Business and accounting leaders have expressed concerns about the new Companies and Intellectual Property Commission (CIPC) compliance checklist, which came into effect on 1 January 2020.
The checklist requires all companies – except close corporations – to answer a 24-question compliance list when they submit their annual returns.
The Compliance Checklist comprises of 24 questions with ‘yes’, ‘no’ or ‘not applicable’ answer options.
Companies are prompted to indicate if they complied with a particular section during the previous calendar year. The questionnaire does not allow respondents an opportunity to explain their responses.
Failure to complete the checklist includes heavy penalties, including the possibility of up to 12 months in jail.
The CIPC said that the purpose of the checklist is to:
- To ensure compliance with the mandatory requirements of the Companies Act;
- To serve as an educational tool for directors and company secretaries, in guiding them with regards to their responsibilities in terms of the Companies Act;
- To utilise the checklist to monitor and regulate proper compliance with the Companies Act and, if trends of non-compliance appear, to act accordingly.
The South African Institute of Chartered Accountants (SAICA) has raised concerns about what the CIPC will do with the information provided and how differences in interpretation of the Companies Act will be dealt with.
SAICA said that its members are also concerned about the potential increase in costs to be incurred by clients.
Hennie Ferreira, chief executive of digital accounting company Osidon, said that the checklist undermines the country’s drive for investment and the deregulation of business.
“Small business owners and entrepreneurs are already burdened by red tape and over-regulation. This just adds to the ever-increasing amount of compliance hurdles business owners have to jump through,” he said.
Ferreira said the list would increase accounting fees as the average business owner does not have adequate knowledge of the Companies Act, leaving accountants to complete the list on their clients’ behalf.
“SMEs in South Africa already struggle to survive and over-regulation slits their throats. They can use the money spent on regulation to grow their business, create jobs and contribute to the economy.
“Over-regulation flies in the face of government’s plan to turn the economy around. Investors will look at the over-regulated environment and decide to invest elsewhere.
“Government has an obligation to deregulate the business environment as far as possible,” Ferreira said.