass the risk back to the directors and this can easily be done by a standard mandate or engagement letter that all the directors sign. If there is no mandate, is the company secretarial practitioner on the hook for incorrect facts?
By doing this work and doing it properly we are in fact helping protect all stakeholders, we are helping smaller companies survive.