CIPC: Compliance obligations of companies and close corporations in business rescue

10 January 2022
Business Rescue
South African Accounting Academy

Section 133 of the Companies Act clearly places a moratorium on legal proceedings, including enforcement action and does not state the suspension of any compliance obligation in terms of the Act, the Close Corporations Act or any other legislation.

Once the business rescue proceedings end, all obligations may automatically become enforceable.

If compliance obligations are not taken into consideration during the business rescue proceedings and/or the business rescue plan, such may place the company or close corporation at an unnecessary disadvantage when the proceedings end.

It is also in the best interest of companies and close corporations to continue to comply, not just with the acts stated in this notice but also compliance obligations derived from other legislation, since such compliance supports the efforts of the business rescue process and provides assurance of the process to the various parties affected by the proceedings

The notice sets out the obligations (in terms of acts stated in this notice) that companies and CCs must continue to comply with, e.g. annual returns, changes to the entity, keeping of accurate and complete accounting records, etc.

Click here to download Notice 61 of 2021:

http://www.cipc.co.za/za/wp-content/uploads/2021/11/Notice_Compliance-obligations-while-in-business-rescue_v1.0.pdf

How does this affect you and your clients?

Relevance to Auditors, Independent Reviewers & Accountants:

The Companies Act is yet another piece of legislation that your clients must comply with, and which you must assess compliance with. If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
As an auditor, you also need to monitor your client’s compliance with the Companies Act and all relevant notices/enforcements issued by CIPC as the regulator.

Relevance to Your clients:

This CIPC notice confirms that a company or CC in business rescue still needs to comply with all obligations.
The client has a duty to comply with the Companies Act, as well as relevant notices/enforcements published by the Regulator.

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