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May 10, 2019
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August 27, 2019

What is corporate governance all about?

In terms of Section 33 of the Companies Act 71 of 2008 (“the Act”), read with Regulations 28, 29, 30 and 33 of the Companies Regulations of 2011 (“Regulations”), companies and close corporations must submit Annual Financial Statements or a Financial Accountability Supplement (“FAS”) together with their Annual Return with the Companies and Intellectual Property Commission (“CIPC”) annually.

All companies (including external companies) and close corporations are required by law to file their annual returns with the CIPC on an annual basis, within a prescribed time period. The purpose of filing such annual returns is to confirm whether a company or close corporation is still in business/trading, or if it will be in business in the near future.

Therefore, if annual returns are not filed within the prescribed time period, the assumption is that the company or close corporation is inactive, and as such CIPC will start the deregistration process to remove the company or close corporation from its active records. The legal effect of the deregistration process is that the juristic personality is withdrawn, and the company or close corporation ceases to exist.

Companies and close corporations are required to file annual returns once a year within a given time period. Companies must file within 30 (thirty) business days after the anniversary date of its incorporation date while close corporations must file within the anniversary month of its incorporation up until the month thereafter.

A clear distinction must be made between an annual return and a tax return. An annual return is a sort of ‘renewal’ and has the purpose of confirming whether CIPC is in possession of the most up to date information of a company or a close corporation and that the company or close corporation is still conducting business. A tax return focuses on the taxable income of a company or close corporation in order to determine the tax liability of the company or close corporation to the State and is filed with SARS. Compliance with one does not mean that there is automatic compliance with the other.

In determining the appropriate fee for the filing of an annual return, a distinction must be made between a company and close corporation filing, and the date on which the annual return became due, since different fee structures are used for companies and close corporations. If the annual return became due on 1 May 2011 or thereafter, the fee structure under the Act must be used. If it became due before 1 May 2011 the Companies Act, 1973 fee structure must be used. (Please refer to the CIPC website at www.cipc.co.za for the various filing fees applicable based on the company or close corporation’s turnover for a particular filing year.)

During February 2016, CIPC launched a programme to implement eXtensible Business Reporting Language (“XBRL”) as a digital financial reporting standard for qualifying entities in South Africa by mandating submission of annual financial statements to the CIPC together with its Annual Return submission from July 2018.

Regulation 30 of the Act stipulates that a company that is required by the Act or Regulation 28 to have its annual financial statements audited must file a copy of its audited statements:

  1. on the date that it files its annual return, if the company’s board has approved the statements by that date; or
  2. within 20 business days after the board approved the statements, if they had not been approved by the date on which the company filed its annual return.

A company that is not required to have its statements audited, in terms of the Act or Regulations, may, at its option:

  1. file a copy of its audited or reviewed statements together with its annual return; or
  2. undertake to file a copy of its audited or reviewed statements within the time provided.

A company that is not required to file annual financial statements in terms of the regulations, or a company that does not elect to file, or undertake to file, a copy of its audited or reviewed annual financial statements in terms of the regulation, must file an FAS to its annual return in Form CoR 30.2.

Should a company be required to file its annual financial statements in terms of the Regulations with its Annual Return with CIPC, these Annual financial statements need to be submitted in XBRL format. The idea behind XBRL is that instead of treating financial information as a block of text – as in a standard internet page, spreadsheet or printed document – it provides an identifying tag for each individual item of data. For example, company net profit or net current assets have their own unique tags that are understandable to computers. These tags contain information about the item, including its description, e.g. ‘accounts receivable’, its value and currency and whether the amount is a debit or credit.

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)