Three points you need to know about the Companies Act to avoid a R1 million government fine
43984, 19 Nov. 2014
Tags: companies act, financial statements,
The Companies Act 71 of 2008 came into effect over three years ago.
According Werksmans Attorneys, the Act fundamentally re-wrote South African company law.
The Act, which applies to all companies in South Africa – from one-man companies to large multinationals – ensures South Africa is in line with international standards when it comes to corporate governance.
While the Act has been around for quite some time now, companies are still failing to comply with some of the provisions.
They’re essentially playing with fire. But you don’t have to…
Here’s why it’s dangerous not to comply with the Companies Act
If you don’t comply with ALL the provisions of the Companies Act, you can be fined anything up to R1 million! Government determines these fines according to which section you didn’t comply with.
If, for example, you don’t add the correct abbreviation after your company name, you won’t be fined R1 million, but you’ll be fined nevertheless.
What’s more, some sections of the Act say if you don’t perform a specific action, you won’t be fined, but you’ll be guilty of a criminal offence. This means you’ll go straight to jail.
To help you avoid these nasty consequences, we recommend you take note of these three points about the Companies Act so you can comply.
Familiarise yourself with these three points about the Companies Act to steer clear of government penalties
#1: In terms of the Companies Act, companies now have a choice of having audits, independent reviews or otherwise nothing performed.
Your company needs to have either an audit or an independent review, unless it’s exempt because all your shareholders are directors.
An audit is a process during which a registered auditor states if your company’s financial statements are fairly presented. He has to be satisfied that your financial statements are fair and reasonable.
During an independent review, the person doing the review needs to conclude that nothing has come to his attention indicating your financial statements aren’t fairly presented.
So how do you know if your company needs an audit or review?
It all depends on your Public Interest Score.
You need to calculate your Public Interest Score (PIS) to determine whether you need an audit or review.
You’ll find the details on how to calculate your score in the Act.
#2: Only registered auditors can perform audits while a wider range of professionals can perform independent reviews.
By “wider range of professionals”, only registered auditors, Chartered Accountants and accounting officers can perform a review for you.
#3: The Act says all registered companies need to have financial statements.
What’s more, you must prepare your financial statements according to the provisions of the Act.
We recommend you consult the Act to see exactly how to prepare your financial statements.
As you can see, the cost of not complying with the Companies Act is huge. Make sure you comply now that you know these three all important points.
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