South Africa ’s Companies and Intellectual Property Commission (CIPC) has implemented a new comprehensive compliance checklist that all business owners registered with the commission in South Africa must complete — or face up to 12 months in jail.
“The Act, and the particular sections in the checklist, have been in place since 2011,”Asogaren Chetty, head of Governance, Surveillance & Enforcement at CIPC says. “So CIPC does not quite understand what is meant by this being a regulatory burden. If one had to follow the regulatory burden argument, the CIPC would then be concerned with what exactly directors and companies have been complying with, in terms of the Companies Act, for almost 10 years.”
Here Is All You Need To Know
- The checklist, announced by CIPC in August last year, includes 24 questions relating to compliance with South Africa’s Companies Act — to which companies must answer “yes”, “no”, or “not applicable”.
- CIPC says that the checklist is a new and necessary process to ensure that businesses in South Africa are compliant with the act — and that it may help to prevent serious compliance issues, such as those that have plagued the country in recent years.
- As of January 1 this year, CIPC requires that prior to submitting annual returns, all companies complete this checklist. Companies affected include private, non-profit, personal liability, public, and state-owned companies. The checklist does not apply to closed corporations.
- But some, including the South African Institute of Chartered Accountants (SAICA), have said that the checklist is “onerous and vague”.
- Asogaren Chetty said CIPC is aware of some complaints regarding the new checklist, but does not agree that it is a new burden for companies.
- Chetty also says that they have allowed company directors “adequate time in advance to read and understand their statutory obligations prior to completing the checklist”
- He believes that some of the resistance comes from how the commission and its duties have evolved in recent years, from a registrar to a regulator.
“One of the CIPC’s functions is the monitoring of proper Compliance with the Act,” he says. “The CIPC would be failing in its statutory duty if it did not monitor and promote compliance with the Act.”
- According to SAICA, some businesses have raised concerns about interpretation of the Act, and that the “yes”, “no”, and “not applicable” answers are too broad. The checklist also doesn’t allow for discussion around particular intricacies in the act’s subsections.
- In a statement, SAICA said CIPC should create more focused questions, and allow for a separate process in which directors can enter specific explanations relating to potential reasons for non-compliance.
- For this reason, Chetty says CIPC has created a dedicated email account (COR135.1complaints@cipc.co.za) to handle such queries. He says they are monitoring this email address and are open to discussing specificities or issues of confusion with companies.
- Even so, Chetty says there are consequences for failing to complete this checklist, or knowingly completing it incorrectly.
“If you provide us with false or misleading information on this checklist you may face a fine, or imprisonment of up to 12 months,” Chetty says. “But this section [of the Companies Act] has been in place since 2011, and is not new.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com