Compliance for Small Business- The Need-to-Know
By Sarah Gama, Attorney
Navigating the legal framework
Starting a business is more than just incorporating and registering your company with the Companies and Intellectual Property Commission (“CIPC”). Before starting a business, very few entrepreneurs are aware of the laws and the legal framework that they have to operate in in order to ensure that their business is operating within the ambits of the law. This article will take a brief look at only three of the many Acts that all companies are required to comply with.
The Companies Act, 71 of 2008 (“Companies Act”) provides for, inter alia, the incorporation, registration, organisation and management of companies in South Africa and also defines the relationships between the companies and their respective shareholders and directors. The Companies Act also sets out the rules relating to more complex transactions such as the amalgamations, mergers and takeovers of companies.
Every company registered in South Africa is required to comply with the provisions of the Companies Act. The compliance requirements of the company may differ depending on the size and type of company (for example, whether the company is a private company, a public company or a state-owned company). Listed on the CIPC website are some basic compliance requirements for a company. Some of the requirements listed include:
The maintenance of company records. A company is required to retain certain information such as information regarding the company’s directors, a copy of the company’s Memorandum of Incorporation, copies of notices and minutes of all shareholder meetings and copies of written communication.
Providing accurate and complete accounting records. These must be kept and be accessible at the company’s registered address.
The appointment of an Audit Committee as well as a Social and Ethics Committee by some companies.
The requirement to file an annual return with the CIPC.
In addition to the above, a company is also required to notify the CIPC of certain changes such as the change of the company’s address, the appointment, resignation and removal of a director, the commencement of Business Rescue as well as the winding up of a company.
Income Tax Act
A company registered or incorporated in South Africa is required to register as a provisional taxpayer with the South African Revenue Service (“SARS”). The company will be required to comply with the provisions of the Income Tax Act, 58 of 1962 (“Income Tax Act”).
A newly registered or incorporated company is automatically assigned an income tax number when it is incorporated with the CIPC, however, the Public Officer is required to submit certain documents with SARS in order to finalise the registration process. If an income tax number has not been assigned, the Public Officer will have to go to any SARS branch to register the company as a provisional taxpayer. The registration process is simple and quick if all the supporting documents have been provided.
The Income Tax Act is a highly technical and sometimes difficult Act to understand if one does not have specialist tax knowledge. It is recommended that assistance from a registered tax practitioner should be sought in order to ensure compliance.
Protection of Personal Information Act
The Protection of Personal Information Act (“POPI”) regulates how the personal data of people should be handled by organisations. In terms of POPI, personal information is data that may be used to identify the identity of a person. POPI sets out how personal information should be handled and stored. POPI was passed in 2013 with most of its provisions only coming into effect as of 1 July 2020. Companies have 1 year, commencing from 1 July 2020, to ensure compliance with POPI.
The above three Acts are a small part of the legal framework that companies need to navigate. If unsure about how to comply, companies should seek the assistance of legal professionals who can help make the journey less daunting. Contact Sarah Gama to assist with any aspect of compliance at firstname.lastname@example.org.
Disclaimer: This article is for information purposes only and should not be regarded as legal advice. It may contain errors and/or omissions, and Spence Attorneys will not be held liable for any person acting on any information herein.