Changes to the requirements and process relating to the CIPC compliance checklist

Following our e-alert of 13 February 2020, the Companies and Intellectual Property Commission (CIPC) issued a notice on 5 March 2020 (CIPC March Notice), advising of changes to its compliance checklist requirement. The CIPC seeks to address some of the concerns raised by various stakeholders since implementation of the new requirement.

Provision is now made for -

  • companies to confirm to the CIPC whether their annual financial statements (AFS) are audited or independently reviewed;
  • only companies who submit a positive confirmation of the above are required to complete the compliance checklist;
  • confirmation emails will be sent by the CIPC to all directors of a company and the person submitting the confirmation above and/or the completed checklist;
  • alignment of the compliance year in the compliance checklist with the anniversary of the company's incorporation and for submission to be made within 30 days thereof, in line with the date and time period relevant to annual returns;
  • delinking of annual return submissions with that of the compliance checklist; and
  • a comment box for each compliance checklist question, should companies wish to provide explanations.

A number of the concerns raised in our e-alert of 13 February 2020 however remain as highlighted in this alert.

New requirement to indicate whether audited or independently reviewed

The CIPC March Notice advises that all companies must indicate to the CIPC whether their AFS are audited or subject to independent review (Audit / Review Confirmation).  The CIPC March Notice further states that the compliance checklist is only applicable to companies (personal liability, private, public, state-owned and non-profit companies) who have submitted a positive Audit / Review Confirmation.

In terms of the Companies Act, 2008 (Act) and the regulations under the Act (Regulations):

  • public companies' and state-owned companies' AFS must be audited;
  • other profit or non-profit companies' AFS (Other Companies) must be audited if they meet the required public interest score requirements or if their memoranda of incorporation, a shareholders' resolution or a board decision, so require (Public Interest Score / MOI / Resolution Category);
  • Other Companies not falling under the Public Interest Score / MOI / Resolution Category -
    • must have their AFS independently reviewed subject to the below;
    • need not have their AFS audited or independently reviewed under the Act or the Regulations if every person who is a holder of, or has a beneficial interest in, any securities of that company is also a director of the company.  This does not relieve the company of any requirement to have its AFS audited or reviewed in terms of another law, or in terms of any agreement to which the company is a party.

Compliance checklist exception

The CIPC March Notice provides for an exception from the CIPC's requirement to submit a compliance checklist, namely that companies who answer the Audit / Review Confirmation in the negative need not complete the compliance checklist.  The checklist would therefore not apply to certain small businesses where all shareholders are also directors of the company.

However, the CIPC March Notice does not specify whether the Audit / Review Confirmation must be made by reference to the requirements of the Act and the Regulations only.  A company may not be required in terms of the Act or the Regulations to have its AFS audited or independently reviewed, however it may be required to do so in terms of another law or an agreement to which the company is a party. It is unclear whether in this instance a company would need to submit a positive answer in the Audit / Review Confirmation and if so, whether a compliance checklist is required in these circumstances.

Compliance reference period

The CIPC originally required companies to complete the checklist with reference to the previous calendar year. The CIPC has changed the compliance period so it is aligned with the filing of a company's annual return. Companies are therefore required to answer the checklist's questions by reference to the 12-month period preceding the anniversary date of their incorporation (referred to by the CIPC as the "Compliance Year").  The comment in our e-alert of 13 February 2020 remains as the annual return filed on the same date as the compliance checklist would attach the previous financial year's AFS, whereas the compliance checklist will cover the immediately preceding 12-month period.

Compliance checklist is a standalone service that is not linked to the filing of annual returns

The CIPC had originally announced that a company would not be able to file its annual return unless it had submitted its completed compliance checklist to the CIPC. The CIPC has amended this process and now allows companies to file their annual return and checklist separately. The compliance checklist has been set up as a standalone service on the CIPC's website. It must be submitted to the CIPC within the same period as annual returns, namely 30 business days after the anniversary of the company's date of incorporation.

Submission of comments

Companies are now able to submit comments with their answers to the checklist. Accordingly, companies will have an opportunity to explain why they answered in a certain way. It is unclear whether companies will be able to attach documentary evidence to support their answers.