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
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.
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.
• 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
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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