Complying with Changes in Legislation

Accounting records (Section 28)

A company must keep accurate and complete accounting records in one of the official languages of the Republic.

A company’s accounting records must be kept at, or be accessible from, the registered office of the company.

It is an offence for a company with an intention to deceive or mislead any person:

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  To fail to keep accurate or complete accounting records;
  
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  To keep records other than in the prescribed manner and form; or
  
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  To falsify any of its accounting records, or permit any person to do so.
  
  
  

Regulation The accounting records of a company must include: A register of the company's assets and liabilities including; A register of the company's non-current assets showing for each such asset: the date the company acquired it, and the acquisition cost; the date the company revalued it, and the amount of the revaluation and, if it was revalued after the Act took effect, the basis of, and reason for, the revaluation; the date the company disposed of it, once it has been disposed, and the value of the consideration received for it, and, if it was disposed of after the Act took effect, the name of the person to whom it was transferred; and a register of any loan by the company to a shareholder, director, prescribed officer or employee of the company, or to a person related to any of them, including the amount borrowed, the interest rate, and the terms of re-payment; and A record of any property held by the company in a fiduciary capacity; A record of all liabilities and obligations including: a register of any loan to the company from a shareholder, director, prescribed officer or employee of the company, or from a person related to any of them, including the amount borrowed, the interest rate, and the terms of re-payment; a register of any guarantee granted by the company in respect of an obligation to a third party incurred by a shareholder, director, prescribed officer or employee of the company, or by a person related to any of them, including the amount guaranteed, the interest rate, the terms of re-payment, and the circumstances in which the company may be called upon to honour the guarantee; a register of contractual obligations due to be performed in the future, recording for each such obligation the date on which it was undertaken, the person to whom the obligation is owed, the estimated cost of discharging the obligation and the date on which it is due to be discharged. If the company trades in goods, a record of inventory and stock in trade, statements of the annual stocktaking, and records to enable the value of stock at the end of the financial year to be determined; and A record of the company's revenue and expenditures, including: daily records of all money received and paid out, in sufficient detail to enable the nature of the transactions and, except in the case of cash transactions, the names of the parties to the transactions to be identified; daily records of all goods purchased and sold on credit, and services received and rendered on credit, in sufficient detail to enable the nature of those goods or services and the parties to the transactions to be identified; and statements of every account maintained in the name of the company, or in any name under which the company carries on its activities, together with vouchers or other supporting documentation for all transactions recorded on any such statement. A non profit company must maintain a register of revenue received from donations, grants, and member's fees, or in terms of any funding contracts or arrangements with any party.

Financial statements (Section 29)

If a company provides any financial statements, including any annual financial statements, to any person for any reason, those statements must:

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  Satisfy the financial reporting standards;
  
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  Present fairly the state of affairs and business of the company, and explain the transactions and financial position of the business of the company;
  
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  Show the company’s assets, liabilities and equity, as well as its income and expenses, and any other prescribed information;
  
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  Set out the date on which the statements were produced, and the accounting period to which the statements apply; and
  
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  Bear, on the first page of the statements whether the statements:
  
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    have been audited;
    
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    if not audited, have been independently reviewed; or
    
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    have not been audited or independently reviewed.
    
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  The name and professional designation of the individual who prepared, or supervised the preparation of the statements.
  

 Any financial statements and annual financial statements must not be:

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  False or misleading in any material respect; or
  
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  Incomplete in any material particular.
  

A person is guilty of an offence if the person is a party to the preparation, approval, dissemination or publication of any financial statements, including any annual financial statements, knowing that those statements:

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  Do not comply with the above requirements; or
  
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  Are materially false or misleading.
  
  
  

Annual financial statements (Section 30)

Each year, a company must prepare annual financial statements within six months after the end of its financial year, or such shorter period as may be appropriate to provide the required notice of an annual general meeting.

The annual financial statements must:

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  Be audited, in the case of a public company; or
  
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  In the case of any other company:
  
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     be audited, if so required by the regulations;
    
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    audited voluntarily at the option of the company; or
    
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    independently reviewed, unless exempted if it is a private company and:
    
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      one person holds, or has all of the beneficial interest in, all of the securities issued by the company; or
      
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      every person who is a holder of, or has a beneficial interest in, any securities issued by the company is also a director of the company unless the company has only one director.
      

The annual financial statements of a company must:

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  Include an auditor’s report, if the statements are audited;
  
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  Include a report by the directors with respect to the state of affairs, the business and profit or loss of the company, or of the group of companies, if the company is part of a group;
  
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  Be approved by the board and signed by an authorised director; and
  
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  Be presented to the first shareholders meeting after the statements have been approved by the board.
  

The annual financial statements of each company that is required to have its annual financial statements audited, must include particulars showing:

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  The remuneration and benefits received by each director, or individual holding any prescribed office in the company;
  
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  The amount of:
  
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    any pensions paid by the company to or receivable by current or past directors or individuals who hold or have held any prescribed office in the company;
    
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    any amount paid or payable by the company to a pension scheme with respect to current or past directors or individuals who hold or have held any prescribed office in the company;
    
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    the amount of any compensation paid in respect of loss of office to current or past directors or individuals who hold or have held any prescribed office in the company;
    
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    the number and class of any securities issued to a director or person holding any prescribed office in the company, or to any person related to any of them, and the consideration received by the company for those securities; and
    
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    details of service contracts of current directors and individuals who hold any prescribed office in the company.
    
  
  
  

Regulation "lFRS" means the International Financial Reporting Standards as adopted from time to time by the International Accounting Standards Board or its successor body and approved for use in South Africa from time to time by the Council; and "lFRS for SMEs" means the International Financial Reporting Standards for Small and Medium Enterprises, as adopted from time to time by the International Accounting Standards Board or its successor body and approved for use in South Africa from time to time by the Council. Any financial statements must comply with the applicable standards as follows: Category of Companies Applicable Financial Reporting Standard State owned companies IFRS, but in the case of any conflict with any requirements in terms of the Public Finance Management Act, The Public Audit Act, or other applicable national legislation, the latter prevails Public companies listed on an exchange IFRS Public companies not listed on an exchange IFRS Profit companies, other than public companies that are required to have their annual financial statements audited IFRS Profit companies that are required to have their annual financial statements independently reviewed IFRS for SME’s Profit companies that are required to have their annual financial statements independently complied and reported, or exempted from having their annual financial statements audited or reviewed. There is no prescribed Financial Reporting Standard Non-profit companies that are required to have their annual financial statements audited IFRS, but in the case of any conflict with any requirements in terms of the Public Finance Management Act, The Public Audit Act, or other applicable national legislation, the latter prevails Non-profit companies that are required to have their annual financial statements independently reviewed. IFRS for SME’s Non-Profit companies that are required to have their annual financial statements independently compiled and reported There is no prescribed Financial Reporting Standard Summary of regulations relating to audit and review: Companies to be audited Companies to be Independently Reviewed Public companies State owned companies Private companies holding assets in a fiduciary capacity for a broad group of 3rd parties Non-profit company that is an organ of the State or a subsidiary of an international entity or, that solicits donations from the general public and its assets exceeds R 60 million or its current expenditure as reported in its annual financial statements for the proceeding year exceeds R 120 million. Any company issued with a compliance notice requiring an audit. Companies that are not required to be audited Companies that are not voluntarily audited Companies that are not exempt by virtue of being “ owner managed” Please note: Personal liability companies would fall within the definition of owner managed companies as in most instances the holders of securities would also be directors Private companies and non profit companies that do not take donations: Type Assets / Turnover Standards to be used Independent review Assets > R 100 mil or turnover > R 200 mil per annum (three immediately preceding financial years) ISRE 2400 – Engagement to review financial statements Agreed upon procedures Assets between R 5 mil and R 100 mil and turnover between R 20 mil and R 200 mil ISRS 4400 – Engagement to perform agreed upon procedures regarding financial information Independent compilation Assets less than R 5 mil and turnover less than R 20 mil No set standard Independent Accounting Professional The regulations propose that only an "Independent Accounting Professional" be allowed to issue an independent review report. Independent accounting professionals:  Should be a member of professional body that is a member of IFAC; Should have no personal financial interest in the company or a related or interrelated company; and  Should not be involved in day to day management for the previous three years, or a prescribed officer, or a material supplier or customer of the company.