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Complying with Changes in Legislation 2013

September/ October 2013

Delegates WorkbookFacilitated by ProBeta Training (Pty) Ltd.

The views expressed in this workbook are not necessarily reflective of the official views of Fasset.

Complying with Changes in Legislation

COMPLYING WITH CHANGES IN LEGISLATION CONTENTS

The Financial Intelligence Centre Act 38 of 2001 and the Financial Intelligence Centre

Amendment Act, 2008 8

Purpose of the Act.................................................................................................................................8

Definition of a money laundering activity...............................................................................................8

Money Laundering legislation in South Africa......................................................................................10

The Financial Intelligence Centre (“FIC”).............................................................................................10

Money Laundering Control measures..................................................................................................10

Registration of accountable and reporting institutions.........................................................................17

Directives.............................................................................................................................................17

Responsibility for supervision of accountable institutions....................................................................18

Appointment of inspectors...................................................................................................................18

Inspections...........................................................................................................................................19

Administrative sanctions......................................................................................................................20

Appeal..................................................................................................................................................21

Compliance and enforcement..............................................................................................................22

Schedules to the Act............................................................................................................................23

Inspections by IRBA.............................................................................................................................25

Financial Advisory and Intermediary Services Act 26

Purpose of the Act...............................................................................................................................26

Definition of advice...............................................................................................................................26

Intermediary services...........................................................................................................................27

Authorisation of financial service providers..........................................................................................27

Application for authorisation.................................................................................................................28

Lapsing of licence................................................................................................................................28

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Qualifications of representatives and duties of authorised financial service providers........................29

Debarment process of representatives................................................................................................29

Compliance officers and compliance arrangements............................................................................30

Accounting and audit requirements.....................................................................................................30

Change in financial year-end...............................................................................................................31

Exemption of FSP’s from audited financial statement requirements...................................................31

Submission of annual financial statements..........................................................................................32

Submission of compliance reports.......................................................................................................32

Reporting duty of auditors and compliance officers.............................................................................34

Determination of Fit and Proper requirements.....................................................................................36

Application for an exemption in relation to qualifications and regulatory examinations.......................40

Professional indemnity and fidelity insurance cover............................................................................41

Offences and penalties........................................................................................................................41

The National Credit Act No.34 of 2005 42


Overview of the Act..............................................................................................................................42

Chapter 1 – Interpretation, Purpose and Application...........................................................................42

Chapter 2 – Consumer Credit Institutions............................................................................................46

Chapter 3 – Consumer Credit Industry Regulation..............................................................................46

Chapter 4 – Consumer Credit Policy...................................................................................................47

Chapter 5 – Consumer Credit Agreements..........................................................................................50

Chapter 6 – Collection, Repayment, Surrender and Debt Enforcement..............................................55

Compliance and Reporting – Chapter 8 of the Regulations................................................................56

Debt counselling..................................................................................................................................57

Consumer Protection Act 59


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Application of the Act...........................................................................................................................59

Exemptions..........................................................................................................................................61

Fundamental consumer rights.............................................................................................................61

Protection of consumer rights and the consumer voice.......................................................................71

Business names and industry codes of conduct..................................................................................71

Protection of Personal Information Bill 73


Application of the Act...........................................................................................................................73

What information is protected?............................................................................................................73

Exclusions............................................................................................................................................74

Conditions for lawful processing of personal information....................................................................74

Processing of special personal information.........................................................................................76

Information Protection Regulator.........................................................................................................76

Information Protection Officer..............................................................................................................76

Notification of processing.....................................................................................................................77

Rights of data subjects regarding unsolicited electronic communications and automated decision making.............................................................................................................................................................77

Enforcement.........................................................................................................................................77

Offences and penalties........................................................................................................................78

Implementation timeline.......................................................................................................................78

The Companies Act, 71 of 2008 79

Categories of companies (Section 8)...................................................................................................79

Criteria for names of companies (Section 11)......................................................................................79

Financial statements (Section 29)........................................................................................................81

Annual financial statements (Section 30).............................................................................................82

Access to financial statements / related information (Section 31).......................................................90

Annual return (Section 33)...................................................................................................................91

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Access to company records (Section 26)............................................................................................93

Appointment of auditor (Section 90)....................................................................................................94

Resignation of auditors & vacancies (Section 91)...............................................................................94

Rotation of auditors (Section 92).........................................................................................................95

Rights and restricted functions of auditors (Section 93)......................................................................95

Director's personal financial interests (Section 75)..............................................................................95

Directors conduct (Section 76).............................................................................................................97

Liability of directors and prescribed officers (Section 77)....................................................................98

Indemnification and directors’ insurance (Section 78).........................................................................99

Financial assistance for subscription of securities (Section 44)........................................................100

Loans or other financial assistance to directors (Section 45)............................................................101

Distributions (Section 46)...................................................................................................................102

Deregistration.....................................................................................................................................102

Re-instatement...................................................................................................................................103

Rejections in relation to applications for close corporations amendments........................................104

Alternative Payment Method..............................................................................................................105

Cash Office Closure...........................................................................................................................105

Fax to Email.......................................................................................................................................105

Drop-off Box for Registration and Amendments................................................................................106

Refunding of Customer Deposits.......................................................................................................106

New Company Registration Certificate..............................................................................................106

Online verification of CIPC Certificates..............................................................................................107

Address of Actual Business Premises Required...............................................................................107

Tax Administration Act 109

General..............................................................................................................................................109

Powers and duties of SARS and SARS officials................................................................................110

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Registration........................................................................................................................................112

Returns and records..........................................................................................................................113

Information gathering.........................................................................................................................116

Inspections.........................................................................................................................................117

Inquiries.............................................................................................................................................118

Search and seizure............................................................................................................................120

Confidentiality of information..............................................................................................................123

Assessments......................................................................................................................................125

Tax liability and payment...................................................................................................................127

Taxpayer account and allocation of payments..................................................................................130

Deferral of payment...........................................................................................................................131

Recovery of tax..................................................................................................................................132

Interest...............................................................................................................................................134

Refunds..............................................................................................................................................135

Write-off or compromise of tax debts.................................................................................................136

Administrative non-compliance penalties...........................................................................................139

Percentage based penalty.................................................................................................................141

Procedures for imposing penalty.......................................................................................................141

Understatement penalty.....................................................................................................................143

Voluntary disclosure programme.......................................................................................................145

Criminal offences...............................................................................................................................147

Registration of tax practitioners and reporting of unprofessional conduct.........................................148

Tax clearance certificates..................................................................................................................152

Estate Agency Affairs Act 153

Purpose..............................................................................................................................................153

Accounting and auditing requirements...............................................................................................153

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Educational Requirements.................................................................................................................154

The use of professional designations by estate agents.....................................................................156

Inspections.........................................................................................................................................156

Licensing of businesses Bill 160

Proposed changes to B-BBEE (Broad Based Black Economic Empowerment) 162

Proposed changes.............................................................................................................................162

Fraudulent BBBEE Certificates..........................................................................................................162

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THE FINANCIAL INTELLIGENCE CENTRE ACT 38 OF 2001 AND THE FINANCIAL INTELLIGENCE CENTRE AMENDMENT

ACT, 2008 PURPOSE OF THE ACT

The objective of the Financial Intelligence Centre Act (FICA), 38 of 2001 is to establish a Financial Intelligence Centre and a Money Laundering Advisory Council in order to combat money laundering activities. The legislation aims to combat money laundering activities by getting “accountable institutions” to report suspect and unusual transactions that may be indicative of possible money laundering opportunities to the money laundering office.

FIC ACT aims to impose certain duties on institutions and other persons who might be used for money laundering purposes.

DEFINITION OF A MONEY LAUNDERING ACTIVITY

Any person who knows or should reasonably have known that property is or forms part of the proceeds of unlawful activities and:

Enters into any agreement or, engages in any arrangement or transaction with anyone in connection with that property whether the agreement, arrangement or transaction is legally enforceable or not or,

Performs any other Act in connection with such property whether it is performed independently or in concert (together) with any other person, which has or is likely to have the effect of:

○ Concealing or disguising the:

― Nature

― Source

― Location

― Disposition or

― Movement

of the property or its ownership or any interest which anyone may have in respect thereof, or:

Enabling or assisting any person who has committed or commits an offence in the Republic or elsewhere:

○ To avoid prosecution

○ To remove or diminish any property acquired directly or indirectly as a result of the commission of an offence.

You can be guilty of an offence not only when you know that the property forms part of an illegal activity but also which you should reasonably have known and you did not report it.

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You do not have to be actively involved. The mere concealing or disguising of the source, location etc. constitutes an offence. If you assist someone who has committed an offence to avoid prosecution or remove the property directly or indirectly, you are again running a risk of conviction.

Any person who knows or should reasonably have known that another person has obtained the proceeds of unlawful activities and who enters into any agreement with anyone or engages in any agreement or transaction whereby:

The retention or the control by or on behalf of the other person of the proceeds of unlawful activities is facilitated, or

The proceeds of unlawful activities are used to make funds available to the other person or to acquire property on his/her behalf or to benefit him/her in any way shall be guilty of an offence.

Actual knowledge again is not required. You are deemed to know when you should reasonably have known. This clause is aimed at preventing assistance to someone who was engaged in illegal activities or entering into an agreement with such a person to make the funds available to purchase property on his/her behalf or to benefit him/her in any other way.

Any person who acquires, uses, or, has possession of, property and who knows or should have reasonably known that it is, or forms part of the proceeds of unlawful activities of another person shall be guilty of an offence.

Proceeds of an unlawful activity are defined as follows:

Any property, service, advantage, benefit reward

Which was derived, received, retained directly or indirectly, in the republic or elsewhere at any time before or after the commencement of the Act, in connection with or as a result of any unlawful activity carried on by any person, and includes any property representing property so derived.

An unlawful activity is defined as follows:

Conduct which constitutes a crime or which contravenes any law, whether such conduct occurred before or after the commencement of the Act and whether such conduct occurred in the Republic or elsewhere.

Meaning of knowledge of a fact:

The person who has actual knowledge of that fact or the Court is satisfied that the person believes that there is a reasonable possibility of the existence of the fact, and that the person fails to obtain information or confirm or refute the existence of the fact.

The Act says if the conclusions that he/she should have reached are those which would have been reached by a reasonably diligent and vigilant person having both the general knowledge, skill, training and experience that may reasonably be expected of a person in his/her position, and the general knowledge, skill, training and experience that he/she in fact has.

MONEY LAUNDERING LEGISLATION IN SOUTH AFRICA

The Prevention of Organised Crime Act (POCA) came into being in 1998.

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This Act defines offences relating to proceeds of unlawful activities that are punishable. This includes money laundering, assisting another to benefit from the proceeds of unlawful activities and acquisition as well as possession or use of proceeds of unlawful activities.

As a result of international pressure, this legislation was clearly not enough to conform to world standards in combating money laundering. The Financial Intelligence Centre Act 2001 (FICA) was passed and needs to be read in conjunction with POCA.

THE FINANCIAL INTELLIGENCE CENTRE (“FIC”)

The principal objective of the Centre is to assist in the identification of the proceeds of unlawful activities and the combating of money laundering activities.

The other objectives of the Centre are:

To make information collected by it, available to investigating authorities, supervisory bodies, the intelligence services and the South African Revenue Service to facilitate the administration and enforcement of the laws of the Republic;

To exchange information with bodies with similar objectives in other countries regarding money laundering activities, the financing of terrorist and related activities, and other similar activities;

To supervise and enforce compliance with this Act or any directive made in terms of this Act and to facilitate effective supervision and enforcement by supervisory bodies.

MONEY LAUNDERING CONTROL MEASURES

The principal money laundering control measures as contained in the Act are:

Duty to identify clients (section 21);

Duty to keep records of transactions and business relationships (section 22);

Reporting cash transactions above a prescribed limit (section 28);

Reporting duties and access to information (section 29 and others);

Formulation and implementation of internal rules (section 42);

Training and compliance (section 43).

Duty to identify clients

An accountable institution is obligated to establish the identity of any prospective client before any business relationship is established with the client. This must be done even if only one transaction will be concluded with the client. This will include establishing the identity of a person on whose behalf the client may be acting. If any transactions have taken place before the FIC ACT took effect, the institution must trace all accounts at the institution that were involved in such a transaction.

A business relationship will be deemed to have been established if an arrangement exists with a view of concluding transactions on a regular basis.

In addition to establishing and verifying the identity of existing clients, accountable institutions will also be required to trace all accounts that they have that are involved in transactions concluded in the course of the business relationship with that client.

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Board/senior management approval of an accountable institution’s anti-money laundering and terrorist financing policies and procedures.

Board of directors’/senior management’s approval of an accountable institution’s own internal policies and procedures to address money laundering and terrorist financing is critical if an accountable institution wishes to be considered serious about its appreciation of, and willingness to, mitigate money laundering and terrorist-financing risks in its daily operations.

The Centre therefore expects that the internal anti-money laundering and terrorist financing policies and procedures of an accountable institution should be adopted and approved by the board of directors of that accountable institution.

Risk-based approach

Accountable institutions are not required to follow a “one size fits all” approach in the methods that they use and the levels of verification that they apply.

Application of a risk-based approach to the verification of the relevant particulars implies that an accountable institution can accurately assess the risk involved. It also implies that an accountable institution can take an informed decision on the basis of its risk assessment as to the appropriate methods and levels of verification that should be applied in a given circumstance.

An accountable institution would need to document and make use of a risk framework. Such a risk framework should form part of the accountable institution’s internal policies and procedures.

Duty to keep records

This duty placed on accountable institutions must be performed as soon as a business relationship exists or a transaction has been concluded with a client. The details that should be included in the records are:

Identity of the client;

Where a client is acting on behalf of another person:

○ Identity of such a party; and

○ The client’s authority to act on behalf of another person.

The manner in which the identities were established;

The nature of the business relationship or transaction;

Where a transaction has taken place:

○ The amount involved; and

○ The parties involved in the transaction;

○ All accounts that were involved in such a transaction or relationship;

○ The name of the person that verified the identities of the parties;

○ A copy of any document that was used to establish the identity of the parties.

It is allowable to keep the above information in electronic form. The above mentioned information must be kept for a period of five years after the termination of a particular business relationship or for the same period after a single transaction. The keeping of records may be done by a third party on behalf of the accountable institution

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as long as the FIC is furnished with the details of the said third party. When any records mentioned above are presented in a matter before a court, the records shall be deemed admissible as evidence of any fact that would normally have been admissible had it been stated orally. A certified printout or extract would also be acceptable.

If any of the records are tampered with, or not kept in the prescribed detail, the accountable institution is guilty of an offence.

Reporting duties

Reporting cash transactions above a prescribed limit

An accountable institution must, as soon as possible but no later than 2 days, report to the FIC the prescribed particulars concerning a transaction concluded with a client, if in terms of the transaction an amount of cash in excess of R25 000, or an aggregate of smaller amounts, when combined, come to this amount:

Is paid by the accountable institution or reporting institution to the client, or to a person acting on behalf of the client, or to a person on whose behalf the client is acting; or

Is received by the accountable institution or reporting institution from the client, or from a person acting on behalf of the client, or from a person on whose behalf the client is acting.

The aggregation period is not specified in the Act but the FIC requests that a period of at least 24 hours be applied when considering aggregation.

Indications of when a series of smaller amounts combine to form a “composite” transaction that exceed the prescribed threshold are the following:

The period within which such a series of smaller transactions take place;

The fact that the series of transactions consist of a repetition of the same type of transaction e.g. cash payments or cash deposits;

The smaller amount transactions involve the same person or account holder, or relates to the same account.

In terms of regulation 22(1) of the Regulations a Cash Threshold Report (CTR) must be filed with the Centre electronically by making use of the internet-based reporting portal provided for this purpose at http://www.fic.gov.za.

An accountable institution may only file CTRs by other means in exceptional circumstances where the reporter does not have the technical capability to report electronically to the Centre. In such cases a CTR may be sent to the Centre by facsimile.

A CTR may not be posted to the Centre.

Suspicious and unusual transactions:

This provision includes any person that carries on a business, manages one, is employed by such a business or knows or suspects an unusual transaction. Unlawful or suspicious transactions would include:

A business that has received or is about to receive proceeds derived from unlawful activities;

Any transaction to which the business is a party that:

○ Facilitates the transfer of proceeds received as a result of unlawful activities;

○ Has no apparent business or lawful purpose;

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http://www.fic.gov.za/


○ Is conducted in order to avoid having to comply with the reporting duty as laid down by this Act;

○ May be relevant to the investigation of the evasion of any type of tax levied by SARS.

Using the business for any purpose relating to money laundering;

Any person, to whom the above applies, must inform the FIC within the prescribed period after such knowledge was acquired or such a suspicion arose. A person that is obligated to inform the FIC is not permitted to disclose the content or the existence of such a report to any person, including the person to whom the report pertains unless:

It is within the scope of powers conferred to that person by means of legislation;

The disclosure is for the purpose of complying with the Act;

The purpose of the disclosure is for legal proceedings;

The person has been granted permission through a court order.

There is a special defence available to someone that has been charged with the failure of reporting a suspicious or unusual transaction. Any person that is involved in an accountable institution as an employee or similar position can raise the following as a defence:

The fact that the matter was reported by him to the person that is responsible for ensuring that the accountable institution complies with the Act;

That he/she had complied with the internal rules that regulate the reporting of information;

That he/she had reported the matter to his/her superior.

The above defences are only available to employees, partners, directors and trustees of accountable institutions.

The effect of the FIC ACT is that a person of an accountable institution will be able to raise the same defence when charged with contravening the Prevention of Organised Crime Act whereas any persons in the same capacity in non-accountable institutions will not be able to raise the defence of internal reporting as far as a contravention of the Prevention of Organised Crime Act goes. It would be the safest to report any activity that imposes a reporting obligation directly to the FIC.

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Duty to report under POCDATARA

In terms of section 12(1) of POCDATARA a person has a duty to file a report when he/she has reason to suspect that any other person intends to commit or has committed an offence of terrorism and related offences, including financing of terrorism, or is aware of the presence at any place, of any other person, who is so suspected.

The report must be filed as soon as reasonably possible with any police official. The police official must take down the report in a prescribed format and provide the reporter with an acknowledgement of receipt of that report.

A person who realises that he/she is processing a problematic transaction is allowed to continue with the transaction as long as he/she acts in good faith and reports the suspicion. In such a case he/she will have a defence against a charge of contravening the Act.

The failure to file a report is an offence for which a high court may impose a sentence of imprisonment for a maximum period of five years. The mere fact that the terrorist activity did not, or does not occur is no defence to such a charge.

The client’s involvement in these activities may also amount to a reportable irregularity that should be reported to IRBA in terms of section 45 of the APA.

Section 28A of the FIC ACT sets out further reporting requirements relating to property associated with terrorism and related activities. An accountable institution must file a report with the FIC if it has in its possession or under its control property owned or controlled by or on behalf of, or at the direction of a person or entity involved in terrorism, or financing of terrorism, or which was identified in a notice by the President under section 25 of POCDATARA.

This notice publishes the names listed by the United Nations Security Council for the purpose of sanctions it imposed in respect of individuals and entities belonging or related to the Taliban, Osama Bin Laden and the Al-Qaida organisation.

Duty to report under PRECCA

Prevention and Combating of Corrupt Activities Act: Duty to Report Corrupt Transactions

The SAPS Amendment Act 2012 amended the duty to report corrupt transactions on 14 September 2012.

Who must comply with this duty?

A person in authority, namely:

The manager, secretary or a director of a company as defined in the Companies Act 1973 (now the Companies Act 2008);

A member of a close corporation;

The executive manager of any bank or other financial institution;

Any other person who is responsible for the overall management and control of the business of an employer;

Any person appointed as CEO or an equivalent officer of any agency, authority, board, commission, committee, corporation, council, department, entity, financial institution, foundation, fund, institute, service, or any other institution or organisation;

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The Director-General or head, or equivalent officer, of a national or provincial department;

A municipal manager;

Any public officer in the senior management service of a public body;

Any head, rector or principal of a tertiary institution;

Any partner in a partnership; or

Any person appointed in an above capacity in an acting or temporary capacity.

What amendments were made on the 14 September 2012?

A person in authority must report a corrupt transaction to the police official in the Directorate for Priority Crime Investigation (as opposed to reporting to any police official).

What general compliance requirements are involved in this duty?

A person in authority must report a corrupt transaction to the police official if that person knows or should reasonably have known or suspected that another person committed:

The general offence of corruption;

The specific person corruption offences (including corruption of directors, agents and public officials);

The unauthorised gratification offence;

The specific matters corruption offences (including contracts and tenders);

The accessory to corruption offence and attempt to commit corruption offence; and

The offence of theft, fraud, extortion, forgery or uttering a forged document, involving an amount of R100 000 or more.

Internal rules

An accountable institution must formulate and implement internal rules concerning:

The establishment and verification of the identity of its clients;

The nature and the type of records which must be kept;

The steps to be taken to determine when a transaction is reportable, to ensure the institution complies with its duties under FIC ACT.

An accountable institution must make its internal rules available to each of its employees involved in transactions to which FIC ACT applies and the internal rules must set out in detail the procedures to guide the compliance officer and employees in the discharge of their duties under FIC ACT.

An accountable institution must, on request, make a copy of its internal rules available to the FIC and to its supervisory body.

Training

An accountable institution must provide training to its employees to enable them to comply with the provisions of FIC ACT and the internal rules applicable to them.

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Accountable institutions must provide training to the employees in any manner it deems appropriate. Accountable institutions must be able to demonstrate that the training took place and that it was sufficient to enable the employees to understand and comply with the FIC Act.

Employees of the accountable institution should not be allowed to deal with clients if they have not received training on the FIC Act and internal rules of the accountable institution. This should form part of the induction program of the applicable accountable institution.

The training program should include assessments of employees, depending on their position within the accountable institution, to ascertain their level of knowledge in relation to the FIC Act obligations.

Employees may be assessed, interviewed or be required to write tests in order to evaluate the level of knowledge and understanding on the compliance obligations imposed by the provisions of the FIC Act. However, each accountable institution must determine in accordance with their risk appetite and risk management system whether knowledge assessments should form part of its training programme.

The accountable institution should keep an attendance register to ensure that a record of training attended is kept. Although the use of an attendance register is not required in terms of the FIC Act, it is an acceptable business practice and can serve as proof that the training requirement has been met. The use of an attendance register can also assist the accountable institution to track the number of employees that have been trained.

Training should be ongoing and employees should also receive refresher training to ensure that they are kept abreast of any new developments in terms of the FIC Act. The manner, content and frequency of the training is not prescribed and each accountable institution must determine in accordance with their internal rules and risk management system how and when the refresher training should be provided.

Any changes to internal policy, changes in legislation or any other related matters must be included in the training programme and communicated to all employees.

Record is kept of any refresher training conducted by the accountable institution.

Appointment of a Compliance Officer

Section 43(b) of the FIC Act requires all accountable institutions to appoint a person (compliance officer) with the responsibility to ensure compliance by the accountable institution and its employees with the obligations imposed by the provisions of the FIC Act.

The compliance officer is also responsible to ensure that employees comply with both the provisions of the FIC Act as well as internal rules applicable to them.

The FIC Act does not list any specific fit and proper requirements to be appointed as a compliance officer in terms of Section 43(b). However, it is recommended that a compliance officer has a thorough understanding of the institution and the application of the FIC Act to the institution.

The compliance officer must have sufficient authority and seniority within the institution to be able to fulfil the responsibilities in terms of the FIC Act as well as sufficient independence to have access to all areas of the institution’s operations to effect corrective actions accordingly.

A compliance officer should be able to monitor compliance and implement corrective measures to ensure compliance with the FIC Act, and should preferably be at the management or executive level of an accountable institution. Given the differences in nature, size and complexity of businesses, management may be interpreted broadly to mean a person who undertakes the handling, direction or control of FIC Act compliance obligations within a particular accountable institution. This is particularly relevant where the accountable institution is a small business.

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The compliance officer should be formally appointed by the board of directors, or the governing board or senior management of the accountable institution. The compliance officer should be issued with a formal appointment letter or at least a detailed description outlining all FIC Act compliance functions that he/she is required to perform.

The FIC Act does not specify whether the compliance officer must be an employee of the accountable institution or an independent contractor / consultant.

However, the person appointed as a compliance officer must be a person who has the authority to make, or participate in making decisions that affect the business from a FIC Act compliance perspective.

It is important to note that the accountable institution remains responsible for any compliance failures.

REGISTRATION OF ACCOUNTABLE AND REPORTING INSTITUTIONS

Every accountable and reporting institution must, register with the Centre, accompanied by the particulars as may be required by the Centre. If a person does not have the technical capability to register in accordance that person must submit the registration on a form specified by the Centre at the contact particulars specified by the Centre from time to time for this purpose.

Any person or category of persons who, on commencing a new business, fall within the list of accountable institutions or reporting institutions in Schedule 1 and Schedule 3 respectively must, within 90 days of the day the business opened, register with the Centre.

Note: The Centre must keep and maintain a register of every registered accountable and reporting institution registered.

A registered accountable institution or reporting institution must notify the Centre, in writing, of any changes to the particulars furnished within 90 days after such a change.

DIRECTIVES

The Centre may by notice in the Gazette, issue a directive to all institutions to whom the provisions of this Act apply, regarding the application of this Act.

The Centre or a supervisory body may, in writing, issue a directive to any category of accountable institutions, reporting institutions, or other category of persons to whom the provisions of the Act apply to:

Provide information, reports or statistical returns specified in the notice, within the period specified in the notice;

Cease or refrain from engaging in any Act, omission or conduct in contravention of the Act;

Remedy an alleged non-compliance;

Meet obligations imposed by the Act.

The cost incurred in complying with a directive must be borne by the accountable institution, reportable institution, or other person concerned.

A supervisory body may issue a directive only after consulting the Centre on the directive.

RESPONSIBILITY FOR SUPERVISION OF ACCOUNTABLE INSTITUTIONS

Every supervisory body is responsible for supervising and enforcing compliance with this Act or any order, determination or directive made in terms of this Act by all accountable institutions, regulated or supervised by it.

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The obligation forms part of the legislative mandate of any supervisory body and constitutes a core function of that supervisory body.

A supervisory body may utilise any fees or charges it is authorised to impose or collect to defray expenditure incurred in performing its obligations.

A supervisory body can:

Require an accountable institution supervised or regulated by it to report on that institution’s compliance;

Issue or amend any licence, registration, approval or authorisation;

In making a determination as to whether a person is fit and proper to hold office in an accountable institution, take into account any involvement, whether directly or indirectly, by that person in any non-compliance with this Act or any involvement in any money laundering, terrorist or related activity.

A supervisory body must report in writing to the Centre on any action taken against any accountable institution.

APPOINTMENT OF INSPECTORS

The Director or head of the supervisory body:

May appoint any person in the service of the Centre or supervisory body as an inspector;

May determine the remuneration to be paid to such a person;

Must issue a certificate of appointment signed by the director or head of the supervisory body.

The certificate of appointment must specify:

The full name of the person;

ID number;

Signature;

Photograph;

Description of capacity;

Extent of powers.

An inspector may undertake inspections in terms of section 45B.

When an inspector undertakes inspections he/she must be in possession of a certificate of appointment, and on request show that certificate to any person affected.

INSPECTIONS

An inspector may:

At any reasonable time and on reasonable notice enter and inspect any premises of an accountable institution, reportable institution or other person;

In writing direct a person to appear for questioning before the inspector at a time and place determined by the inspector;

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Order any person who had any document in his/her possession or under his/her control to produce that document;

Open a strong room, safe or other container, or order any person to open it;

Use any computer system or equipment on the premises or require reasonable assistance from any person on the premises to use that computer system to access any data or to reproduce any document;

Examine or make extracts from or copy any documentation or remove any documentation;

Seize any document which in the opinion of the inspector constitutes evidence of non-compliance.

An accountable institution, reportable institution or other person must without delay provide reasonable assistance to an inspector.

The Centre or supervisory body may recover all expenses incurred in conducting an inspection from the accountable institution, reportable institution or other person.

An inspector may not disclose to any person not in the service of the Centre or supervisory body any information obtained in the performance of his/her functions.

An inspector may disclose information in the following circumstances:

For the purpose of enforcing compliance;

For the purpose of legal proceedings;

When required to do so by a court;

If it is in the public interest to disclose.

An inspector of a supervisory body may conduct any inspection, other than a routine inspection, only after consultation with the Centre.

No warrant is required for the purposes of an inspection in terms of this section.

ADMINISTRATIVE SANCTIONS

The Centre or supervisory body (SB) may impose an administrative sanction to any accountable institution, reporting institution or other person when satisfied on available facts and information that the institution or person has failed to comply with:

A provision of this Act;

A condition of a licence, registration, approval or authorisation issued or amended;

A directive issued;

A non-financial administrative sanction.

When determining an appropriate administrative sanction the following factors must be considered:

The nature, duration, seriousness and extent of the relevant non-compliance;

Whether the institution or person has previously failed to comply with any law;

Any remedial steps taken by the institution or person to prevent a recurrence of the non-compliance;

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Any steps taken or to be taken against the institution or person by:

○ Another supervisory body; or

○ A voluntary association of which the institution or person is a member.

Any other relevant factor, including mitigating factors.

The Centre or supervisory body may impose any one or more of the following administrative sanctions:

A caution not to repeat the conduct which led to the non-compliance;

A reprimand;

A directive to take remedial action or to make specific arrangements;

The restriction or suspension of certain specified business activities; or

A financial penalty not exceeding R10 million in respect of natural persons and R50 million in respect of any legal person.

The Centre or supervisory body may:

Make recommendations to the relevant institution or person in respect of compliance with this Act;

Direct that a financial penalty must be paid by a natural person or persons for whose actions the relevant institution is accountable in law, if that person or persons was or were personally responsible for the non-compliance;

Suspend any part of an administrative sanction on any condition the Centre or the supervisory body deems appropriate for a period not exceeding five years.

Before imposing an administrative sanction, the Centre or supervisory body must give the institution or person reasonable notice in writing:

Of the nature of the alleged non-compliance;

Of the intention to impose an administrative sanction;

Of the amount or particulars of the intended administrative sanction.

The institution or person may, in writing, within a period specified in the notice, make representations as to why the administrative sanction should not be imposed.

After considering any representations the Centre, or supervisory body may impose an administrative sanction the Centre or supervisory body considers appropriate.

Upon imposing the administrative sanction the Centre or supervisory body must, notify the institution or person in writing:

Of the decision and the reasons there for; and

Of the right to appeal against the decision.

The Centre must, prior to taking a decision consult the relevant supervisory body, if applicable.

Any financial penalty imposed must be paid into the Criminal Assets Recovery Account.

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If the institution or person fails to pay the financial penalty within the specified period and an appeal has not been lodged within the required period, the Centre or supervisory body may forthwith file a certified copy of the notice with the clerk or Registrar of a competent court, and the notice thereupon has the effect of a civil judgement lawfully given in that court in favour of the Centre or supervisory body.

An administrative sanction may not be imposed if the respondent has been charged with a criminal offence in respect of the same set of facts.

If a court assesses the penalty to be imposed on a person convicted of an offence in terms of this Act, the court must take into account any administrative sanction imposed under this section in respect of the same set of facts.

Unless the Director or supervisory body is of the opinion that there are exceptional circumstances present that justify the preservation of the confidentiality of a decision the Director or supervisory body must make the decision and the nature of any sanction imposed public if:

An institution or person does not appeal against a decision of the Centre or supervisory body within the required period; or

The appeal Board confirms the decision of the Centre or supervisory body.

APPEAL

An appeal fee of R10 000 (ten thousand rand) is payable to the FIC and proof of such payment must accompany the notice of appeal. The payment, which may be a bank deposit or electronic funds transfer, must reflect the name of the appellant as reference together with “Reg 27C(d) fee” when making the payment to the FIC. No appeal fee payment may be made by cheque.

The appellant must complete the attached notice of appeal form within 30 days from the date when notice of the decision by the SB or the FIC was received in writing by the appellant. The notice of appeal, proof of payment of the appeal fee and any relevant documents must be hand delivered to the Secretary of the Appeal Board.

The office hours of the Secretary are 08:00 to 16:00 on business days and documents will only be received between these hours. The notice of appeal will only be accepted by the Secretary if all procedural and legal requirements have been adhered to. A set of the notice of appeal and other relevant documents must also be delivered to the supervisory body if the supervisory body imposed the administrative sanction.

The Secretary will notify all relevant parties of the date of the appeal including all procedural requirements, after consultation with the Chairperson of the Appeal Board and relevant parties. A decision of the appeal Board may be taken on appeal to the High Court as if it were a decision of a magistrate in a civil matter.

The launching of appeal proceedings does not suspend the operation or execution of a decision, unless the chairperson of the appeal Board directs otherwise.

COMPLIANCE AND ENFORCEMENT

The following all constitute offences under the Act:

Failure to identify persons;

Failure to keep records;

Destroying or tampering with records;

Failure to give assistance to the FIC;

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Failure to advise the Centre of a client;

Failure to report cash transactions (date of commencement to be proclaimed);

Failure to report suspicious or unusual transactions;

Unauthorised disclosure;

Failure to report the conveyance of cash or bearer negotiable instrument into or out of Republic (date of commencement to be proclaimed);

Failure to send a report to the Centre (date of commencement to be proclaimed);

Failure to report electronic transfers (date of commencement to be proclaimed);

Failure to comply with a request;

Failure to comply with direction by Centre or supervisory body;

Failure to comply with monitoring order;

Misuse of information;

Failure to formulate and implement internal rules;

Failure to register with the Centre;

Failure to provide training;

Offences relating to inspection;

Hindering or obstruction of Appeal Board;

Failure to attend when summoned;

Failure to answer fully or truthfully;

Obstructing of official in performance of functions;

Conducting transactions to avoid reporting duties;

Failure to appoint a compliance officer.

Penalties

A person convicted of an offence under FIC ACT is:

Liable to imprisonment for a period not exceeding 15 years, or

To a fine not exceeding R100 million.

However, a person convicted of an offence mentioned in sec 55, 61A, 62, 62A, 62B, 62C, 62D is liable to imprisonment for a period not exceeding 5 years or to a fine not exceeding R10 000 000.

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SCHEDULES TO THE ACT

SCHEDULE 1 – LIST OF ACCOUNTABLE INSTITUTION

A practitioner who practices as defined in section 1 of the Attorneys Act, 1979 (Act 53 of 1979).

A board of executors or a trust company or any other person that invests, keeps in safe custody, controls or administers trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).

An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).

An authorised user of an exchange as defined in the Securities Services Act, 2004 (Act 36 of 2004).

A manager registered in terms of the Collective Investment Schemes Control Act, 2002 (Act 45 of 2002), but excludes managers who only conduct business in Part 6 of the Collective Investment Schemes Control Act (Act 45 of 2002).

A person who carries on the business of a bank as defined in the Banks Act, 1990 (Act 94 of 1990).

A mutual bank as defined in the Mutual Banks Act, 1993 (Act 124 of 1993).

A person who carries on a long-term insurance business as defined in the Long-Term Insurance Act, 1998 (Act 52 of 1998).

A person who carries on the business of making available a gambling activity as contemplated in section 3 of the National Gambling Act, 2004 (Act 7 of 2004) in respect of which a license is required to be issued by the National Gambling Board or a provincial licensing authority.

A person who carries on the business of dealing in foreign exchange.

A person who carries on the business of lending money against the security of securities.

A person who carries on the business of a financial service provider requiring authorisation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act 37 of 2002), to provide advice and intermediary services in respect of the investment of any financial product (but excluding a short term insurance contract or policy referred to in the Short-term Insurance Act, 1998 (Act 53 of 1998) and a health service benefit provided by a medical scheme as defined in section 1(1) of the Medical Schemes Act, 1998 (Act 131 of 1998).

A person, who issues, sells or redeems travellers’ cheques, money orders or similar instruments.

The Postbank referred to in section 51 of the Postal Services Act, 1998 (Act 124 of 1998).

The Ithala Development Finance Corporation Limited.

A person who carries on the business of a money remitter.

SCHEDULE 2 – LIST OF SUPERVISORY BODIES

The Financial Service Board established by the Financial Service Board Act, 1990 (Act 97 of 1990).

The South African Reserve Bank in respect of the powers and duties contemplated in section 10(1)(c) in the South African Reserve Bank Act, 1989, (Act 90 of 1989) and the Registrar as defined in sections 3

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and 4 of the Banks Act, 1990, (Act 94 of 1990) and the Financial Surveillance Department in terms of Regulation 22E of the Exchange Control Regulations, 1961.

The Estate Agency Affairs Board established in terms of the Estate Agency Affairs Act , 1976 (Act 112 of 1976).

The Independent Regulatory Board for Auditors established in terms of the Auditing Profession Act , 2005 (Act 26 of 2005).

The National Gambling Board established in terms of the National Gambling Act and retained in terms of the National Gambling Act , 2004 (Act 7 of 2004).

A law society as contemplated in section 56 of the Attorneys Act, 1979 (Act 53 of 1979).

A provincial licensing authority as defined in section 1 the National Gambling Act, 2004 (Act 7 of 2004).

SCHEDULE 3 – LIST OF REPORTING INSTITUTIONS

A person who carries on the business of dealing in motor vehicles;

A person who carries on the business of dealing in Kruger rands.

The Financial Intelligence Centre (FIC) views “a person who carries on the business of dealing in Kruger rands” to be any person who, as a regular feature of his/her business, deals in jewellery, ornaments, watches or other objects that contain Kruger rands irrespective of the value of the turnover of the Kruger rand dealer.

The view given by the Financial Intelligence Centre:

Some businesses including jewellers are buying Kruger rands and using these Kruger rands to manufacture jewellery, ornaments and watches that contain the original Kruger rands.

The inclusion of a Kruger rand in another object such as a piece of jewellery, ornament, watches etc. does not alter the intrinsic nature of the Kruger rand.

INSPECTIONS BY IRBA

In assessing the compliance by a registered auditor with the minimum standards set by the IRBA, the IRBA Inspections Department is conducting inspections during which the following will be assessed:

Anti-Money laundering policy document;

Proof of registration with FIC in respect of the following (if applicable):

○ Entity within firm which meets the definition of an Accountable Institution;

○ Client as Accountable Institution;

○ Client as Reporting Institution.

Reporting procedures in terms of the following legislation:

○ Section 29 Financial Intelligence Centre Act 31/2001;

○ Protection of Democracy Against Terrorist and Related Activities Act (POCDATARA), Act 83/2004;

○ Protection and Combating of Corrupt Activities Act (PRECCA), Act 12/2004.

Monitoring procedures in respect of client’s accountability in terms of section 28 of FIC ACT.

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Procedures during an audit to detect possibility of money laundering;

Training schedules and programme in respect of staff;

Any other supplementary information you would like to present to substantiate compliance with the guidelines.

To the extent that the firm may or may not be fully compliant the inspection will offer a platform to discuss implementation of these criteria within the firm.

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FINANCIAL ADVISORY AND INTERMEDIARY SERVICES ACT PURPOSE OF THE ACT

The Act creates a formal system of regulating financial advisors and intermediaries.

Aggrieved consumers will be able to seek redress when they have been misled or misrepresented by a representative or financial service provider.

The FAIS Act was introduced to regulate the business of all Financial Service Providers who give advice or provide intermediary services to clients, regarding a wide range of financial products.

In terms of the Act, such Financial Service Providers need to be licensed, and professional conduct is controlled through Codes of Conduct and enforcement measures.

DEFINITION OF ADVICE

Advice means any recommendation, guidance or proposal of a financial nature furnished, by any means or medium, to any client or group of clients:

In respect of the purchase of any financial product; or

In respect of the investment in any financial product; or

On the conclusion of any other transaction, including a loan or cession, aimed at the incurring of any liability or the acquisition of any right or benefit in respect of any financial product; or

On the variation of any term or condition applying to a financial product, on the replacement of any such product, or on the termination of any purchase of or investment in any such product, and irrespective of whether or not such advice:

○ Is furnished in the course of or incidental to financial planning in connection with the affairs of the client; or

○ Results in any such purchase, investment, transaction, variation, replacement or termination, as the case may be, being effected.

For the purposes of FAIS, advice does NOT include factual advice given:

On the procedure for entering into any transaction relating to a financial product;

In relation to the description of a financial product;

In response to a routine administrative query;

In the form of objective information about a specific financial product;

By the display or distribution of promotional material.

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In terms of FAIS, advice also excludes:

An analysis or report on a financial product without any express or implied recommendation as to its suitability for a client.

Advice given by a board member or management, of a pension fund organisation or friendly society, or trustees, or board member of a medical scheme to its members, on the benefits enjoyed or to be enjoyed by such members.

INTERMEDIARY SERVICES

An intermediary service occurs when a person performs any act, other than giving advice, for or on behalf of a client or product supplier. For example:

Doing something other than giving advice as a result of which the client will enter into a financial product with a product supplier;

Keeping a financial product in safe custody;

Processing the claims of a client against a product supplier;

Collecting or accounting for premium payments.

In practice intermediary service means the facilitation of a financial transaction, where the service is not a recommendation, guidance or proposal regarding financial products.

The difference between intermediary services and advisory services may be described simply as follows:

Intermediary services may facilitate the administration of the product;

Advisory services facilitate the client’s decision in relation to a financial product.

AUTHORISATION OF FINANCIAL SERVICE PROVIDERS

A person may not act or offer to act as a financial service provider or a representative (unless such person has been appointed as a representative of an authorised financial service provider) unless such person has been issued with a license.

An authorised financial service provider or representative may only conduct financial service related business with a person rendering financial service, if:

That person has been issued with a licence and the conditions and restrictions of that licence authorises the rendering of that financial service, or

Is a representative as contemplated in this Act.

Exemption given to certain financial service providers

A person who is not authorised as a financial service provider, and who renders financial service (excluding the administration of assistance policies) in respect of assistance policies only will be exempted from section 7(1) until 21 August 2013 (Exempted Provider), if such a person complies with the exemption conditions.

An assistance policy refers to a life policy in respect of which the aggregate of:

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The value of the policy benefits, other than an annuity, to be provided (not taking into account any bonuses to be determined in the discretion of the long-term insurer); and

The amount of the premium in return for which an annuity is to be provided, does not exceed R18 000.

APPLICATION FOR AUTHORISATION

An application for an authorisation, must be submitted to the Registrar, and be accompanied by information to satisfy the Registrar that the applicant complies with the requirements for fit and proper financial service providers or categories of providers, in respect of:

Personal character qualities of honesty and integrity;

The competence and operational ability; and

The applicant's financial soundness.

Where an application is granted, the Registrar must issue a license authorising the applicant to act as a financial service provider.

A licensee must:

Display a certified copy of the license in a prominent and durable manner within every business premises of the licensee;

Ensure that a reference to the fact that such a license is held is contained in all business documentation, advertisements and other promotional material;

Ensure that the license is at all times immediately or within a reasonable time available for production to any person requesting proof of license.

LAPSING OF LICENCE

A license lapses:

Where the licensee, being a natural person:

○ Becomes permanently incapable of carrying on any business due to physical or mental disease or serious injury;

○ Is finally sequestrated; or

○ Dies;

○ Where the licensee, being any other person, is finally liquidated or dissolved;

○ Where the business of the licensee has become dormant; and

○ In any other case, where the licensee voluntarily and finally surrenders the license to the Registrar.

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QUALIFICATIONS OF REPRESENTATIVES AND DUTIES OF AUTHORISED FINANCIAL SERVICE PROVIDERS

An authorised financial service provider must at all times be satisfied that the provider's representatives, and key individuals of such representatives, are, when rendering a financial service on behalf of the provider, competent to act.

The authorised financial service provider must maintain a register of representatives, and key individuals of such representatives, which must be regularly updated and be available to the Registrar for reference or inspection purposes.

Such register must:

Contain every representative's or key individual's name and business address, and state whether the representative acts for the provider as employee or as mandatory; and

Specify the categories in which such representatives are competent to render financial services.

The following validations will be built into the system:

FSPs will no longer be able to submit foreign juristic representatives electronically (1 June 2013);

FSPs will no longer be able to add a representative to its register that should have written the regulatory exams and not passed it (1 June 2013);

The qualification codes will be validated from 1 January 2014;

The person’s appointment date as representative will be validated against the dates provided per financial product.

DEBARMENT PROCESS OF REPRESENTATIVES

Procedures to be followed by all financial service providers in order to notify the Registrar of financial service providers regarding debarment of representatives:

The provider should debar any representative who does not comply with the fit and proper requirements;

Debarred representative(s) must be removed from the register of representatives that the provider must maintain.

The provider should inform the Registrar of Financial Service Providers in writing of the debarment of representatives or key individuals of the representative within 15 days, and provide the Registrar with the reasons for the debarment in such format as the Registrar may require.

The Registrar may automatically debar a person who, in his opinion, no longer possesses the personal character qualities of honesty and integrity.

An application to have a representative debarred should be accompanied by reasons for the debarment, plus supporting documentation, in the format required by the Registrar. The Registrar is then obliged to publish details of the debarment, and the reasons therefore, in an appropriate form of public media.

Examples of such documentary evidence:

Evidence and information supporting the reasons for the debarment;

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A copy of the service contract or mandate between the FSP and the debarred representative;

A transcript of the disciplinary hearing; and

A forensic/investigation report (if any).

COMPLIANCE OFFICERS AND COMPLIANCE ARRANGEMENTS

Any authorised financial service provider with more than one key individual or one or more representatives must, appoint one or more compliance officers to monitor compliance with this Act, and to take responsibility for liaison with the Registrar.

Such person must comply with the fit and proper requirements.

A compliance officer must be approved by the Registrar.

A compliance officer must submit reports to the Registrar in the manner and regarding the matters, as from time to time determined by the Registrar by notice in the Gazette, for different categories of compliance officers.

Qualifications

A compliance officer may be any person with suitable qualifications and experience as Gazetted.

Duties upon termination of appointment

A compliance officer whose appointment is terminated must submit to the Registrar:

A statement of what the compliance officer believes to be the reasons for that termination; and

An Irregularity Report if the compliance officer would, but for that termination, have had reason to submit such a report.

A failure by a compliance officer to submit reports to the Registrar is deemed to be a failure by the provider.

ACCOUNTING AND AUDIT REQUIREMENTS

An authorised financial service provider must:

Maintain full and proper accounting records on a continual basis, brought up to date monthly; and

Annually prepare financial statements reflecting:

○ The financial position of the entity at its financial year-end;

○ The results of operations, the receipt and payment of cash and cash equivalent balances;

○ All changes in equity for the period then ended; and

○ A summary of significant accounting policies and explanatory notes.

An authorised financial service provider must cause the statements to be audited and reported on by an external auditor approved by the Registrar.

The financial statements must be submitted by the FSP to the Registrar not later than four months after the end of the provider's financial year, or such longer period as may be allowed by the Registrar.

The FSP must maintain records in respect of money and financial products held on behalf of clients, and must, in addition to and simultaneously with the financial statements submit to the Registrar a report, by the auditor who performed the audit, which confirms for different categories of financial service providers:

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The amount of money and financial products at year end held by the provider on behalf of clients;

That such money and financial products were throughout the financial year kept separate from those of the business of the authorised financial service provider and, report any instance of non-compliance identified in the course of the audit and the extent thereof.

CHANGE IN FINANCIAL YEAR-END

A financial service provider may not change a financial year-end without the approval of the Registrar.

The approval of the Registrar is not necessary where a change of a financial year-end has been approved by another regulatory authority, other than the Companies and Intellectual Property Commission, regulating the financial soundness of the provider.

Where a change of a financial year-end was approved by another regulatory authority the provider must inform the Registrar of that approval within 14 days of the approval being granted.

EXEMPTION OF FSP’S FROM AUDITED FINANCIAL STATEMENT REQUIREMENTS

The following services providers are exempt from the audit requirement:

"FSP limited by product" means an authorised Category I FSP who renders financial service limited to financial products belonging to Long-term Insurance subcategory A or friendly society benefits provided by a friendly society and who receives or holds clients' money.

"FSP" means an authorised Category I FSP who does not receive premiums (contemplated in the Short-term Insurance Act, 1998, and the Long-term Insurance Act, 1998) or otherwise receive or hold clients' money or assets.

In the case of a close corporation, an auditor's involvement is not obligatorily, only that of an accounting officer.

The Companies Act, 2008, has different requirements regarding the submission of financial statements for different types of companies. The extent to which annual financial statements of companies will have to be reviewed or audited depends on various criteria.

In view of the aforesaid the Registrar is satisfied that there are reasonable grounds for relaxation of the application of the audit requirements. FSPs and FSPs limited by product are therefore relieved from the obligation to cause annual financial statements to be audited and reported on by an external auditor. However, the FSP and FSP limited by product remains responsible for the accounting and reporting obligations detailed in section 19 of the Act.

Where the FSP and FSP limited by product is otherwise obliged by law to have financial statements reviewed, audited and reported on, or otherwise prepared, such statements must be submitted to the Registrar.

An FSP and FSP limited by product who wish to be exempt from the audit requirement must within six months after publication of the Notice or upon application for authorisation in case of an unauthorised FSP:

Register the exemption with the Registrar within the prescribed format and manner; and

Must inform the Registrar in writing within 15 days after the change has taken place, of any change in respect of the information that was submitted for purposes of registering the exemption.

SUBMISSION OF ANNUAL FINANCIAL STATEMENTS

All authorised FSPs should submit their annual financial statements within four months after their financial year-

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end. This means that FSPs who use accounting officers or auditors must ensure that they submit their documentation timeously to the accounting officer or auditor, and agree a time-frame for completion of the financial statements with them. It remains the responsibility of the FSP and Key Individual to ensure that these reports are submitted within the prescribed period.

Financial statements can be submitted electronically using the online submission process or by sending a copy of the financial statements.

Preferred method - electronic submission via the FAIS Online system.

Post - the financial statements can be posted. If the financial statements are posted, it remains the FSPs responsibility to prove that it has been sent. It is therefore suggested that FSPs send all post per registered mail and retain the proof (tracking number) thereof. FSPs must allow for sufficient time to ensure that the statements are received by the Registrar before the due date.

Please do not fax through the financial statements as the FSB does not accept faxes.

Extensions

All requests for extension must be done 15 days prior to the submission date. Please note that extension will not be granted if any financial statements or compliance reports is outstanding.

Non submission of financial statements:

In terms of section 41(2) of the FAIS Act, an FSP who fails to submit its financial statements within the period prescribed or any extension thereof is liable to pay a penalty for every day during which the failure continues.

The Registrar will impose a penalty up to R1 000 per day from the day on which the financial statements become due until the date on which it is received by the Registrar.

The non-submission of financial statements and/or the non-payment of penalties may result in the suspension of an FSP’s license.

SUBMISSION OF COMPLIANCE REPORTS

A compliance report is a predetermined questionnaire and is used to gauge the level of compliance for each FSP.

A compliance officer or, in the absence of such officer, the authorised financial service provider concerned, must submit reports to the Registrar.

In the case of a sole proprietor who has not appointed any representatives or a second key individual, the annual compliance report must be completed and submitted by the sole proprietor.

In the case where a FSP has appointed a compliance officer, the report must be completed and submitted by the compliance officer (the key individual is still required to review the completed compliance report and sign the declaration attached to the report).

Dormant/newly authorised FSPs

All FSPs are required to submit annual compliance reports, regardless of whether they are dormant or newly authorised.

A dormant FSP will indicate the fact that it is dormant on the compliance reports, the reason(s) for the dormancy, and the expected date on which the FSP will resume its activities. The FSP is required to complete the relevant compliance report in full.

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An FSP that has only just been authorised when the reporting period for the FSP is due is required to also submit a fully completed compliance report. The FSP can indicate on the compliance report that it has just been authorised, and therefore very little activity has taken place. It will need to state what action(s) are being taken to ensure that the FSP will be fully compliant by the next reporting period.

Reporting dates

The reporting date is determined by the type of FSP. The financial year-end of FSPs does not influence the reporting date. The reporting date is now dependent on the type of license that was granted and in the case of Category I FSPs, whether they have an approved compliance officer or not.

The reporting dates for the 2013 Compliance Reports are as follows:

In the case where an entity is authorised for more than one category, only one annual report needs to be submitted. Please note that the FSP in respect of Category I, II, IIA and III will need to submit the report that applies to the highest category that appears on the license. For example an FSP that is:

Licensed for Category I and II only needs to submit the Category II report;

Only licensed as a Category IV FSP, only needs to submit the Category IV report.

The handover report does not need to be submitted if the FSP appoints another compliance officer from the same compliance practice. In the case where an FSP that did not have a compliance officer, appoints a compliance officer, the handover report must be submitted by the key individual or the sole proprietor. In the case where a profile change is requested to change the compliance officer on their system, the handover report must be submitted at the same time, if it was not done electronically. The reporting dates for the 2013 Compliance Reports can only be submitted after the reporting date.

The Compliance Report may only be submitted either in hardcopy format or online.

In the case of hardcopy submissions, the Registrar only accepts reports that are posted, couriered or hand delivered at their offices. Please note that hardcopy reports that are incorrectly completed or that are sent for the incorrect reporting date, will be returned and regarded as not submitted.

Note: No other hardcopy format will be accepted and no faxed or e-mailed copies of reports will be accepted.

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The online system allows users to submit their compliance reports and financial statements electronically by way of the FSB website. The online submission is the preferred method of submission for all compliance reports.

No extensions for submission of compliance reports will be given. In terms of section 41(2) (a) of the FAIS Act a penalty for late submission may be charged.

REPORTING DUTY OF AUDITORS AND COMPLIANCE OFFICERS

Sections 16 and 19 of the Act state that, despite anything to the contrary contained in any law, the compliance officer or auditor of an authorised financial service provider must inform the Registrar in writing of any irregularity or suspected irregularity in the conduct or the affairs of that provider:

Of which the compliance officer or auditor became aware in performing functions as compliance officer or auditor; and

Which, in the opinion of the compliance officer or auditor, is material.

Materiality will depend on the individual circumstances and involve considering, amongst others, its impact on the ability to give financial service as authorised, the actual or potential financial loss to clients and the number or frequency of similar previous irregularities.

Reportable matters are those that will have a significant adverse effect on the regulatory authorisation or on the clients.

Report by the compliance officer

A compliance officer must report certain material irregularities (Immediate Reporting) to:

Its employer/client without undue delay (unless it can be shown that a reasonable person would have believed that the employer/client would use the time to hide the information etc.), notifying them that the matter will be reported and giving them a reasonable opportunity to provide written comments as to why the irregularity is in fact not material or the steps that will be taken to address it; and

The FSB without undue delay, including any response by the employer/client, reasons why the irregularity should not be considered material and steps taken by the employer/client since being informed of the irregularity, to rectify it.

Examples of Immediate Reporting circumstances include:

Serious licence transgressions (e.g. doing business after an authorisation is refused, suspended, withdrawn or lapsed);

Serious product transgressions (e.g. purporting to be licensed to render financial service if that product is not defined in the Act);

Serious client transgressions (e.g. category 2, 2A or 3 financial service providers selling financial products owned by themselves to clients or buying financial products owned by clients for its own account);

Serious fraud transgressions (e.g. fraud that may have an adverse impact on the business and its ability to render financial service); and

Continued non-compliance after the compliance officer directed that rectification was required.

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A compliance officer may delay reporting certain irregularities (Delayed Reporting) based on the circumstances and low materiality and allow an appropriate time period for an irregularity to be rectified, as determined by the individual circumstances appropriate to the nature, scale and complexity of the business.

Examples of Immediate Reporting circumstances (always depending on the materiality test) include non-compliance with aspects of:

The Act (e.g. operating without a key individual where the provider is not a sole proprietor);

FAIS regulations (e.g. non-compliance with requirements in respect of the operational ability of the provider); and

Licence conditions.

In both instances the compliance officer must document the process - if possible they should get legal advice on the keeping of the particular records and the formal manner of reporting to the FSB.

Report by the auditor

An individual registered auditor that has reason to believe that a reportable irregularity has taken place or is taking place must, without delay, send a written report to the Regulatory Board, giving particulars of the reportable irregularity and such other information and particulars as the registered auditor considers appropriate.

The registered auditor must:

Within 3 days of sending the report notify the members of the management board of the entity in writing of the sending and the provisions of this requirement, including a copy of the report to the Regulatory Board;

Within 30 days from the date the report was sent take all reasonable measures to discuss the report with the members of the management board and give them a chance to make representations on the report;

Send another report to the Board, containing detailed particulars and information supporting a statement that they believe:

○ No reportable irregularity has taken place or is taking place;

○ The suspected reportable irregularity is no longer taking place and that adequate steps have been taken for the prevention or recovery of any loss as a result thereof, if relevant; or

○ The reportable irregularity is continuing.

The Board must as soon as possible after receipt of a report containing a statement that a reportable irregularity is continuing, notify any appropriate regulator (including the FSB).

Notes

A registered auditor does not incur any liability to a client or any third party for a report made in the ordinary course of duties, unless it is proven that the report was made maliciously, fraudulently or pursuant to a negligent performance of duties.

This Act defines reportable irregularity i.e. any unlawful act, or failure to act, committed by any person responsible for the management of an entity, which:

Caused or is likely to cause material financial loss to the entity or to any partner, member, shareholder, creditor or investor of the entity in respect of his, her or its dealings with that entity;

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Is fraudulent or amounts to theft; or

Represents a material breach of any fiduciary duty owed by such person to the entity or any partner, member, shareholder, creditor or investor of the entity under any law applying to the entity or the conduct or management thereof.

Material breach is not defined.

DETERMINATION OF FIT AND PROPER REQUIREMENTS

Personal Character Qualities of Honesty and Integrity

An applicant must be a person who is honest and has integrity.

Any of the following factors constitutes prima facie evidence that the applicant does not qualify:

Has within a period of five years preceding the date of application:

○ Been found guilty in any civil or criminal proceedings by a court of law (whether in the Republic or elsewhere) of having acted fraudulently, dishonestly, unprofessionally, dishonourably or in breach of a fiduciary duty;

○ Been found guilty by any professional or financial service industry body (whether in the Republic or elsewhere) recognised by the Board, of an act of dishonesty, negligence, incompetence or mismanagement, sufficiently serious to impugn the honesty and integrity of the applicant;

○ Been denied membership by anybody on account of an act of dishonesty, negligence, incompetence or mismanagement, sufficiently serious to impugn the honesty and integrity of the applicant;

○ Been found guilty by any regulatory or supervisory body (whether in the Republic or elsewhere), recognised by the Board; or

○ Had its authorisation to carry on business refused, suspended or withdrawn by any such body, on account of an act of dishonesty, negligence, incompetence or mismanagement sufficiently serious to impugn the honesty and integrity of the applicant;

○ Had any licence granted to the applicant by any regulatory or supervisory body suspended or withdrawn by such body on account of an act of dishonesty, negligence, incompetence or mismanagement, sufficiently serious to impugn the honesty and integrity of the applicant.

Has at any time prior to the date of application been disqualified or prohibited by any court of law (whether in the Republic or elsewhere) from taking part in the management of any company or other statutorily created, recognised or regulated body, irrespective whether such disqualification has since been lifted or not.

Competency

A key individual must have at least one year’s experience in managing or overseeing the financial service of an organisation, and the experience period must relate to the period required for the category or subcategory he/she is approved for.

A representative must have the relevant product related experience.

The qualification requirements must also be met before the Registrar will approve the application. There is a list of recognised qualifications that can be consulted.

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If a specific qualification does not appear on the list, application can be made to the Registrar to approve the qualification.

All key individuals are required to write regulatory examinations. There are two levels of regulatory examinations. The first level regulatory examination deals with the legislation, such as FAIS and FIC Act, and the subordinate legislation such as the regulations and codes of conduct. The second level regulatory examinations deals with product specific information.

Key individuals are only required to write the second level regulatory exams if they give advice or render intermediary services (act as representatives).

The FSB decided to postpone the level 2 regulatory examinations. The examinations are postponed until a date yet to be determined by them.

The postponement will allow the FSB to amend the qualifying criteria, i.e. the criteria on which the examinations are based and that were determined in 2008, as it has become apparent that certain of the criteria are no longer adequate and relevant.

Continued Professional Development

CPD refers to continuous professional development. This occurs after the key individual has met the requirements regarding the regulatory examinations. The purpose of CPD is to help the key individual to keep their knowledge and understanding of the legislation and industry up to date, without you having to obtain more qualifications or examinations. Depending on the category or subcategory the key individual is authorised for, needs to complete between 15 and 60 hours of CPD activities over a 3 year cycle.

Any employer, conference organiser, industry body or professional association may apply to the FSB to have activities registered as CPD activities for FAIS purposes. Application forms are available from the FSB.

These activities can include:

Courses, conferences, seminars;

Studies leading to formal assessment; distance learning, additional qualifications, or attendance at formal courses;

Workshops;

Structured self-study programmes including web and computer based programmes that assess knowledge.

It is essential to obtain evidence of attendance at these programmes and that the compliance officer of the company keeps record of CPD hours to report back to the FSB.

Operational ability

An applicant must have and be able to maintain the operational ability to fulfil the responsibilities, including at least the following:

A fixed business address;

Adequate access to communication facilities including at least a full-time telephone or cell phone service, and typing and document duplication facilities;

Adequate storage and filing systems for the safe-keeping of records, business communications and correspondence; and

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An account with a registered bank including, where required by the Act, a separate bank account for client funds.

An applicant must have in place, the appropriate money laundering control systems and provision for training of staff, including identification, record-keeping and reporting procedures, where required under the Financial Intelligence Centre Act, 2001.

Financial Soundness

An applicant must not be an unrehabilitated insolvent or under liquidation or provisional liquidation.

Category I that does not hold client assets or receive premiums or money:

Assets (excluding goodwill, other intangible assets and investments in related parties) must at all times exceed the FSP's liabilities (excluding loans validly subordinated in favour of all other creditors).

Category I that holds client assets or receive premiums or money:

Assets (excluding goodwill, other intangible assets and investments in related parties) must exceed the FSP's liabilities (excluding loans validly subordinated in favour of all other creditors);

Current assets sufficient to meet current liabilities; and

Liquid assets equal to or greater than 4/52 weeks of annual expenditure.

Category II and IV:

Assets (excluding goodwill, other intangible assets and investments in related parties) must exceed the FSP's liabilities (excluding loans validly subordinated in favour of all other creditors);



Categories IIA and III:

Assets (excluding goodwill, other intangible assets and investments in related parties) must exceed the FSP's liabilities (excluding loans validly subordinated in favour of all other creditors) by at least R 3 million;



“Annual Expenditure” means the expenditure set out in:

The latest financial statements of the FSP; or

The budgeted expenditure as expressed in the budget, or financial accounts, in the case of an applicant commencing with business, less:

Staff bonuses;

Employees’ and directors’, partners’ or members’ share in profits;

Emoluments of directors, members, partners or a sole proprietor;

Other appropriation of profits to directors, members and partners;

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Fifty percent of the commissions or fees paid to representatives for the rendering of services that did not form part of their remuneration;

Depreciation;

Bad debts;

Any loss resulting from the sale of assets.

“Liquid Assets” were previously simply defined as “cash or cash equivalents which can be liquidated within seven (7) days without realising a loss on liquidation.”

The new definition reads:

Cash and other assets equivalent to cash that can be liquidated without realising a loss on liquidation provided that:

○ 25% of such assets must be capable of being liquidated in 7 days;

○ A further 25% of such assets must be capable of being liquidated in 30 days; and

○ The remaining 50% of such assets must be capable of being liquidated in 60 days.

“Management Accounts” means a set of financial statements which:

Is prepared from the accounting records contemplated in section 19(1)(a) of the Act;

Reflects the financial position of the FSP at month end;

Is prepared in accordance with the accounting policies as contemplated in section 19(1)(b)(iv) of the Act;

Fairly represents the financial performance and position of the FSP; and

Reflects any material matter which has affected or is likely to affect the financial affairs of the FSP.

APPLICATION FOR AN EXEMPTION IN RELATION TO QUALIFICATIONS AND REGULATORY EXAMINATIONS

To apply for an exemption the applicant may use a letterhead and apply for an exemption in a letter format addressed to the Registrar.

The fee for this application is R 5700 per application.

The fee must be paid and the proof of payment must be submitted together with the application.

Where an applicant requires exemption from the fee as well, the applicant must provide bank statements of the last 6 months as evidence that he/she cannot afford the application fee.

Compulsory information required:

The applicant must write a letter addressed to the Registrar that includes the following:

The applicant name, surname, ID number and FSP number;

Clarity in terms of what requirement the applicant would like exemption from, i.e. qualifications or regulatory examinations;

Clarity on the timeframe for which the exemption is required, for example, 6 months, 12 months, etc.;

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A very detailed and factual explanation/motivation of why this exemption should be considered. It is important that very specific reasons must be provided. The application is considered based on this motivation, and therefore the motivation must be factual and clear.

It is recommended that the applicant include in this explanation/motivation what previous attempts he/she has already made to try and meet the requirements. If no attempts have been made, then an explanation on why no previous attempts have been made to meet the requirements.

The reasons why the exemption is required must be supported by verifiable evidence/records. For example, if an applicant is stating that he/she requires an exemption based on medical grounds, then a letter from the relevant specialist or doctor is required to support that statement.

A certified copy of the applicant’s identity book / passport must be included in the application.

The application and all the supporting documents and proof of payment must be submitted together.

PROFESSIONAL INDEMNITY AND FIDELITY INSURANCE COVER

A person who is a Category I provider on the date of commencement must, with effect from a date 12 months after that date, maintain:

Professional indemnity of a minimum of R1 million; or

Guarantees of a minimum of R1 million.

A person who is a Category I or IV provider and who receives or holds clients financial products or funds of or on behalf of a client on the date of commencement must, with effect from a date 12 months after that date, maintain:

Guarantees of a minimum R1 million; or

Suitable fidelity insurance cover of a minimum of R1 million.

A person who is a Category II or IIA and who receives or hold clients financial products or funds of or on behalf of a client on the date of commencement must, with effect from a date six months after that date, maintain:

Guarantees of a minimum amount of R5 million, or

Suitable professional indemnity or fidelity insurance cover of a minimum of R5 million, respectively.

A person who is a Category III provider and who receives or hold clients financial products or funds of or on behalf of a client on the date of commencement must, with effect from a date six months after that date, maintain:

Guarantees of a minimum amount of R5 million; or

Professional indemnity and fidelity insurance cover of a minimum amount of R5 million, respectively.

OFFENCES AND PENALTIES

Any person who:

Contravenes or fails to comply with a provision of section 7(1) or (3), 8(8), 8(10)(a), 13(1) or (2), 14(1), 17(4), 18, 19(2), 19(4) or 34(4) or (6);

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In any application in terms of this Act, deliberately makes a misleading, false or deceptive statement, or conceals any material fact;

In the execution of duties imposed by this Act gives an appointed auditor or compliance officer information which is false, misleading or conceals any material fact; or

Is not a representative appointed or mandated by an authorised financial service provider, and who in any way declares, pretends, gives out, maintains or professes to be a person who is authorised to render financial service to clients on the basis that the person is appointed or mandated as a representative.

Is guilty of an offence and is on conviction liable to a fine not exceeding R10 million or imprisonment for a period not exceeding 10 years, or both such fine and such imprisonment.

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THE NATIONAL CREDIT ACT NO.34 OF 2005 PURPOSE OF THE ACT

The Act was passed into law by Parliament and signed by the President in March 2006. This aims to protect consumers taking credit or entering into consumer credit transactions.

In addition, the Act makes provision for the control and regulation of all credit transactions, including mortgages, credit cards, overdrafts, micro-loans and pawn broking transactions.

The Act also regulates all institutions that provide consumer credit, including banks, furniture companies, clothing and other retailers, micro-lenders and pawnbrokers.

Provision is made in the Act for the registration of debt counsellors and debt restructuring for over-indebted consumers. The Act also regulates credit bureaux and consumer credit information, providing for free access to this information, kept by credit bureaux, and for a process by which any errors on the credit records can be

corrected.

OVERVIEW OF THE ACT

Chapter 1 – Interpretation, Purpose and Application

Chapter 2 – Consumer Credit Institutions

Chapter 3 – Consumer Credit Industry Regulation

Chapter 4 – Consumer Credit Policy

Chapter 5 – Consumer Credit Agreements

Chapter 6 – Collection, repayment, surrender and debt enforcement

Chapter 7 – Dispute settlement other than debt enforcement

Chapter 8 – Enforcement of Act

Chapter 9 – General provisions

Schedule 1 – Rules concerning conflicting legislation

Schedule 2 – Amendment of Laws

Schedule 3 – Transitional Provisions

CHAPTER 1 – INTERPRETATION, PURPOSE AND APPLICATION

DEFINITIONS

Consumer

The party to whom goods or services are sold under a discount transaction, incidental credit agreement or instalment agreement;

The party to whom money is paid, or credit granted, under a pawn transaction;

The party to whom credit is granted under a credit facility;

The mortgagor under a mortgage agreement;

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The borrower under a secured loan;

The lessee under a lease;

The guarantor under a credit guarantee; or

The party to whom or at whose direction money is advanced or credit granted under any other credit agreement.

Credit provider

The party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement;

The party who advances money or credit under a pawn transaction;

The party who extends credit under a credit facility;

The mortgagee under a mortgage agreement;

The lender under a secured loan;

The lessor under a lease;

The party to whom an assurance or promise is made under a credit guarantee;

The party who advances money or credit to another under any other credit agreement; or

Any other person who acquires the rights of a credit provider under a credit agreement.

Educational loan

A student loan;

A school loan; or

Another credit agreement entered into by a consumer for purposes related to the consumer’s adult education, training or skill’s development.

Incidental credit agreements

Incidental credit agreement: means an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply:

A fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or

Two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.

Installment agreement

Installment agreement means a sale of movable property in terms of which:

All or part of the price is deferred and is to be paid by periodic payments;

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Possession and use of the property is transferred to the consumer;

Ownership of the property either:

○ Passes to the consumer only when the agreement is fully complied with; or

○ Passes to the consumer immediately subject to a right of the credit provider to re-possess the property if the consumer fails to satisfy all of the consumer’s financial obligations under the agreement.

Interest, fees or other charges are payable to the credit provider in respect of the agreement, or the amount that has been deferred.

Discount transaction

Goods or services are to be provided to a consumer over a period of time; and

More than one price is quoted for the goods or service, the lower price being applicable if the account is paid on or before a determined date, and a higher price or prices being applicable if the price is paid after that date, or is paid periodically during the period.

Lease

Temporary possession of any movable property is delivered to or at the direction of the consumer, or the right to use any such property is granted to or at the direction of the consumer;

Payment for the possession or use of that property is:

○ Made on an agreed or determined periodic basis during the life of the agreement; or

○ Deferred in whole or in part for any period during the life of the agreement.

Interest, fees or other charges are payable to the credit provider in respect of the agreement, or the amount that has been deferred; and

At the end of the term of the agreement, ownership of that property either:

○ Passes to the consumer absolutely; or

○ Passes to the consumer upon satisfaction of specific conditions set out in the agreement.

Large credit agreement

A credit agreement which is greater than R250,000; or

A mortgage.

Intermediate agreement

A credit agreement of between R15 001 and R250 000;

Except a pawn transaction and a mortgage.

Small agreement

Any pawn transaction;

A credit agreement of up to R15 000, excluding a mortgage.

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APPLICATION OF THE ACT

This Act applies to every credit agreement between parties dealing at arm’s length and made within, or having an effect within, the Republic, except a credit agreement in terms of which the consumer is:

A juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds R 1 000 000;

The State; or

An organ of State;

A large agreement in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the time the agreement is made, below R 1 000 000;

A credit agreement in terms of which the credit provider is the Reserve Bank of South Africa; or

A credit agreement in respect of which the credit provider is located outside the Republic.

The asset value or annual turnover of a juristic person at the time a credit agreement is made, is the value stated as such by that juristic person at the time it applies for or enters into that agreement.

In any of the following arrangements, the parties are not dealing at arm’s length:

A shareholder loan or other credit agreement between a juristic person, as consumer, and a person who has a controlling interest in that juristic person, as credit provider;

A loan to a shareholder or other credit agreement between a juristic person, as credit provider, and a person who has a controlling interest in that juristic person, as consumer;

A credit agreement between natural persons who are in a familial relationship and:

○ Are co-dependent on each other; or

○ One is dependent upon the other; and

Any other arrangement in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction; or

That is of a type that has been held in law to be between parties who are not dealing at arm’s length;

A juristic person is related to another juristic person if:

○ One of them has direct or indirect control over the whole or part of the business of the other; or

○ A person has direct or indirect control over both of them.

The Act has limited application to so-called ‘incidental’ credit agreements. These are defined as goods or services provided to the consumer whereby interest becomes payable only when payment is not made on or before a predetermined period. The providers of such types of credit do not have to register in terms of the Act. An incidental credit agreement is distinguished from a trade account. A trade account is one where a credit limit is set for a customer. This is not the same thing as a credit facility. Provided interest is not charged on any overdue amount, the agreement to provide credit does not fall within the ambit of the Act.

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CHAPTER 2 – CONSUMER CREDIT INSTITUTIONS

THE NATIONAL CREDIT REGULATOR

The National Credit Regulator (NCR) was established as the regulator under the National Credit Act 34 of 2005 (the Act) and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring enforcement of the Act.

The Act requires the Regulator to promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and remote, isolated or low density communities.

The NCR is also tasked with the registration of credit providers, credit bureaux and debt counsellors; and enforcement of compliance with the Act.

THE NATIONAL CONSUMER TRIBUNAL

The Tribunal is an independent body provided for under the Act. It is tasked with the hearing of cases arising from non-compliance with the Act as well as issuing of fines for contraventions thereof. Consumers and Credit providers may appeal to the Tribunal against the decisions of the NCR.

CHAPTER 3 – CONSUMER CREDIT INDUSTRY REGULATION

REGISTRATION REQUIREMENTS

The Act requires the registration of credit providers, credit bureaux and debt counsellors. Credit providers must register if they have at least 100 credit agreements (excluding incidental credit agreements); or total principal debt of more than R 500 000.

REGISTRATION AND RENEWAL FEES

The Minister may prescribe application fees to be paid as follows:

An initial registration fee upon registration;

An annual renewal fee.

CERTIFICATE, VALIDITY AND PUBLIC NOTICE OF REGISTRATION Upon registering an applicant, the NCR must:

Issue a certificate of registration;

Enter the registration in the register;

Assign a unique registration number.

NATIONAL RECORD OF REGISTRATIONS

The NCR must establish and maintain a register of all persons who have been registered.

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CHAPTER 4 – CONSUMER CREDIT POLICY

RIGHT TO APPLY FOR CREDIT

The NCA provides that every person, whether an individual, a group of people or a company, has the right to apply for credit from any credit provider. This right, however, does not prevent the credit provider from refusing to grant the credit, provided the reason for refusing to grant the credit is based on business grounds that are in line with their normal credit risk evaluation processes (section 60).

THE RIGHT NOT TO BE DISCRIMINATED AGAINST WHEN APPLYING FOR CREDIT Consumers who are applying for credit are further protected against unfair discrimination by a credit provider. The Act forbids credit providers from discriminating against consumers on the basis of colour, race, age, political affiliation, sexual orientation, religious belief, or affiliation to any particular trade union. A consumer who is of the opinion that he/she has been discriminated against for these reasons may act against the credit provider through the Equality Court, or may complain to the National Credit Regulator which will refer the matter to the Equality Court (section 61).

THE RIGHT TO BE GIVEN REASONS FOR CREDIT BEING DECLINED The NCA gives a consumer, whose credit application has been declined by a credit provider, the right to request written reasons explaining why his/her application for credit has been declined. If the decision to decline the consumer's request is based on an unfavourable report received from a credit bureau, the Act stipulates that the credit provider must supply the consumer in writing with the name, address and other contact details of the credit bureau from which the credit provider received the information (section 62).

THE RIGHT TO BE GIVEN DOCUMENTS IN AN OFFICIAL LANGUAGE THAT THE CONSUMER UNDERSTANDS A consumer has the right to receive documents from a credit provider in an official language that he/she understands. Documents that a credit provider must give to a consumer include the credit agreement, quotations and statements. This requirement is, however, subject to reasonability and factors such as usage, practicality, expenses, region and the needs of the consumers served by the credit provider. The credit provider must make a proposal to the NCR on the languages in which it intends making its documents available and the NCR will approve these proposals (section 63).

THE RIGHT TO BE GIVEN DOCUMENTS IN PLAIN AND UNDERSTANDABLE LANGUAGE A consumer has the right to receive information and documents in plain language. This means that the contents, meaning and importance of the document must be easy to understand. In this regard the NCR may issue guidelines to indicate what would be regarded as “plain language” (section 64).

THE RIGHT TO BE GIVEN DOCUMENTS RELATED TO THE CREDIT TRANSACTION The NCA gives the consumer the right to receive documents relating to the credit agreement in a manner that the consumer chooses. A consumer may choose to receive documents either in person at the credit provider's place of business, or by fax, email, or by a printable web page.

A consumer has the right to receive one replacement copy of documents from the credit provider, free of charge, but only if the consumer requests the replacement copy within a year of the delivery of the original documents. For any additional replacement documents, the consumer will be expected to pay the credit provider (section 65).

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THE RIGHT TO CONFIDENTIAL TREATMENT The consumer's right to confidentiality is protected by the provision that any person or organisation that receives or compiles confidential information on a consumer must use the information for the sole purpose for which the consumer has given his/her consent, unless the usage or release of such information is a requirement in terms of the NCA. The NCA further stipulates that the person or organisation holding the consumer's confidential information may only release it as specifically instructed by the consumer or by a court of law (section 68).

THE RIGHT TO ACCESS AND CHALLENGE INFORMATION HELD BY A CREDIT BUREAU The NCA gives the consumer the right to:

Access information that a credit bureau has in relation to him/her. The information must be given to the consumer free of charge every twelve months or for a fee if the consumer requests the information more than once within twelve months. Such a fee may not exceed R 20.

Challenge and request proof of the accuracy of information held by a credit bureau. Should a credit bureau fail to provide the consumer with proof of accuracy of information that the consumer disputes, it is compelled to remove the disputed information from its records.

Be advised by a credit provider before certain adverse information about that consumer is passed on to a credit bureau. The consumer is also entitled to receive a copy of that information on request (section 72).

NEGATIVE OPTION MARKETING Negative option marketing occurs when a credit provider offers a consumer credit, for which the consumer did not apply, and the offer states that the agreement will automatically come into existence unless the consumer rejects the offer. The Act prohibits this type of marketing. Any credit agreement that a consumer enters into on this basis is unlawful.

The Act further requires that at the time of signing a credit agreement the consumer must be given an opportunity to decide on the following:

To have the consumer's credit limit under a credit facility automatically increased every twelve months.

To receive any marketing communication or to be included in any customer or marketing list of the credit provider that is to be sold or distributed (section 74).

PROHIBITION OF MARKETING AND SALES OF CREDIT AT HOME AND AT WORK A credit provider may not harass a prospective consumer with the aim of entering into a credit agreement with the consumer. To ensure that consumers are not pestered into entering into credit agreements, the Act prohibits the marketing and sale of credit at a consumer's home or place of employment. There are, however, certain instances/exceptions, where credit can be legally marketed or sold at a consumer's home or work place:

If the credit provider is invited by the consumer to market or sell the credit at the consumer's home;

If the credit provider visits the consumer to sell goods or services, and in the process incidentally offers to give or arrange credit to finance the goods or services that the credit provider is selling;

If the credit provider sells developmental credit he/she can do so at the consumer's home or place of work without having been invited there by the consumer;

If the prospective consumer is an employer;

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If the consumer has arranged with the credit provider to be visited at work for the purpose of marketing or selling credit;

If the credit provider arranges with the employer as well as a representative of a trade union and/or employee for the credit provider to market or sell credit at work (section 75).

RECKLESS CREDIT AND OVER-INDEBTEDNESS

A consumer is over-indebted when, according to available information, the consumer will be unable to satisfy in a timely manner all the agreements to which the consumer is a party.

Credit is reckless when:

No assessment was made of the consumer’s ability to pay;

The consumer did not understand his/her obligations;

The specific agreement caused the consumer to become over-indebted.

The Act requires credit providers to do an assessment before entering into any credit agreement. The consumer must disclose information fully and truthfully at the time the agreement is made.

If reckless credit has been extended, a debt counselor may recommend that the debt be cancelled or restructured.

A court may suspend or reduce obligations. A lender has no recourse against another lender who extends credit recklessly, with the result that responsible lenders then suffer (section 78, 79, 80, 81, 82, 83).

DEBT COUNSELLING

If a consumer is in default of a credit agreement, the credit provider must advise the consumer in writing and propose that the consumer refers the credit agreement to a debt counsellor. No legal proceeding may be instated against a consumer before the proper counselling procedures have been observed.

The debt counsellor will assess whether the consumer is over-indebted or not, and if so, will propose a debt re-arrangement.

The debt counsellor cannot write off the debt. The full debt must be repaid, but according to terms agreed to by all parties.

Once consent has been reached between the parties, a member of the Tribunal may confirm the order. If no consent is reached, the matter must be taken to court. Until the debt is paid off the consumer may not take on more debt.

CHAPTER 5 – CONSUMER CREDIT AGREEMENTS

UNLAWFUL AGREEMENTS The Act declares the following credit agreements as unlawful:

Agreements where the consumer is a minor and was not assisted by a guardian at the time the agreement was signed by the consumer. If the consumer misleads the credit provider into believing that he/she is no longer a minor then the agreement will be enforceable;

Agreements entered into with a consumer who has been declared mentally unfit;

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Agreements entered into with a consumer who is subject to an administration order where the administrator did not consent to the agreement being entered into;

Agreements which are a result of negative option marketing;

Agreements where the credit provider is not registered with the NCR, despite being legally required to do so. A registered credit provider is required to display a registration certificate as well as a decal issued by the NCR. (Section 89) (Regulation 32).

If a credit agreement is declared unlawful by a court, the credit provider cannot sue the consumer for any monies owing under that agreement. The Act provides that the credit provider must refund the consumer any monies paid, together with interest at the rate quoted in the agreement. Where it is found that the consumer will be unfairly enriched if all the monies paid to the credit provider are refunded to him/her, such monies will be forfeited by the credit provider to the State (section 89).

The Act does not allow certain provisions/clauses to be included in credit agreements. The prohibition of these terms and conditions serves to protect the consumer against certain practices by credit providers. Among the provisions/clauses that are prohibited are:

Provisions/clauses which mislead the consumer or subject the consumer to potential fraud;

Provisions/clauses which determine that the consumer has waived certain of his/her rights that may apply to credit agreements. The rights that cannot be waived include a consumer's right to have their debt restructured, the right to have repossessed goods sold at a fair, market-related price, and the right to dispute any debits that pass through a consumer's account;

Provisions/clauses which require the consumer to acknowledge that he/she has received goods or any information from the credit provider, before the goods or information have actually been received by the consumer;

Provisions/clauses which require the consumer to agree to forfeit monies paid to the credit provider in the event of the consumer terminating the agreement;

Provisions/clauses which require the consumer to leave items such as identity document, bank cards or PIN numbers of bank cards with the credit provider;

Provisions/clauses that authorise the credit provider to set-off a consumer's debt against an asset or account of the consumer held by the credit provider, except where the consumer has given the credit provider specific instructions specifying which assets may be set-off against which credit agreement.

The following common law rights or remedies that are available to the consumer may not be waived in a credit agreement:

Exceptio errore calculi refers to a defence based on an error in calculation;

Exceptio non numerate pecuniae refers to a defence by a party who was sued on a promise to repay money that was never received;

Exceptio non causa debiti refers to a defence that the debt claimed has no basis or ground.

The exceptions referred to above have the effect that the credit provider need not prove the substance of the relevant exceptions in detail when a credit agreement is being enforced (section 90 & 121) (Regulation 32).

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A consumer cannot be sued or forced to comply with a provision in a credit agreement which is found to be unlawful. Unlawful provisions affect credit agreements in two ways:

An unlawful provision may cause the entire credit agreement to be unlawful and the consumer cannot be forced to pay the credit provider under that agreement, or

An unlawful provision can be amended by the court or deleted to ensure the agreement remains lawful in which case the consumer will still be bound by the credit agreement and the amended provision. (Section 90).

PRE-AGREEMENT STATEMENTS AND QUOTES The NCA requires that a consumer must be given a pre-agreement statement and a quotation before entering into a credit agreement with a credit provider. A pre-agreement statement is a document which details the terms and conditions of the credit agreement that the credit provider intends entering into with the consumer. In addition, the consumer must be given a quotation disclosing the costs of the credit required.

This quotation must include the principal debt, the interest rate, the total amount payable under the agreement, the instalments and all fees, charges and interest. The pre-agreement statement and the quotation can either be written in one document or in separate documents. The quotation that the consumer receives is valid for five business days. If the credit provider enters into the credit agreement with the consumer within these five days, he/she is obliged to do so at the same rate or costs as noted in the quotation. (Sections 92 and 93).

COST OF CREDIT

Interest and initiation fees

The NCA regulates interest rates and initiation fees by specifying maximum rates and fees that credit providers may charge consumers for various credit agreements:

Type of credit agreement Maximum interest rate Maximum initiation fee

Mortgages / Bonds (REPO rate x 2.2) + 5% R1,000 + 10% of any amount greater than R10,000

(Maximum fee R5,000)

Credit facilities (e.g. credit cards, store cards, etc.)

(REPO rate x 2.2) + 10% R150 + 10% of any amount greater than R1,000


Unsecured credit facilities (e.g. personal loans)



Credit facilities (e.g. credit cards, store cards, etc.)

(REPO rate x 2.2) + 5% R1,000 + 10% of any amount greater than R10,000


Incidental credit agreements (e.g. overdue bills from doctors, Eskom, etc.)

2% per month N/A

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Type of credit agreement Maximum interest rate Maximum initiation fee

Small & Medium Business Loans (REPO rate x 2.2) + 20% R250 + 10% of any amount greater than R1,000


Low income housing loans (REPO rate x 2.2) + 5% R500 + 10% of any amount greater than R10,000


Short term loans (i.e. loans of up to 6 months of no more than R8,000)

5% per month R150 + 10% of any amount greater than R1,000


Any other type of loans not covered above



Service Fees

A service fee is a fee that a credit provider charges a consumer for servicing a credit agreement between them. The fee is for administering or maintaining the credit agreement. The credit provider can charge this fee on a monthly or annual basis. It can also be charged per transaction. The NCA regulates service fees in a number of ways including by specifying the maximum fees that credit providers are allowed to charge and how often the fees can be recovered. The current maximum service fee that a credit provider can charge a consumer is R50 a month. If the consumer pays an annual service fee, the maximum that the consumer can be charged is R600 per year.

If the credit agreement is settled sooner than originally agreed by the consumer and within the year to which the annual service fee relates, the credit provider must refund the unused portion of the service fee to the consumer (section 101) (Regulation 44).

Credit insurance

The NCA also regulates credit insurance. This is insurance which can be required by a credit provider when a consumer takes up a specific product such as a home loan or credit card. The insurance would then cover the debt due to the credit provider in certain cases such as the death of the consumer.

The NCA stipulates that the insurance cover taken by the consumer may not exceed the outstanding obligation to the credit provider and the cover must reduce as the outstanding balance due to the credit provider reduces. In the case of a home loan, the insurance may not exceed the value of the property.

In certain instances a consumer may be offered “optional” insurance which will be to the benefit of the consumer. For example in the case of vehicle financing, it might be in the consumer's best interest to ensure that the full market value of the vehicle is covered and not only the balance due to the credit provider, failing which in the case of the vehicle being written off, only the outstanding balance to the credit provider will be covered and the consumer will receive nothing for the value of the vehicle.

The Act provides that the consumer may not be forced to take the insurance offered by the credit provider and can in fact select to replace the insurance offered by the credit provider with a policy of the consumer's choice.

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When the consumer chooses to use his/her own insurance, the credit provider can request that the premiums are paid by the credit provider to the insurance company and that the consumer is billed monthly.

All insurance premiums payable to the credit provider must be by way of monthly premiums except in the case of a large agreement where an annual premium may be recovered. The annual premium has to be recovered at the beginning of the twelve month period that the agreement will be in place. In the event that the large agreement is settled early, the consumer must be refunded premiums equal to the number of the remaining months (sections 101 & 106).

Default administration charges

This is a charge that a credit provider may charge a consumer who is in arrears with repayments on his/her credit agreement. These charges relate to costs that the credit provider has incurred in attempting to advise the consumer that he/she is in arrears with his/her account. These costs are limited to a letter sent by the credit provider to the consumer, informing him/her that he/she is in default in terms of the agreement. These default administration charges do not include any telephone calls made to the consumer. The Act specifies that a credit provider may not charge a consumer more than the cost actually incurred by the credit provider. The Act specifies that the charge for the letter must be equal to the tariff allowed by the court, plus the actual costs incurred for sending the registered letter.

Collection costs

Collection costs are costs that the credit provider incurs when attempting to collect an outstanding, overdue debt from the consumer. The Act specifies that a credit provider is not allowed to charge a consumer collection costs which are more than the court tariff allows.

THE RIGHT TO RECEIVE PERIODIC STATEMENTS The Act stipulates that a credit provider must provide a consumer with a statement once a month or once every two months if the agreement is an instalment sale agreement, lease or secured loan. A longer interval may be allowed with the consent of the consumer. This interval may, however, not exceed three months.

With regards to a mortgage agreement the consumer is entitled to receive a statement every six months. (Section 108).

CHANGES TO CREDIT AGREEMENTS AND INCREASES/DECREASES OF CREDIT LIMITS The NCA states that any change that is made to a credit agreement, which a consumer has already signed, will have no effect, unless:

The change reduces the consumer's debt under the agreement; or

The consumer signs his/her initials in the margins next to the change made; or

The change is recorded in writing and signed by both the consumer and the credit provider; or

If the change is agreed upon orally it must be recorded and thereafter provided in writing.

In terms of the NCA, a consumer is entitled to instruct a credit provider, in writing, to reduce his/her credit limit under a credit facility. The credit provider must confirm with the consumer that the limit was reduced in accordance with the consumer's request and must indicate the date when the reduced limit becomes effective.

A consumer is allowed to request a credit provider to increase his/her credit limit under a credit facility either temporarily or permanently. A consumer has to agree, in writing, to an automatic limit increase to his/her credit facility, but even where the credit provider obtains such agreement from the consumer, the limit may only

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increase once a year. However, a consumer may at any time request an increase of the credit limit (sections 116 -119).

TERMINATION OF CREDIT AGREEMENTS

The Act specifies that a consumer can at any time terminate a credit agreement by paying the settlement amount. A settlement amount is the amount that is arrived at by adding the following amounts:

The outstanding principal debt as at the date of termination;

The outstanding interest on the principal debt as at the date of termination;

Any outstanding fees and charges as at the date of termination;

An early termination charge in the case of large agreements as explained below.

No penalty fee is payable for the early settlement of a small or intermediate agreement. If the consumer wants to terminate a large credit agreement i.e. a credit agreement which is greater than R250 000, or a mortgage agreement, the settlement amount may include an early settlement charge which is not allowed to be more than three months interest, and less if the consumer provides notice of his/her intention to settle early. In the case of a notice given by the consumer it will reduce the three month interest early settlement charge by the notice period.

The Act allows the credit provider to terminate a credit agreement early if the consumer is in default. (Section 122- 123)

CHAPTER 6 – COLLECTION, REPAYMENT, SURRENDER AND DEBT ENFORCEMENT

EARLY PAYMENTS AND CREDITING OF PAYMENTS A consumer can pay an instalment owing under a credit agreement in advance. The credit provider may not refuse to accept an advance payment from a consumer or penalise the consumer for paying in advance.

When a consumer makes payments that are not yet due to the credit provider, the Act stipulates that the credit provider has to distribute the payments in the following sequence:

Firstly, to pay the interest due in terms of the credit agreement;

Secondly, to pay any fees and charges that are due;

Thirdly, to reduce the principal debt. (Section 126)

THE CONSUMER'S RIGHT TO SETTLE THE AGREEMENT EARLY The NCA also gives the consumer the right to settle an agreement at any time before the date specified in the agreement. The consumer is not obligated to give the credit provider notice that he/she intends to settle the credit agreement early.

In the case of a large agreement, when a consumer exercises this right, he/she will be charged an early settlement amount, as noted above. This right is also available to a guarantor. A guarantor is a person who agrees to pay a debt, which is due to a credit provider by another consumer should the consumer fail to pay the credit provider (section 125).

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SURRENDER OR RETURN OF GOODS The Act specifies that a consumer can withdraw from an instalment sale, secured loan or lease agreement at any time by returning the goods to the credit provider. When the consumer returns the goods to the credit provider, the credit provider is expected to sell them and credit the consumer's account with the proceeds of the sale. If the proceeds from the sale are more than the consumer's debt, the credit provider must refund any surplus to the consumer. If the proceeds are less than the consumer's debt, the consumer is obliged to pay the outstanding amount the credit provider within ten days (section 127).

COLLECTION AND DEBT ENFORCEMENT When a consumer is unable to pay, the credit provider will take steps to collect monies that are due to him/her. This is called debt enforcement. The Act prohibits certain practices that credit providers may use to collect overdue monies from consumers. A credit provider is not allowed to retain the following documents for purposes of collection and debt enforcement:

An identity document;

A debit or credit card;

An ATM card;

A PIN number (sections 90 & 133).

When a consumer has defaulted, the credit provider must first notify the consumer in writing of the status of the account. The consumer is in default if his/her account is twenty business days in arrears. In the notice the credit provider must propose that the consumer refer the credit agreement to a debt counsellor or a consumer court or an Ombudsman with the authority to handle any possible disputes. The purpose of such a referral is to enable the consumer and the credit provider to resolve the matter or agree to a plan to bring the repayments up to date. A credit provider cannot take legal action against a consumer before first notifying the consumer of the default and to draw his/her attention to his/her rights in this regard. Should the consumer fail to approach the credit provider or an Ombudsman within ten days to resolve the matter, the credit provider can take further steps to enforce the debt.

A credit provider can approach the Magistrates' Court to enforce a credit agreement, which is in arrears when the following has happened:

The consumer did not respond to the written notice from the credit provider to bring repayments under a credit agreement up to date;

The consumer refused to agree to a proposal made by the credit provider in the written notice, suggesting ways in which to resolve any dispute or to bring repayments up to date; or

The consumer did not approach a debt counsellor within the allowed ten business days.

A consumer can terminate a credit agreement by returning the goods to the credit provider. The credit provider will have to sell the goods. The consumer will have to pay for any shortfall should the goods be sold at a price less than the outstanding balance. The Act specifies that the credit provider may approach the court to recover the shortfall if not paid within ten business days.

The court will only consider the credit provider's request for a judgment if the credit agreement is not subject to debt review. Where a consumer and a credit provider have agreed on a plan to bring repayments up to date on

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an agreement that is in arrears, and the consumer has adhered to this arrangement the credit provider cannot approach the court for a judgement on this agreement.

COMPLIANCE AND REPORTING – CHAPTER 8 OF THE REGULATIONS

STATUTORY REPORTING

A credit provider must submit the following to the NCR:

Compliance report;

Statistical returns;

Annual financial and operational returns;

Assurance report.

If requested by the NCR, any analysis of any item contained in the forms prescribed must be furnished to the NCR within 20 business days after such request.

COMPLIANCE REPORT

A credit provider must complete and submit a compliance report to the NCR on an annual basis within six months after the financial year-end of the credit provider.

STATISTICAL RETURNS

A credit provider whose annual disbursements exceed R15 million must complete and submit the statistical return to the NCR in respect of the quarters and by the dates set out below:

Quarter 1 15 May

Quarter 2 15 August

Quarter 3 15 November

Quarter 4 15 February

All other credit providers must complete and submit the statistical return by the 15th of February each year for the period 1 January to 31 December.

ANNUAL FINANCIAL STATEMENTS A credit provider must submit its annual financial statements including the auditor or accounting officer’s report to the NCR within six months after the provider’s financial year- end.

ANNUAL FINANCIAL AND OPERATIONAL RETURN

A credit provider must submit an annual financial and operational return to the NCR, within six months after the credit provider’s year-end.

RESPONSIBILITY FOR ASSURANCE ENGAGEMENT

A credit provider must require an accounting officer or auditor to conduct an assurance engagement and issue a report to the NCR on the basis of that person’s finding with regard to that engagement.

A credit provider must submit the report to the NCR within six months after the credit provider’s year-end.

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DEBT COUNSELLING

If a Debt Counsellor is of the view that a consumer is over-indebted he can propose a restructuring to all credit providers of the consumer. However, should any of the credit providers refuse to consent to such a restructuring, the debt counsellor will have to make one or more of the following recommendations to the Magistrates’ Court, concerning the obligations of the consumer:

That the period of the consumer agreement should be extended and the monthly payments be reduced;

That certain payments be postponed;

The recalculation of the consumer’s obligations in cases of the charging of unlawful fees;

Suspension of obligations under any reckless agreement.

There are four points of entry for a consumer to enter the debt review process, namely:

A referral by court;

A referral by the National Credit Regulator;

A referral by a credit provider; or

A voluntary application by a consumer;

Section 129 of the Act prescribes if a consumer is in default of payment, the credit provider can bring the default to the attention of the consumer and advise him/her that he/she can refer the matter to a debt counsellor.

A credit provider is allowed to proceed with legal action if:

The consumer fails to respond to the notice of the creditor; or

The consumer refuses the advice of the creditor and does not refer the matter to a debt counselor.

All credit agreements are subject to the debt review process. The only exception is if the credit provider has proceeded with legal action against the consumer in terms of section 129 of the Act.

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CONSUMER PROTECTION ACT PURPOSE OF THE ACT

The primary purpose of the Act is to protect consumers against exploitation and unfair practices by unscrupulous businesses, and to empower consumers to make wise purchasing decisions. The Preamble to the Act briefly summarises the ambit of the Act to have the following desired results:

To promote a fair, accessible and sustainable marketplace for consumer products and services by setting national norms and standards relating to consumer protection.

To provide for the improved standards of consumer information.

To prohibit certain unfair marketing and business practices.

To promote responsible consumer behaviour.

To harmonise laws relating to consumer protection.

To provide a consistent enforcement framework.

To establish a National Consumer Commission.


The Act applies to every transaction involving the supply of goods and/or services in the ordinary course of business within the Republic of South Africa, to the promotion of such goods and services that could lead to such transactions and to the goods and services themselves after the transaction is completed.

The following arrangements are also regarded as transactions between the supplier and consumer:

Memberships of associations for example a club membership; and

Any franchise arrangement between the franchisor and a franchisee (regardless of whether the franchisee is above or below the threshold). The Act will apply to the relationship in all respects for the protection of the franchisee.

In addition, the Act extends to a transaction irrespective of whether the supplier:

Resides or has its principal office within or outside the Republic;

Operates on a "for profit" basis or otherwise;

Is an individual, juristic person, partnership, trust, organ of state, an entity owned or directed by an organ of state, a person contracted or licensed by an organ of state to offer or supply any goods or services, or is a public–private partnership; or

Is required or licensed in terms of any public regulation to make the supply of the particular goods or services available to all or part of the Republic.

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Meaning of transaction and consumer

The following are the elements of a consumer transaction:

It is an interaction or agreement to interact between a consumer and supplier in the ordinary course of the supplier’s business, including in terms of any public regulation;

There is an exchange of consideration; or

The interaction concerns the supply or potential supply of goods or services to or at the direction of the consumer.

The definition of a consumer is extended to the actual users of goods or services, regardless of who actually may have conducted a transaction or paid for the goods or services.

A consumer means:

A person to whom goods or services are marketed in the ordinary course of business;

A person who has entered into an agreement or transaction with a supplier;

A user of the goods or a recipient or beneficiary of the services; or

A franchisee in terms of a franchise agreement.

Goods:

Anything marketed for human consumption;

Any tangible or intangible product (e.g. music, photograph, literature, information, software code, licenses);

Legal interest in land or any other immovable property (this would include usufructs / bare dominiums); and

Gas, water and electricity services.

Services:

Any work or undertaking performed by one person for the direct or indirect benefit of another;

The provision of any education, information, advice or consultation (excluding FAIS);

Any banking services or related financial service;

The transportation of any individual or any goods;

The provision of any accommodation (e.g. restaurants and hotels);

The provision of any entertainment or similar intangible products (e.g. sale of tickets to a concert);

The provision or access to any electronic communications infrastructure (e.g. cell phones, 3G, hotspots);

The provision of access to an event;

The provision of access to any premises, activity or facility;

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The provision of access to any premises or other property in terms of a lease;

The provision of a right of occupancy in connection with land or other immovable property; and

The rights of a franchisee in terms of a Franchise Agreement.

Supplier / service provider

Any person including a juristic person, who markets, promotes or supplies goods or services, is a supplier, as well as any person who promotes, supplies or offers to supply any service.

EXEMPTIONS

The following transactions are exempted from the provisions of the Act:

Transactions where goods or services are promoted to the State or are supplied to or at the direction of the State;

Transactions where the consumer is a juristic person whose asset value or annual turnover at the time the transaction is entered into, equals to or exceeds R2 million;

A transaction which constitutes a credit agreement for the purposes of the National Credit Act 34 of 2005. (The goods and services that are the subject of the agreement will remain subject to the provisions of the Act);

Transactions pertaining to services to be supplied under an employment contract;

Transactions which give effect to a collective bargaining agreement within the meaning of section 23 of the Constitution, or the Labour Relations Act 66 of 1995 (LRA), or those transactions giving effect to a collective agreement as defined in the LRA;

Transactions that fall within an industry wide environment:

○ Regulators apply for an industry wide exemption for example where the service constitutes advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act 37 of 2003 FAIS) or insurers subject to the Short-Term Insurance Act 53 of 1998 or the Long-Term Insurance Act 52 of 1998.

FUNDAMENTAL CONSUMER RIGHTS

RIGHT OF EQUALITY IN THE CONSUMER MARKET

Discriminatory marketing is when a supplier unfairly excludes a consumer from accessing goods or services despite the fact that the consumer meets the necessary basic requirements.

The Act protects consumers against a range of discriminatory marketing practices. It also specifies when a consumer can fairly be excluded from receiving a product or service. (A child may not be sold alcohol or view an age-restricted movie).

Discriminatory marketing also applies if the supplier grants exclusive access, a different quality or price of goods or services to a particular person, community or market segment.

A consumer that has been discriminated against can:

Institute proceedings before an equality court;

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File a complaint with the Commission, which must refer the complaint to the equality court if the complaint is valid.

RIGHT TO RESTRICT UNWANTED DIRECT MARKETING

Definition of direct marketing

Direct marketing is to approach a person either in person, by mail or by electronic communication (for example, using telephone, fax, SMS or email) for the direct or indirect purpose of promoting or offering to supply, in the ordinary course of business, any goods or services, or requesting the person to make a donation of any kind.

The consumer's right to restrict unwanted direct marketing

Every person has the right to require a marketer to discontinue any approach or communication that is primarily for the purpose of direct marketing. This is done by demanding during the communication, or within a reasonable time afterwards, that the marketer stop initiating communication.

Where the approach is not in person, the consumer will have the option to register a "pre-emptive block" on a registry to be set up. This block can be applicable to all direct marketing or only for specific purposes.

The Act requires a person who authorises, directs or conducts any direct marketing to implement appropriate procedures to facilitate the receipt of a demand to the effect that direct marketing to a consumer be discontinued.

Such a person must not deliver any communication for the purpose of direct marketing to a consumer who has made such a demand or registered a relevant pre-emptive block.

Consumers may not be charged a fee for making a demand or registering a pre-emptive block.

Prohibited time period for contacting consumers

No direct marketing during the prohibited periods will be allowed if the direct marketing is:

Directed to a consumer at home; and

For any promotional purpose except to the extent that the consumer has expressly or implicitly requested or agreed otherwise.

Identification

Whenever a person is engaged in direct marketing, in person, at the premises of a consumer, that person must:

Visibly wear or display a badge or similar identification device that satisfies any prescribed standards; or

Provide suitable identification on request by the consumer.

CONSUMER’S RIGHT TO CHOOSE

In order to enhance consumer choice the Act introduces a number of provisions that are aimed at assisting consumers to select goods or services on the basis of having examined the goods and compared prices.

Consumer’s right to select suppliersSuppliers are prohibited from requiring consumers to purchase bundled goods or services unless it can be proven that the bundling results in economic benefit for consumers.

Expiry and renewal of fixed-term agreementsThe Act provides that where a fixed term arrangement is contemplated:

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The supplier may not require the conclusion of the agreement for a period longer than the maximum period prescribed for that particular consumer agreement. The maximum period of a fixed-term consumer agreement is 24 months from the date of signature by the consumer:

The supplier must allow the consumer to:

○ Cancel the agreement upon the expiry of its fixed term, without penalty or charge; or

○ Cancel the agreement at any other time by giving the supplier 20 business days’ notice in writing; or

○ Rectify any material failure to comply with the agreement on 20 business days’ written notice prior to cancellation thereof by the supplier.

Where a fixed term agreement exists the supplier is required, not more than 80 nor less than 40 business days before the expiry date of the fixed term of the consumer agreement, to notify the consumer in writing or other recordable form of the impending expiry, including notice of any material changes if the agreement is to be renewed or continued beyond the expiry date, and the options available to the consumer;

The Act allows the consumer the option of expressly directing the supplier to terminate the agreement on the expiry date, or agreeing to renew the agreement for a further fixed term;

Should the consumer refrain from electing any of those options, the Act provides that on expiry of the fixed term of the consumer agreement, it will automatically continue on a month to month basis, subject to any material changes of which notice has been given by the supplier to the consumer;

Unless the consumer terminates the agreement or agrees to renewal for a further fixed term, a fixed term agreement will continue on a month to month basis indefinitely.

The consumer’s rights on expiry and renewal of fixed term agreements excludes all transactions between juristic persons (in other words, entities other than individuals like companies, trusts, close corporations, partnerships etc.), regardless of thresholds set by the Act.

Franchise agreements are also exempt from these provisions.

Pre-authorisation of repair or maintenance services

This right will only apply to:

A transaction or agreement;

Where the price value is above an amount that will be prescribed;

Where the service provider supplies a repair or maintenance service to property belonging to or in the control of the consumer or supplies or installs any replacement parts or components; and

The service provider has possession, or takes possession, of that property to repair or for maintenance.

A service provider may only charge a consumer, for the supply of any goods or services if the consumer:

Received an estimate and then authorised the work;

In writing or other recorded form declined the offer of an estimate and authorised the work; or

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In writing or other recorded form pre-authorised any charges up to a specified maximum, and the amount charged does not exceed that maximum.

A service provider may only charge for preparing an estimate if the price for preparing that estimate was disclosed before-hand and the consumer accepted the estimated cost.

Charges for preparing an estimate would include:

Diagnostic work, disassembly or re-assembly required to prepare an estimate; and

Damage to or loss of material or parts in the course of preparing an estimate.

Authorisation is needed for costs that exceed the estimate

A price for goods and services may only exceed an estimate provided to the consumer if the consumer has:

Been informed of the additional estimated charges (preferably in writing); and

Authorised the work to continue.

This right will not apply to pre-existing agreements.

Consumer’s right to cooling-off period after direct marketingConsumers who are approached by direct marketers often feel psychologically pressured to agree to a transaction.

The consumer has the right to cancel such an agreement without penalty during a brief ‘‘cooling-off period’’ of five business days (i.e. one calendar week).

Consumer’s right to cancel advance reservations, bookings or orders

A consumer may cancel any advance booking, reservation or order for any goods or services to be supplied.

A supplier who makes a commitment or accepts a reservation to supply goods or services on a later date may require payment of a reasonable deposit in advance and a reasonable charge for cancellation of the order or reservation.

The charge must not exceed a fair amount in the circumstances, having regard to:

The nature of the goods or services that were reserved or booked;

The length of notice of cancellation provided by the consumer;

The reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the canceled reservation; and

The general practice of the relevant industry.

No cancellation fee may be charged if the consumer is unable to honour the booking, reservation or order due to the death or hospitalisation of the person for whom it was made, or for whose benefit it was made.

Consumer’s right to choose or examine goods

Loss or damage to displayed goods

A consumer will only be responsible for any loss or damage to goods displayed by a supplier, if the loss or damage results from actions by the consumer amounting to gross negligence or recklessness, malicious behaviour or criminal conduct.

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Choosing from open stock

A consumer may select or reject any particular item from goods displayed in open stock, or sold from open stock, before completing the transaction.

Delivered goods must correspond with sample or described goods

A supply of goods made by sample and description must correspond with the sample and the description.

Limitation of right

This right will not apply to the supply of goods or services to a franchisee in terms of a franchise agreement.

Implied delivery conditions

It is an implied condition of every transaction for the supply of goods or services that the supplier must deliver the goods or perform the services:

○ On the agreed date and at the agreed time, or otherwise within a reasonable time after concluding the transaction or agreement;

○ At the place of business of the supplier or else residence of the supplier (if the supplier does not have a place of business);

○ At the cost of the supplier, in the case of delivery of goods; and

○ At the risk of the supplier (until the consumer has accepted delivery of the goods).

Acceptance of delivery

A supplier may not require a consumer to accept delivery or performance of services at an unreasonable time, if an agreement does not provide a specific date or time.

Examination of goods

A supplier must, when tendering delivery of any goods, on request, allow the consumer a reasonable opportunity to examine those goods to determine whether the consumer is satisfied that the goods are:

○ Of a type and quality reasonably contemplated in the agreement;

○ In all material respects and characteristics correspond to that which an ordinary alert consumer would have expected based on the description or on a reasonable examination of the sample, if the consumer agreed to purchase goods solely on the basis of a description and/or sample; and

○ Corresponding with the sample and description if the supply of goods is by sample as well as description.

Delivery at a different time or date then agreed

If the supplier tenders the delivery of goods or the performance of any services at a location, on a date or at a time other than as agreed with the consumer, the consumer may either:

○ Accept the delivery or performance at that location, date and time;

○ Require the delivery or performance at the agreed location, date and time, if that date and time has not yet passed; or

○ Cancel the agreement without penalty, treating any delivered goods or performed services as unsolicited goods or services.

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Right to reject incorrectly delivered goods or treat them as unsolicited goods

A consumer that receives delivery of a larger quantity of goods, than the consumer agreed to buy, may:

○ Reject all of the delivered goods; or

○ Accept delivery of the goods, pay for the agreed quantity at the agreed rate and treat the excess quantity as unsolicited goods.

RIGHT TO DISCLOSURE AND INFORMATION

Right to information in plain and understandable language

A notice, document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class or persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance, and import of the notice, document or visual representation without undue effort, having regard to:

The context, comprehensiveness and consistency of the notice, document or visual representation;

The organisation, form and style of the notice, document or visual representation;

The vocabulary, usage and sentence structure of the notice, document or visual representation; and

The use of any illustrations, examples, headings, or other aids to reading and understanding.

Disclosure of price of goods or services

The right to disclosure aims to ensure that consumers understand the terms and conditions of the transactions or agreements they enter into and are able to make informed choices about the products and services they consume. The Act seeks to advance that right with the following provisions:

It is compulsory to display prices for any goods that are displayed for sale;

If two prices are displayed for the same goods, the lowest has to be charged;

If an advertisement or notice states that prices are subject to a reduction or sale price, clause 23(11) provides for a consistent application of such notices, so that consumers can better compare the price in a consistent fashion.

Product labeling and trade descriptions

Trade descriptions applied to any goods must not be misleading, and must not be tampered with. The Minister may prescribe categories of goods to which a trade description must be applied.

Disclosure of reconditioned or grey market goods

If goods are reconditioned, that has to be disclosed, and if they have been imported without the benefit of the manufacturer’s warranty (so called ‘‘grey market goods’’), that fact must be disclosed.

Sales records

Clause 26 makes it compulsory for sales records of every transaction to be provided to the consumer. The record must include the following information:

The supplier’s full name, or registered business name, and VAT registration number;

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The address of the premises at which, or from which, the goods or services were supplied;

The date on which the transaction occurred;

The name or description of any goods or services;

The unit price;

The quantity;

The total price of the transaction before any applicable taxes;

The amount of any applicable taxes;

Total price of the transaction after including any applicable taxes.

Disclosure by intermediaries

Clause 27 sets out disclosure requirements that intermediaries who are not regulated under another law have to comply with. This includes commissions earned, and entities that they represent. The Minister may prescribe the information or records that intermediaries or categories of intermediaries must keep.

Identification of deliverers, installers and others

Persons who attend at a consumer’s place of business or residence to deliver or install any goods, or perform any services, must wear satisfactory identification.

RIGHT TO FAIR AND RESPONSIBLE MARKETING

General standards for marketing of goods or servicesThe Act sets out standards for fair and responsible marketing and provides a general prohibition against marketing that is misleading, fraudulent or deceptive.

Bait marketing, Negative option marketing, Referral sellingA number of specific marketing and selling practices are prohibited:

Bait marketing – where non-existent special offers lure customers into the shop.

Negative options – where customers have to ask NOT to be sold something.

Referral selling – when customers are encouraged to buy products or services based on potential future rebates or commissions.

Direct marketingClause 32 outlines standards to be adhered to when suppliers engage in direct marketing. Consumers have to be informed and provided with the identity of the agent(s) or person(s) and informed of their right to rescind the agreement during the cooling-off period.

Catalogue marketing, Trade coupons, Work from home schemesClause 33 establishes standards for the conduct of catalogue sales, clause 34 regulates the use of trade coupons, and clause 37 regulates the marketing of work from home schemes.

Customer loyalty programsThe Act regulates loyalty programs by requiring sponsors of loyalty programs to meet their obligations when loyalty credits are tendered, prohibits offering inferior quality products or requiring the bundling of ‘‘reward’’

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goods or services with ‘‘revenue’’ products, requires a supplier to accept the tender of sufficient loyalty credits as adequate consideration for goods and services at any time, subject to limited black-out periods.

If the sponsor of a loyalty program keeps a register of members, the sponsor may increase the price of ‘‘rewards’’ only after notifying the members.

Promotional competitionsClause 36 prohibits offering prizes with the intention of not providing them.

It also prohibits informing consumers that they have won a prize when no competition has been conducted, or they have never entered a competition, or making the prize subject to a previously undisclosed condition payment of any consideration, whether for participating in the competition or for the prize itself.

RIGHT TO HONEST AND FAIR DEALING

Unconscionable conduct

Unconscionable conduct, force, coercion, undue influence, pressure or harassment, unfair tactics or conduct is prohibited in connection with any marketing, supply, negotiation, collection or recovery of goods from consumers.

False, misleading or deceptive representations

A supplier or a person acting on his or her behalf is prohibited from making false, misleading or deceptive representations in respect of any goods and services under the circumstances listed in clause 41.

Consumer’s right to assume that the supplier is entitled to sell goods

The consumer has the right to assume, and it is an implied term of every transaction, that the supplier or lessor has legal right to sell or lease the goods for full title of the goods to pass to the consumer.

If a third party has a legal claim over the goods, the supplier is liable to that third party, unless it can be shown that the supplier and consumer colluded to defraud the third party.

This does not apply to used goods or immovable property.

Auctions

New provisions in clause 45 aim to ensure fairness in auctions by regulating the participation of owners or their agents as bidders, and requiring notice of any reserve bid or upset price.

Over-selling and over-booking

There is a prohibition against overselling and overbooking, which requires a supplier not to accept consideration for any goods or services unless they reasonably expect to have capacity to supply them or intend to provide goods or services that are materially different.

Consumers have to be refunded in full with interest and consumers can also claim contractual and consequential damages, including economic losses.

RIGHT TO FAIR, JUST AND REASONABLE TERMS AND CONDITIONS

Unfair, unreasonable or unjust contract terms

A supplier must not offer to supply, or enter into an agreement to supply or market, any goods or services at a price or terms that are unfair, unreasonable or unjust.

A supplier may not require a consumer to waive any rights, assume any obligation or waive any liability on terms that are unfair, unreasonable or unjust.

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Notice required for certain terms and conditions

Any notice to consumers or a provision in an agreement that purports to:

Limit the risk or liability of the supplier;

Constitute an assumption of risk or liability by the consumer;

Impose an obligation on the consumer to indemnify the supplier for any cause; or

Be an acknowledgement of any fact by the consumer;

must be written in plain language.

RIGHT TO FAIR VALUE, GOOD QUALITY AND SAFETY

Consumer’s rights to safe, good quality goods

The Act provides for a general right for consumers to receive goods that are of good quality and free from defects.

An exception is allowed where the consumer has been expressly informed of the condition of the goods and has expressly agreed to buy them in that particular state.

It provides that consumers have a right to receive goods that are reasonably suitable for the purpose for which they are intended, of good quality, in good working order, free of defects, and useable and durable for a reasonable period of time.

If the consumer had informed the supplier of the use he/she wants to put the goods to, the consumer has the right to expect that it will be suitable for that particular purpose.

Implied warranty of quality

There is an implied warranty of quality (six months on repair, replace or refund requirement, and a further three month replacement or refund requirement after repair), which is additional to any other implied or expressed warranty provided.

Warning concerning the fact and nature of risks

There is an obligation on the supplier to issue alerts of any activity or facility that is subject to any hazard that could result in serious injury or death to consumers; notice or instructions of safe handling of goods; notice on how to inhibit any risk associated with the use of goods, and to remedy or mitigate the effects, and provide for the safe disposal of the goods.

Safe disposal of goods

Suppliers are obligated to accept the return of waste goods that may not be accepted in the common waste collection system.

Safety monitoring and recall

Clause 60 creates a framework for industry codes to be developed, establishing schemes of product safety monitoring and, if needed, product recall.

The Commission would have authority to order an investigation and recall of any dangerous or defective products covered by any such industry code.

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Liability for damage caused by goods

The producer or importer, distributor or retailer of any goods is liable for any harm caused wholly or partly as a consequence of the following:

Supplying any unsafe goods, a product failure, defect or hazard in any goods; or

Inadequate instructions or warnings provided to a consumer pertaining to any hazard arising from or associated with the use of any goods - irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributer or retailer.

Even if a transaction is exempt from the Act, the strict liability provision applies to the goods themselves.

SUPPLIER’S ACCOUNTABILITY TO CONSUMERS

Lay-bys

In respect of lay-bys the Act provides that suppliers are accountable for amounts paid by consumers for lay-bys, and that the goods remain at the risk of the supplier.

The Act further requires the supplier to compensate the consumer if the supplier is unable to produce the goods once the full price has been paid by the consumer.

Prepaid certificates, credits and vouchers

The Act provides that prepaid certificates, credits and vouchers remain negotiable for up to five years, and that the supplier is obligated to honour them when presented.

The minimum period is three years.

During this time, until redeemed, it will be shown as prepaid income.

PROTECTION OF CONSUMER RIGHTS AND THE CONSUMER VOICE

RIGHT TO BE HEARD AND OBTAIN REDRESS

The Act aims to make redress accessible, and to protect consumers from being victimised if they act to enforce their rights.

Clause 69 outlines the available avenues of redress, including the courts, alternative dispute resolution, and complaint to the Commission.

If a complaint arises in an industry in which a statutory ombud scheme is in place, the consumer must pursue a resolution through that scheme before making a complaint to the Commission.

An ombud, consumer court or provincial authority that has resolved a complaint may record the agreement as an order, which must then be confirmed as a consent order by the courts.

If a complaint is made to the Commission, it will investigate, and may make a referral to the Tribunal, which may resolve the matter by making certain orders as contemplated in clause 75.

In addition to their jurisdiction to hear a matter initiated directly by a consumer, the courts have jurisdiction to hear appeals against Tribunal decisions, and may order suppliers to alter or discontinue certain practices, award damages against suppliers for collective injury to all or a class of consumers, to be paid to any person on any terms that the court might decide.

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ROLE OF CIVIL SOCIETY

The Act recognises the role of civil society in consumer protection by providing for the support of any juristic person or association of persons that meet the set criteria as consumer protection groups.

The Act allows class actions in the form of accredited consumer protection groups, which groups may act to protect the interests of a consumer individually or of consumers collectively.

BUSINESS NAMES AND INDUSTRY CODES OF CONDUCT

REGISTRATION OF BUSINESS NAMES

Section 79 of the Act prohibits any person from carrying on business except under the person’s full name as recorded in an identity document, or officially recognised, or in the case of a juristic person (for example, a company), a business name registered with the Registrar of Companies (CIPC).

This means that a trading name must be the registered name of the entity. Section 80 does, however, allow a person to register any number of business names that are used or will be used in carrying on business.

The present custom whereby a company or CC carries on business as “XYZ Bank, trading as XYZ Loans” is no longer allowed.

A business name may not be the same as, or confusingly similar to an entity already registered under the Companies Act, the Close Corporations Act or the Co-operatives Act.

The name may also not be the same as or similar to a registered trade mark belonging to another person.

If an entity conducts business under a trading name that is not its registered name, the National Consumer Commission may require it to cease trading under that name.

The provisions relating to the registration of business names through the CIPC have not yet taken effect as the effective date for implementation thereof is still to be published by the Minister of Trade and Industry in the Government Gazette. This notice by the Minister must furthermore be given 6 (six) months prior to the implementation date.

As soon as the date has been published, it will be communicated to the general public by CIPC in print media and on the CIPC website, at www.cipc.co.za.

Until the provisions come into force, there is no prohibition on the creation and use of business names.

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http://www.cipc.co.za/


PROTECTION OF PERSONAL INFORMATION BILL PURPOSE OF THE ACT

POPI is to promote the protection of personal information:

Processed by public and private bodies;

To introduce information protection principles so as to establish minimum requirements for the processing of personal information;

Establish an Information Protection Regulator;

To provide for the issuing of codes of conduct;

To provide for the rights of persons regarding unsolicited electronic communications and automated decision making;

To regulate the flow of personal information across the borders of the Republic; and

To provide for matters connected therewith.


The Bill applies to any public or private body or any other person who (alone or in conjunction with others) determines the purpose of, and means for, processing Personal Information (called a "Responsible Party").

The Bill regulates the processing of "Personal Information", being information relating to an identifiable, living, individual, and where applicable, an identifiable, existing juristic person such as a company or close corporation (the "Data Subject").

WHAT INFORMATION IS PROTECTED?

Personal Information includes, but is not limited to:

Information relating to the race, gender, sex, pregnancy, marital status, national, ethnic or social origin, colour, sexual orientation, age, physical or mental health, well-being, disability, religion, conscience, belief, culture, language and birth of the person;

Information relating to the education or the medical, financial, criminal or employment history of the person;

Any identifying number, symbol, e-mail address, physical address, telephone number or other particular assignment to the person;

The blood type or any other biometric information of the person;

The personal opinions, views or preferences of the person;

Correspondence sent by the person that is implicitly or explicitly of a private or confidential nature, or further correspondence that would reveal the contents of the original correspondence;

The views or opinions of another individual about the person; and

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The name of the person if it appears with other personal information relating to the person, or if the disclosure of the name itself would reveal information about the person.

EXCLUSIONS

The Act does not apply to the processing of the following personal information:

Purely personal or household activity;

De-identified information that cannot be re-identified again;

Processing by or on behalf of the State:

○ National security, defence or public safety;

○ Criminal offences, prosecution, execution of criminal sentences and security measures.

Processing for exclusively journalistic purposes;

By the Cabinet and its committees;

Judicial functions of a court;

Exempted in terms of sec 34.

CONDITIONS FOR LAWFUL PROCESSING OF PERSONAL INFORMATION

The Bill regulates the "Processing" of Personal Information. This is very widely defined and covers any activity or operation involving personal information, whether automated or not. It includes the collection, recording, organisation, storage, updating or modification, retrieval, consultation, use, dissemination by means of transmission, distribution or making available in any other form, merging, linking, as well as blocking, erasure or destruction of information.

The Processing of Personal Information must comply with certain requirements which are framed as the eight "Information Protection Principles" ("Principles") in the Bill.

The Information Protection Principles are as follows:

Accountability

The responsible party must ensure that all principles are complied with.

Processing limitation

Lawfulness of processing:

○ Lawfully and in a reasonable manner.

Minimality of information:

○ For a specific purpose, adequate, relevant and not excessive.

Consent and other grounds of justification:

○ Objection allowed in specific instances;

○ If data subject has objected, the responsible party may no longer process the personal information.

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Collection directly from data subject:

○ Exceptions allowed: public record; necessary for the enforcement of laws or national security, not reasonably practicable etc.

Purpose specification

Specifying a purpose specific, explicitly defined, lawful, related to a function or activity of the responsible party.

Informing data subject of purpose.

Retaining data for no longer than needed.

Further processing limitation

Compatible with original purpose.

Exceptions e.g. statistical, historical or research purposes.

Quality of information

Reasonably practicable steps, given purpose, to ensure complete, up to date, accurate and not misleading.

Openness

Notification to the Regulator and the data subject of planned processing.

Security safeguards

Companies will have to implement appropriate, reasonable technical and organisational measures to prevent the loss or unauthorised use of personal information. Companies will have to identify all internal and external risks to personal information and establish and maintain appropriate security safeguards. In addition to a well drafted privacy and data protection policy, companies will have to invest in technologies like encryption and access control.

Processing by an operator:

○ Only with knowledge of the responsible party;

○ Duty of confidentiality.

Notification of security compromises:

○ Notification to the Regulator and the data subject when personal information has been accessed or acquired by any unauthorised person.

Data subject participation

Right to access:

○ The data subject has the right to request, free of charge, whether or not the responsible party holds personal information and to whom such data was disclosed;

○ Request a description of the personal information.

Correction of personal information:

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○ The data subject has the right to request the responsible party to correct or delete personal information that is inaccurate, irrelevant, excessive, out of date, incomplete, misleading or obtained unlawfully.

Manner of access is in terms of the Promotion to Access of Information Act.

PROCESSING OF SPECIAL PERSONAL INFORMATION

Subject to certain exclusions, the processing of Special Personal Information is generally prohibited by the Bill.

Special Personal Information is information concerning:

A child who is subject to parental control in terms of the law; or

A data subject's religious or philosophical beliefs, race or ethnic origin, trade union membership, political opinions, health, sexual life, or criminal behaviour.

INFORMATION PROTECTION REGULATOR

The Information Protection Regulator will have wide-ranging investigative and enforcement powers.

Establishment of Information Protection Regulator:

Independent juristic person;

Receive notification of processing:

○ Failure to notify is an offence.

Keep a register of processing activities;

Powers and duties:

○ Education and research;

○ Monitor and enforce compliance:

― Audits;

― Prior investigations;

― Information notices;

― Enforcement notices;

― Issue codes of conduct.

INFORMATION PROTECTION OFFICER

Duties and Responsibilities of the Information Protection Officer include:

To encourage compliance, by the body, with the information protection principles;

Deal with requests made to the body pursuant to this Act by the data subjects;

Work with the Regulator in relation to investigations conducted; and

Ensuring compliance by the body with the provisions of this Act.

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Every organisation must have an Information Protection Officer. Officers may only take up their duties in terms of the POPI Act after the responsible party (Information Protection Officer) has been registered with the Regulator.

NOTIFICATION OF PROCESSING

Personal Information that is processed in a fully or partly automated manner may only be processed if the Responsible Party has notified the Regulator in the prescribed manner, in advance. Failure to notify is an offence.

RIGHTS OF DATA SUBJECTS REGARDING UNSOLICITED ELECTRONIC COMMUNICATIONS AND AUTOMATED DECISION MAKING

The processing of Personal Information for the purpose of direct marketing by means of automatic calling machines, facsimile machines, SMS’s or electronic mail is prohibited unless the Data Subject has given consent to the processing, or the Data Subject is a customer of the responsible party (subject to conditions).

Any communication for the purpose of direct marketing (such as spam mail) must contain details of the identity of the sender or the person on whose behalf the communication has been sent, and an address or other contact details to which the recipient may send a request that such communications cease.

Marketing communications may be sent to customers only if their details were obtained in the context of the sale of goods or services. Only the goods or services of the same company may be advertised in this manner – in other words, marketers may not forward personal details to associated companies or sell such databases.

Any marketing communication must clearly indicate the identity of the sender and give an “unsubscribe” address.

Prior to the publication or use of directories, all those included in the directory should be informed of their inclusion and the intended purpose and use of the directory. Individuals must also be given a reasonable opportunity to object to their inclusion in the directory and request the withdrawal of their information.

ENFORCEMENT

POPI contains a complaints procedure whereby any person may lodge a complaint with the regulator against any company or organisation relating to unsolicited communications, directories and automated decision-making. The regulator will have extensive powers of investigation including:

The right to apply to a court for a warrant to enter and search premises;

The right to bring a claim for damages;

The right to issue enforcement notices.

OFFENCES AND PENALTIES

Contravention of any of the Principles is not, in itself a criminal offence. However the Regulator has the power to issue enforcement notices for certain breaches of the Bill and failure to comply with an enforcement notice is a criminal offence.

On conviction of an offence under the Bill, a person is liable to a fine and/or up to 12 months imprisonment, except if the offence relates to obstructing the Regulator, in which case the person is liable to a fine and/or up to 10 years imprisonment.

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IMPLEMENTATION TIMELINE

Companies must, within one year from the date that the Bill comes into force, ensure that their Processing of Personal Information complies with the legislation and is notified to the Regulator. This one year grace period may be extended by the Minister to a maximum of three years.

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THE COMPANIES ACT, 71 OF 2008 CATEGORIES OF COMPANIES (SECTION 8)

Two types of companies may be formed and incorporated, namely profit companies and non-profit companies.

A profit company is:

A state-owned company;

A private company if:

○ It is not a state-owned company; and

○ Its Memorandum of Incorporation (MOI) prohibits it from offering any of its securities to the public and restricts the transferability of its securities.

A personal liability company if:

○ It meets the criteria for a private company; and

○ Its MOI states that it is a personal liability company.

A public company, in any other case;

CRITERIA FOR NAMES OF COMPANIES (SECTION 11)

A company name may comprise of one or more words in any language, irrespective of whether the word or words are commonly used or contrived for the purpose, together with:

Any letters, numbers or punctuation marks;

Any of the following symbols: +, &, #,@ , %, =;

Any other symbol permitted by the regulations; or

Round brackets used in pairs to isolate any other part of the name, alone or in any combination.

In the case of a profit company the name may be the registration number of the company.

If the name of a profit company is the company’s registration number, that number must be immediately followed by the expression ‘‘(South Africa)’’.

If the MOI includes any important provisions restricting or prohibiting the amendment of any particular provision of the MOI, the name must be immediately followed by the expression ‘‘(RF)’’.

A company name, irrespective of its form or language, must end with one of the following expressions:

The word ‘‘Incorporated’’ or its abbreviation ‘‘Inc.’’, in the case of a personal liability company;

The expression ‘‘Proprietary Limited’’ or its abbreviation ‘‘(Pty) Ltd.’’, in the case of a private company;

The word ‘‘Limited’’ or its abbreviation, ‘‘Ltd.’’, in the case of a public company;

The expression ‘‘SOC Ltd.’’ in the case of a state-owned company;

The expression ‘‘NPC’’, in the case of a non-profit company.

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Interpretation of Section 11(3)(b) read with Section 15(2)(b) and (c) of the Companies Act, 2008, in relation to the use of the “(RF)” in the name of a companyRF is the abbreviation for “Ring Fenced” and section 11(3)(b) requires every company to use “(RF)” as part of its name “if the company’s Memorandum of Incorporation includes any provision contemplated in sections 15(2)(b) or (c) restricting or prohibiting the amendment of any particular provision of the Memorandum”.

Section 15(2)(b) refers to provisions that contain any restrictive conditions applicable to the company and any requirement for the amendment of any such restrictive condition in addition to the requirements set out in section 16; and

Section 15(2)(c) refers to provisions that “prohibit the amendment of any particular provision” of the Memorandum of Incorporation of the company.

Under the old companies Act a company had the powers and capacity determined by its main object as stated in the specific company’s Memorandum of Association. The powers and capacity of companies were thus restricted. The doctrine of “constructive notice” applied to all outsiders and in terms thereof anyone dealing with the company was presumed to be aware of the contents of the company documents as filed because they are open to inspection by the public. In terms of this doctrine the public was, therefore, presumed to have knowledge of any limitations on the powers and capacity of the company.

Under the Companies Act, 2008, a company has, in terms of section 19(1)(b), the powers and capacity of a natural person or individual of full capacity except to the extent that a juristic person is incapable of exercising any such power or having such capacity (a juristic person, for instance, cannot get engaged or get a driver’s license.) Furthermore, section 19(4) specifically excludes the operation of the doctrine of constructive notice under the Act. Under the Companies Act, 2008, therefore, a person who interacts with a company can accept that the company has the necessary power and capacity to participate in that activity and to bind the company. However, should there be any limitation the outsider would in terms of section 19(5)(a) only be bound by it if the company’s name includes the element “RF” and the company’s Notice of Incorporation or subsequent Notice of Amendment has drawn attention to the relevant provision.

The doctrine of constructive notice would, therefore, under the Companies Act, 2008, only apply in very limited circumstances.

In principle, if a limitation could have any effect on third parties, it would be advisable to use “(RF)” in the name. If on the other hand, it is of no consequence to third parties there would also be no need to warn them.

The expression “(RF)” should be used only in cases where it is evident that:

The purpose or objectives of the company are restricted or limited in the MOI of the company;

The powers of the company are restricted or limited in its MOI;

Any other pertinent restricting condition is contained in the MOI of the company;

Any requirement in addition to those set out in section 16, for the amendment of any of the abovementioned restrictions or limitations is contained in the MOI; or

The MOI of a company contains a prohibition on the amendment of any particular provision of the MOI.

If the Memorandum of Incorporation contains a provision:

Setting higher standards or more onerous requirements under section 15(2)(a)(iii) than would otherwise apply to the company in terms of an unalterable provision of the Act; or

Requiring a special resolution to approve any matter not listed in section 65(11);

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Such a provision in itself is not a restriction contemplated in section 11(3)(b) as it does not limit the powers or capacity of the company but rather prescribes a different procedure to perform the activity concerned.

The requirements of section 11(3)(b) to use “(RF)” in the name equally applies to NPC’s. This is, however, a specific type of company and the Act in Schedule 1 requires that it must set out its objectives in its MOI and that it must apply all of its assets and income to advance its stated objects only. This is itself constitutes a limitation or restriction of its powers and capacity but as all NPC’s are subject to the same restriction it is submitted that special attention to this restriction through the use of “(RF)” in the names of NPC’s is not required. The use of the expression NPC in its name already alerts third parties that they are dealing with a special kind of company.

FINANCIAL STATEMENTS (SECTION 29)

If a company provides any financial statements, including any annual financial statements, to any person for any reason, those statements must:

Satisfy the financial reporting standards;

Present fairly the state of affairs and business of the company, and explain the transactions and financial position of the business of the company;

Show the company’s assets, liabilities and equity, as well as its income and expenses, and any other prescribed information;

Set out the date on which the statements were published, and the accounting period to which the statements apply; and

Bear, on the first page of the statements whether the statements:

○ Have been audited;

○ If not audited, have been independently reviewed; or

○ Have not been audited or independently reviewed.

The name and professional designation of the individual who prepared, or supervised the preparation of the statements.

Any financial statements and annual financial statements must not be:

False or misleading in any material respect; or

Incomplete in any material particular.

A person is guilty of an offence if the person is a party to the preparation, approval, dissemination or publication of any financial statements, including any annual financial statements, knowing that those statements:

Do not comply with the above requirements; or

Are materially false or misleading.

ANNUAL FINANCIAL STATEMENTS (SECTION 30)

Each year, a company must prepare annual financial statements within six months after the end of its financial year, or such shorter period as may be appropriate to provide the required notice of an annual general meeting.

The annual financial statements must:

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Be audited, in the case of a public company; or

In the case of any other profit or non-profit company:

○ Be audited, if so required by the regulations;

○ Audited voluntarily if the company’s MOI, or a shareholders resolution so requires, or if the company’s board has so determined; or

○ Independently reviewed.

If every person who is a holder of, or has a beneficial interest in, any securities issued by that company is also a director of the company, that company is exempt from the requirements to have its annual financial statements audited or independently reviewed, but this exemption:

Does not apply to the company if it falls into a class of company that is required to have its annual financial statement audited in terms of the regulations; and

Does not relieve the company of any requirement to have its financial statements audited or reviewed in terms of another law, or in terms of any agreement to which the company is a party.

The annual financial statements of a company must:

Include an auditor’s report, if the statements are audited;

Include a report by the directors with respect to the state of affairs, the business and profit or loss of the company, or of the group of companies, if the company is part of a group;

Be approved by the board and signed by an authorised director; and

Be presented to the first shareholders meeting after the statements have been approved by the board.

The annual financial statements of each company that is required to have its annual financial statements audited must include particulars showing:

The remuneration and benefits received by each director, or individual holding any prescribed office in the company;

The amount of:

○ Any pensions paid by the company, to or receivable by, current or past directors or individuals who hold or have held any prescribed office in the company;

○ Any amount paid or payable by the company, to a pension scheme with respect to current or past directors or individuals who hold or have held any prescribed office in the company;

○ The amount of any compensation paid in respect of loss of office to current or past directors or individuals who hold or have held any prescribed office in the company;

○ The number and class of any securities issued to a director or person holding any prescribed office in the company, or to any person related to any of them, and the consideration received by the company for those securities; and

○ Details of service contracts of current directors and individuals who hold any prescribed office in the company.

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The information to be disclosed must satisfy the prescribed standards, and must show the amount of any remuneration or benefits paid to or receivable by persons in respect of:

Services rendered as directors or prescribed officers of the company; or

Services rendered while being directors or prescribed officers of the company:

○ As directors or prescribed officers of any other company within the same group of companies; or

○ Otherwise in connection with the carrying on of the affairs of the company, or any other company within the same group of companies.

Remuneration includes:

Fees paid to directors for services rendered by them to or on behalf of the company, including any amount paid to a person in respect of the person’s accepting the office of director;

Salary, bonuses and performance-related payments;

Expense allowances, to the extent that the director is not required to account for the allowance;

Contributions paid under any pension scheme;

The value of any option or right given directly or indirectly to a director, past director or future director, or person related to any of them;

Financial assistance to a director, past director or future director, or person related to any of them, for the subscription of options or securities, or the purchase of securities; and

With respect to any loan or other financial assistance by the company to a director, past director or future director, or a person related to any of them, or any loan made by a third party to any such person, if the company is a guarantor of that loan, the value of:

○ Any interest deferred, waived or forgiven; or

○ The difference in value between:

― The interest that would reasonably be charged in comparable circumstances at fair market rates in an arm’s length transaction; and

― The interest actually charged to the borrower, if less.

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Regulation 26: Interpretation of regulations affecting transparency and accountability

Independent accounting professional

“Independent accounting professional”, means a person who is:

A registered auditor in terms of the Auditing Profession Act; or

A member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Profession Act; or

Qualified to be appointed as an accounting officer of a close corporation in terms of section 60 (1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984); and

Does not have a personal financial interest in the company or a related or inter-related


Public interest score

Every company must calculate its “public interest score” at the end of each financial year, calculated as the sum of the following:

A number of points equal to the average number of employees of the company during the financial year;

One point for every R1 million (or portion thereof) in third party liability of the company, at the financial year end;

One point for every R1 million (or portion thereof) in turnover during the financial year; and

One point for every individual who, at the end of the financial year, is known by the company:

o In the case of a profit company, to directly or indirectly have a beneficial interest in any of the company’s issued securities; or

o In the case of a non-profit company, to be a member of the company, or a member of an association that is a member of the company.

Regulation 27: Financial Reporting Standards

A company’s financial statements may be compiled internally or independently.

A company’s financial statements must be regarded as having been compiled internally, unless they have been ‘independently compiled and reported.

Nothing precludes a company:

That is required to prepare its financial statements to the standards of IFRS for SME’s, from preparing its financial statements to the standards of IFRS instead; or

That is not subject to any prescribed standards, from preparing its financial statements to the standards of either IFRS or IFRS for SME’s or SA GAAP.

Any financial statements must comply with the applicable standards for that category of company as

follows:

State owned and profit companies

Category of Companies Financial Reporting Standard

State owned companies. IFRS, but in the case of any conflict with any requirement in terms of the Public Finance Management Act, the latter prevails.


Public companies listed on an exchange. IFRS

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Regulation 26: Interpretation of regulations affecting transparency and accountability

Independent accounting professional

“Independent accounting professional”, means a person who is:

A registered auditor in terms of the Auditing Profession Act; or

A member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Profession Act; or

Qualified to be appointed as an accounting officer of a close corporation in terms of section 60 (1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984); and

Does not have a personal financial interest in the company or a related or inter-related



Public companies not listed on an exchange.

One of –

(a) IFRS; or

(b) IFRS for SME’s, provided that the company meets the scoping requirements outlined in the IFRS for SME’s.

Profit companies, other than state- owned or public companies, whose public interest score for the particular financial year is at least 350.

One of –

(a) IFRS; or


Profit companies, other than state – owned or public companies –

(a) Whose public interest score for the particular financial year is at least 100 but less than 350; or

(b) Whose public interest score for the particular financial year is less than 100, and whose statements are independently compiled.

One of –

(a) IFRS; or

(b) IFRS for SME’s, provided that the company meets the scoping requirements outlined in the IFRS for SME’s; or

(c) SA GAAP.

Profit companies, other than state - owned or public companies, whose public interest score for the particular financial year is less than 100, and whose statements are internally compiled.

The Financial Reporting Standard as determined by the company for as long as no Financial Reporting Standard is prescribed.

Non - profit companies


Non-profit companies that are required in terms of regulation 28 (2) (b) to have their annual financial statements audited.

IFRS, but in the case of any conflict with any requirements in terms of the Public Finance Management Act, the latter prevails.


One of –

(a) IFRS; or

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Non-profit companies, other than those contemplated in the first row above, whose public interest score for the particular financial year is at least 350.


Non-profit companies, other than those contemplated in the first row above –

(a) Whose public interest score for the particular financial year is at least 100, but less than 350; or

(b) Whose public interest score for the particular financial year is less than 100, and whose financial statements are independently compiled.

One of –

(a) IFRS; or

(b) IFRS for SME’s, provided that the company meets the scoping requirements outlined in the IFRS for SME’s; or

(c) SA GAAP.

Non-profit companies, other than those contemplated in the first row above, whose public interest score for the particular financial year is less than 100, and whose financial statements are internally compiled.

The Financial Reporting Standard as determined by the company for as long as no Financial Reporting Standard is prescribed.

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Regulation 28: Categories of companies required to be audited

In addition to public companies and state owned companies, any company that falls within any of the following categories in any particular financial year must have its annual financial statements for that financial year audited:

Any profit or non-profit company if, in the ordinary course of its primary activities, it holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R 5 million;

Any non-profit company, if it was incorporated:

o Directly or indirectly by the state, an organ of state, a state-owned company, an international entity, a foreign state entity or a foreign company; or

o Primarily to perform a statutory or regulatory function in terms of any legislation, or to carry out a public function at the direct or indirect initiation or direction of an organ of the state, a state-owned company, an international entity, or a foreign state entity, or for a purpose ancillary to any such function; or


Regulation 29: Independent review of financial statements

Independent reviewer

“Independent reviewer”, means a person who has been appointed to perform an independent review under this regulation.

This regulation applies to a company, with respect to any particular financial year, unless the company:

Is exempt from any requirement to have its annual financial statements for that year audited or reviewed;

Is required by its own Memorandum of Incorporation, or required in terms of the Act or regulation 28, to have its annual financial statements for that financial year audited; or

Has voluntarily had its annual financial statements for that year audited.

A company to which this regulation applies must have its annual financial statements independently reviewed in accordance with ISRE 2400.

An independent review of a company’s annual financial statements must be carried out:

In the case of a company whose public interest score for the particular financial year was at least 100, by a registered auditor, or a member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Professions Act; or

In the case of a company whose public interest score for the particular financial year was less than 100, by:

o A registered auditor, or a member in good standing of a professional body that has been accredited in terms of section 33 of the Auditing Professions Act; or

o A person who is qualified to be appointed as an accounting officer of a close corporation in terms of section 60 (1), (2) and (4) of the Close Corporations Act, 1984 (Act No. 69 of 1984).

An independent review of a company’s annual financial statements must not be carried out by an independent accounting professional who was involved in the preparation of the said annual financial statements.

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Regulation 28: Categories of companies required to be audited

Any other company whose public interest score in that financial year, as calculated:

o Is 350 or more; or

o Is at least 100, if its annual financial statements for that year were internally compiled.


Reportable irregularity

“Reportable irregularity” means any act or omission committed by any person responsible for the management of a company, which:

Unlawfully has caused or is likely to cause material financial loss to the company or to any member, shareholder, creditor or investor of the company in respect of his, her or its dealings with that entity; or

Is fraudulent or amounts to theft; or

Causes or has caused the company to trade under insolvent circumstances.

An independent reviewer of a company that is satisfied or has reason to believe that a reportable irregularity has taken place or is taking place in respect of that company must, without delay, send a written report to the Commission.

The report must give particulars of the reportable irregularity and must include such other information and particulars as the independent reviewer considers appropriate.

The independent reviewer must within three business days of sending the report to the Commission notify the members of the board of the company in writing of the sending of the report.

A copy of the report to the Commission must accompany the notice.

The independent reviewer must as soon as reasonably possible but not later than 20 business days from the date on which the report was sent to the Commission:

Take all reasonable measures to discuss the report with the members of the board of the company;

Afford the members of the board of the company an opportunity to make representations in respect of the report; and

Send another report to the Commission, which report must include a statement that the independent reviewer is of the opinion that:

o No reportable irregularity has taken place or is taking place; or

o The suspected reportable irregularity is no longer taking place and that adequate steps have been taken for the prevention or recovery of any loss as a result thereof, if relevant; or

o The reportable irregularity is continuing; and

o Detailed particulars and information supporting the statement.

The Commission must as soon as possible after receipt of a report notify any appropriate regulator in writing of the details of the reportable irregularity to which the report relates and provide it with a copy of the report and may investigate any alleged contravention of the Act.

For the purpose of the reports an independent reviewer may carry out such investigations as the independent reviewer may consider necessary and, in performing any duty referred to in the preceding provisions of this regulation the independent reviewer must have regard to all the information which

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comes to the knowledge of the independent reviewer from any source.

Where a company is liquidated, whether provisionally or finally, and an independent reviewer at the time of the liquidation:

Has sent or is about to send a report, the report must also be submitted to a provisional liquidator or liquidator, as the case may be, at the same time as the report is sent to the Commission or as soon as reasonably possible after his or her appointment; or

Has not sent a report and is requested by a provisional liquidator to send a report, the independent reviewer must as soon as reasonably possible:

o Send the report together with a motivation as to why a report was not sent; or

o Submit a notice that in the independent reviewer’s opinion no report needed to be submitted, together with a justification of the opinion.

Important notice about SA GAAP

The Accounting Practices Board (“APB”) was formed in 1973 to consider what should be generally accepted accounting practice and issue SA GAAP. In 2003, the APB decided to harmonise SA GAAP with International Financial Reporting Standards (“IFRS”). Since then, after due process, the APB has issued the IFRS standards as SA GAAP without amendment. The Companies Regulations, 2011 (“the Regulations”), prescribe the reporting frameworks based on each individual company’s public interest score. The Regulations permit the use of either IFRS, IFRS for SMEs or SA GAAP in specific instances. However, in order to reduce the burden of issuing each IFRS standard as SA GAAP, it has been decided to withdraw SA GAAP. Accordingly, SA GAAP will no longer apply in respect of financial years commencing on or after 1 December 2012.

ACCESS TO FINANCIAL STATEMENTS / RELATED INFORMATION (SECTION 31)

A person who holds or has a beneficial interest in any securities issued by a company, is entitled:

Without demand to receive a notice of the publication of any annual financial statements of the company required by this Act, setting out the steps required to obtain a copy of those statements; and

On demand to receive without charge one copy of any annual financial statements of the company required by this Act.

If a judgment creditor of a company has been informed, by a person whose duty it is to execute the judgment, that there appears to be insufficient disposable property to satisfy that judgment, the judgement creditor is entitled within five business days after making a demand, to receive without charge, one copy of the most recent annual financial statements of the company.

Trade unions must, through the Commission and under conditions as determined by the Commission, be given access to company financial statements for purposes of initiating a business rescue process.

It is an offence for a company to:

Fail to accommodate any reasonable request for access, or to unreasonably refuse access, to any record that a person has a right to inspect or copy in terms of this section; or

Otherwise impede, interfere with, or attempt to frustrate the reasonable exercise by any person of the rights set out in this section.

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Regulation 25

A company must notify the Commission of a change in its financial year end by filing Form CoR25.

ANNUAL RETURN (SECTION 33)

Every company must file an annual return in the prescribed form with the prescribed fee, and within the prescribed period after the end of the anniversary of the date of its incorporation, including a copy of its annual financial statements.

Each year, in its annual return, every company must designate a director, employee or other person responsible for the company’s compliance with this requirement.

Regulation 30: Company annual returns

Annual Return fees

Annual Turnover Filing within 30 business days after anniversary

Filing more than 30 business days after anniversary

Less than R1 million R100 R150

R1 million but less than R10 million

R450 R600

R10 million but less than R25 million

R2 000 R2 500

R25 million or more R3 000 R4 000

Waiver of Penalty Fees

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Regulation 30: Company annual returns

Every company must file an annual return in the prescribed form (CoR30.1) together with the prescribed fee set out in Table CR2 B of the Regulations, unless exempt from such payment, within 30 business days after:

The anniversary of its date of incorporation, in the case of a company incorporated in the Republic; or

The date that its registration was transferred to the Republic, in the case of a domesticated company.

A company that is required by the Act or Regulations to have its annual financial statements audited must file a copy of the latest approved audited financial statements on the date that it files its annual return. Alternatively, a company that is not required in terms of the Act or Regulations to be audited may elect to file a copy of its audited or reviewed statements together with the return.

A company which does not file annual financial statements as described above must file a financial accountability supplement to its annual return.

The Commission must establish a system to select and review a sample of financial accountability supplements, audited annual financial statements or independently reviewed annual financial statements that have been filed, with the objective of monitoring compliance with the financial record keeping and financial reporting provisions of the Act. The Commission may issue a compliance notice to any such company setting out changes that are required to the company’s practices to better comply with the specific provisions of the Act.

Any company that has been inactive during the financial year preceding the date on which its annual return becomes due, may apply to the Commission for an exemption from payment of the fee, provided that the application is supported by the financial statements indicating that the company had in fact no turnover during that financial year.


To accommodate customers and business that are submitting annual returns after the due dates as stipulated in the Close Corporations Act, 1984, as well as the Companies Act, 2008, CIPC is hereby waiving the late filing fees and penalties in respect of annual returns on both close corporations and companies that became due 1 April 2011 or thereafter, up until 30 September 2013.

The consequences of non-compliance

If you do not file an annual return and pay annual duty for 2 successive years, CIPC will send you a notice of an intention to deregister your business. If you do not respond, your business will be deregistered – this means it will cease being a legal entity and will be unable to trade. Directors or members can be held personally liable for debts of the business.

Filing of Audited Financial Statements

The waiver for the filing of financial statements for companies, other than State Owned and Public companies, have lapsed on 31 March 2013.

Therefore, all companies and close corporations that are required by the Companies Act, 2008 (the Act) or Companies Regulation 28 to have its annual financial statements audited must file a copy of the latest approved audited financial statements when it files its annual return in terms of Companies Regulation 30(2). Such copy of the audited financial statements must be filed on the same date that the annual return is filed by sending such to the following e-mail address: [email protected].

It should be noted that the duty of close corporations to file a copy of its annual financial statements arise out of the amendment of section 58 of the Close Corporations Act by Schedule 3 Part A section 5.

ACCESS TO COMPANY RECORDS (SECTION 26)

A person who holds, or has a beneficial interest, in any securities issued by a profit company or who is a member of a non-profit company, has a right to inspect and copy, without any charge for any such inspection, or upon payment of no more than the prescribed maximum charge for any such copy, the information contained in the following records of the company:

The company's Memorandum of Incorporation and any amendments to it, and any rules made by the company;

The records in respect of the company's directors;

The reports to annual meetings, and annual financial statements;

The notices and minutes of annual meetings, and communications to shareholders meetings;

The securities register of a profit company, or the members register of a non-profit company that has members.

Any other person has a right to inspect the securities register of a profit company, or the members register of a non-profit company that has members, or the register of directors of a company, upon payment of an amount not exceeding the prescribed maximum fee for any such inspection.

The MOI may establish additional information rights of any person, with respect to any information pertaining to the company, but no such right may negate or diminish any mandatory protection of any record required by or in terms of Part 3 of the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000).

A person may exercise the rights above:

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mailto:[email protected]


For a reasonable period during business hours;

By direct request made to a company in the prescribed manner, either in person or through an attorney or other personal representative designated in writing; or

In accordance with the Promotion of Access to Information Act, 2000 (Act No.2 of 2000).

Where a company receives a request it must within 14 business days comply with the request by providing the opportunity to inspect or copy the register concerned to the person making such request.

Regulation 24

A person claiming a right of access to any record held by a company must make a written request, by delivering to the company:

A completed Request for Access to Information in Form CoR24; or

To the extent applicable any further documents or other material required in terms of the Promotion of Access to Information Act, 2000.

APPOINTMENT OF AUDITOR (SECTION 90)

Upon its incorporation, and each year at its annual general meeting, a public company or state-owned company must appoint an auditor.

To be appointed as an auditor a person or firm:

Must be a registered auditor;

Must not be a director or prescribed officer of the company;

An employee or consultant of the company who was or has been engaged for more than one year in the maintenance of any of the company’s financial records or the preparation of any of its financial statements;

A director, officer or employee of a person appointed as company secretary;

A person who, alone or with a partner or employees, habitually or regularly performs the duties of accountant or bookkeeper, or performs related secretarial work, for the company;

A person who, at any time during the five financial years immediately preceding the date of appointment, was a person mentioned above, or a person related to a person mentioned above;

Must be acceptable to the company’s audit committee as being independent of the company.

If a company that is required to appoint an auditor does not do so when it registers the incorporation of the company, the directors of the company must appoint the first auditor of the company within 40 business days after the date of incorporation of the company.

The first auditor of a company holds office until the conclusion of the first annual general meeting of the company.

RESIGNATION OF AUDITORS & VACANCIES (SECTION 91)

The resignation of an auditor is effective when the notice is filed.

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If a vacancy arises in the office of auditor of a company, the board of that company:

Must appoint a new auditor within 40 business days, if there was only one incumbent auditor of the company; and

May appoint a new auditor at any time, if there was more than one incumbent, but while any such vacancy continues, the surviving or continuing auditor may act as auditor of the company.

Before making an appointment:

The board must propose to the company’s audit committee, within 15 business days after the vacancy occurs, the name of at least one registered auditor to be considered for appointment as the new auditor; and

May proceed to make an appointment of a person if, within five business days after delivering the proposal, the audit committee does not give notice in writing to the board rejecting the proposed auditor.

ROTATION OF AUDITORS (SECTION 92)

The same individual may not serve as the auditor or designated auditor of a company for more than five consecutive financial years.

If an individual has served as the auditor, or designated auditor, of a company for two or more consecutive financial years, and then ceases to be the auditor or designated auditor, the individual may not be appointed again as the auditor or designated auditor of that company until after the expiry of at least two further financial years.

RIGHTS AND RESTRICTED FUNCTIONS OF AUDITORS (SECTION 93)

The auditor of a company:

Has the right of access at all times to the accounting records and all books and documents, and is entitled to require from the directors or prescribed officers any information and explanations necessary for the performance of the auditor’s duties;

The auditor of a holding company, has the right of access to all current and former financial statements of any subsidiary of that holding company and is entitled to require from the directors or officers of the holding company or subsidiary any information and explanations in connection with any such statements and in connection with the accounting records, books and documents of the subsidiary as necessary for the performance of the auditor’s duties;

Is entitled to:

○ Attend any general shareholders meeting;

○ Receive all notices of, and other communications relating to any general shareholders meeting; and

○ Be heard at any general shareholders meeting on any part of the business of the meeting that concerns the auditor’s duties or functions.

An auditor may not perform any services that would place the auditor in a conflict of interest.

DIRECTOR'S PERSONAL FINANCIAL INTERESTS (SECTION 75)

In this section, ‘‘director’’ includes:

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An alternate director;

A prescribed officer; and

A person who is a member of a committee of a board, or of the audit committee, irrespective of whether or not the person is also a member of the board.

This section does not apply:

To a director in respect of a decision that may generally affect:

○ all of the directors in their capacity as directors; or

○ a class of persons, despite the fact that the director is one member of that class of persons, unless the only members of the class are the director or persons related or inter-related to the director; or

In respect of a proposal to remove that director from office; or

To a company or its director, if one person:

○ holds all of the beneficial interests of all of the issued securities; and

○ is the only director.

If a person is the only director, but does not hold all of the beneficial interests of all of the issued securities, that person may not:

Approve or enter into any agreement in which the person, or a related person, has a personal financial interest; or

As a director, determine any other matter in which the person, or a related person, has a personal financial interest,

unless the agreement or determination is approved by an ordinary resolution of the shareholders after the director has disclosed the nature and extent of that interest to the shareholders.

A director may disclose any personal financial interest in advance, by delivering to the board, or shareholders in, a notice in writing setting out the nature and extent of that interest.

If a director has a personal financial interest in respect of a matter to be considered at a meeting of the board, or knows that a related person has a personal financial interest in the matter, the director must disclose:

The interest and its general nature before the matter is considered at the meeting;

To the meeting any material information relating to the matter, and known to the director.

The director must, if present at the meeting, leave the meeting immediately after making any disclosure and must not take part in the consideration of the matter.

The director is also not allowed to execute any document on behalf of the company in relation to the matter unless specifically requested or directed to do so by the board.

If a director acquires a personal financial interest in an agreement in which the company has a material interest, or knows that a related person has acquired a personal financial interest in the matter, after the agreement or other matter has been approved by the company, the director must promptly disclose to the board, or to the shareholders, the nature and extent of that interest, and the material circumstances relating to the director, or related person’s acquisition of that interest.

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A decision by the board, or a transaction or agreement approved by the board is valid despite any personal financial interest of a director or person related to the director, if it was approved or has been ratified by an ordinary resolution of the shareholders.

DIRECTORS CONDUCT (SECTION 76)

A director of a company must:

Not use the position of director, or any information obtained while acting in the capacity of a director:

○ To gain an advantage for the director, or for another person, other than the company, or a wholly-owned subsidiary of the company; or

○ To knowingly cause harm to the company or a subsidiary of the company.

Communicate to the board at the earliest practicable opportunity any information that comes to the director’s attention, unless the director reasonably believes that the information is:

○ Immaterial to the company; or

○ Generally available to the public, or known to the other directors; or

○ Is bound not to disclose that information by a legal or ethical obligation of confidentiality.

A director of a company must exercise the powers and perform the functions of director:

In good faith and for a proper purpose;

In the best interests of the company; and

With the degree of care, skill and diligence that may reasonably be expected of a person:

○ Carrying out the same functions in relation to the company as those carried out by that director; and

○ Having the general knowledge, skill and experience of that director.

In respect of any particular matter arising in the exercise of the powers or the performance of the functions of director, a particular director of a company will have satisfied the above if:

The director has taken reasonably diligent steps to become informed about the matter;

The director had no material personal financial interest in the subject matter of the decision, and had no reasonable basis to know that any related person had a personal financial interest in the matter; or

The director disclosed the interest in advance; and

The director made a decision, or supported the decision of a committee or the board, with regard to that matter, and the director had a rational basis for believing, and did believe, that the decision was in the best interests of the company.

A director is entitled to rely on:

One or more employees of the company whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports or statements provided;

Legal counsel, accountants, or other professional persons retained by the company, the board or a committee as to matters involving skills or expertise that the director reasonably believes are matters:

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○ Within the particular person’s professional or expert competence; or

○ As to which the particular person merits confidence.

A committee of the board of which the director is not a member, unless the director has reason to believe that the actions of the committee do not merit confidence.

LIABILITY OF DIRECTORS AND PRESCRIBED OFFICERS (SECTION 77)

A director may be held liable in accordance with the principles of the common law relating to:

Breach of a fiduciary duty, for any loss, damages or costs sustained by the company as a consequence of any breach by the director of a duty; or

Delict for any loss, damages or costs sustained by the company as a consequence of any breach by the director of any provision of this Act and the MOI.

A director is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having:

Acted in the name of the company, signed anything on behalf of the company, or purported to bind the company or authorise the taking of any action by, or on behalf of the company, despite knowing that the director lacked the authority to do so;

Acquiesced in the carrying on of the company’s business despite knowing that it was being conducted recklessly;

Been a party to an act or omission by the company despite knowing that the act or omission was calculated to defraud a creditor, employee or shareholder of the company, or had another fraudulent purpose;

Signed, consented to, or authorised, the publication of:

○ Any financial statements that were false or misleading in a material respect; or

○ A prospectus, or a written statement, that contained an untrue statement or a statement to the effect that a person had consented to be a director of the company, when no such consent had been given.

Been present at a meeting, or participated in the making of a decision, and failed to vote against:

○ The issuing of any unauthorised shares;

○ The issuing of any unauthorised securities;

○ The granting of unauthorised options to any person;

○ The provision of financial assistance to any person for the acquisition of securities of the company, despite knowing that the provision of financial assistance was inconsistent with the provisions of section 44 and the MOI;

○ The provision of financial assistance to a director, despite knowing that the provision of financial assistance was inconsistent with the provisions of section 45 the MOI;

○ A resolution approving a distribution, despite knowing that the company does not satisfy the solvency and liquidity test; and

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○ The acquisition by the company of any of its shares, or the shares of its holding company, despite knowing that the acquisition was contrary to section 46 or 48; or

○ An allotment by the company, despite knowing that the allotment was contrary to any provision of Chapter 4.

The company or any director who has been or may be held liable may apply to a court for an order setting aside the decision of the board.

The liability of a person is joint and several with any other person who is, or may be held liable for the same act.

Proceedings to recover any loss, damages or costs for which a person is, or may be held liable may not be commenced more than three years after the act or omission that gave rise to that liability.

Any person who would be liable is jointly and severally liable with all other such persons to pay the costs of all parties in the court, unless the proceedings are abandoned and to restore to the company any amount improperly paid by the company as a consequence of the impugned act.

In any proceedings against a director, other than for wilful misconduct or wilful breach of trust, the court may relieve the director, either wholly or partly, from any liability, if it appears that the director has acted honestly and reasonably.

INDEMNIFICATION AND DIRECTORS’ INSURANCE (SECTION 78)

Any provision of an agreement, the MOI, rules of or a resolution is void, to the extent that it directly or indirectly purports to relieve a director of a liability or negate, limit or restrict any legal consequences arising from an act or omission that constitutes wilful misconduct or wilful breach of trust on the part of the director.

A company may not directly or indirectly pay any fine that may be imposed on the director, or on a director of a related company, who has been convicted of an offence, unless the conviction was based on strict liability.

The above section does not apply to a private or personal liability company if:

A single individual is the sole shareholder and sole director of that company; or

Two or more related individuals are the only shareholders of that company, and there are no directors of the company other than one or more of those individuals.

Except to the extent that the MOI provides otherwise, the company:

May advance expenses to a director to defend litigation in any proceedings arising out of the director’s service to the company; and

May directly or indirectly indemnify a director, for expenses, if the proceedings are abandoned or exculpate the director, or arise in respect of any liability for which the company may indemnify the director.

A company may not indemnify a director in respect of any liability arising from:

Wilful misconduct, or wilful breach of trust, on the part of the director;

Acted without authority;

Acted recklessly;

Defrauding a creditor, employee or shareholder.

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Except to the extent that the MOI of a company provides otherwise, a company may purchase insurance to protect a director against any liability or expenses, or the company against any expenses that the company is permitted to advance, or for which the company is permitted to indemnify.

FINANCIAL ASSISTANCE FOR SUBSCRIPTION OF SECURITIES (SECTION 44)

To the extent that the MOI provides otherwise, the board may authorise the company to provide financial assistance by way of a loan, guarantee, the provision of security or otherwise to any person for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company.

Despite any provision of the MOI, the board may not authorise any financial assistance, unless:

The particular provision of financial assistance is:

○ Pursuant to an employee share scheme; or

○ Pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance, either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

The board is satisfied that:

○ Immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

○ The terms under which the financial assistance is proposed to be given, are fair and reasonable to the company.

A decision by the board of a company to provide financial assistance, or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with:

This section; or

A prohibition, condition or requirement in the MOI.

If a resolution or an agreement is void a director of a company is liable for loss, damages or costs if the director:

Was present at the meeting when the board approved the resolution or agreement, or participated in the making of such a decision; and

Failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section or a prohibition, condition or requirement in the MOI.

LOANS OR OTHER FINANCIAL ASSISTANCE TO DIRECTORS (SECTION 45)

In this section, ‘‘financial assistance’’:

Includes lending money, guaranteeing a loan, or other obligation, and securing any debt or obligation; but

Does not include:

○ Lending money in the ordinary course of business by a company whose primary business is the lending of money;

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○ An accountable advance to meet:

― Legal expenses in relation to a matter concerning the company; or

― Anticipated expenses to be incurred by the person on behalf of the company; or

― An amount to defray the person’s expenses for removal at the company’s request.

Except to the extent that the MOI provides otherwise, the board may authorise the company to provide direct or indirect financial assistance to a director or prescribed officer of the company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related corporation, or to a person related to any such company, corporation, director, prescribed officer or member.

Despite any provision of the MOI to the contrary, the board may not authorise any financial assistance, unless:

The particular provision of financial assistance is:

○ Pursuant to an employee share scheme; or

○ Pursuant to a special resolution of the shareholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category; and

○ The board is satisfied that immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test.

The board must ensure that any conditions or restrictions respecting the granting of financial assistance set out in the company’s Memorandum of Incorporation have been satisfied.

If the board adopts a resolution, the company must provide written notice of that resolution to all shareholders, unless every shareholder is also a director of the company, and to any Trade Union representing its employees:

Within 10 business days after the board adopts the resolution, if the total value of all loans, debts, obligations or assistance contemplated in that resolution, together with any previous such resolution during the financial year, exceeds one-tenth of 1% of the company’s net worth at the time of the resolution; or

Within 30 business days after the end of the financial year, in any other case.

A decision by the board of a company to provide financial assistance, or an agreement with respect to the provision of any such assistance, is void to the extent that the provision of that assistance would be inconsistent with:

This section; or

A prohibition, condition or requirement in the MOI.

If a resolution or an agreement is void, a director of a company is liable for loss, damages or costs if the director:

Was present at the meeting when the board approved the resolution, or agreement, or participated in the making of such a decision; and

Failed to vote against the resolution or agreement, despite knowing that the provision of financial assistance was inconsistent with this section, or a prohibition, condition or requirement in the MOI.

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DISTRIBUTIONS (SECTION 46)

A company must not make any proposed distribution unless the distribution:

Is pursuant to an existing legal obligation of the company, or a court order; or

The board of the company, by resolution, has authorised the distribution;

It reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution; and

The board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test, and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.

If the distribution contemplated in a particular board resolution, court order or existing legal obligation has not been completed within 120 business days the board must reconsider the solvency and liquidity test with respect to the remaining distribution to be made pursuant to the original resolution, order or obligation. Despite any law, order or agreement to the contrary, the company must not proceed with or continue with any such distribution unless the board adopts a further resolution.

DEREGISTRATION

The Companies Act 2008 allows the CIPC to upon request from the company or close corporation, or any other party, deregister a company or close corporation provided that the company or close corporation:

Has ceased to carry on business; and

Has no assets or, because of the inadequacy of its assets, there is no reasonable probability of the company being liquidated.

In order for the CIPC to process the deregistration request, the following information is required on an original letterhead of either the company or close corporation, or any other person applying for deregistration:

Statement and sufficient documentary proof confirming that:

○ The company or close corporation is not carrying on business or is dormant, and

○ Has no assets or, because of the inadequacy of its assets, that there is no reasonable probability of the company being liquidated;

Tax clearance certificate or any other written confirmation from SARS that no tax liability is outstanding;

Tax number (if available);

If the company or close corporation submits the request, the letter must be signed by each active director, member or the company or close corporation’s duly authorised representative, or otherwise by the person who is requesting the deregistration; and

A certified ID copy of any of the persons signing the letter wherein deregistration is required.

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If all annual returns are up to date, the CIPC will regard the business as being active and will return the request for deregistration to the applicant. Filing of annual returns by a company or close corporation creates the assumption that a company or close corporation is in business.

The request for deregistration will be returned to the applicant for correction if any of the above stated requirements are not complied with.

It is only after the final deregistration of the company or close corporation that the legal persona of the company or close corporation will cease to exist.

Upon final deregistration, CIPC will not administratively protect company or close corporation names, if the cause of the deregistration was non-compliance with annual returns or any other cause. The entity name will immediately become available for any other third party to register such name.

During the process of deregistration, any third party or the company or close corporation itself, may object to the deregistration process. If the company or close corporation was deregistered due to annual return non-compliance, the process of deregistration can only successfully be cancelled upon the filing of all outstanding annual returns. If the deregistration was for any other reason, a written objection with a certified ID copy of the requester must be filed with the CIPC, and any filing of annual returns will not be allowed until the deregistration process is cancelled.

RE-INSTATEMENT

In order to re-instate a company or close corporation, the re-instatement application on an original signed form CoR40.5 must comply with the following requirements regardless of the cause or date of deregistration:

Certified ID copy of the applicant (director / member);

Certified ID copy of the customer filing the application;

Deed search (reflecting ownership of immovable property or not);

Letters from National Treasury and the Department of Public Works, indicating that such departments have no objection to the re-instatement, if it has immovable property;

Advertisement in a local newspaper giving 21 days’ notice of proposed application for re-instatement;

Affidavit indicating the reasons for the non-filing of annual returns, if deregistration was due to non-compliance in relation to annual returns;

Affidavit indicating the reason for the original request for deregistration, if the company or close corporation itself applied for deregistration; and

Sufficient documentary proof indicating that the company or close corporation was in business or that it had any outstanding assets or liabilities (e.g. property, intellectual property rights) at the time of deregistration.

Upon the successful processing of the re-instatement application, all outstanding annual returns must be filed in order to complete the process. If the company or close corporation fails to file all outstanding annual returns within 30 business days from date of the re-instatement, the company or close corporation will be finally deregistered, without any further notification.

It should be noted that the CIPC will no longer re-instate a company or close corporation solely based on a statement that the company or close corporation is in business, or will be in business in the near future. The re-

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instatement process is reserved for companies and close corporations that can prove that they were in business at the time of deregistration, have outstanding assets and / or liabilities which must be transferred or liquidated.

REJECTIONS IN RELATION TO APPLICATIONS FOR CLOSE CORPORATIONS AMENDMENTS

To prevent rejections in respect of applications for amendments in relation to close corporations, kindly take note of the following:

When capturing members’ particulars via the electronic CK2 application, ensure that the same information as reflected in the ID copy is captured (ID number, surname and name/s) as CIPC does not re-capture any applications submitted electronically (CK2/CK2A);

If some of the existing information is incorrect or not updated, e.g. spelling error on principal business, financial year end, etc., customers are urged not to automatically update/correct this information when lodging an amendment. CIPC must first update such information before an electronic CK2/CK2A application can be submitted;

Updating existing information will cause unnecessary deductions from customers’ accounts, as certain deductions will automatically be made when corrections are effected by customers;

At least one member must sign the CK2A and the attached certified ID copy when a new practice number is allocated for an existing accounting officer, and a letter of consent is required from the accounting officer;

All members must sign and submit their certified ID copies in the case of appointing of a new accounting officer;

A form CoR39 cannot be used to amend details of members of a close corporation; the correct form to be used therefore remains a CK2/CK2A;

Insert the correct customer codes on all manual CK2/CK2A applications submitted, as no tracking number will be allocated without a customer code;

Where the signatures of the application/s submitted do not correspond with the signatures already on file at CIPC, an affidavit from that member is required to explain the reason for the difference in signature, and to confirm that it is the same member who has signed the CK2 form;

Where the signature is not that of a member, an appropriate Power of Attorney must be attached; ensure there are sufficient funds in the virtual account to make provision for costs in relation to, for example, changes on certain pages of the CK2 application;

The executor must sign the application forms on behalf of a deceased member, and attached to the application must also be a certified copy of the ID of the executor, as well as an executor’s letter;

All annual returns must be up to date before lodging a form CK2/CK2A;

An accounting officer of a close corporation cannot be a company;

Supporting documents relating to trusts must be attached to a CK2 application linked with trust registration;

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In instances of a change of name, the customer code on the CK2 form must be the same as the customer code on the CoR9.4 form;

Members’ ID number or date of birth cannot be changed to reflect a passport number.

ALTERNATIVE PAYMENT METHOD

CIPC introduced debit card payments as an alternative payment method from 1 January 2013.

Debit cards from all major banks will be accepted at CIPC’s office in Pretoria. The introduction of this payment mechanism will ensure that cash handling risks are minimised to both CIPC and its customers.

Only debit cards, (no credit cards) will be accepted.

CASH OFFICE CLOSURE

CIPC will no longer accept cash deposits at its premises (dti Campus – Sunnyside – Pretoria) with effect from 1 July 2013.

The change in business operation is intended to improve security of customers and CIPC. Customers are, therefore, advised to deposit transaction fees at any ABSA Bank. The deposited amount will be reflected on the CIPC customer account within 1 hour of being deposited. Customers are urged to use the correct bank account number and customer code as a reference when making deposits.

FAX TO EMAIL

CIPC introduced a fax-to-email service to allow customers to submit certain applications. With effect from the 1st February 2013, the applications listed below can be faxed to 086 6186 960.

Name and Defensive name reservations and extensions (CoR9.1, CoR9.2, CoR10.1 and CoR10.2);

New company applications (CoR15.1A to CoR15.1E);

Close corporation to company conversions (CoR18.1);

Company changes (CoR21.1, CoR21.2, CoR22, manual CoR39, and CoR44);

Company and close corporation deregistrations (deregistration request and CoR40.2);

Company and close corporation re-instatements (CoR40.5).

Keep the originals for a period of 7 years in case it is required by CIPC. The fax number and e-mail address is to be used exclusively for the purpose indicated above. CIPC will not process any other documents sent via this medium.

DROP-OFF BOX FOR REGISTRATION AND AMENDMENTS

A drop-off box for entity registrations and amendments was introduced with effect from the 8th of April 2013. The drop-off box will enable customers to submit documents 24 hours a day, Monday to Sunday. The drop-off box will be located at the main entrance of the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria.

Documents must be sealed in an envelope prior to posting them into the drop-off box to avoid pages being detached during the collection and / or during the sorting process. Customers should ensure that all supporting documents required are included to prevent delays.

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REFUNDING OF CUSTOMER DEPOSITS

CIPC has embarked on a process of refunding deposits that have been in its account for more than 60 days. In light of the aforementioned information, the CIPC requests the customer to provide the following information and documentation to facilitate the refunding process:

Confirmation of banking details by the relevant bank;

Proof of deposits;

Certified copy of the customer’s identity document;

Formal and signed request by customer to refund the money in the CIPC account.

Should the customer fail to comply with the above mentioned request the customer’s account will be de-activated. CIPC would like to caution the customer about depositing money into the CIPC bank account and not utilizing the funds in the account within a reasonable period of time. This places CIPC at risk of contravening the Banks Act. CIPC cannot retain money in its account indefinitely.

NEW COMPANY REGISTRATION CERTIFICATE

Customers are advised that once a new company is registered, the system automatically dispatches a registration certificate to a customer’s email address. Customers must ensure that email addresses provided to CIPC are correct and functional.

In the event that a customer has not received a certificate within the stipulated service delivery standards (i.e. 25 working days after receipt of an application) he/she must send an email to [email protected] or [email protected].

ONLINE VERIFICATION OF CIPC CERTIFICATES

The CIPC are receiving complaints from registered businesses that CIPC documents (web disclosures, confirmation letters, registration certificates and certificates of confirmation) which they present to the banks are not always accepted due to the face that it may be in black or white, or that the authenticity of the documents cannot be verified by the bank concerned.

In this regard, CIPC emphasises the importance of verifying CIPC documents and entity information presented by businesses directly with CIPC via its website www.cipc.co.za at a cost of R 30 per disclosure. Requested disclosures may be utilised by:-

Viewing it;

E-mailing it to the e-mail address as per the customer account information;

Printing it; or

Saving it.

These “real-time” disclosures will provide assurance to the banks that the documents presented are authentic as well as confirming “real-time” information for the business per CIPC records. This function is available from www.cipc.co.za/Additional services/Customer log in/Disclosure/selecting either companies, close corporations or co-operatives/providing either the name or registration number of the business.

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http://www.cipc.co.za/Additional

http://www.cipc.co.za/




In order for the banks to access this service, it should register its individual branches as a customer via the CIPC website and then request CIPC, on a letterhead of the branch, to change the type of customer to a bank customer and providing a list of personnel that it will be using the account.

CIPC also confirms that CIPC documents may either be printed in colour or black and white by businesses or their representatives, depending on their preference. Consequently, CIPC documents may be presented in a black and white format by businesses to the banks and therefore should not be disregarded because of it.

ADDRESS OF ACTUAL BUSINESS PREMISES REQUIRED

The CIPC require that all postal and physical addresses of customers must be of the actual business premises i.e. the site from where the business operates and not the address of a representative or of a director. The address must be structured in a specific manner in order to allow for better statistical records and data quality.

In this regard the following information must be provided:

Physical address:

○ Street number;

○ Street name;

○ Suburb/town/city;

○ Province; and

○ Street code.

Postal address:

○ Postal number or description

○ Suburb/town/city;

○ Province; and

○ Postal code.

If the address provided is outside of the Republic, the country description must also be provided. Any form filed with the CIPC that does not comply with the above requirements will be rejected.

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TAX ADMINISTRATION ACT GENERAL

PURPOSE OF ACT

The purpose of this Act is to ensure the effective and efficient collection of tax by:

Aligning the administration of the tax Acts to the extent practically possible;

Prescribing the rights and obligations of taxpayers and other persons to whom this Act applies;

Prescribing the powers and duties of persons engaged in the administration of a tax Act; and

Generally giving effect to the objects and purposes of tax administration.

ADMINISTRATION OF TAX ACTS

SARS is responsible for the administration of this Act under the control or direction of the Commissioner.

Administration of a tax Act means to:

Obtain full information in relation to:

○ Anything that may affect the liability of a person for tax in respect of a previous, current or future tax period;

○ A taxable event; or

○ The obligation of a person (whether personally or on behalf of another person) to comply with a tax Act.

Ascertain whether a person has filed or submitted correct returns, information or documents;

Establish the identity of a person for purposes of determining liability for tax;

Determine the liability of a person for tax;

Collect tax and refund tax overpaid;

Investigate whether an offence has been committed, and, if so to lay criminal charges; and

To provide the assistance that is reasonably required for the investigation and prosecution of tax offences or related common law offences;

Enforce SARS’ powers and duties under a tax Act to ensure that an obligation imposed by or under a tax Act is complied with;

Perform any other administrative function necessary to carry out the provisions of a tax Act; and

Give effect to the obligation of the Republic to provide assistance under an international tax agreement.

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If SARS has, in accordance with an international agreement, received a request for:

Information, SARS may obtain the information requested for transmission to the competent authority of the other country as if it were relevant material required for purposes of a tax Act and must treat the information obtained as if it were taxpayer information;

The conservancy or the collection of an amount alleged to be due by a person under the tax laws of the requesting country, SARS may deal with the request under the provisions of section 185; or

The service of a document which emanates from the requesting country, SARS may effect service of the document as if it were a notice, document or other communication required under a tax Act to be issued, given, sent or served by SARS.

APPLICATION OF ACT

This Act applies to every person who is liable to comply with a provision of a tax Act (whether personally or on behalf of another person) and binds SARS.

If this Act is silent with regard to the administration of a tax Act and it is specifically provided for in the relevant tax Act, the provisions of that tax Act apply.

In the event of any inconsistency between this Act and another tax Act, the other Act prevails.

PRACTICE GENERALLY PREVAILING A practice generally prevailing is a practice set out in an official publication regarding the application or interpretation of a tax Act.

Despite any provision to the contrary contained in a tax Act, a practice generally prevailing set out in an official publication, other than a binding general ruling, ceases to be a practice generally prevailing if:

The provision of the tax Act that is the subject of the official publication is repealed or amended to an extent material to the practice, from the date the repeal or amendment becomes effective;

A court overturns or modifies an interpretation of the tax Act which is the subject of the official publication to an extent material to the practice from the date of judgment, unless:

The decision is under appeal;

The decision is fact-specific and the general interpretation upon which the official publication was based is unaffected; or

The reference to the interpretation upon which the official publication was based was obiter dicta; or

The official publication is withdrawn or modified by the Commissioner, from the date of the official publication of the withdrawal or modification.

POWERS AND DUTIES OF SARS AND SARS OFFICIALS

POWERS AND DUTIES

Powers and duties which are assigned to the Commissioner by this Act must be exercised by the Commissioner personally but he or she may delegate such powers and duties.

Powers and duties to be exercised by a senior SARS official must be exercised by:

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The Commissioner;

A SARS official who has specific written authority from the Commissioner to do so; or

A SARS official occupying a post designated by the Commissioner for this purpose.

CONFLICT OF INTEREST

The Commissioner or a SARS official may not exercise a power or become involved in a matter, if:

The Commissioner or the official has or had, in the previous three years, a personal, family, social, business, professional, employment or financial relationship presenting a conflict of interest; or

Other circumstances present a conflict of interest that will reasonably be regarded as giving rise to bias.

IDENTITY CARDS

SARS must issue an identity card to each SARS official.

When a SARS official exercises a power or duty the official must produce the identity card upon request by a member of the public.

If the official does not produce the identity card, a member of the public is entitled to assume that the person is not a SARS official.

THE TAX OMBUD The Tax Ombud will provide taxpayers with a cost-effective mechanism to address administrative difficulties, which will operate in addition to the existing mechanisms to do so. It is important to note that the creation of a

The Tax Ombud is appointed by the Minister to ensure the Tax Ombud’s independence from SARS. The Minister determines the Tax Ombud’s terms and conditions of service. The Tax Ombud may only be removed by the Minister in the case of misconduct, incapacity or incompetence.

The Tax Ombud’s office must be established within one year after commencement of the Act. The secondment of SARS employees to the Tax Ombud’s office is a practical matter, which will ensure staff are knowledgeable about tax and SARS’s internal processes and will simplify the administration of secrecy around taxpayers’ affairs.

The Tax Ombud must review and address a complaint laid by a taxpayer and resolve a dispute using informal, fair and cost effective measures. This method of resolution is intended to be a simple and affordable remedy to taxpayers who have legitimate complaints that relate to administrative matters, poor service or the failure by SARS to observe taxpayer rights.

The Tax Ombud may not review matters namely:

Legislation or tax policy;

SARS’s policy or practice generally prevailing, other than to the extent that it relates to a service matter or a procedural or administrative matter arising from the application of the provisions of a tax Act by SARS;

A matter subject to objection and appeal under a tax Act, except for an administrative matter relating to such objection and appeal; or

A decision of, proceeding in or matter before the tax court.

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The Tax Ombud reports directly to the Minister.

Before an administrative complaint can be sent to the Tax Ombud, the taxpayer must first try to resolve the complaint through SARS’s internal complaints resolution procedures, unless there are compelling circumstances justifying direct access to the Tax Ombud, for example where the complaint is very serious.

REGISTRATION

REGISTRATION REQUIREMENTS

A person obliged to apply or who may voluntarily register with SARS must apply for registration within the period provided for in a tax Act or, if no such period is provided for, 21 business days of so becoming obliged or within the further period as SARS may approve in the prescribed form and manner.

A person applying for registration may be required to submit biometric information for the:

Proper identification of the person; or

Counteracting identity theft or fraud.

Where a taxpayer that is obliged to register with SARS fails to do so, SARS may register the taxpayer for one or more tax types as is appropriate under the circumstances.

COMMUNICATION OF CHANGES IN PARTICULARS

A person who has been registered must communicate to SARS within 21 business days any change that relates to:

Postal address;

Physical address;

Representative taxpayer;

Banking particulars used for transactions with SARS;

Electronic address used for communication with SARS; or

Such other details as the Commissioner may require by public notice.

TAXPAYER REFERENCE NUMBER SARS may allocate a taxpayer reference number in respect of one or more taxes to each person registered.

SARS may register and allocate a taxpayer reference number to a person who is not registered.

A person who has been allocated a taxpayer reference number by SARS must include the relevant reference number in all returns or other documents submitted to SARS.

SARS may regard a return or other document submitted by a person to be invalid if it does not contain the reference number and must inform the person accordingly if practical.

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RETURNS AND RECORDS

SUBMISSION OF RETURN A person required submitting or who voluntarily submits a return must do so:

In the prescribed form and manner; and

By the date specified in the tax Act.;

A return must contain the information prescribed by a tax Act or the Commissioner and be a full and true return.

A return must be signed by the taxpayer or by the taxpayer’s duly authorised representative and the person signing the return is regarded for all purposes to be cognisant of the statements made in the return.

Non-receipt by a person of a return form does not affect the obligation to submit a return.

THIRD PARTY RETURNS

The Commissioner may by public notice require a person who employs, pays amounts to, receives amounts on behalf of or otherwise transacts with another person, or has control over assets of another person, to submit a return with the required information in the prescribed form and manner and by the date specified in the notice.

Returns of information to be submitted to third parties

SARS issued two Government notices in 2012 that relate to the duty by persons to provide information. The first one (issued in February 2012) was issued to reporting institutions and the second one (in March 2012) was issued to employers.

A further notice was issued in April 2013 documenting returns of information to be provided by third parties. In terms of this Government Notice, the persons specified in the Schedule to GG 260 must submit returns in respect of the 2013 and future years, by the dates specified in GG 260.

Detail with regards to the notice to third parties

GG 260 defines reporting institutions as banks, co-operative banks, the Postbank, certain regulated financial institutions, companies listed on the JSE (together with its connected persons), state-owned companies and organs of state that issue bonds, debentures or similar financial instruments. Whilst the notice in the prior period was limited to these entities/organisations, the 2013 notice has added a new reporting requirement in respect of:

Any person, including a co-operative who purchases any livestock, produce, timber, ore, mineral or precious metal from a primary producer other than on a retail basis;

Any registered medical scheme;

Any person who acts as either an estate agent or attorney for their own account and who pays to or receives on behalf of a third party, any amount in respect of the investment, interest or rental of property.

All the financial institutions noted above (including the affected estate agents and attorneys) are required to furnish returns (relevant IT3 returns) of money invested with, loaned to and deposited with the reporting person/institution and of interest received by or accrued to or in favour of any person from the reporting person/institution or from business carried on by the reporting institution. It provides a list of the information that must be furnished.

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The additional parties required to submit returns must submit returns of information relevant to their business – i.e.:

Any person who purchases any livestock, produce, timber, ore, mineral or precious metal from a primary producer other than on a retail basis – details of monies paid in respect of these transactions (IT3(e));

Any registered medical scheme – contributions made by persons in respect of a medical scheme, as well as all expenses paid for a person by a medical scheme (IT3(f)).

The list of information required is quite extensive and includes, amongst others, details of the person, including an identity number or registration number, the tax reference number, monthly totals of all credits and debits to the account and an indicator relating to the account verification status in terms of FIC Act.

Due dates:

The required information in respect of the period 1 March 2012 to 28 February 2013 is due by 31 May 2013. A similar report for the period 1 March 2013 to 31 August 2013 must be furnished by 31 October 2013.

Manner of submitting the third party return:

If the third party return includes less than 21 records, the affected entity may submit the return either via e-filing or manually at a SARS branch office. If the records are more than 21 and up to 50 000, or more than 50 000, these returns will have to be submitted electronically to SARS via e-filing with the detailed information to be provided using either the bulk data file platform (21 – 50 000 records) or managed data transfer platform (> 50 000 records) as required by SARS.

STATEMENT CONCERNING ACCOUNTS

SARS may require a person who submits financial statements or accounts prepared by another person in support of that person’s submitted return, to submit a certificate or statement by the other person setting out the details of:

The extent of the other person’s examination of the books of account and of the documents from which the books of account were written up; and

Whether or not the entries in those books and documents disclose the true nature of the transactions, receipts, accruals, payments or debits.

A person who prepares financial statements or accounts for another person must, at the request of that other person, submit to that other person a copy of the certificate or statement.

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DUTY TO KEEP RECORDS

The requirements to keep records for a tax period apply to a person who:

Has submitted a return for the tax period;

Is required to submit a return for the tax period and has not submitted a return for the tax period; or

Is not required to submit a return but has, during the tax period, received income, has a capital gain or capital loss, or engaged in any other activity that is subject to tax or would be subject to tax but for the application of a threshold or exemption.

Records need not be retained after a period of five years from the date of the submission of the return or five years from the end of the relevant tax period.

FORM OF RECORDS KEPT OR RETAINED

The records, books of account, and documents must be kept or retained in their original form in an orderly fashion and in a safe place, including electronic form.

INSPECTION OF RECORDS

The records, books of account and documents must at all reasonable times be open for inspection by a SARS official in the Republic for the purpose of:

Determining compliance with the record and documentation requirements; or

An inspection, audit or investigation.

RETENTION PERIOD IN CASE OF AUDIT, OBJECTION OR APPEAL

If records are relevant to an audit or investigation which the person subject to the audit or investigation has been notified of, or is aware of, or a person lodges an objection or appeal against an assessment or decision, the person must retain the records until the audit is concluded or the assessment or the decision becomes final.

ELECTRONIC RECORDS STORAGE On 1 October, the Commissioner of SARS released a Notice prescribing the format in which electronic records are to be kept.

A taxpayer must be able to provide SARS with the electronic document so that SARS can access, read and analyse the electronic document. This means you must be able to email it to SARS and provide them with print copies.

Finally, the electronic records are to be available for inspection by SARS at a reasonable time and in a location in South Africa.

What about Cloud storage?

We have seen that records have to be available for inspection at a location in South Africa. Thus, if your Cloud storage is outside of South Africa:

You will need to get the permission of a senior SARS official,

There must be a double tax agreement between South Africa and the country where the records are stored,

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If software or the platform used is not recognised in South Africa, the taxpayer keeps manuals that document the method of record keeping and how to access the records.

INFORMATION GATHERING

SELECTION FOR INSPECTION, VERIFICATION OR AUDIT

SARS may select a person for inspection, verification or audit on the basis of any consideration relevant for the proper administration of a tax Act, including on a random or a risk assessment basis.

KEEPING TAXPAYER INFORMED

A SARS official involved in or responsible for an audit must provide the taxpayer with a report indicating the stage of completion of the audit.

Upon conclusion of the audit or a criminal investigation, and where:

The audit or investigation was inconclusive, SARS must inform the taxpayer accordingly within 21 business days; or

The audit identified potential adjustments of a material nature, SARS must within 21 business days, or the further period that may be required based on the complexities of the audit, provide the taxpayer with a document containing the outcome of the audit, including the grounds for the proposed assessment or decision.

Upon receipt of the document the taxpayer must within 21 business days of delivery of the document, or the further period requested by the taxpayer that may be allowed by SARS based on the complexities of the audit, respond in writing to the facts and conclusions set out in the document.

The taxpayer may waive the right to receive the document.

The above does not apply if a senior SARS official has a reasonable belief that compliance with these requirements would impede or prejudice the purpose, progress or outcome of the audit.

SARS may issue the assessment or make the decision resulting from the audit, and the grounds of the assessment must be provided to the taxpayer within 21 business days of the assessment, or the further period that may be required based on the complexities of the audit.

REFERRAL FOR CRIMINAL INVESTIGATION

If at any time before or during the course of an audit it appears that a person may have committed a serious tax offence, the investigation of the offence must be referred to a senior SARS official responsible for criminal investigations for a decision as to whether a criminal investigation should be pursued.

Relevant material gathered during an audit after the referral, must be kept separate from the criminal investigation and may not be used in criminal proceedings instituted in respect of the offence.

The relevant material and files relating to the case must be returned to the SARS official responsible for the audit if:

It is decided not to pursue a criminal investigation;

It is decided to terminate the investigation; or

After referral of the case for prosecution, a decision is made not to prosecute.

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CONDUCT OF CRIMINAL INVESTIGATION

In the event that a decision is taken to pursue the criminal investigation of a serious tax offence, SARS may make use of relevant material obtained prior to the referral.

Relevant information obtained during a criminal investigation may be used for purposes of audit as well as in subsequent civil and criminal proceedings.

INSPECTIONS

A SARS official may without prior notice, arrive at a premise where the SARS official has a reasonable belief that a trade or enterprise is being carried on and conduct an inspection to determine only:

The identity of the person occupying the premises;

Whether the person occupying the premises is registered for tax; or

Whether the person is complying with the record and documentation requirements.

A SARS official may not enter a dwelling-house or domestic premises, except any part thereof used for the purposes of trade, without the consent of the occupant.

REQUEST FOR RELEVANT MATERIAL

SARS may require the taxpayer or another person to, within a reasonable period, submit relevant material (whether orally or in writing) that SARS requires.

A request by SARS for relevant material from a person other than the taxpayer is limited to the records maintained or that should reasonably be maintained by the person in relation to the taxpayer.

A person receiving from SARS a request for relevant material must submit the relevant material to SARS at the place and within the time specified in the request.

SARS may extend the period within which the relevant material must be submitted on good cause shown.

Relevant material required by SARS must be referred to in the request with reasonable specificity.

A senior SARS official may direct that relevant material be provided under oath or solemn declaration.

A senior SARS official may request relevant material for purposes of revenue estimation.

PRODUCTION OF RELEVANT MATERIAL IN PERSON

A senior SARS official may, by notice, require a person, whether or not chargeable to tax, to attend in person at the time and place designated in the notice for the purpose of being interviewed by a SARS official concerning the tax affairs of the person, if the interview:

Is intended to clarify issues of concern to SARS to render further verification or audit unnecessary; and

Is not for purposes of a criminal investigation.

The senior SARS official issuing the notice may require the person interviewed to produce relevant material under the control of the person during the interview.

Relevant material required by SARS must be referred to in the notice with reasonable specificity.

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A person may decline to attend an interview, if the distance between the place designated in the notice and the usual place of business or residence of the person exceeds the distance prescribed by the Commissioner by public notice.

FIELD AUDIT OR CRIMINAL INVESTIGATION

A SARS official may require a person, with prior notice of at least 10 business days, to make available at the person’s premises specified in the notice relevant material that the official may require to audit or criminally investigate.

The notice must:

State the place where and the date and time that the audit or investigation is due to start (which must be during normal business hours); and

Indicate the initial basis and scope of the audit or investigation.

SARS is not required to give the notice if the person waives the right to receive the notice.

ASSISTANCE DURING FIELD AUDIT OR CRIMINAL INVESTIGATION

The person on whose premises an audit or criminal investigation is carried out must provide such reasonable assistance:

Making available appropriate facilities, to the extent that such facilities are available;

Answering questions relating to the audit or investigation; and

Submitting relevant material.

No person may:

Obstruct a SARS official from carrying out the audit or investigation; or

Refuse to give the access or assistance.

The person may recover from SARS after completion of the audit (or, at the person’s request, on a monthly basis) the costs for the use of photocopying facilities in accordance with the fees prescribed in section 92(1)(b) of the Promotion of Access to Information Act.

INQUIRIES

INQUIRY ORDER A judge may grant an order for an inquiry if satisfied that there are reasonable grounds to believe that:

A person has:

○ Failed to comply with an obligation imposed under a tax Act; or

○ Committed a tax offence; and

Relevant material is likely to be revealed during the inquiry which may provide proof of the failure to comply or of the commission of the offence.

The order must:

Designate a presiding officer before whom the inquiry is to be held;

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Identify the person subject to the inquiry;

Refer to the alleged non-compliance or offence to be inquired into;

Be reasonably specific as to the ambit of the inquiry; and

Be provided to the presiding officer.

NOTICE TO APPEAR

The presiding officer may, by notice in writing, require a person, whether or not chargeable to tax, to:

Appear before the inquiry, at the time and place designated in the notice, for the purpose of being examined under oath or solemn declaration, and

Produce any relevant material in the custody of the person.

WITNESS FEES

The presiding officer may direct that a person receive witness fees to attend an inquiry in accordance with the tariffs prescribed in terms of section 51bis of the Magistrates’ Courts Act, 1944 (Act No. 32 of 1944).

CONFIDENTIALITY OF PROCEEDINGS

An inquiry is private and confidential.

The presiding officer may, on request, exclude a person from the inquiry if the person’s attendance is prejudicial to the inquiry.

SARS may use evidence given by a person under oath or solemn declaration at an inquiry in a subsequent proceeding involving the person or another person.

INCRIMINATING EVIDENCE A person may not refuse to answer a question during an inquiry on the grounds that it may incriminate the person.

Incriminating evidence is not admissible in criminal proceedings against the person giving the evidence, unless the proceedings relate to:

The administering or taking of an oath or the administering or making of a solemn declaration;

The giving of false evidence or the making of a false statement; or

The failure to answer questions lawfully put to the person, fully and satisfactorily.

SEARCH AND SEIZURE

APPLICATION FOR WARRANT

A senior SARS official may, authorise an application for a warrant under which SARS may enter premises where relevant material is kept to search the premises and any person present on the premises and seize relevant material.

SARS must apply ex parte to a judge for the warrant, which application must be supported by information supplied under oath or solemn declaration, establishing the facts on which the application is based.

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ISSUANCE OF WARRANT

A judge or magistrate may issue the warrant if satisfied that there are reasonable grounds to believe that:

A person failed to comply with an obligation imposed under a tax Act, or committed a tax offence; and

Relevant material likely to be found on the premises specified in the application may provide evidence of the failure to comply or commission of the offence.

A warrant must contain the following:

The alleged failure to comply or offence that is the basis for the application;

The person alleged to have failed to comply or to have committed the offence;

The premises to be searched; and

The fact that relevant material is likely to be found on the premises.

The warrant must be exercised within 45 business days or such further period as a judge or magistrate deems appropriate on good cause shown.

CARRYING OUT SEARCH

A SARS official exercising a power under a warrant must produce the warrant.

A SARS official’s failure to produce a warrant entitles a person to refuse access to the official.

The SARS official may:

Open or cause to be opened or removed in conducting a search, anything which the official suspects to contain relevant material;

Seize any relevant material;

Seize and retain a computer or storage device in which relevant material is stored for as long as it is necessary to copy the material required;

Make extracts from or copies of relevant material, and require from a person an explanation of relevant material; and

If the premises listed in the warrant is a vessel, aircraft or vehicle, stop and board the vessel, aircraft or vehicle, search the vessel, aircraft or vehicle or a person found in the vessel, aircraft or vehicle, and question the person with respect to a matter dealt with in a tax Act.

The SARS official must make an inventory of the relevant material seized and provide a copy thereof to the person.

The SARS official must conduct the search with strict regard for decency and order, and may search a person if the official is of the same gender as the person being searched.

The SARS official may request such assistance from a police officer as the official may consider reasonably necessary and the police officer must render the assistance.

No person may obstruct a SARS official, or a police officer, from executing the warrant or without reasonable excuse refuse to give such assistance as may be reasonably required for the execution of the warrant.

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If the SARS official seizes relevant material, the official must ensure that the relevant material seized is preserved and retained until it is no longer required for:

The investigation into the non-compliance or the offence; or

The conclusion of any legal proceedings or criminal proceedings in which it is required to be used.

SEARCH OF PREMISES NOT IDENTIFIED IN WARRANT

If a senior SARS official has reasonable grounds to believe that:

The relevant material referred is at premises not identified in the warrant and may be removed or destroyed;

A warrant cannot be obtained in time to prevent the removal or destruction of the relevant material; and

The delay in obtaining a warrant would defeat the object of the search and seizure,

A SARS official may enter and search the premises, as if the premises had been identified in the warrant.

A SARS official may not enter a dwelling-house or domestic premises, except any part thereof used for purposes of trade, without the consent of the occupant.

SEARCH WITHOUT WARRANT

A senior SARS official may without a warrant search the premises:

If the owner or person in control of the premises so consents in writing; or

If the senior SARS official on reasonable grounds is satisfied that:

○ There may be an imminent removal or destruction of relevant material likely to be found on the premises;

○ If SARS applies for a search warrant, a search warrant will be issued; and

○ The delay in obtaining a warrant would defeat the object of the search and seizure.

A SARS official must, before carrying out the search, inform the owner or person in control of the premises:

That the search is being conducted; and

Of the alleged failure to comply with an obligation imposed under a tax Act or tax offence that is the basis for the search.

LEGAL PROFESSIONAL PRIVILEGE

If SARS foresees the need to search and seize relevant material that may be alleged to be subject to legal professional privilege, SARS must arrange for an attorney from the panel to be present during the execution of the warrant.

An attorney with whom SARS has made an arrangement may appoint a substitute attorney to be present on the appointing attorney’s behalf during the execution of a warrant.

If, during the carrying out of a search and seizure, a person alleges the existence of legal professional privilege in respect of relevant material and an attorney is not present, SARS must seal the material, make arrangements

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with an attorney from the panel to take receipt of the material and, as soon as is reasonably possible, hand over the material to the attorney.

An attorney:

Is not regarded as acting on behalf of either party; and

Must personally take responsibility:

○ In the case of a warrant issued, for the removal from the premises of relevant material in respect of which legal privilege is alleged;

○ In the case of a search and seizure, for the receipt of the sealed information; and

○ If a substitute attorney, for the delivery of the information to the appointing attorney.

The attorney must within 21 business days make a determination of whether the privilege applies and may do so in the manner the attorney deems fit, including considering representations made by the parties.

If a determination of whether the privilege applies is not made or a party is not satisfied with the determination, the attorney must retain the relevant material pending final resolution of the dispute.

PERSON’S RIGHT TO EXAMINE AND MAKE COPIES

The person to whose affairs relevant material seized relates, may examine and copy it.

Examination and copying must be made:

At the person’s cost in accordance with the fees prescribed in accordance with section 92(1)(b) of the Promotion of Access to Information Act;

During normal business hours; and

Under the supervision determined by a senior SARS official.

APPLICATION FOR RETURN OF SEIZED RELEVANT MATERIAL OR COSTS OF DAMAGES

A person may request SARS to:

Return some or all of the seized material; and

Pay the costs of physical damage caused during the conduct of a search and seizure.

If SARS refuses the request, the person may apply to a High Court for the return of the seized material or payment of compensation for physical damage caused during the conduct of the search and seizure.

The court may, on good cause shown, make the order as it deems fit.

If the court sets aside the warrant issued or orders the return of the seized material, the court may nevertheless authorise SARS to retain the original or a copy of any relevant material in the interests of justice.

CONFIDENTIALITY OF INFORMATION

GENERAL PROHIBITION OF DISCLOSURE

This Chapter applies to:

SARS confidential information; and

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Taxpayer information, which means any information provided by a taxpayer or obtained by SARS in respect of the taxpayer, including biometric information.

An oath or solemn declaration must be taken before a magistrate, justice of the peace or commissioner of oaths by a SARS official and the Tax Ombud.

In the event of the disclosure of SARS confidential information or taxpayer information, the person to whom it was so disclosed may not in any manner disclose, publish or make it known to any other person who is not a SARS official.

The Commissioner may, for purposes of protecting the integrity and reputation of SARS as an organisation and after giving the taxpayer at least 24 hours’ notice, disclose taxpayer information to counter or rebut false allegations or information disclosed by the taxpayer, the taxpayer’s duly authorised representative or other person acting under the instructions of the taxpayer and published in the media or in any other manner.

A person who is a SARS official or former SARS official may disclose SARS confidential information if:

The information is public information;

Authorised by the Commissioner;

Disclosure is authorised under any other Act which expressly provides for the disclosure of the information despite the provisions in this Chapter;

Access has been granted for the disclosure of the information in terms of the Promotion of Access to Information Act; or

Required by order of a High Court.

SECRECY OF TAXPAYER INFORMATION AND GENERAL DISCLOSURE

A person who is a current or former SARS official must preserve the secrecy of taxpayer information and may not disclose taxpayer information to a person who is not a SARS official.

The Act does not prohibit the disclosure of information:

To the taxpayer; or

With the written consent of the taxpayer, to another person.

Biometric information of a taxpayer may not be disclosed by SARS.

The Commissioner may, publish:

The name and taxpayer reference number of a taxpayer; and

A list of approved public benefit organisations for the purposes of the provisions of sections 18A and 30 of the Income Tax Act.

DISCLOSURE IN CRIMINAL, PUBLIC SAFETY OR ENVIRONMENTAL MATTERS

If so ordered by a judge, a senior SARS official must disclose the information to:

The National Commissioner of the South African Police Service;

The National Director of Public Prosecutions.

The above disclosure applies to information which may reveal evidence:

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That an offence (other than a tax offence) has been or may be committed in respect of which a court may impose a sentence of imprisonment exceeding five years;

That may be relevant to the investigation or prosecution of the offence; or

Of an imminent and serious public safety or environmental risk.

SELF-INCRIMINATION

A taxpayer may not refuse to comply with his or her obligations in terms of legislation to complete and file a return or an application on the grounds that to do so might incriminate him or her, and an admission by the taxpayer contained in a return, application, or other document submitted to SARS by a taxpayer is admissible in criminal proceedings against the taxpayer for a tax offence unless a competent court directs otherwise.

DISCLOSURE TO TAXPAYER OF OWN RECORD

A taxpayer or the taxpayer’s duly authorised representative is entitled to obtain:

A copy, certified by SARS, of the recorded particulars of an assessment or decision;

Access to information submitted to SARS by the taxpayer or by a person on the taxpayer’s behalf; and

Other information relating to the tax affairs of the taxpayer.

A request for the above information must be made under the Promotion of Access to Information Act.

The person requesting may be required to pay for the costs of copies in accordance with the Promotion of Access to Information Act.

PUBLICATION OF NAMES OF OFFENDERS

The Commissioner may publish the particulars relating to a tax offence committed by a person, if:

The person was convicted of the offence; and

All appeal or review proceedings relating to the offence have been completed or were not instituted within the period allowed.

The above publication may specify:

The name and area of residence of the offender;

Any particulars of the offence that the Commissioner thinks fit; and

The particulars of the fine or sentence imposed.

ASSESSMENTS

ORIGINAL ASSESSMENTS

If a tax Act requires a taxpayer to submit a return which does not incorporate a determination of the amount of a tax liability, SARS must make an original assessment based on the return submitted by the taxpayer or other information available or obtained in respect of the taxpayer.

If a tax Act requires a taxpayer to submit a return which incorporates a determination of the amount of a tax liability, the submission of the return is an original self-assessment of the tax liability.

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If a tax Act requires a taxpayer to make a determination of the amount of a tax liability and no return is required, the payment of the amount of tax due is an original assessment.

If a taxpayer does not or is not required to submit a return, SARS may make an assessment based on an estimate.

ADDITIONAL ASSESSMENTS

If at any time SARS is satisfied that an assessment does not reflect the correct application of a Tax Act to the prejudice of SARS or the fiscus, SARS must make an additional assessment to correct the prejudice.

REDUCED ASSESSMENTS

SARS may make a reduced assessment if:

The taxpayer successfully disputed the assessment;

Necessary to give effect to a settlement;

Necessary to give effect to a judgment; or

SARS is satisfied that there is an error in the assessment as a result of an undisputed error.

JEOPARDY ASSESSMENTS

SARS may make a jeopardy assessment in advance of the date on which the return is normally due, if the Commissioner is satisfied that it is required to secure the collection of tax that would otherwise be in jeopardy.

ESTIMATION OF ASSESSMENTS

SARS may make an original, additional, reduced or jeopardy assessment based in whole or in part on an estimate if the taxpayer:

Fails to submit a return as required; or

Submits a return or information that is incorrect or inadequate.

SARS must make the estimate based on information readily available to it.

If the taxpayer is unable to submit an accurate return, a senior SARS official may agree in writing with the taxpayer as to the amount of tax chargeable and issue an assessment accordingly, which assessment is not subject to objection or appeal?

NOTICE OF ASSESSMENT

SARS must issue a notice of the assessment stating:

The name of the taxpayer;

Reference number, or if one has not been allocated, any other form of identification;

Date of the assessment;

Amount of the assessment;

Tax period in relation to which the assessment is made;

Date for paying the amount assessed; and

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Summary of the procedures for lodging an objection to the assessment.

WITHDRAWAL OF ASSESSMENTS

SARS may, despite the fact that no objection has been lodged or appeal noted, withdraw an assessment which:

Was issued to the incorrect taxpayer;

Was issued in respect of the incorrect tax period; or

Was issued as a result of an incorrect payment allocation.

PERIOD OF LIMITATIONS FOR ISSUANCE OF ASSESSMENTS

SARS may not make an assessment:

Three years after the date of assessment of an original assessment by SARS;

In all other cases five years.

The above limitation does not apply to the extent that:

In the case of assessment by SARS, the fact that the full amount of tax chargeable was not assessed, was due to:

○ Fraud;

○ Misrepresentation; or

○ Non-disclosure of material facts.

In the case of self-assessment, the fact that the full amount of tax chargeable was not assessed, was due to:

○ Fraud;

○ Intentional or negligent misrepresentation;

○ Intentional or negligent non-disclosure of material facts; or

○ The failure to submit a return or, if no return is required, the failure to make the required payment of tax.

TAX LIABILITY AND PAYMENT

REPRESENTATIVE TAXPAYER

A representative taxpayer means a person who is responsible for paying the tax liability of another person as an agent, other than as a withholding agent, and includes a person who:

Is a representative taxpayer;

Is a representative employer;

Is a representative vendor.

Every person who becomes or ceases to be a representative taxpayer must notify SARS within 21 business days.

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A taxpayer is not relieved from any liability, responsibility or duty by reason of the fact that the taxpayer’s representative:

Failed to perform such responsibilities or duties; or

Is liable for the tax payable by the taxpayer.

LIABILITY OF REPRESENTATIVE TAXPAYER

A representative taxpayer is liable for the amount of tax specified by a Tax Act.

A representative taxpayer may be assessed in respect of a tax specified by a Tax Act, but such assessment is regarded as made upon the representative taxpayer in such capacity only.

PERSONAL LIABILITY OF REPRESENTATIVE TAXPAYER

A representative taxpayer is personally liable for tax payable in the representative taxpayer’s representative capacity while it remains unpaid.

WITHHOLDING AGENT

Withholding agent means a person who must withhold an amount of tax and pay it to SARS.

PERSONAL LIABILITY OF WITHHOLDING AGENT

A withholding agent is personally liable for an amount of tax:

Withheld and not paid to SARS; or

Which should have been withheld under a Tax Act but was not so withheld.

RESPONSIBLE THIRD PARTY

Responsible third party means a person who becomes otherwise liable for the tax liability of another person, other than as a representative taxpayer or as a withholding agent, whether in a personal or representative capacity.

PERSONAL LIABILITY OF RESPONSIBLE THIRD PARTY

A responsible third party is personally liable.

RIGHT TO RECOVERY OF TAXPAYER

A representative taxpayer, withholding agent or responsible third party who pays a tax is entitled:

To recover the amount so paid from the person on whose behalf it is paid; or

To retain out of money or assets in that person’s possession or that may come to that person in that representative capacity, an amount equal to the amount so paid.

SECURITY BY TAXPAYER

A senior SARS official may require security from a taxpayer to safeguard the collection of tax by SARS, if the taxpayer:

Is a representative taxpayer, withholding agent or responsible third party who was previously held liable in the taxpayer’s personal capacity under a tax Act;

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Has been convicted of a tax offence;

Has frequently failed to pay amounts of tax due;

Has frequently failed to carry out other obligations imposed under any tax Act which constitutes non-compliance.

If security is required, SARS must by written notice to the taxpayer require the taxpayer to furnish to or deposit with SARS security for the payment of any tax which has or may become payable by the taxpayer.

The security must be of the nature, amount and form that the senior SARS official directs.

If the security is in the form of cash deposit and the taxpayer fails to make such deposit, it may:

Be collected as if it were a tax debt of the taxpayer recoverable under this Act; or

Be set-off against any refund due to the taxpayer.

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A senior SARS official may, in the case of a taxpayer which is not a natural person and cannot provide the security require of any or all of the members, shareholders or trustees who control or are involved in the management of the taxpayer to enter into a contract of surety ship in respect of the taxpayer’s liability for tax which may arise from time to time.

DETERMINATION OF TIME AND MANNER OF PAYMENT OF TAX

Tax must be paid by the day and at the place notified by SARS and must be paid as a single amount or in terms of an instalment payment agreement.

SARS may prescribe the method of payment of tax, including electronically.

A senior SARS official may, if there are reasonable grounds to believe that:

A taxpayer will not pay the full amount of tax;

A taxpayer will dissipate the taxpayer’s assets; or

That recovery may become difficult in the future, require the taxpayer to:

○ Pay the full amount immediately upon receipt of the notice of assessment or within the period as the official deems appropriate; or

○ Provide such security as the official deems necessary.

PRESERVATION ORDER

A senior SARS official may authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer or other person prohibiting any person from dealing in any manner with the assets to which the order relates.

SARS may, in anticipation of the application and in order to prevent any realisable assets from being disposed of or removed which may frustrate the collection of the full amount of tax due, seize the assets pending the outcome of an application for a preservation order, which application must commence within 24 hours from the time of seizure of the assets or the further period that SARS and the taxpayer or other person may agree on.

Until a preservation order is made in respect of the seized assets, SARS must take reasonable steps to preserve and safeguard the assets.

A preservation order may be made if required to secure the collection of tax and in respect of:

Realisable assets seized by SARS;

The realisable assets as may be specified in the order and which are held by the person against whom the preservation order is being made;

All realisable assets held by the person, whether it is specified in the order or not; or

All assets which, if transferred to the person after the making of the preservation order, would be realisable assets.

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If the taxpayer or other person has been absent for a period of 21 business days from his or her usual place of residence or business within the Republic, the court may direct that it will be sufficient service of that notice or rule if a copy thereof is affixed to or near the outer door of the building where the court sits and published in the Gazette, unless the court directs some other mode of service.

In order to prevent any realisable assets that were not seized from being disposed of or removed contrary to a preservation order, a senior SARS official may seize the assets if the official has reasonable grounds to believe that the assets will be so disposed of or removed.

PAYMENT OF TAX PENDING OBJECTION OR APPEAL

Unless a senior SARS official otherwise directs:

The obligation to pay tax; and

The right of SARS to receive and recover tax, will not be suspended by an objection or appeal or pending the decision of a court of law.

A taxpayer may request a senior SARS official to suspend the payment of tax or a portion thereof due under an assessment if the taxpayer intends to dispute or disputes the liability to pay that tax.

A senior SARS official may suspend payment of the disputed tax having regard to:

The compliance history of the taxpayer;

The amount of tax involved;

The risk of dissipation of assets by the taxpayer concerned during the period of suspension;

Whether the taxpayer is able to provide adequate security for the payment of the amount involved;

Whether payment of the amount involved would result in irreparable financial hardship to the taxpayer;

Whether sequestration or liquidation proceedings are imminent;

Whether fraud is involved in the origin of the dispute; or

Whether the taxpayer has failed to furnish information requested under this Act for purposes of a decision under this section.

TAXPAYER ACCOUNT AND ALLOCATION OF PAYMENTS

TAXPAYER ACCOUNT

SARS must maintain one or more taxpayer accounts for each taxpayer.

The taxpayer account must reflect the tax due in respect of each tax type included in the account.

The taxpayer account must record details for all tax periods of:

The tax owed;

Any penalty imposed;

The interest payable on outstanding amounts due;

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Any other amount owed;

Tax payments made by or on behalf of the taxpayer; and

Any credit for amounts paid that the taxpayer is entitled to have set off against the taxpayer’s tax liability.

From time to time, or when requested by the taxpayer, SARS must send to the taxpayer a statement of account, reflecting the amounts currently due and the details that SARS considers appropriate.

ALLOCATION OF PAYMENTS

SARS may allocate any payment made against the oldest amount of tax outstanding at the time of the payment, other than amounts:

For which payment has been suspended; or

That are payable in terms of an instalment payment agreement.

SARS may apply the first-in-first-out principle.

DEFERRAL OF PAYMENT

INSTALMENT PAYMENT AGREEMENT

A senior SARS official may enter into an agreement with a taxpayer under which the taxpayer is allowed to pay a tax debt in one sum or in instalments.

SARS may terminate an instalment payment agreement if the taxpayer fails to pay an instalment or to otherwise comply with its terms and a payment prior to the termination of the agreement must be regarded as part payment of the tax debt.

CRITERIA FOR INSTALMENT PAYMENT AGREEMENT

A senior SARS official may enter into an instalment payment agreement only if:

The taxpayer suffers from a deficiency of assets or liquidity which is reasonably certain to be remedied in the future;

The taxpayer anticipates income or other receipts which can be used to satisfy the tax debt;

Prospects of immediate collection activity are poor or uneconomical but are likely to improve in the future;

Collection activity would be harsh in the particular case and the deferral or instalment agreement is unlikely to prejudice tax collection; or

The taxpayer provides the security as may be required by the official.

RECOVERY OF TAX

DEBT DUE TO SARSAn amount of tax due or payable is a tax debt due to SARS for the benefit of the National Revenue Fund.

A tax debt due to SARS is recoverable by SARS, and is recoverable from:

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In the case of a representative taxpayer who is not personally liable, any assets belonging to the person represented which are in the representative taxpayer’s possession or under his or her management or control; or

In any other case, any assets of the taxpayer.

SARS need not recover an amount if the amount is less than R100 but the amount must be carried forward in the relevant taxpayer account.

PERIOD OF LIMITATION ON COLLECTION OF TAX

Proceedings for recovery of a tax debt may not be initiated after the expiration of 15 years from the date the assessment of tax.

APPLICATION FOR CIVIL JUDGMENT FOR RECOVERY OF TAX

If a person fails to pay tax when it is payable, SARS may, after giving the person at least 10 business days’ notice, file with the clerk or Registrar of a competent court a certified statement setting out the amount of tax payable and certified by SARS as correct.

SARS may file the statement irrespective of whether or not the amount of tax is subject to an objection or appeal, unless the obligation to pay the amount has been suspended.

SARS is not required to give the taxpayer prior notice if SARS is satisfied that giving notice would prejudice the collection of the tax.

INSTITUTION OF SEQUESTRATION, LIQUIDATION OR WINDING-UP PROCEEDINGS

SARS may institute proceedings for the sequestration, liquidation or winding-up of a person for a tax debt.

SARS may institute the proceedings whether or not the person:

Is present in the Republic; or

Has an asset in the Republic.

If the tax debt is subject to an objection or appeal or a further appeal against a decision by the tax court, the proceedings may only be instituted with leave of the court before which the proceedings are brought.

LIABILITY OF THIRD PARTY APPOINTED TO SATISFY TAX DEBTS

A senior SARS official may by notice to a person who holds or owes or will hold or owe any money, including a pension, salary, wage or other remuneration, for or to a taxpayer, require the person to pay the money to SARS in satisfaction of the taxpayer’s tax debt.

A person that is unable to comply with a requirement of the notice, must advise the senior SARS official of the reasons for the inability to comply within the period specified in the notice and the official may withdraw or amend the notice as is appropriate under the circumstances.

A person receiving the notice must pay the money in accordance with the notice and, if the person parts with the money contrary to the notice, the person is personally liable for the money.

SARS may, on request by a person affected by the notice, amend the notice to extend the period over which the amount must be paid to SARS, to allow the taxpayer to pay the basic living expenses of the taxpayer and his or her dependants.

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LIABILITY OF FINANCIAL MANAGEMENT FOR TAX DEBTS

A person is personally liable for any tax debt of the taxpayer to the extent that the person’s negligence or fraud resulted in the failure to pay the tax debt if:

The person controls or is regularly involved in the management of the overall financial affairs of a taxpayer; and

A senior SARS official is satisfied that the person is or was negligent or fraudulent in respect of the payment of the tax debts of the taxpayer.

LIABILITY OF SHAREHOLDERS FOR TAX DEBTS

This section applies where a company is wound up other than by means of an involuntary liquidation without having satisfied its tax debt, including its liability as a responsible third party, withholding agent, or a representative taxpayer, employer or vendor.

The persons who are shareholders of the company within one year prior to its winding up are jointly and severally liable to pay the unpaid tax to the extent that:

They receive assets of the company in their capacity as shareholders within one year prior to its winding-up; and

The tax debt existed at the time of the receipt of the assets or would have existed had the company complied with its obligations under a tax Act.

The liability of the shareholders is secondary to the liability of the company.

Persons who are liable for tax of a company under this section may avail themselves of any rights against SARS as would have been available to the company.

This section does not apply:

In respect of a ‘‘listed company’’ within the meaning of the Income Tax Act; or

In respect of a shareholder of a listed company.

LIABILITY OF TRANSFEREE FOR TAX DEBTS

A person (referred to as a transferee) who receives an asset from a taxpayer who is a connected person in relation to the transferee without consideration or for consideration below the fair market value of the asset is liable for the tax debt of the taxpayer.

The liability is limited to the lesser of:

The tax debt that existed at the time of the receipt of the asset or would have existed had the transferor complied with the transferor’s obligations under a tax Act; and

The fair market value of the asset at the time of the transfer, reduced by the fair market value of any consideration paid, at the time of payment.

The above applies only to an asset received by the transferee within one year before SARS notifies the transferee of liability under this section.

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LIABILITY OF PERSON ASSISTING IN DISSIPATION OF ASSETS

If a person knowingly assists in dissipating a taxpayer’s assets in order to obstruct the collection of a tax debt of the taxpayer, the person is jointly and severally liable with the taxpayer for the tax debt to the extent that the person’s assistance reduces the assets available to pay the taxpayer’s tax debt.

COMPULSORY REPATRIATION OF FOREIGN ASSETS OF TAXPAYER

To collect a tax debt, a senior SARS official may apply for an order, if:

The taxpayer concerned does not have sufficient assets located in the Republic to satisfy the tax debt in full; and

The senior SARS official believes that the taxpayer:

○ Has assets outside the Republic; or

○ Has transferred assets outside the Republic for no consideration or for consideration less than the fair market value which may fully or partly satisfy the tax debt.

A senior SARS official may apply to the High Court for an order compelling the taxpayer to repatriate assets located outside the Republic within a period prescribed by the court in order to satisfy the tax debt.

In addition the court may:

Limit the taxpayer’s right to travel outside the Republic and require the taxpayer to surrender his or her passport to SARS;

Withdraw a taxpayer’s authorisation to conduct business in the Republic, if applicable;

Require the taxpayer to cease trading; or

Issue any other order it deems fit.

INTEREST

GENERAL INTEREST RULES

Interest payable is calculated on the daily balance owing and compounded monthly.

The effective date for purposes of the calculation of interest in relation to:

Tax other than income tax or estate duty for any tax period, is the date by which tax for the tax period is due and payable under a Tax Act;

Income tax for any year of assessment, is the date falling seven months after the last day of that year in the case of a taxpayer that has a year of assessment ending on the last day of February, and six months in any other case;

Estate duty for any period, is the earlier of the date of assessment or 12 months after the date of death;

A fixed amount penalty is the date of assessment of the penalty, and in relation to an increment of the penalty, the date of the increment;

A percentage based penalty, is the date by which tax for the tax period should have been paid; and

An understatement penalty is the effective date for the tax understated.

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If a senior SARS official is satisfied that interest payable by a taxpayer is payable as a result of circumstances beyond the taxpayer’s control, the official may, unless prohibited by a tax Act, direct that so much of the interest as is attributable to the circumstances is not payable by the taxpayer.

The circumstances referred to above are limited to:

A natural or human-made disaster;

A civil disturbance or disruption in services; or

A serious illness or accident.

PERIOD OVER WHICH INTEREST ACCRUES

Interest payable is imposed for the period from the effective date of the tax to the date the tax is paid.

Interest on an amount refundable is calculated from the later of the effective date or the date that the excess was received by SARS to the date the refunded tax is paid; and if a refund is offset against a liability of the taxpayer the date on which the offset is effected is considered to be the date of payment of the refund.

RATE AT WHICH INTEREST IS CHARGED

The rate at which interest is payable is the prescribed rate.

In the case of interest payable with respect to refunds on assessment of provisional tax and employees’ tax paid for the relevant year of assessment, the rate payable by SARS is four percentage points below the prescribed rate.

REFUNDS

REFUNDS OF EXCESS PAYMENTS

A person is entitled to a refund of:

An amount properly refundable under a Tax Act and if so reflected in an assessment; or

The amount erroneously paid in respect of an assessment in excess of the amount payable in terms of the assessment.

SARS need not authorise a refund until such time that verification, inspection or audit of the refund has been finalised.

SARS must authorise the payment of a refund before the finalisation of the verification, inspection or audit if security in a form acceptable to a senior SARS official is provided by the taxpayer.

A person is entitled to a refund only if the refund is claimed by the person within three years, in the case of an assessment by SARS, or five years, in the case of self-assessment, from the date of the assessment.

If SARS pays to a person by way of a refund any amount which is not properly payable to the person, the amount is regarded as tax that is payable by the person to SARS from the date on which it is paid to the person.

A decision not to authorise a refund under this section is subject to objection and appeal.

REFUNDS SUBJECT TO SET-OFF AND DEFERRAL

If a taxpayer has an outstanding tax debt, an amount that is refundable, including interest thereon, must be treated as a payment by the taxpayer that is recorded in the taxpayer’s account, to the extent of the amount outstanding, and any remaining amount must be set off against any outstanding debt.

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The above does not apply to a tax debt:

That is disputed or suspended; or

In respect of which an instalment payment agreement or a compromise applies.

An amount is not refundable if the amount is less than R100, but the amount must be carried forward in the taxpayer account.

WRITE-OFF OR COMPROMISE OF TAX DEBTS

TEMPORARY WRITE OFF OF TAX DEBT

A senior SARS official may decide to temporarily ‘write off’ an amount of tax debt if satisfied that the tax debt is uneconomical to pursue.

A decision by the senior SARS official to temporarily ‘write off’ an amount of tax debt does not absolve the ‘debtor’ from the liability for that tax debt.

A senior SARS official may at any time withdraw the decision to temporarily ‘write off’ a tax debt if satisfied that the tax debt is no longer uneconomical to pursue and that the decision to temporarily ‘write off’ would jeopardise the general tax collection effort.

TAX DEBT UNECONOMICAL TO PURSUE

A tax debt is uneconomical to pursue if a senior SARS official is satisfied that the total cost of recovery will in all likelihood exceed the anticipated amount to be recovered.

In determining whether the cost of recovery is likely to exceed the anticipated amount a senior SARS official must have regard to:

The amount of the tax debt;

The length of time that the tax debt has been outstanding;

The steps taken to date to recover the tax debt and the costs involved in those steps, including steps taken to locate or trace the debtor;

The likely costs of continuing action to recover the tax debt and the anticipated return from that action, including the likely recovery of costs that may be awarded to SARS;

The financial position of the debtor, including that debtor’s assets and liabilities, cash flow, and possible future income streams; and

Any other information available with regard to the recoverability of the tax debt.

PERMANENT WRITE OFF OF TAX DEBT

A senior SARS official may authorise the permanent ‘write off’ of an amount of tax debt:

To the extent satisfied that the tax debt is irrecoverable at law; or

If the debt is compromised.

SARS must notify the debtor in writing of the amount of tax debt ‘written off’.

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TAX DEBT IRRECOVERABLE AT LAW

A tax debt is irrecoverable at law if:

It cannot be recovered by action and judgment of a court; or

It is owed by a debtor that is in liquidation or sequestration and it represents the balance outstanding after notice is given by the liquidator or trustee that no further dividend is to be paid or a final dividend has been paid to the creditors of the estate; or

It is owed by a debtor that is subject to a business rescue plan.

A tax debt is not irrecoverable at law if SARS has not first explored action against or recovery from the personal ‘assets’ of the persons who may be liable for the debt.

PROCEDURE FOR WRITING OFF TAX DEBT

Before deciding to ‘write off’ a tax debt, a senior SARS official must:

Determine whether there are any other tax debts owing to SARS by the debtor;

Reconcile amounts owed by and to the ‘debtor’, including penalties, interest and costs;

Obtain a breakdown of the tax debt and the periods to which the outstanding amounts relate; and

Document the history of the recovery process and the reasons for deciding to ‘write off’ the tax debt.

COMPROMISE OF TAX DEBT

A senior SARS official may authorise the ‘compromise’ of a portion of a tax debt upon request by a ‘debtor’ if:

The purpose of the ‘compromise’ is to secure the highest net return from the recovery of the tax debt; and

The ‘compromise’ is consistent with considerations of good management of the tax system and administrative efficiency.

REQUEST BY DEBTOR FOR COMPROMISE OF TAX DEBT

A request by a debtor for a tax debt to be ‘compromised’ must be signed by the debtor and be supported by a detailed statement setting out:

Assets and liabilities reflecting current fair market value;

Amounts received by or accrued to, and expenditure incurred during the 12 months immediately preceding the request;

Assets which have been disposed of in the preceding three years, together with their value, the consideration received or accrued, the identity of the person who acquired the assets and the relationship between the debtor and the person who acquired the assets;

Future interests in any assets whether certain or contingent or subject to the exercise of a discretionary power by another person;

Assets’ over which the debtor either alone or with other persons, has a direct or indirect power of appointment or disposal, whether as trustee or otherwise;

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Details of any connected person in relation to that debtor;

The debtor present sources and level of income and the anticipated sources and level of income for the next three years, with an outline of the debtor’s financial plans for the future; and

The debtor’s reasons for seeking a compromise.

The request must be accompanied by the evidence supporting the debtor’s claims for not being able to make payment of the full amount of the tax debt.

The debtor must warrant that the information provided in the application is accurate and complete.

A senior SARS official may require that the application be supplemented by such further information as may be required.

CIRCUMSTANCES WHERE NOT APPROPRIATE TO COMPROMISE TAX DEBT

A senior SARS official may not ‘compromise’ any amount of a tax debt if:

The debtor was a party to an agreement with SARS to ‘compromise’ an amount of tax debt within the period of three years immediately before the request for the ‘compromise’;

The tax affairs of the debtor (other than the outstanding tax debt) are not up to date;

Another creditor has communicated its intention to initiate or has initiated liquidation or sequestration proceedings;

The ‘compromise’ will prejudice other creditors;

It may adversely affect broader taxpayer compliance; or

The debtor is a company or a trust and SARS has not first explored action against or recovery from the personal ‘assets’ of the persons who may be liable for the debt.

PROCEDURE FOR COMPROMISE OF TAX DEBT

To ‘compromise’ a tax debt, a senior SARS official and the debtor must sign an agreement setting out:

The amount payable by the debtor in full satisfaction of the debt;

The undertaking by SARS not to pursue recovery of the balance of the tax debt; and

The conditions subject to which the tax debt is ‘compromised’ by SARS.

REGISTER OF TAX DEBTS WRITTEN OFF OR COMPROMISED

SARS must maintain a register of the tax debts ‘written off’ or ‘compromised’.

ADMINISTRATIVE NON-COMPLIANCE PENALTIES

NON-COMPLIANCE SUBJECT TO PENALTY

If SARS is satisfied that non-compliance by a person exists, excluding the non-payment of tax, SARS must impose the appropriate ‘penalty’ in accordance with the penalty table.

Non-compliance is a failure to comply with an obligation that is imposed by or under a tax Act and is listed in a public notice issued by the Commissioner, other than:

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The failure to pay tax subject to a percentage based penalty; or

Non-compliance subject to an understatement penalty.

FIXED AMOUNT PENALTY TABLE

For the non-compliance, SARS must impose a ‘penalty’ in accordance with the following table:

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Table: Amount of Administrative Non-Compliance PenaltyThe fixed amounts are to be imposed by SARS in accordance with the following table:

Item Assessed loss or taxable income for preceding year of assessment

Penalty Maximum penalty

(i) Assessed loss R250 R8 750

(ii) R0 – R250 000 R250 R8 750

(iii) R250 001 – R500 000 R500 R17 500

(iv) R500 001 – R1 000 000 R1 000 R35 000

(v) R1 000 001 – R5 000 000 R2 000 R70 000

(vi) R5 000 001 – R10 000 000 R4 000 R140 000

(vii) R10 000 001- R50 000 000 R8 000 R280 000

(viii) R50 000 000 and above R16 000 R560 0000

The amount of the ‘penalty’ in column 3 will increase automatically by the same amount for each month, or part thereof, that the person fails to remedy the non-compliance within one month after:

The date assessment of the penalty, if SARS is in possession of the current address of the person and is able to deliver the assessment, but limited to 35 months after the date of assessment; or

The date of the non-compliance if SARS is not in possession of the current address of the person and is unable to deliver the ‘penalty assessment’, but limited to 47 months after the date of non-compliance.

The following persons, except those falling under item (viii) of the Table or those that did not trade during the year of assessment, are treated as falling under item (vii) of the Table:

A company listed on a recognised stock exchange;

A company whose gross receipts or accruals for the ‘preceding year’ exceed R500 million;

A company that forms part of a ‘‘group of companies’’ as defined in section 1 of the Income Tax Act ;or

A person or entity, exempt from income tax under the Income Tax Act but liable to tax under another tax Act, whose gross receipts or accruals exceed R30 million.

REPORTABLE ARRANGEMENT PENALTY

A ‘participant’ who fails to disclose the information in respect of a reportable arrangement is liable to a ‘penalty’, for each month that the failure continues (up to 12 months), in the amount of:

R50 000, in the case of a ‘participant’ other than the ‘promoter’; or

R100 000, in the case of the ‘promoter’.

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The amount above is doubled if the amount of anticipated ‘tax benefit’ for the ‘participant’ by reason of the arrangement exceeds R5 000 000, and is tripled if the benefit exceeds R10 000 000.

PERCENTAGE BASED PENALTY

IMPOSITION OF PERCENTAGE BASED PENALTY

If SARS is satisfied that an amount of tax was not paid, SARS must, in addition to any other ‘penalty’ or interest for which a person may be liable impose a ‘penalty’ equal to the percentage of the amount of unpaid tax as prescribed in the Tax Act.

PROCEDURES FOR IMPOSING PENALTY

PENALTY ASSESSMENT

A ‘penalty’ is imposed by way of a ‘penalty assessment’, and if a ‘penalty assessment’ is made, SARS must give notice of the assessment, including the following:

The non-compliance in respect of which the ‘penalty’ is assessed and its duration;

The amount of the ‘penalty’ imposed;

The date for paying the ‘penalty’;

The automatic increase of the ‘penalty’; and

A summary of procedures for requesting remittance of the ‘penalty’.

PAYMENT OF PENALTY

A ‘penalty’ is due upon assessment and must be paid:

On or before the date for payment stated in the notice of the ‘penalty assessment’; or

Where the ‘penalty assessment’ is made together with an assessment of tax, on or before the deadline for payment stated in the notice of the assessment for tax.

PROCEDURE TO REQUEST REMITTANCE OF PENALTY

A person who is aggrieved by a ‘penalty assessment’ notice may, on or before the date for payment in the ‘penalty assessment’ request SARS to remit the ‘penalty’.

The ‘remittance request’ must include:

A description of the circumstances which prevented the person from complying with the relevant obligation; and

The supporting documents and information as may be required by SARS.

During the period commencing on the day that SARS receives the ‘remittance request’, and ending 21 business days after notice has been given of SARS’ decision, no collection steps relating to the ‘penalty’ amount may be taken unless SARS has a reasonable belief that there is:

A risk of dissipation of assets by the person concerned; or

Fraud involved in the origin of the non-compliance or the grounds for remittance.

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REMITTANCE OF PENALTY FOR FAILURE TO REGISTER

If a ‘penalty’ is imposed on a person for a failure to register, SARS may remit the ‘penalty’ in whole or in part if:

The failure to register was discovered because the person approached SARS voluntarily; and

The person has filed all returns required under a tax Act.

REMITTANCE OF PENALTY FOR NOMINAL OR FIRST INCIDENCE OF NON-COMPLIANCE

If a ‘penalty’ has been imposed in respect of:

A first incidence of the non-compliance; or

An incidence of non-compliance under fixed amount penalties if the duration of the non-compliance is less than five business days, SARS may, in respect of a fixed amount penalty, remit the ‘penalty’, or a portion thereof, up to an amount of R2 000 if SARS is satisfied that:

○ Reasonable grounds for the non-compliance exist; and

○ The non-compliance in issue has been remedied.

In the case of a reportable arrangement penalty, the limit for the penalty is R 100 000.

In the case of a percentage based penalty SARS may remit the ‘penalty’, or a portion thereof, if SARS is satisfied that:

The ‘penalty’ has been imposed in respect of a ‘first incidence’ of the non-compliance or involved an amount of less than R2 000;

Reasonable grounds for the non-compliance exist; and

The non-compliance in issue has been remedied.

REMITTANCE OF PENALTY IN EXCEPTIONAL CIRCUMSTANCES

SARS must, upon receipt of a ‘remittance request’, remit the ‘penalty’ or if applicable a portion thereof, if SARS is satisfied that one or more of the circumstances referred to below rendered the person incapable of complying with the relevant obligation.

The circumstances are limited to:

A natural or human-made disaster;

A civil disturbance or disruption in services;

A serious illness or accident;

Serious emotional or mental distress;

Any of the following acts by SARS:

○ A capturing error;

○ A processing delay;

○ Provision of incorrect information in an official publication or media release issued by the Commissioner;

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○ Delay in providing information to any person; or

○ Failure by SARS to provide sufficient time for an adequate response to a request for information by SARS;

○ Serious financial hardship, such as:

― In the case of an individual, lack of basic living requirements;

― In the case of a business, an immediate danger that the continuity of business operations and the continued employment of its employees are jeopardised; or

Any other circumstance of analogous seriousness.

OBJECTION AND APPEAL AGAINST DECISION NOT TO REMIT PENALTY

A decision by SARS not to remit a ‘penalty’ in whole or in part is subject to objection and appeal.

UNDERSTATEMENT PENALTY

SUBSTANTIAL UNDERSTATEMENT

A case where the prejudice to SARS exceeds the greater of five per cent of the amount of ‘tax’ properly chargeable or refundable, or R1 000 000.

UNDERSTATEMENT

Any prejudice to SARS as a result of:

A default in rendering a return;

An omission from a return;

An incorrect statement in a return; or

If no return is required, the failure to pay the correct amount of ‘tax’.

UNDERSTATEMENT PENALTY

In the event of an ‘understatement’ by a taxpayer, the taxpayer must pay, in addition to the ‘tax’ payable for the relevant tax period, the understatement penalty.

The understatement penalty is the amount resulting from applying the highest applicable understatement penalty percentage to the shortfall.

The shortfall is the sum of:

The difference between the amount of ‘tax’ properly chargeable for the tax period and the amount of ‘tax’ that would have been chargeable if the ‘understatement’ were accepted;

The difference between the amount properly refundable for the tax period and the amount that would have been refundable if the ‘understatement’ were accepted; and

The difference between the amount of an assessed loss or any other benefit to the taxpayer properly carried forward from the tax period to a succeeding tax period and the amount that would have been carried forward if the ‘understatement’ were accepted, multiplied by the tax rate.

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UNDERSTATEMENT PENALTY TABLE

Item2

Behaviour3

Standard case4

If obstructive, or if it is a

'repeat case'

5 Voluntary

disclosure after notification of

audit

6 Voluntary disclosure

before notification of

audit

(i) 'Substantial understatement'

25% 50% 5% 0%

(ii) Reasonable care not taken in completing return

50% 75% 25% 0%

(iii) No reasonable grounds for 'tax position' taken

75% 100% 35% 0%

(iv) Gross negligence

100% 125% 50% 5%

(v) Intentional tax evasion

150% 200% 75% 10%

SARS must remit a ‘penalty’ imposed for a ‘substantial understatement’ if SARS is satisfied that the taxpayer:

Made full disclosure of the arrangement that gave rise to the prejudice to SARS by no later than the date that the relevant return was due; and

Was in possession of an opinion by a registered tax practitioner that:

○ Was issued by no later than the date that the relevant return was due;

○ Was based upon full disclosure of the specific facts and circumstances of the arrangement and, in the case of any opinion regarding the applicability of the substance over form doctrine or the anti-avoidance provisions of a tax Act, this requirement cannot be met unless the taxpayer is able to demonstrate that all of the steps in or parts of the arrangement were fully disclosed to the tax practitioner, whether or not the taxpayer was a direct party to the steps or parts in question; and

○ Confirmed that the taxpayer’s position is more likely than not to be upheld if the matter proceeds to court.

OBJECTION AND APPEAL AGAINST DECISION NOT TO REMIT UNDERSTATEMENT PENALTY

A decision by SARS not to remit an understatement penalty is subject to objection and appeal.

VOLUNTARY DISCLOSURE PROGRAMME

DEFAULT

The submission of inaccurate or incomplete information to SARS, or the failure to submit information or the adoption of a ‘tax position’, where such submission, non-submission, or adoption resulted in:

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The taxpayer not being assessed for the correct amount of tax;

The correct amount of tax not being paid by the taxpayer; or

An incorrect refund being made by SARS.

QUALIFYING PERSON

A person may apply, whether in a personal, representative, withholding or other capacity, for voluntary disclosure relief, unless that person is aware of:

A pending audit or investigation into the affairs of the person seeking relief; or

An audit or investigation that has commenced, but has not yet been concluded.

A person is deemed to be aware of a pending audit or investigation, or that the audit or investigation has commenced, if:

A representative of the person;

An officer, shareholder or member of the person, if the person is a company;

A partner in partnership with the person;

A trustee or beneficiary of the person, if the person is a trust; or

A person acting for or on behalf of or as an agent or fiduciary of the person, has become aware of a pending audit or investigation, or that the audit or investigation has commenced.

REQUIREMENTS FOR VALID VOLUNTARY DISCLOSURE

The requirements for a valid voluntary disclosure are that the disclosure must:

Be voluntary;

Involve a ‘default’ which has not previously been disclosed by the applicant;

Be full and complete in all material respects;

Involve the potential imposition of an understatement penalty in respect of the ‘default’;

Not result in a refund due by SARS; and

Be made in the prescribed form and manner.

NO-NAME VOLUNTARY DISCLOSURE

A senior SARS official may issue a non-binding private opinion as to a person’s eligibility for relief, if the person provides sufficient information to do so, which information need not include the identity of any party to the ‘default’.

VOLUNTARY DISCLOSURE RELIEF

SARS must, pursuant to the making of a valid voluntary disclosure by the applicant and the conclusions of the voluntary disclosure agreement:

Not pursue criminal prosecution for a tax offence arising from the ‘default’;

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Grant the relief in respect of any understatement penalty to the extent referred to in the understatement penalty percentage table; and

Grant 100 per cent relief in respect of an administrative non-compliance penalty that was or may be imposed.

VOLUNTARY DISCLOSURE AGREEMENT

The approval by a senior SARS official of a voluntary disclosure application and relief, must be evidenced by a written agreement between SARS and the qualifying person who is liable for the outstanding tax in the prescribed format and must include details on:

The material facts of the ‘default’ on which the voluntary disclosure relief is based;

The amount payable by the person, which amount must separately reflect the understatement penalty payable;

The arrangements and dates for payment; and

Relevant undertakings by the parties.

WITHDRAWAL OF VOLUNTARY DISCLOSURE RELIEF

In the event that, subsequent to the conclusion of a voluntary disclosure agreement, it is established that the applicant failed to disclose a matter that was material for purposes of making a valid voluntary disclosure, a senior SARS official may:

Withdraw any relief granted;

Regard an amount paid in terms of the voluntary disclosure agreement to constitute part payment of any further outstanding tax in respect of the relevant ‘default’; and

Pursue criminal prosecution for a tax offence.

Any decision by the senior SARS official is subject to objection and appeal.

ASSESSMENT OR DETERMINATION TO GIVE EFFECT TO AGREEMENT

If a voluntary disclosure agreement has been concluded, SARS may issue an assessment or make a determination for purposes of giving effect to the agreement.

An assessment issued or determination made to give effect to an agreement is not subject to objection and appeal.

CRIMINAL OFFENCES

CRIMINAL OFFENCES RELATING TO NON-COMPLIANCE WITH TAX ACTS

A person who wilfully and without just cause:

Fails or neglects to register or notify SARS of a change in registered particulars;

Fails or neglects to appoint a representative taxpayer or notify SARS of the appointment or change of a representative taxpayer;

Fails or neglects to register as a tax practitioner;

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Fails or neglects to submit a return or document to SARS or issue a document to a person as required under a Tax Act;

Fails or neglects to retain records as required under this Act;

Submits a false certificate or statement;

Issues an erroneous, incomplete or false document required to be issued under a Tax Act to another person;

Refuses or neglects to:

○ Furnish, produce or make available any information, document or thing;

○ Reply to or answer truly and fully any questions put to the person by a SARS official;

○ Take an oath or make a solemn declaration; or

○ Attend and give evidence, as and when required in terms of this Act;

○ Fails to comply with a directive or instruction issued by SARS to the person under a Tax Act;

○ Fails or neglects to disclose to SARS any material facts which should have been disclosed under this Act or to notify SARS of anything which the person is required to so notify SARS under a Tax Act;

○ Obstructs or hinders a SARS official in the discharge of the official’s duties;

○ Refuses to give assistance;

○ Holds himself or herself out as a SARS official engaged in carrying out the provisions of this Act;

○ Fails or neglects to transfer assets or pay the amounts to SARS when requested by SARS; or

○ Dissipates that person’s assets or assists another person to dissipate that other person’s assets in order to impede the collection of any taxes, penalties or interest, is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding two years.

CRIMINAL OFFENCES RELATING TO EVASION OF TAX

A person who with intent to evade or to assist another person to evade tax or to obtain an undue refund under a Tax Act:

Makes or causes or allows to be made any false statement or entry in a return or other document, or signs a statement, return or other document so submitted without reasonable grounds for believing the same to be true;

Gives a false answer, whether orally or in writing, to a request for information made under this Act;

Prepares, maintains or authorises the preparation or maintenance of false books of account or other records or falsifies or authorises the falsification of books of account or other records;

Makes use of, or authorises the use of, fraud or contrivance; or

Makes any false statement for the purposes of obtaining any refund of or exemption from tax, is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding five years.

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CRIMINAL OFFENCES RELATING TO FILING RETURN WITHOUT AUTHORITY

A person who:

Submits a return or other document to SARS under a forged signature;

Uses an electronic or digital signature of another person in an electronic communication to SARS without the person’s consent and authority; or

Otherwise submits to SARS a communication on behalf of another person without the person’s consent and authority; is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding two years.

REGISTRATION OF TAX PRACTITIONERS AND REPORTING OF UNPROFESSIONAL CONDUCT

REGISTRATION OF TAX PRACTITIONERS

Every natural person who:

Provides advice to another person with respect to the application of a Tax Act; or

Completes or assists in completing a return by another person;

Must register with:

○ A ‘recognised controlling body’; and

○ With SARS as a tax practitioner within 21 business days after the date on which that person for the first time provides the advice or completes or assists in completing the return.

The provisions of this section do not apply in respect of a person who:

Provides the advice or completes or assists in completing a return solely for no consideration to that person or his or her employer or a connected person in relation to that employer or that person;

Provides the advice solely in anticipation of or in the course of any litigation to which the Commissioner is a party or where the Commissioner is a complainant;

Provides the advice solely as an incidental or subordinate part of providing goods or other services to another person;

Provides the advice or completes or assists in completing a return solely:

○ To or in respect of the employer by whom that person is employed on a full-time basis or to or in respect of the employer and connected persons in relation to the employer; or

○ Under the direct supervision of a person who is a registered tax practitioner.

A person may not register as a tax practitioner if the person:

During the preceding five years has been removed from a related profession by a ‘controlling body’ for serious misconduct; or

During the preceding five years has been convicted (whether in the Republic or elsewhere) of:

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○ Theft, fraud, forgery or uttering a forged document, perjury or an offence under the Prevention and Combating of Corrupt Activities Act, 2004 (Act 12 of 2004); or

○ Any other offence involving dishonesty, for which the person has been sentenced to a period of imprisonment exceeding two years without the option of a fine or to a fine exceeding the amount prescribed in the Adjustment of Fines Act, 1991 (Act 101 of 1991).

The Tax Administration Act required tax practitioners who provide tax advice or complete returns for payment to be registered with a Recognised Controlling Body and with SARS by 1 July 2013. The Act provides for certain exceptions when persons who provide tax advice or complete returns need no register as a tax practitioner. These exceptions are included under section 240(2) of the Tax Administration Act, and include persons who perform these functions under the direct supervision of a person who is a registered tax practitioner.

The amendment to section 240(2) proposes to replace direct supervision with the concept of acceptance of accountability. This amendment is proposed in clause 68 of the Tax Administration Laws Amendment Bill, 2013, published for public comment in 5 July 2013. Under the current wording of section 240(2) of the Tax Administration Act, the result of using the concept direct supervision according to the industry is that "intermediate managers” between trainees or articled clerks, for example, and a partner or director must also register as tax practitioners.

In view of the arguable adverse practical implications thereof, the amendment to replace direct supervision with the concept of acceptance of accountability is proposed. This will require the partner or director who is a registered tax practitioner, to accept accountability for the actions of both the intermediate manager and the trainees or articled clerks, for example, for purposes of complaints by taxpayers or SARS to the relevant Recognised Controlling Body.

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As it is not a certainty that Parliament will accept the proposed amendment, SARS will not lay complaints or charges for the period after 1 July 2013 if the amendment is not accepted and a person otherwise required to register as a tax practitioner by 1 July 2013 did not do so in anticipation of the outcome of the proposed legislation, if SARS is satisfied that the failure to register was bona fide and solely for this reason.

RECOGNITION OF CONTROLLING BODIES The Commissioner must recognise as a ‘recognised controlling body’:

The Independent Regulatory Board for Auditors;

The South African Legal Practice Council; and

A statutory body that the Minister is satisfied is similar to the bodies mentioned above and the details of which are published in the Gazette.

The Commissioner may recognise a ‘controlling body’ for natural persons providing advice with respect to the application of a tax Act or completing returns as a ‘recognised controlling body’ if the body:

Maintains relevant and effective:

○ Minimum qualification and experience requirements;

○ Continuing professional education requirements;

○ Codes of ethics and conduct; and

○ Disciplinary code and procedures;

Is approved in terms of section 30B of the Income Tax Act for purposes of section 10(1)(d)(iv) of the Act; and

Has at least 1 000 members when applying for recognition or reasonable prospects of having 1 000 members within a year of applying.

The following five controlling bodies have been recognised by SARS in terms of the Tax Administration Act:

Institute of Accounting and Commerce - IAC;

South African Institute of Chartered Secretaries and Administrators - ICSA;

South African Institute of Chartered Accountants - SAICA;

South African Institute of Professional Accountants - SAIPA; and

South African Institute of Tax Practitioners - SAIT.

COMPLAINT TO CONTROLLING BODY A senior SARS official may lodge a complaint with a ‘controlling body’ or person who carries on a profession governed by the ‘controlling body’, did or omitted to do anything with respect to the affairs of a taxpayer, including that person’s affairs, that in the opinion of the official:

Was intended to assist the taxpayer to avoid or unduly postpone the performance of an obligation imposed on the taxpayer under a Tax Act;

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By reason of negligence on the part of the person resulted in the avoidance or undue postponement of the performance of an obligation imposed on the taxpayer;

Constitutes a contravention of a rule or code of conduct for the profession which may result in disciplinary action being taken against the ‘registered tax practitioner.

A senior SARS official may lodge a complaint with a ‘recognised controlling body’ if a registered tax practitioner has, in the opinion of the official:

Without exercising due diligence prepared or assisted in the preparation, approval or submission of any return, affidavit or other document relating to matters affecting the application of any Tax Act;

Unreasonably delayed the finalisation of any matter before SARS;

Given an opinion contrary to clear law, recklessly or through gross incompetence, with regard to any matter relating to a Tax Act;

Been grossly negligent with regard to any work performed as a registered tax practitioner;

Knowingly given false or misleading information in connection with matters affecting the application of any tax Act or participated in such activity; or

Directly or indirectly attempted to influence any person employed by SARS with regard to any matter relating to any Tax Act by the use of threats, false accusations, duress, or coercion, or by offering gifts, favours, or any special inducements.

Before a complaint is lodged or information is disclosed, SARS must deliver to the taxpayer and the person against whom the complaint is to be made notification of the intended complaint and information to be disclosed.

The taxpayer or that person may, within 21 business days after the date of the notification, lodge with SARS an objection to the lodging of the complaint or disclosure of the information.

If on the expiry of that period of 21 business days no objection has been lodged or, if an objection has been lodged and SARS is not satisfied that the objection should be sustained, a senior SARS official may thereupon lodge the complaint.

COMPLAINT CONSIDERED BY CONTROLLING BODY

The complaint is to be considered by the ‘controlling body’ according to its rules.

A hearing of the matter where details of a person’s tax affairs will be disclosed may be attended only by persons whose attendance, in the opinion of the ‘controlling body’, is necessary for the proper consideration of the complaint.

The ‘controlling body’ and its members must preserve secrecy in regard to the information as to the affairs of a person as may be conveyed to them by SARS or as may otherwise come to their notice in the investigation of the complaint and must not communicate the information to a person other than the person concerned or the person against whom the complaint is lodged, unless the disclosure of the information is ordered by a competent court of law.

TAX CLEARANCE CERTIFICATES

A tax clearance certificate (TCC) is a document issued by SARS confirming that the applicant’s tax affairs are in order.

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TCCs are required for tender applications, to reflect “good standing”, for foreign investment, and for emigration purposes.

The Tax Administration Act, which came into effect on 1 October 2012, contains requirements and time frames for the issue of tax clearance certificates.

In any application for a TCC, for whatever purpose, the reason for the application must be properly stated. The TCC is only valid for one year from the date of issue, provided the taxpayer remains compliant with SARS requirements. The proviso confirms that SARS is entitled to withdraw a TCC at any time if it was issued in error or if it was obtained on the basis of fraud, misrepresentation or non-disclosure of material facts.

SARS requires certain conditions to be met before a TCC is issued. These conditions are that:

The taxpayer must have registered for income tax prior to applying for a TCC;

The taxpayer should have no outstanding debt for any taxes (including income tax, Value Added Tax (VAT), dividend tax, administrative penalties and employees’ tax);

Any deferred arrangements made are being adhered to;

All returns and/or declarations are up to date and in the process of being assessed by SARS;

All tax reference numbers must be active and correct, e.g. the tax reference number must not be deregistered or suspended on the SARS system; and

The registration details on the application form (TCC-001) must correspond with the information on the SARS system.

It is important to bear in mind that SARS has 21 business days following the submission of an application to issue or decline a TCC and that, to be on the safe side if one is in a hurry, the full period should be allowed for. It goes without saying that, to avoid an application being declined, one should be 100% sure that one’s tax affairs are indeed in order before applying for a TCC.

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ESTATE AGENCY AFFAIRS ACT PURPOSE

To provide for the establishment of an Estate Agency Affairs Board and an Estate Agents Fidelity Fund;

For the control of certain activities of estate agents in the public interest;

And for incidental matters.

ACCOUNTING AND AUDITING REQUIREMENTS

Every estate agent is to keep accounting records and have these audited within 4 months after the final date of the estate agent’s financial year.

Which accounting records are to be audited?

Those records as are necessary to reflect:

All moneys received or expended, including moneys deposited to trust account or invested in a savings or other interest-bearing account (Section 32(2)(a));

All assets and liabilities;

All financial transactions and the financial position of the business.

It is important to note that the audit report submitted by the estate agency’s auditor, is submitted in respect of the estate agency’s annual financial statements, together with the relevant trust- and, where applicable, other interest-bearing account records and any other documentation.

The accounting records which are to be audited are not limited to the trust account records.

The auditor must not attach the audited financial statements to the audit report when submitting to the EAAB.

The auditor should only submit the completed audit report; bearing in mind the EAAB may request full audited financial statements.

Is an estate agent required to conduct the full audit even if they do not use their trust account?

The audit requirements remain, irrespective of the amount of activity on the trust account.

Which auditing standards are to be used when completing the audit report?

Auditors are to use the International Financial Reporting Standards (IFRS) or IFRS for SME’s in respect of the audit reports for a close corporation or company.

In respect of the audit reports of sole proprietors and partnerships, the appointed auditor is required to specify the accounting framework utilized on the audit report.

Can my bookkeeper or accountant complete the audit report?

No, it is a legislative requirement for the audit report to be signed off by an auditor, registered as an accountant and auditor with IRBA.

Can an auditor who owns and operates an estate agent business, audit his/her own accounting records?

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No, an auditor needs to be independent of the entity he/she is auditing and would therefore not be able to audit the entity if he/she is in charge of the entity and is the Risk, Compliance and Internal Audit manager for the entity.

The Estate Agency Affairs Act requires the appointed auditor of the estate agency, registered as such with the EAAB, to submit the audit report. It does however remain the responsibility of the estate agent to ensure the audit report is submitted and accepted as having complied with all relevant requirements.

There is no automated receipt created and the audit reports are processed in the manner in which they are received. It is therefore important to retain proof of submission of the audit report, should this be required at a later stage.

The Estate Agency Affairs Act prescribes the manner and time frame within which the required audit reports are to be submitted to the EAAB and no requests for extension of the submission date of any audit report required in terms of the Estate Agency Affairs Act, will be entertained.

EDUCATIONAL REQUIREMENTS

Any person wishing to register as an estate agent for the first time must:

Serve as an intern estate agent;

Act under the active supervision and control of a principal estate agent or of a full status estate agent who has continuously held a valid fidelity fund certificate issued by the EAAB for a period of not less than three years;

For a continuous period of twelve months as from the date of the first issue to such person of an ‘intern’ fidelity fund certificate.

All new entrants to the estate agency profession, therefore, notwithstanding the nature of any academic and/or professional qualifications which such new entrants may hold, are obliged to serve as intern estate agents for a continuous period of twelve months.

The issue of ‘intern’ fidelity fund certificates by the EAAB

Before a valid ‘intern’ fidelity fund certificate may be issued to any prospective intern estate agent by the EAAB that person is required to:

Lodge a completed application, in the prescribed form; and

Pay the prescribed levy.

The application form must, in addition, be accompanied by a letter, addressed on the letterhead of the relevant estate agency enterprise and dated and signed by the principal estate agent, confirming that the estate agency enterprise concerned intends taking that person into service as an intern estate agent. The principal estate agent must, moreover, undertake either himself/herself or by appointing a suitably qualified estate agent having at least three years’ experience as an estate agent to do so, to mentor the intern estate agent in all aspects of the practical estate agency services rendered by the enterprise.

Education requirements for estate agents

No person may perform the functions and activities of:

A non-principal estate agent, unless that person has completed the Further Education and Training Certificate: Real Estate at NQF Level 4 (SAQA QUAL ID 59097); or

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Principal estate agent, unless that person has completed the National Certificate: Real Estate at NQF Level 5 (SAQA QUAL ID 20188).

Intern and non-principal estate agents

Intern estate agents are expected to complete the NQF Level 4 during the course of the twelve month internship period. Should an intern estate agent fail to complete the NQF Level 4 during the initial internship period that person shall remain an intern estate agent until such time as that person has duly attained the NQF Level 4 with the proviso, however, that the extended internship period shall not exceed a further period of twelve months.

Intern estate agents who have been certificated against the NQF Level 4 and completed the twelve-month internship period will be entitled to a status upgrade from intern estate agent to full-status non-principal estate agent provided, however, that they furnish the EAAB with:

Acceptable proof that they have been duly certificated against the NQF Level 4; and

A letter, on the letterhead of the relevant estate agency enterprise and dated and signed by the principal estate agent and/or mentor concerned, confirming that to the best of their knowledge and belief that intern estate agent has successfully and satisfactorily completed the twelve month internship period. [The necessity for the provision of such a letter by intern estate agents will be superseded by the lodging with the EAAB of the prescribed log-book duly signed by the intern estate agent as well as the principal and/or mentor once such log-book has been approved and issued by the EAAB.]

Full-status non-principal estate agents are granted a period of two years, calculated as from the date when such persons were certificated against the NQF Level 4, to pass the PDE 4 to acquire professional status as non-principal estate agents with the proviso, however, that any persons wishing to undertake the PDE 4 must hold a valid full status non-principal fidelity fund certificate issued by the EAAB.

Non-principal estate agents who have passed the PDE 4 may use the designation Professional Practitioner in Real Estate or “PPRE” for so long as such persons hold a valid fidelity fund certificate issued by the EAAB.

Principal estate agents

All persons wishing to register as principal estate agents must be certificated against both the NQF Level 4 and the NQF Level 5 before a principal’s fidelity fund certificate, authorising them to conduct activities as a principal estate agent, can be issued to them by the EAAB.

Non-principal estate agents who have been certificated against the NQF Level 5 are entitled to a status upgrade from non-principal estate agent to full-status principal estate agent provided, however, that they furnish the EAAB with acceptable proof of the fact that they have been certificated against the NQF Level 5.

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Full-status principal estate agents are granted a period of two years, calculated as from the date when such persons were certificated against the NQF Level 5, to pass the PDE 5 to acquire professional status as principal estate agents with the proviso, however, that any persons wishing to undertake the PDE 5 must have passed the PDE 4 and must also hold a valid full status non-principal fidelity fund certificate issued by the EAAB. Principal estate agents who have passed the PDE 5 may use the designation Master Practitioner in Real Estate or “MPRE” for so long as such persons hold a valid fidelity fund certificate issued by the EAAB.

THE USE OF PROFESSIONAL DESIGNATIONS BY ESTATE AGENTS

The approved professional designations may only be used by estate agents who have passed a Professional Designation Examination (whether PDE 4 and/or PDE 5) and who, in addition, hold a valid fidelity fund certificate issued to them by the EAAB.

Estate agents who have passed a Professional Designation Examination (whether PDE 4 and/or PDE 5) but who do not hold a valid fidelity fund certificate issued by the EAAB are not entitled to, and may not, use the approved professional designation(s).

The professional designations that may be used by qualifying estate agents

Estate agents who have passed the PDE 4, and who hold a valid fidelity fund certificate issued by the EAAB, are entitled to use the designation of Professional Practitioner in Real Estate (“PPRE”).

Estate agents who have passed the PDE 5, and who hold a valid fidelity fund certificate issued by the EAAB, are entitled to use the designation of Master Practitioner in Real Estate (“MPRE”).

INSPECTIONS

The purpose of this Inspections and Investigations Policy is to clarify and enhance the inspection and supervision functions of the EAAB and to ensure transparency in the administration of inspections and investigations. Strict adherence to, and compliance with, the provisions of the Estate Agency Affairs Act, 112 of 1976 (“the Act”) as well as all other applicable legislation and regulations, in respect of the operations of estate agency enterprises is essential to ensure the sound and appropriate operations of estate agency enterprises, fairness and equality in their dealings and the protection of consumers. It is essential, furthermore, that estate agency enterprises should fully understand, appreciate and manage their affairs in compliance with the Act since they, by so doing, will ensure that they conduct their estate agency operations in a sound and appropriate manner.

The EAAB is, in this respect, obliged by the provisions of the Act to maintain and promote the standard of conduct of estate agents and to regulate the activities of estate agents having due regard to the public interest. The EAAB is also responsible for the supervision and enforcement of compliance by estate agents with the provisions of the Financial Intelligence Centre Act (“the FIC Act”) or any order, determination, or directive made in terms of the FIC Act. The EAAB has the authority to impose administrative sanctions on estate agents if it is satisfied that, on the basis of all available facts and information, any estate agency enterprise or estate agent has failed and/or neglected to comply with the provisions of the FIC Act or any order, determination or directive made in terms of the FIC Act.

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Appointment of inspectors

The appointment of inspectors to conduct inspections whether the provisions of the Act and of the FIC Act are being, or have been, complied with, shall vest solely in the EAAB. The EAAB shall appoint such inspectors on such terms and conditions and at such remuneration as it may in its sole discretion determine. All work in respect of, and incidental to, the carrying out of the inspection function including the undertaking of inspections shall be undertaken by the duly appointed inspectors acting under the supervision, direction and control of the EAAB.

Qualifications of inspectors

The EAAB shall ensure that all inspectors who may be appointed from time to time shall be competent in all aspects of the law and accounting procedures so as to be able to understand and accurately interpret estate agents’ books of account, financial records and legal documents. Inspectors shall, in addition, be required to possess appropriate administration, communication, writing and inter-personal skills.

Inspection authority

Inspectors who are duly appointed by the EAAB for the undertaking of any inspection shall be furnished with a written inspection authority by the EAAB prior to such inspectors undertaking their inspection functions and duties. Inspectors who exercise any inspection power or authority in terms of the Act shall be obliged, at the request of any person affected by the exercise of that power or authority, to produce to such person the written inspection authority furnished to that inspector by the EAAB. Inspectors may, after having duly obtained the consent of the EAAB so to do, also appoint any person or persons to assist them in the carrying out of an inspection provided only that any such person or persons has/have similarly been issued with a written inspection authority by the EAAB.

Reporting by inspectors

Duly appointed inspectors shall be required to report objectively and impartially to the EAAB on the affairs of all of the estate agents who have been inspected, whether those estate agents are natural persons, partnerships, companies, close corporations or trusts. Such comprehensive inspection reports shall be in writing and shall be communicated to the EAAB as soon as possible but, in any event, by no later than fourteen days, after the conclusion of the relevant inspection.

The required reports shall clearly indicate the outcome of the inspections that have been undertaken and shall include any such further information and/or recommendations as the inspectors may deem to be necessary or required in the circumstances to facilitate the undertaking by the Board and/or the EAAB of any such further follow-up steps or actions as may be required.

Any such necessary follow-up steps or actions to be implemented upon receipt of the inspectors’ reports shall be in the sole discretion of the Board and/or the EAAB and shall be dependent upon the nature and seriousness of the contraventions of either the Act or the FIC Act, or any other applicable legislation, that have been underscored in those reports by the inspectors.

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The undertaking of inspections

Should the EAAB have any reason at any time to believe and/or to suspect that any estate agent, whether that estate agent is a natural person, partnership, company, close corporation or trust, is in any way operating in contravention of the provisions of the Act and/or the regulations promulgated in terms of the Act and/or operating in contravention of the provisions of the FIC Act, the EAAB may forthwith instruct an inspector, or inspectors, to inspect the affairs, or any part of the affairs, of such person, partnership, company, close corporation or trust, to determine whether the provisions of the Act and/or of the FIC Act are being, or have been, complied with. It shall not be necessary or required for any inspector, or inspectors, to give prior written notice to any estate agent of the intention to conduct an inspection. The appointed inspector, or inspectors may, however, should this be felt to be in the interest of justice, provide reasonable written notice to the estate agent concerned of the intention to conduct an inspection.

Routine inspections

In addition, the EAAB shall cause routine inspections of all estate agents to be undertaken to satisfy itself that such estate agents are complying fully with the provisions of the Act as well as the provisions of the FIC Act. Such inspections shall be undertaken from time to time on a random basis with a view, however, to ensuring that the majority of estate agency undertakings throughout the country are inspected over five-year rolling periods.

Time and place of inspections

Inspectors may, in liaison with the EAAB, determine the date, time and place of any inspection to be undertaken.

Powers of the inspectors

Inspectors shall be required to undertake and perform all such additional authorised functions and/or activities as may be delegated by the Board and/or the EAAB to such inspectors from time to time.

Inspectors shall be empowered, at all reasonable times, to enter any place in respect of which such inspectors have reason to believe that:

Any person there is performing an act as an estate agent; and/or

The place is connected with an act performed by an estate agent; and/or

There are books, records or documents to which the provisions of the Act are applicable.

Inspectors may order any estate agent or the manager, employee or agent of any estate agent:

To produce the fidelity fund certificate of that estate agent;

To produce any book, record or other document in the possession or under the control of that estate agent, manager, employee or agent;

To furnish, at such place and in such manner as the inspector(s) may reasonably specify, with such information in respect of that fidelity fund certificate, book, record or other document as the inspector(s) may desire.

Inspectors may examine or make extracts from or copies of any such fidelity fund certificate, book, record or other document.

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Inspectors may seize and retain any such fidelity fund certificate, book, record or other document to which any prosecution or charge of conduct deserving of sanction under the Act or under the FIC Act may relate provided that the person from whose possession or custody any fidelity fund certificate, book, record or other document is taken, is allowed, at that person’s request, to make, at that person’s own expense and under the supervision of the inspectors concerned, copies thereof or extracts there from.

No person shall:

Fail on demand to place at the disposal of any inspectors anything in that person’s possession or under that person’s control or on that person’s premises which may relate to any inspection;

Hinder or obstruct any inspectors in the exercise of their powers under the Act;

Falsely hold himself/herself out as being an inspector.

Inspectors shall be obliged to issue a receipt to the owner or person in control of anything that has been seized and retained under the Act.

Confidentiality

Inspectors undertaking inspections pursuant to this Inspections and Investigations Policy shall be required to maintain, or assist in maintaining, strict confidentiality regarding all matters that may come to their knowledge and attention as a result of the performance of their functions and duties as inspectors.

Inspectors may not communicate any such matters to any person or authority except:

For the Board and/or the EAAB; or

Unless ordered to do so by a court of law; or

Insofar as such communication is necessary and desirable properly to carry out and complete the required inspection;

Any self-regulating association or organisation; and/or

Any statutory board charged with supervisory or regulatory duties;

provided any of such authorities, persons or entities are affected by, or have an interest in, such information.

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LICENSING OF BUSINESSES BILL The Licensing of Businesses Bill was published on 18 March 2013 by the Minister of Trade & Industry for public comment.

The Bill requires every business in the country to obtain a licence. It applies to every provider of any goods or services. This is wide enough to cover every grocery and greengrocer, car dealer, pharmacy, and seller of livestock. It includes every factory and wholesaler of heavy machinery and raw materials. It also includes every service provider, from lawyers and hospitals to hotels, carparks, airports, freight carriers and advertising agencies.

The Bill will criminalise all businesses, existing or new, who don't obtain a licence.

The Bill provides no clear transitional period to enable all existing businesses to obtain licences.

The licensing authorities will be municipalities.

Licensing authorities can impose any licence condition in their sole discretion, and amend any licensee's licence conditions unilaterally.

The Bill envisages ‘deemed licences'. If the licensing authority has not issued or renewed a licence within a specified time after receiving the application, the application must be deemed to have been approved and the licence must be ‘deemed as having been issued'. Businesses will be at risk of being penalised for being unable to produce a licence. Inspectors are given powers to impose fines on a licence holder who ‘fails to produce a business licence' upon request, and to ‘close any premises pending further investigation'. In practice, applicants to whom licensing authorities have not promptly issued licences and whose licences are ‘deemed as having been issued' will be penalised as if they were unlicensed.

The Bill will have draconian consequences for persons convicted of contravening the counterfeit-goods, tax, food-safety or immigration laws. It would empower municipalities to order persons found guilty of contravening such a law to stop business.

The Bill applies to ‘any person carrying on business or who seeks to carry on business within the Republic.

It would include every business supplying any goods for sale to the public, including, for example:

Foodstuffs and groceries; flowers, fruit and vegetables; clothing and footwear; jewellery; gold and silver coins; stationery; telephones, computers, televisions and other electronic goods; cameras; liquor; petroleum products; tools, implements, hardware and cutlery; light motor vehicles, pedal cycles, trailers, parts and accessories; pumps; pharmaceutical products; boats; clocks and watches; musical instruments; furniture and bedding; lamps and lights and their fittings; toys, games and sports equipment; paintings, sculptures and other artworks; curios and souvenirs; tobacco, cigarettes and cigars; disinfectants, insecticides, fungicides, poisons and herbicides; leather, saddles, harness, travel goods and handbags.

The Bill applies to the sale of ‘goods'. The term ‘goods' probably embraces all movables, which are commonly bought and sold in the course of business, including livestock, gold coin, and fruit and vegetables produced upon the seller's own property. The sale or leasing of fixed property, being immovable, would appear to be excluded.

The Bill also covers the supply of services. This is wide enough to include provision of any service to the public, including:

Legal services; accountancy and auditing; medicine and dentistry; engineering and architectural design; building construction and repair; conveyance of persons and goods; driving lessons,

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provision of accommodation; cinemas and theatres; nightclubs; amusement parks, massage services; advertising and marketing services; auctioneering; barbering and hairdressing; gardening services; kennelling; laundry services; vehicle repair and servicing; conducting a parking garage; motor vehicle attendance; pawn broking services; photography; private investigation; warehousing.

No person may carry on business without a valid licence issued in respect of the premises by the relevant licensing authority. Any person who contravenes this provision is guilty of an offence and may on conviction be liable to a fine or imprisonment.

The business licence will be valid for five years, but it can be extended again.

An inspector can impose an administrative fine on a licence holder who ‘fails to produce a business licence' upon request.

An inspector will have the power to close any premises pending further investigation.

The licensing authority can revoke a person's licence or order the person to stop trading, if the person has been found guilty of contravening the laws governing customs and excise or ‘any applicable tax legislation (this reference to being found guilty of contravening ‘any applicable tax legislation' presumably refers to the provisions of the statute governing tax administration which create a variety of criminal offences relating to non-compliance with tax laws (including the laws governing income taxation and value-added tax and relating to tax evasion).

The licensing authority can revoke a person's licence or order the person to stop trading, if the person has been found guilty of contravening the laws governing safety of foodstuffs, cosmetics and disinfectants.

The licensing authority can revoke a person's licence or order the person to stop trading, if the person has been found guilty of contravening the laws governing immigration or employing an illegal foreigner or refugees.

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PROPOSED CHANGES TO B-BBEE (BROAD BASED BLACK ECONOMIC EMPOWERMENT)

PROPOSED CHANGES

The number of elements in the scorecard will be reduced from seven to five.

Employment equity will be joined with management control whilst preferential procurement and enterprise development would also merge and be called enterprise and supplier development.

Ownership, skills development and socio-economic development would remain as the other three elements. The stated aim of these intended amendments is to broaden the base of black participation in the economy.

The qualifying turnover

For EMEs, the proposed threshold would increase from R5 million to R10 million. This will take pressure off businesses with turnover from R5 million to R10 million as they are spared from doing the B-BBEE scorecard and they can obtain exemption certificates. QSEs’ (Qualifying Small Enterprises) turnover threshold increases from R10 million to R50 million versus R5 million to R35 million in terms of the current code.

ProcurementThe new codes propose that B-BBEE procurement points can only be claimed from value adding suppliers – defined as “entities whose profit before tax added to their salary costs is to exceed 25% of their turnover”. In essence, the codes are favouring businesses with high labour content.

OwnershipThis element is given priority in the suggested codes. Under the current codes, businesses can make up points in other elements if they do not meet the ownership criteria. In terms of the proposed codes, businesses’ B-BBEE contributor status will drop two levels if they fail to get 40% compliance in this element..

QSEsIn terms of the current codes, QSEs can choose the best four of the seven elements when having their B-BBEE compliance measured. The proposed codes require QSEs to comply with all five elements. This will make the process more difficult for QSEs. As opposed to larger entities which stand to drop two contributor levels when they do not meet compliance targets in priority elements, QSEs will only drop one level.

FRAUDULENT BBBEE CERTIFICATES

Valid Certificates for entities with an annual turnover of more than R5 million (large enterprises and qualifying small enterprises) can only be issued by:

Verification agencies, accredited by the South African National Accreditation System (SANAS); or

Registered auditors, approved by the Independent Regulatory Board of Auditors (IRBA).

Valid Certificates for entities with an annual turnover of less than R5 million (exempted micro enterprises) can only be issued by:

Accounting officers, as contemplated in the CCA; or

Verification agencies, accredited by SANAS; or

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Registered auditors (registered auditors do not need to meet the prerequisites for IRBA’s approval for the purpose of conducting verification and issuing Exempted Micro Enterprises with B-BBEE Status Level Certificates).

The relevant Verification Agency or Approved Registered Auditor may be contacted to confirm whether such a certificate was issued.

Confirmation of the validity of a B-BBEE Status Level Verification Certificate can be obtained by tracing the name of the issuing B-BBEE Verification Agency or Approved Registered Auditor to the lists of all SANAS-accredited agencies and Approved Registered Auditors.

Confirmation of the validity of a B-BBEE Status Level Verification Certificate can be done by tracing the Practice Number of the issuing B-BBEE Accounting Officer to the Professional body they are registered with.

If an entity is found in possession of a Fraudulent B-BBEE Certificate, the entity’s details will be dealt with in accordance with the provision of the law, which may include, but is not limited to, inclusion by the National Treasury on the central Database of Restricted Suppliers that are prohibited from conducting business with the public sector. Other legal remedies will be taken against that entity.

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