CIPC: Notice to accounting officers of CCs

CIPC: Notice to accounting officers of CCs

• 30 August 2024
• CIPC
• South African Accounting Academy

Section 62(3) requires the accounting officer to submit a written report to CIPC if:

• the CC is not carrying on business and has no intention of resuming operations in the foreseeable future;
• a change to the founding statement has not been registered by the Commission in terms of Section 15 of the CC Act;
• the AFS indicate that the liabilities of the CC exceed its assets; or
• the AFS incorrectly indicate that the CC's assets exceed the liabilities.

In cases of technical insolvency, the existence of a subordination agreement or similar agreement that could influence the solvency assessment, does not change the Accounting Officer's reporting responsibility.

In addition to the Accounting Officer Report that a CC must include with their annual financial statements as a result of a reporting engagement with its Accounting Officer in terms of Sections 62(1) and 62(2) of the Close Corporations Act 69 of 1984, Accounting Officers are prescribed further statutory reporting duties under the CC Act.

The Commission has noted that the Accounting Officers of CCs are not complying with their further mandatory reporting duties as required by Section 62(3) of the CC Act. The Commission is not receiving the Section 62(3) reports as prescribed for the reporting of certain disclosure contraventions or certain indicators in the annual financial statements of CCs. It was further noted that the Accounting Officers also fail to adhere to the stipulated time commitments for reporting these matters to the Commission.

In terms of Section 62(3) of the CC Act, the Accounting Officer of a Close Corporation is obligated and therefore must report certain matters forthwith, namely immediately, without delay or as soon as is reasonably possible under the circumstances, to the Commission. After reporting such matters and finding in any subsequent financial statements that the situation has changed or been rectified, the Accounting Officer may report to the Commission accordingly. Accounting Officers are therefore not obliged to submit Section 62(4) reports to the Commission but has the discretion to submit such a report if they deem it appropriate under the circumstances.

In this regard the Commission hereby advise that a dedicated e-mail address has been set up for the purpose of receiving the Section 62(3) and Section 62(4) Reports i.e., – [email protected]

CIPC has also included a “Practice Guideline” for ease of reference and in support of our urgent request for compliance in this regard.

It is imperative that all Accounting Officers of Close Corporations adhere to and comply with the afore-stated provisions. Failure to comply will result in a contravention under the CC Act, the Companies Act and Regulations as amended, and possible enforcement actions.

Click here to download Notice 56 of 2024:

https://www.cipc.co.za/wp-content/uploads/2024/08/Notice-56.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Close Corporations 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, independent reviewer and accountant, you also need to monitor your client’s compliance with the CCs Act and all relevant notices/enforcements/practice notes issued by CIPC as the regulator.
• Where you perform these compliance tasks on behalf of your client, you need to ensure that you comply with all relevant notices/enforcements/practice notes and that you are aware of the latest media statements issued by CIPC as the regulator.
• Company Secretarial staff play a critical role in bridging the gap between entities and CIPC. As legislation, regulations and tax law are continuously changing and evolving, it is of utmost importance for CCs and company secretarial practitioners to keep abreast of such changes in so that CCs continue to meet their compliance obligations.

Relevance to Your Clients:

• A close corporation has a duty to comply with the Close Corporations Act, and members have to fulfil their duties accordingly, and all relevant notices/enforcements/practice notes and to be aware of the latest media statements issued by CIPC as the regulator.

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