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Frequently Asked Questions
What happens if the Company is deregistered due to failure to lodge Annual Returns?
If a company or close corporation has been deregistered due to non-payment of annual returns, it is possible to reinstate the entity with the Companies and Intellectual Property Commission (CIPC). It’s important to note that when a company is deregistered, any assets it may have are forfeited to the State.
The reinstatement process involves several steps, including corresponding with the relevant Government Departments and obtaining the necessary authority. Once these prerequisites are fulfilled, the CIPC will grant an extension of 30 days during which you can lodge the outstanding annual return. It’s crucial to act promptly during this period to ensure the reinstatement process is successful and your business can resume its normal operations.
What is a Public Officer?
A public officer must be appointed within one month after the incorporation date of the company in South Africa. A nominee public officer serves as the company’s tax representative with SARS dealing with all tax related requirements.
What is the difference between Branch and Company?
A branch or external company registered in South Africa is a foreign company’s branch or office in South Africa but not a separate legal entity to the foreign company and therefor the risk sits with the foreign company. A company is a registered public or privately held company registered as a limited, proprietary limited or limited liability company.
What is a Financial Accountability Supplement – COR30.2?
A CIPC financial accountability statement is a document that certain companies in South Africa are required to file with the Companies and Intellectual Property Commission (CIPC).
This requirement applies to private or personal liability companies that are not mandated to have their financial statements audited.
Instead, these companies can file a financial accountability supplement with their annual return if they choose not to file a full set of financial statements. The purpose of this document is to provide a summary of the company’s financial position, which helps in maintaining transparency and accountability.
It is an essential part of compliance for companies operating within the stipulated guidelines of the CIPC.
What is the CIPC Compliance Checklist?
As of January 1, 2020, the CIPC (Companies and Intellectual Property Commission) has introduced a mandatory compliance checklist as part of its annual return process. This checklist aims to enhance compliance and aligns with South Africa’s efforts to attract investment. Achieving a high level of compliance positively impacts our sovereign rating and can lead to more favourable interest rates from organizations like the IMF (International Monetary Fund). However, despite the Companies Act being in existence for over a decade, CIPC has observed that many companies and directors are still not compliant with its basic provisions. The compliance checklist seeks to raise awareness about these legal obligations.
Why is the CIPC Compliance Checklist Important?
Completing the CIPC Compliance Checklist is mandatory. Without completing it, a company cannot finalise its Annual Return. Failure to submit an annual return could result in the deregistration of a company. Knowingly providing false information in the checklist can lead to fines or imprisonment of up to 12 months, or both.
What Does the Checklist Include?
The checklist consists of 24 questions, each with three possible answers: yes, no, or not applicable. Each question assesses whether the company has complied with a specific section of the Companies Act in the previous year. Additionally, the checklist provides PDF references to the relevant sections, regulations, and schedules.
What does a snapshot of a company in South Africa look like?
A registered company in South Africa is obligated by the Companies Act 71 of 2008 to adhere to strict guidelines of compliance to the company’s registrar, the Companies and Intellectual Property Commission (CIPC). A company needs to keep its statutory records at its registered address or at an address indicated as the holder of the company records.
Types of Companies that can be Incorporated in South Africa.
For a breakdown of the different types of companies that can be incorporated in South Africa.
How to close a company in South Africa?
Deregistration of companies
CIPC will deregister an entity in the following circumstances:
The company has ceased to carry on business and has inadequate assets to be voluntary wound up and the Directors have made an application to be deregistered.
The company has been inactive for a period of seven or more years.
The company has failed to file annual returns for two or more years in succession and has failed, on demand by the Commission, to show why the returns weren’t filed and why the company should not be deregistered.
The Master of the High Court has filed a certificate of winding up (i.e. when a company has been liquidated).
The company has transferred its registration to a foreign jurisdiction.
Liquidation
Liquidation implies that the business is not able to pay its debts and that the business will cease to operate in most cases due to the result of financial problems facing the company or close corporation.
Companies are usually liquidated as a result of a court process or if the creditors place the company into liquidation.
Voluntary Winding up of a solvent company
There are times that a company served the purpose for which it was registered, its use or function has become redundant. This entity has no liabilities or any debt, but it does have assets and these assets will be disposed of during the winding up of the entity and the proceeds distributed to the shareholders.
A solvent company or close corporation may be wounded up voluntarily by its members by the adoption of a Special resolution by the company or close corporation. The special resolution together with supporting documents must be filed with CIPC and the Master of the High Court.
A company or close corporation remains a juristic person and retains all its powers as such while it is being wound up. The entity must cease trading and the powers of the Directors are now passed on to the liquidator.
Voluntary Winding up of an insolvent company
When a company is financially distressed, the members or a creditor can apply to voluntary wind up the company. This is termed winding up of an insolvent company.
Before the resolution is adopted by the company or close corporation, the company or close corporation must set security with the Master of the High Court for the payment of the company’s debts within 12 months after the start of the winding-up of the company or close corporation or obtain consent of the Master to dispense with security. A company or close corporation remains a juristic person and retains all its powers as such while it is being wound up. The entity must cease trading and the powers of the Directors are now passed on to the liquidator or the creditors.
How to determine when and Audit or Independent Review is required.
The Public Interest Score is a measurement used to determine whether an independent audit or independent review is required on the company’s financial statements.
What do I need to know about CIPC’s Annual Compliance?
The CIPC Annual Compliance include:
- Annual Return Payment
- Compliance Checklist submission
- Registration of UBO (ultimate beneficial ownership)
- XBRL or FAS (Financial Accountability Supplement) submission
Recently, South Africa has been placed on the Financial Action Task Force’s “grey list,” prompting the country to tighten its anti-money laundering and counter-terrorist financing regulations.
In South Africa, the term UBO refers to ‘Ultimate Beneficial Owner,’ which is a legal term used in financial and corporate sectors. An Ultimate Beneficial Owner is the person who ultimately owns or controls a company and/or the person on whose behalf a transaction is conducted. This includes those who exercise ultimate effective control over a legal entity or arrangement. The concept of UBO is significant in the context of legal transparency and anti-money laundering regulations.
As a result, companies are now required to disclose their Beneficial Ownership information to the Companies and Intellectual Property Commission (CIPC), which has established a Beneficial Ownership Register.
This register aims to maintain accurate and updated information on the ownership of corporate entities, which is crucial for law enforcement and regulatory bodies to effectively monitor and investigate financial crimes.
Newley formed companies have 10 days from date of incorporation or registration to file their initial beneficial ownership information report with CIPC.
If there is a change in the beneficial ownership of a company the company must also advise CIPC of the change within 10 days of such change
What is an XBRL and which companies need to file their Annual Financial Statements in XBRL format with CIPC
An XBRL, is revolutionizing the way financial data is communicated. By integrating XBRL tags directly into HTML documents, iXBRL provides a dual-view document that is both human-friendly and machine-readable. This innovation enhances the transparency and efficiency of financial reporting, making it easier for regulators, investors, and analysts to access and analyze critical financial data. As its adoption grows globally, iXBRL is becoming the standard for financial statement submissions, streamlining processes for businesses and regulatory bodies alike.
In South Africa, the Companies and Intellectual Property Commission (CIPC) mandates the filing of Annual Financial Statements (AFS) in iXBRL format for certain entities. According to the Companies Act of 2008, as amended, all entities registered with the CIPC are required to file Annual Returns, and along with these, either AFS or Financial Accountability Supplements (FAS), depending on the entity’s specific requirements. The CIPC no longer accepts PDF documents for AFS submissions; instead, entities must file their AFS via the XBRL portal provided by the CIPC.
Entities required to file AFS in iXBRL format with the CIPC include all public companies, state-owned companies, and non-profit companies. Additionally, companies with a Public Interest Score of 350 or more, companies with a score of at least 100 if their AFS were internally compiled, and companies that hold assets in a fiduciary capacity for unrelated persons with an aggregate value exceeding R5 million during the financial year are also required to file in this format.
It is important for all companies, including dormant ones, to familiarize themselves with the stipulations of the Companies Act to ensure compliance with filing requirements. For detailed guidance on the filing process, entities can refer to the CIPC’s official documentation and user manuals available on their website. Compliance with these requirements is crucial for maintaining an active business status and ensuring that the company’s financial information is accurately communicated to stakeholders and regulatory bodies
HOW IS CIPC ANNUAL DUTY CALCULATED
The calculation of CIPC annual duty, also known as the annual return fee, is based on the turnover of the company. Companies are required to file annual returns with the Companies and Intellectual Property Commission (CIPC) in South Africa, and the fee is determined by the company’s turnover for the previous financial year.
CIPC fees for Companies (Rands) | ||
Return | On time | Late |
Annual if turnover <R1m | 100 | 150 |
Annual if turnover <R10m | 450 | 600 |
Annual if turnover <R25m | 2 000 | 2 500 |
Annual if turnover R25m + | 3 000 | 4 000 |
can be made as part of the filing process, and it’s essential to ensure that all information, including the Beneficial Ownership Declaration, is up to date before proceeding.