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CIPC Compliance | Accounting Services

The Importance Of CIPC Compliance

Tinashe Munyati, Chartered Certified Accountant, Fourways

June 08 2018

sTo operate a company in South Africa the company must be registered with the Companies and Intellectual Property Commission (CIPC) of South Africa prior to commencing business.

Two options are available when registering a company:

* You can reserve a name for your company when you register or

* You can register your company without name reservation – CIPC will auto generate a name based on the registration number of the company.

The process, including name reservation, should be completed in 10 working days after payment and necessary documents are received.

The following documents are required:

A clear scanned copy of all directors’ identity documents (ID) and proof of operating address for your business (not older than 3 months).

CIPC charges an initial once-off fee of R125 for company registration. If you would like to utilise name reservation, an additional R50 once-off fee will be payable. The total fee for company registration and name reservation is R175 payable to CIPC, although this service is only available if you are registering a PTY (Ltd) (Private Companies).

What are the main functions of CIPC?

– Registration of Companies, Co-operatives and Intellectual Property Rights (trade marks, patents, designs and copyright) and maintenance thereof.

– Disclosure of Information on its business registers.

– Promotion of education and awareness of Company and Intellectual Property Law.

– Promotion of compliance with relevant legislation.

– Efficient and effective enforcement of relevant legislation.

– Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to Financial Reporting Standards Council (FRSC).

– Licensing of Business rescue practitioners.

– Report, research and advise the Minister on matters of national policy relating to company and intellectual property law


According to the Companies Act, your company must comply with certain regulations pertaining to company information and legal status that must be maintained and kept up-to- date. These include, among others:

– Submission of an annual return to CIPC each year on the anniversary date of registration of the company.

– Advising CIPC of any change in directors, auditors or registered address. When any of these changes take place, CoR or CK documents, along with minutes of meetings, and resolutions must be submitted to CIPC.

– Certain private companies with a greater responsibility to the wider public as a consequence of their significant social or economic impact may be required to have their AFSs audited. All other companies must be either voluntarily audited or independently reviewed.

– All financial statements must satisfy the prescribed financial reporting standards. These standards may vary for different categories of companies but must be consistent with International Financial Reporting Standards as set by the International Accounting Standards Board.

– All public and certain private companies must appoint an auditor.

Duties of directors:

It is essential that directors know their rights and are aware of what is expected of them. They are subject to the common law as found in court rulings and judgements. The Act has introduced a partial codification of directors’ duties, including both a fiduciary duty and duty of reasonable care, which operate in addition to the existing common law duties.

A director is required to act in good faith and for a proper purpose in the best interests of the company. They should act with the degree of care, skill and diligence that may reasonably be expected of a person carrying out such functions and having the same skill and experience of that director (the reasonable man/woman test).

Directors are required to disclose any personal financial interests. They may not use their position as director or information gained as a director to make a secret profit or gain advantage for themselves or someone else or to cause harm or detriment to the company.

The new Act deals comprehensively with the election, disqualification, vacancies, removal, meetings, resolutions and liabilities of directors:

Appointment: In a private company, there has to be a minimum of one director, while for a public or non-profit company, the minimum is three. Each incorporator of a company becomes its first director. Directors are thereafter appointed by the majority of shareholders entitled to vote on their election, for an indefinite term or as the MoI stipulates. Any vacancies on the board may be filled temporarily by election of other board members or as the Memorandum of Incorporation provides.

Disqualification: A person is disqualified from acting as a director when they are declared delinquent by a court, a juristic person, an un-emancipated minor, an un-rehabilitated insolvent, prohibited by public regulation, removed from office of Trust due to dishonesty, convicted of a crime of dishonesty without option of a fine or if they do not meet the qualifications set out in the MoI of the company.

Removal: A director may be removed by an ordinary resolution of shareholders entitled to vote, or by board meeting (when alleged that director is disqualified, incapacitated or negligent in duties). The director must be given the opportunity to be heard at a meeting before the board can vote on removal. The removed director has the right to apply to court for damages for loss of office.

Board meetings: The board authorised director may call a meeting at any time. They must call a meeting when 25% of directors (when the board has at least 12 members) or two directors in any other case, request a meeting. The company must keep minutes of all board meetings and every resolution taken at a meeting. Each director has one vote and majority vote approves a resolution.

Liability: A director could be held liable to shareholders for fraudulent acts of gross negligence or to a third party who has suffered damages due to the acts of the directors. Amongst previously mentioned liabilities, they are also liable for breach of fiduciary duty, or delictual act, acting without authority, party to supplying false or misleading information about the company or making an untrue statement in a prospectus.

Indemnification and Insurance: A company may not indemnify a director for wilful misconduct or breach of trust, or for a director acting without proper authority from the company or undertaking a prohibited act, or for perpetuating a fraudulent act. A company may take indemnity insurance on behalf of its directors in order to aid in any lawsuit against the director as related to the company. A company may purchase insurance to protect a director against permitted liability.

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This article is for information purposes only and you are advised to seek professional advice from your own accountant as your individual situation will vary.

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