Transparency, Accountability & Access to Information – Chapter 16

Introduction

• Part C of Chapter 2 of the Act ➔ general accountability & transparency duties for all companies

• Chapter 3 ➔ “enhanced” duties (extra disclosures, higher oversight)

• $\text{S34(1)}$: applies enhanced duties to public companies & state-owned companies (SOCs)

• $\text{S34(2)}$: private, personal-liability & non-profit companies = exempt unless their MOI opts-in for stricter rules

• Goal: protect stakeholders, ensure comparability of information, underpin good corporate governance

Records a Company MUST Keep

• Categories:

  • Registered Office

  • Company Information (incl. Company Records)

  • Accounting Records

  • Financial Records (Financial Year, Financial Statements, Annual Returns)

  • Auditing / Independent Review

1. Registered Office

• “Registered office” = office recorded under $\text{S23}$

• Continuous presence: at least one office inside RSA

• Address supplied in Notice of Incorporation

• Changes ➔ Form CoR 21.1 (no fee)

2. Company Information ‑ Company Records

• Kept $7$ years, at registered office, in written & electronic form, accessible to shareholders

• If stored elsewhere ➔ notify CIPC on Form CoR 22

Mandatory contents (ALL companies)

• Copy of MOI + amendments

• Internal rules

• Register of past & present directors

• AGMs: reports, minutes, resolutions

• Financial statements & accounting records

• All shareholders’ meeting docs & notices

• General security-holder notices

• Minutes & resolutions of directors, board committees, audit committee (plus voting records to track solvency/liquidity-test compliance)

• All directors’ declarations under $\text{S75}$ (personal financial interests)

• Per Reg 23 (for each director): service address; if audit committee required ➔ professional qualifications & experience

EXTRA for Profit Companies

• Securities register (Reg 32 – details of issue, transfer, surrender, certificated/un-certificated, options, conversions, beneficial owners)

• Register of secretaries & auditors (where applicable)

3. Accounting Records (S28 & Reg 25)

• Accurate, in one official language

• Must enable preparation of AFS under $\text{S30(1)}$

• Include:

  • Assets & liabilities (non-current assets; loans to shareholders/ directors/ officers/ related persons; loans from others; guarantees, suretyships, indemnities)

  • Property register

  • Revenue & expenditure: daily cash receipts, transaction details, credit sales/purchases, bank statements, vouchers

  • Inventory/stock registers (if trading in goods)

• Safeguards:

  • Prevent theft, loss, damage, falsification

  • Facilitate detection of irregularities

  • Conform to other applicable laws on records & confidentiality

• Electronic records ➔ must be retrievable, readable & printable

• Offences (S28(3), S29(6)):

  • Failing to keep accurate records

  • Intentional misleading format

  • Falsification

4. Access to Company Records (S26 & Reg 24)

• Request via Form CoR 24

Securities holders

• May inspect/copy securities register & directors register free

• Excludes accounting records & directors’ minutes

• BUT $\text{PAIA 2 of 2000}$ can override ➔ possible forced access

Policy reason: prevent hostile actors from buying $1$ share & accessing sensitive strategy

Creditors

• After nulla bona on judgment ➔ entitled to latest AFS

Trade Unions

• Access AFS to initiate business rescue

Public

• Any person may view/copy securities or directors registers (fee payable)

3. Financial Records

Financial Year (S27)

• Fixed for every company

• Starts on incorporation date, ends on stated date (≤ $15$ months later)

• Change via Form CoR 25 | Fee: $R100$

Definition: Financial Statements (FS)

• Includes:

  • Annual FS

  • Provisional annual FS

  • Interim / preliminary reports

  • Group / consolidated FS

  • FS info inside circulars, prospectuses, provisional announcements that stakeholders rely on

FS – Presentation Requirements (S29)

• Conform to prescribed financial reporting standards

• Fair presentation of assets, liabilities, equity, income, expenses

• Contain any prescribed info

• State the production date & accounting period

• Must not be false, misleading, incomplete

• Page 1 disclosure:

  • Whether audited or independently reviewed

  • Name + designation of preparer / supervisor

• Summaries supplied to outsiders must follow Regulations

Annual Financial Statements (AFS)

• Language: any official SA language

• Prepared within $6$ months of year-end

• Board-approved & signed by authorised director

• Delivered to shareholders post-approval

• Contents:

  • Auditor’s report (if audited)

  • Directors’ report covering: state of affairs; profit/loss; material & prescribed info

Annual Return (AR)

• Snapshot + copy of AFS ➔ shows CIPC the entity is active

• Filed online only using Form CoR 30.1

• Deadline: within $30$ business days of incorporation anniversary

• Late filing ➔ penalties until deregistration

CIPC Fee / Penalty Grid

• <$1 m turnover: $R100$ / $R150$

• $R1$ m – <$10 m: $R450$ / $R600$

• $R10$ m – <$25 m: $R2000$ / $R2500$

• $≥R25$ m: $R3000$ / $R4000$

Supporting Docs

• Certified IDs of all directors + applicant

• If audit required or voluntarily audited: latest audited AFS

• If no audit/review: submit Form CoR 30.2 (Financial Accountability Supplement)

4. Auditing & Independent Review

Who MUST be Audited?

• Public companies

• State-owned companies

• Any company whose MOI or Regulations demand it (e.g. public-interest threshold)

• Private companies that voluntarily opt-in

Independent Accounting Professional (IAP)

• Registered auditor (Auditing Profession Act) OR

• IFAC-member body professional (accredited per $\text{S33}$) OR

• Qualified close-corporation accounting officer (S60 of CC Act)

• Independence rules:

  • No personal financial interest

  • Not in day-to-day management for previous $3$ yrs

  • Not prescribed officer / full-time exec within $3$ yrs

  • Not related to above persons

Public Interest Score (PIS)

• Calculated each year ─ points based on: Avg employees; 3rd-party liabilities; turnover; individuals with beneficial interests

• If PIS > $500$ in any $2$ of last $5$ yrs ➔ must appoint Social & Ethics Committee

• PIS also determines:

  • Audit vs. independent review

  • Reviewer qualifications (≥$100$ vs. <$100$ rule)

Audit vs. Independent Review

• Reviews can escalate (extra procedures) if management answers implausible

• Reviewer cannot have compiled the FS being reviewed

Reportable Irregularities (RI)

• Any act/omission by management that:

  • Unlawfully causes/likely causes material financial loss

  • Is fraudulent / theft

  • Causes trading while insolvent

• Steps:

  1. Reviewer sends first report to CIPC

  2. Engage board, then send second report with conclusion: no RI / stopped & remedied / continuing

  3. Reviewer may investigate as needed

Mandatory Assurance Matrix

• Audited: Public, SOC, private if MOI/Reg→audit

• Independently Reviewed: All other private companies

• Exempt: Single-member private company OR where each shareholder = director

Offences & Penalties

• Companies Act mostly shifts from criminalisation ➔ administrative fines & personal liability, BUT:

Criminal Offences (key sections)

• $\text{S28(3)}$ – Failure to keep accurate/complete accounting records with intent to deceive

• $\text{S29(6)}$ – Falsifying accounting records

• $\text{S214(1)(d)}$ – Preparing or being party to false/misleading FS contrary to reporting standards

• Elements: knowledge or reasonable expectation that wording/structure would mislead

Practical / Ethical Significance

• Accurate records underpin solvency & liquidity tests (director liability)

• Transparency → greater investor confidence & cheaper capital

• Access safeguards balance: info rights vs. competitive harm

• Public-interest thresholds ensure scarce audit capacity targets entities with greatest socio-economic footprint

Study Tips / Connections

• Link back to Corporate Governance principles (King IV): accountability, transparency, fairness, responsibility

• Compare with PAIA obligations & constitutional right to information

• Watch for exam scenarios on:

  • Failure to file AR → deregistration risk

  • Director votes & personal liability under solvency/liquidity non-compliance

  • Determining whether a private company must be audited (check PIS, MOI, activity nature)

• Memorise key forms & fees (CoR 21.1, 22, 24, 25, 30.1, 30.2)

• Practice PIS calculation & apply audit vs. review decision tree