The Companies and Intellectual Property Commission (“CIPC”) has implemented a new Compliance Checklist that all business owners who are registered with the CIPC must complete. Failure to complete the Checklist or providing false information on the Checklist could lead to the person facing up to 12 months in prison.
The Checklist consists of 24 multiple choice questions, which ask the Company or Director if they have complied with particular sections and schedules of the Companies Act in the previous calendar year. On the questionnaire, the options for companies to choose from are “yes”, “no” or “not applicable”. There is no place on the Checklist to provide any type of explanation or justification for the answers given.
The Purpose of the Compliance Checklist
The CIPC has stated that the key purposes of the checklist are:
to ensure compliance of the mandatory requirements of the Companies Act;
to serve as an educational tool for Directors and company secretaries, in guiding them with regards to their responsibilities in terms of the Companies Act;
and for the Commission to use the checklist to monitor and regulate proper compliance with Companies Act and if trends of non-compliance appear, to act accordingly.
Concerns with the Compliance Checklist
A primary concern with the Checklist is the fact that it asks if a company has complied with a section of the Companies Act, but it does not explain what the section is about or cater to the sub-sections that fall under that particular section of the Act. SMMEs may bear the brunt of the impact of the checklist – specifically in scenarios where the small businesses may not have the financial means or ability to ensure their compliance whether personally, or by hiring professionals. Thus, it creates an additional hurdle to what many aspiring business owners and entrepreneurs perceive to be an environment littered with obstacles.
A critical concern to many is that it is not clear if the checklist is submitted based on which calendar year, a financial year or a registration anniversary year, particularly as the Companies Act does not define what a calendar year is. This lack of clarity can create confusion amongst Directors and may impact whether the checklist is answered truthfully, and with the correct time frame in mind.
Consequences For Non-Completion Or Providing False Information
To combat the checklist not being completed or someone knowingly completing it incorrectly the CIPC has instituted serious consequences for such actions. Section 215 (2) of the Companies Act states that a person commits an offence who knowingly provides false information to the CIPC. Section 216 (b) states that any person convicted of an offence in terms of the Companies Act is liable to a fine or to imprisonment for a period not exceeding 12 months, or both fine and imprisonment.
For larger Enterprises, the Companies Act itself and the sections addressed in the checklist have existed since 2011 and complying with the Act is nothing new. The new checklist is a mechanism to prevent serious compliance issues so as not to repeat the lack of compliance that affected the country previously.
About The Authors
Pere Pere Consulting is a business services consulting company that aims to provide companies and its leaders the innovative tools, frameworks and expertise to help them create and execute on their strategic plans successfully and efficiently. Their services range from Company Secretarial, Strategic, Compliance, Business Management and BEE Services. Pere Pere Consulting is run by Linda Mokwena and Charity Mhlambo.