[Question] New Companies Act

[PieterPan]

Under the New Companies Act if the company's shareholding is private and two or less, Wages under R1 000 000 -

1. Who (and with what qualifications) can act as accounting officer
2 .Does such a company need signed AFS by the accounting officer?

Regards

Pieter

[CLIVE-TRIANGLE]

The requirements are in the attachment

[PieterPan]

Hi
Thanks

What is the requirements / qualifications of an accounting officer?

Regards

[CLIVE-TRIANGLE]

You will note their are three types of accounting professionals referred to:
1. Accounting Officer. This is a person who is a member of a professional body recognised in Close Corporation's Act. There are quite a number of bodies listed in that Act.
2. Chartered Accountant who is a member of SAICA
3. A registered auditor (Chartered Accountant who is registered with Independent regulatory Board For Auditors)

[Blurock]

Thank you for the info Clive. There appears to be a lot of misconceptions regarding the new companies act. People are still looking for dormant cc's to buy as they think that they will have to be audited if they register a PTY.

Maybe you could elaborate on the points system to give more clarity on who needs to be audited and the criteria used.

[BusFact]

I've heard rumours that existing Pty's need to change their MOI / Articles in order to not have to undergo an audit, even though the new act states that they only need a review.

Is this really the case?

[CLIVE-TRIANGLE]

I'll try to answer both questions, and elaborate on some of the matters that have subsequently come to light, as certain provisions have had unintended consequences. Anything in italics is an explanation or my opinion. If it's my opinion, get a second opinion before you act, as I may be wrong, albeit in good company! Also, the issues apply equally to close corporations!

WHAT IS OWNER MANAGED?
All of the shareholders, or those with a beneficial interest in the securities of the company, are also directors / members. A consequence is that where shares are held by a juristic person such as a company, cc or trust, that company or cc is not owner managed. There is a body of opinion that the wording "those with a beneficial interest in the securities of a company" leaves the door open that if all of the beneficiaries in a trust are also directors, then that company is still owner managed. This view has not been tested in law, yet.

So, it also means that where you have two or more companies, and one holds shares in the other, the one whose shares are held by the other is not owner managed.

AUDIT REQUIRED - IGNORING PUBLIC INTEREST SCORE, OR DESPITE PUBLIC INTEREST SCORE
- A subsidiary when the holding company is required to be audited.
(IFRS defines a subsidiary as a company whose board is controlled by another. In other words, if company A has control of the composition of the majority of the board of company B, then a group is considered to exist and you are required to produce Group AFS. It remains to be seen how that will impact here.)
- When it is required by the MOI
(this includes pre-existing companies that have not had their MOI's converted, Blurock. The transitional arrangements in the act provide that the old Memorandum And Articles continue to exist and apply until changed. This seems to be an unintended consequence and has caused a flood of applications to convert. This flood, along with the registered address debacle, has strained CIPC severely. I know of many companies that have passed a special resolution not to be audited, despite not having yet converted. I can't imagine that it would be a problem, especially when it is owner managed, but the reality is that in terms of the Act it should be audited)
- When the company has during the year held assets in a fiduciary capacity in excess of R5m.
(The easiest example is refundable deposits)

TO CALCULATE PIS
- 1 point for every holder of a beneficial interest in the securities (in other words, a trust with 5 beneficiaries means 5 points, and so on)
- 1 point for every R1m, or portion, of turnover. (R2.1m = 3 points
- 1 point for every R1m, or portion, of unsecured 3rd party liability. (so, for example, you would exclude a bondholder and also an installment sale liability)
- 1 point for every employee, averaged for the year.

[CLIVE-TRIANGLE]

There appears to be a lot of misconceptions regarding the new companies act. People are still looking for dormant cc's to buy as they think that they will have to be audited if they register a PTY.

I have two if anybody wants them