Compliance – consequences of failure to comply with South African law

Non compliance with some of these Acts can attract penalties and even prison sentences.

Non compliance with some of these Acts can attract penalties and even prison sentences.

Source: Rudolf Berkelmann of RB Financial Services (011-907-0302)

I have listed 17 Acts that regulate and affect business in SA. There are additional Acts that relate to specific industries. Non-compliance with any of these Acts can:

· attract penalties ranging from fines of a few hundred rand to imprisonment for 10 years plus a monetary fine;

· make members of Close Corporation or company personally liable for the debt of the Close Corporation

The responsibility for compliance rests solely with Management. In the case of:

· a Close Corporation – the members

· a Company – the directors & public officer

Reporting of irregularities

Accounting Officers (in the case of Close Corporations) and Auditors (in the case of Companies) have a duty by law to report certain offences and / or to qualify the accounting officers report (Close Corporations) or the Audit Report (Companies)

Some of the laws regulating and affecting business in South Africa

a) Companies Act of 1973 as amended

Section 441 sets out the penalties applicable to various offences (ranging from nominal fines to a maximum penalty monetary fine plus 10 Years imprisonment)

Duties of Directors - Non Compliance is an Offence

Section of the Companies Act	Description
234 / 241	A Director has a duty to disclose any interests in contracts and the company must keep a register of such interest
242	The Directors must keep minutes of all their meetings and keep a register of these minutes
216	The Directors must ensure that a register of Directors and Officers is kept
245	The Directors must Maintain an attendance register iro directors meetings. This register to be signed by Directors attending meetings
226	No Loan may be made to any Director without the consent of all members of the company and recorded in a special resolution

Section of the Act	Description	Maximum Penalty
302	The company must send Financial Statements to its members 21 days before the AGM	A fine plus 6 months imprisonment
284	A company must keep accounting records as prescribed	A fine plus 2 Years imprisonment
286	A company must produce annual Financial Statements	A fine plus 6 months imprisonment
287	It is an Offence to issue incomplete financial statements	A fine plus 3 months imprisonment

b) Close Corporations Act, 1984

Some of the possible contraventions

Section of the Act	Description	Maximum Penalty
52	A corporation shall not, directly or indirectly, make a loan to any of its members, to any other corporation in which one or more of its members together hold more than a 50 per cent interest; or to any company or other juristic person controlled by one or more members of the corporation	R2000 plus 2 Years imprisonment
56	A corporation must keep accounting records as prescribed	R2000 plus 2 Years imprisonment
58	A corporation must produce annual Financial Statements	R1000 plus 1 Years imprisonment
23	The corporation to display its full registered name and registration number in a conspicuous position on the outside of its registered office	R500 plus 6 months imprisonment

When members of the Corporation become personally liable for the debts of the corporation

Section	Description
24	Not Paying the members Contribution
22	Using the Name of the corporation without the abbreviation “CC” – NB IN CAPITAL LETTERS
39 / 40	Where the corporation pays for the acquisition members interest or gives financial assistance for any acquisition of members interest
47	Where a person, who is disqualified from doing so, takes part in the management of the corporation
63	Failing to appoint an accounting officer or if the office of the accounting officer is vacant for more than six months

c) Other Acts

Act	Comment
Unemployment Insurance Contributions Act And Unemployment Fund Act	• Employee is any person that is remunerated for work done (ie casual staff as well) • Every Employer must register his employees with this Fund • pay over the employers and Employees contributions monthly • Non Compliance carries a maximum penalty of a fine plus 12 months imprisonment
Income Tax Act	• Companies and close corporations must – Submit Annual Tax Return – Submit provisional tax Returns every six months – Pay the taxes due • Failure to comply with this act carries penalties up to 5 years imprisonment
Compensation Act	This act was introduced to compensate workers and their dependants for death or injury on whilst on duty. Employers must register & submit annual returns. Failure to do so can result in the Fund recovering costs from the employer
Value Added Tax Act	Any business with a turnover of more than R 300,000 is liable to register for VAT and submit the required returns

Bregman Attorneys

Compliance – consequences of failure to comply with South African law