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CHARTERED ACCOUNTANTS Advice for entrepreneurs ANNUAL RETURN UPDATE
consideration to the suitability of operating througha CC, as opposed to a private company.
The annual return for public and external companies Annual Return Update
has been in effect for several months. It has recently Should you become aware that your CC's been announced that the return for private registration details have been amended without companies will be introduced from 1 February your consent, it is essential to act swiftly.
Has Your CC Been Hijacked?
2005. The proposed annual duty for private Unfortunately the only remedy that you have is via companies is as follows: the courts, often a costly exercise, but absolutelynecessary.
Turnover less than R10m BLACK ECONOMIC EMPOWERMENT ("BEE")
Turnover above R10m less then R50m Turnover R50m and above BEE in South Africa is now well under way. This VAT and PAYE - Personal
necessary process will ensure that previously Liability of Directors and
If you have any dormant companies in your group excluded persons will acquire a stake in the it may be worthwhile considering deregistering economic wealth of our country - someone these prior to the introduction of the annual return.
described it as "25% of South Africa is up forsale".
The FAIS Act
HAS YOUR CC BEEN HIJACKED?
The main challenge in BEE transactions is theirfinancing – options or bank loans or vendor finance A recent study conducted in South Africa revealed Centre Act 2001
or leverage buy-outs.
that in excess of 75% of businesses were the victimsof fraud, in one way or another. As entrepreneurswe need to be ever watchful.
We are able to give advice on• choosing a BEE partner Recently we have become aware of several • structuring a BEE transaction incidences of CC's being "hijacked". This alarming • possibilities for financing a BEE transaction new phenomenon has once again highlighted theregulatory weakness in using a close corporation Please call us.
(CC). Unsuspecting members are finding out thatthey are no longer the registered owners of their VAT AND PAYE - PERSONAL LIABILITY OF
CC and that fraudulent CK documents have been DIRECTORS AND SHAREHOLDERS
lodged with the Registrar of Close Corporations(CIPRO) removing them as members and appointing The Revenue Laws Amendment Act promulgated someone else in their stead.
in December 2003 contained amendments whichresult in shareholders and directors of companies A closer inspection of the fraudulent CK documents (including close corporations) becoming personally reveals that, although sometimes crude forgeries, liable for outstanding VAT and PAYE as follows: the fraudsters have clearly had sight of the originalCK documents. The other disconcerting observation is that to date, these "hijacked" CC's have all Every shareholder and director who controls or is involved entities that have excellent credit records regularly involved in the management of the or significant cash balances. This would imply some company's overall financial affairs shall be personally form of collusion between bank employees and liable for the VAT, penalty or interest for which the CIPRO staff.
company is liable. Armed with the amended CK documents these fraudsters attempt to access your bank accounts Where an employer is a company, every shareholder or on the strength of your good credit rating and director who controls or is regularly involved purchase significant assets on credit. Members' of in the management of the company's overall CC's should regularly confirm via the CIPRO website financial affairs shall be personally liable for the (www.cipro.gov.za) that their CC's have not been employees' tax, additional PAYE, penalty or interest tampered with or alternatively should give serious for which the company is liable.
Summer 2004 THE FAIS ACT
freedom to move capital across international boundarieshas made it increasingly easy for criminals to legitimise Certain provisions of the new Financial Advisory and funds from unlawful activities.
Intermediary Services Act (FAIS Act), came into effect on1 October 2004 to regulate the furnishing of advice and In a nutshell, there are three stages of money
intermediary services in respect of financial products.
laundering:
• Placement: this involves introducing illegal funds or
Which entities should comply with the FAIS Act? property into a legitimate financial system.
• Layering: this involves moving laundered funds from If your company provides:
one location to another and converting such funds • Financial advice or into different instruments.
• Renders an intermediary service (resulting in a • Integration: this involves illegally acquired funds client entering into any transaction in respect acquiring the status of legitimacy.
of a financial product), then FICA regulates that any company holding the funds of the company must register as a Financial Service Provider another party in trust is an accountable institution.
(FSP) with the Financial Services Board (FSB) to obtain alicence and adhere to ongoing compliance requirements.
Accountable institutions, as defined, are required
Registration had to take place by 30 September 2004.
Penalties for non-compliance of up to a R1 million fine • obtain further information on existing and new clients and/or up to 10 years imprisonment can be incurred.
• appoint a responsible person to deal with compliance Should you register?
• keep record of all business relationships and transactions As a rule of thumb: If an activity leads to the buying or for a period of a least five years from the date of the selling of a financial product (as defined in the FAIS Act) transaction or business relationship is concluded and the activity is a regular feature of the business then • provide training to all employees to enable compliance registration is required.
• report transactions to the Centre that are suspicious How to register as a Financial Service Provider (FSP)
as well as transactions above a prescribed limit. The You can apply directly to the Financial Services Board (in prescribed limit has to date not been finalized.
Pretoria), or through a recognised body (authorised bythe FSB to do licensing on their behalf).
Non-compliance with FICA can result in severe
penalties: a maximum fine of R100 million and/or
imprisonment for up to 30 years, including possible Once registered, ongoing compliance can be done in forfeiture of the proceeds.
house, by appointing and registering a suitably qualifiedemployee as a compliance officer or, externally, byappointing a specialist compliance firm. We have beenapproved by the FSB as compliance officers.
The aim of the Act is to protect the public against pooradvice and to prevent unscrupulous persons from sellingfinancial products. FSP's must meet minimum educationand training standards and are subject to disciplinaryprocedures if they do not adhere to the requirements ofthe FAIS Act.
FINANCIAL INTELLIGENCE CENTRE ACT ("FICA")
FICA is to date the most aggressive legislation introducedin South Africa to deal with the proceeds of unlawfulactivities and certain of the FICA requirements came intoeffect as early as February 2002.
The aim of FICA is to combat money laundering, to imposecertain duties on institutions and other persons who mightbe used for money laundering purposes and to amendthe Prevention of Organised Crime Act and Promotion ofAccess to Information Act.
Money laundering is the activity of concealing or disguisingthe nature, source, location, disposition or movement ofthe proceeds of unlawful activities.
The worldwide integration of financial systems and the

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