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Steinhoff served with hard-hitting compliance notice
- 15 June 2018
- Accounting
- South African Accounting Academy
The board of Steinhoff International has been served with a hard-hitting compliance notice by the Companies and Intellectual Property Commission (CIPC), which gives the directors six months to identify the individuals involved in the falsification of accounting records and to institute criminal action against them.
During that time, the board is obliged to provide the CIPC with monthly progress reports.
Noncompliance with the notice could result in a fine or imprisonment for the directors
The CIPC, which is responsible for ensuring compliance with the Companies Act, announced in December that it had launched an investigation into allegations of noncompliance by Steinhoff.
On Tuesday, Steinhoff issued a SENS announcement referring to the compliance notice but provided no details other than to say the company was required to investigate the accounting irregularities within six months "and to bring the necessary actions that may be required in terms of the act".
The actual notice, which was provided by the CIPC, said the board of directors had to institute criminal action against the individuals identified in the falsification of accounts, "irrespective of geographic location".
The notice also requires the board to institute civil action in terms of section 77 and section 162 of the Companies Act against those individuals involved in the falsification of the accounting records. Section 77 of the act relates to the liability of directors and prescribed officers. Section 162 relates to an application to declare a director delinquent or under probation.
News of the compliance notice comes as three parliamentary portfolio committees are preparing to interrogate a number of regulatory bodies, including the JSE, the Financial Services Board, the Independent Regulatory Board for Auditors and the Public Investment Corporation, about the circumstances around the Steinhoff controversy.
The three committees want to establish what the role of the regulatory and statutory bodies are in investigating the situation. "We are also interested to know about the co-operation between the regulators and other statutory bodies here and in Germany, the Netherlands and elsewhere," the committee chairpersons said in a statement.
The move by the CIPC is the first decisive step by a regulator in any of the jurisdictions in which Steinhoff operates.
This is only the third compliance notice the CIPC has issued against a listed company. Quantum Properties, which has since been delisted, was the first and Telkom the second.
In 2014, the CIPC issued a compliance notice to Telkom requiring CEO Sipho Maseko to attend governance classes and also requiring the company to recover R6m paid to its former chief financial officer.
A compliance notice issued to South African Airways chairwoman Dudu Myeni in 2016 relating to a controversial board resolution signed in May 2013 approving the purchase of 10 Airbus jetliners played a key role in Myeni’s eventual removal from the airline’s board.
On Tuesday, Steinhoff also announced that it would not be in a position to publish its 2017 consolidated accounts by January 31. Despite the delay, the group’s shares will continue to be listed on both the Frankfurt and Johannesburg stock exchanges. Andre Visser, GM for issuer regulations at the JSE, confirmed that as Frankfurt, Steinhoff’s primary market, was not suspending the share, the JSE would also not be suspending it. Visser said the bonds issued by Steinhoff Services had their primary listing on the JSE.
"So if the entity fails to produce results by the end of February, the rules provide for an extra month, then suspension of the bonds is possible." But he pointed out that Steinhoff was in the process of changing the terms of the bonds so that they could be redeemed early.
Blessing Nkosi
June 22, 2018 Good action taken by the CIPC to oversee this state of the company.