Legal compliance for close corporations: What you need to know about your accounting officer
Let's assume you have a Close Corporation (CC), but you're not really an expert when it comes to the legislation concerning your accounting officer.
If this is the case you face a few problems.
#1: You can't really say whether your accounting officer is legally compliant.
#2: You may not know whether you should use the accounting officer responsibilities in the Companies Act (2008) or the Closed Corporation Act guidelines for your CC?
#3: Do you follow the Close Corporations Act (1984) for your existing CC? Or the Companies Act (2008) ? Or do you follow a combination of the two? (After all, when the Companies Act (2008) came into effect, the Closed Corporations Act (1984) didn't fall away. The Companies Act didn't replace it either!)
So where does that leave your business?
What to do? You should use both and here is how to do it!
Read on to discover the answer...
You have to ensure your accounting officer's registered with these regulatory bodies to avoid penalties
Keep in mind that it is a legal requirement for you to appoint an accounting officer for your CC. If your accounting officer's details aren't complete, you can't update any changes at the Companies and Intellectual Property Commission (CIPC).
The CIPC will immediately notify you if your accounting officer isn't registered. If you have a CC, you still have to comply with the Close Corporations Act.
You should also know that the Accounting Officer is a person registered with a professional body and qualified to perform the duties of an accounting officer. ( Close Corporations Act 69, 1984)
Note that the accounting officer needs to be an independent person from the members/owners of the business.
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Make sure your accounting officer's registered with the CIPC and one of these nine boards:
1. Independent Regulatory Board for auditors (IRBA);
2. The Institute of Administration and Commerce of
South Africa (IAC);
3. The South African Institute of Chartered Accountants (SAICA);
4. The Chartered Institute of Management Accountants (CIMA);
5. Chartered Secretaries Southern Africa (CSSA)
6. The Association of Chartered Certified Accountants (ACCA);
7. The South African Institute for Business Accountants (SAIBA);
8. The South African Institute of Professional Accountants (SAIPA); or
9. The South African Institute of Government Auditors (SAIGA).
And here's the key to the problem: What are accounting officer duties in regards to the two acts? And which Act should you use?
Here's the answer:
According to The Close Corporations Act, you don't need an audit. You can use general accounting principles. For companies, you have to follow IFRS and the Companies Act (2008).
But if your CC grows and has a Public Interest Score over 350, the Companies Act kicks in and a full audit and IFRS or IFRS for SMEs is required.
Accounting officers issue reports to the CC. So your accounting officer addresses the CC, and not you as the owner. You then create your own opinions on the report. Your job is to gauge if it fairly and accurately reflects your CC's financial position. It isn't useful for third parties, but is very useful for you
Note: 5 of 3 votes