The CIPC introduced the Compliance Checklist to:
(i) ensure compliance with the Companies Act;
(ii) serve as an educational tool for directors and company secretaries with regards to their responsibilities in terms of the Companies Act; and
(iii) monitor and regulate proper compliance with the mandatory provisions of the Companies Act.
The Compliance Checklist was rolled out on a voluntary basis for a period of four months from 1 September 2019, and became mandatory for all companies whose annual returns are audited or independently reviewed, from 1 January 2020. Many companies did not file their Compliance Checklist responses for calendar years 2019 and 2020 on time. This was primarily due to the limited guidance available, coupled by the fact that the new requirement was overshadowed by the COVID-19 pandemic and ensuing national lockdown.
With lockdown restrictions easing, and the CIPC’s offices reopening, the CIPC has dedicated a team to address Compliance Checklist queries, monitor responses, and identify areas of non-compliance. Companies are slowly becoming aware of the requirement and we have been inundated with queries on how to respond to the Compliance Checklist and the consequences companies may face for non-compliance with the Compliance Checklist requirement itself, and the provisions of the Companies Act in the broader context.
Following the initial uncertainty around whether the Compliance Checklist is linked to the filing of annual returns, the CIPC has clarified that that the Compliance Checklist is a standalone requirement, independent of the filling of annual returns. Companies are required to submit their responses for the preceding calendar year via the e-services platform within 30 business days of their anniversary of incorporation. For example, if a company’s anniversary of incorporation is 1 July, then its Compliance Checklist for calendar year 2020 (i.e. 1 January 2020 to 31 December 2020) must be filed within 30 business days from 1 July 2021.
The CIPC is yet to take action against companies for failing to file their Compliance Checklist responses, however, we have received communication from the CIPC’s Compliance Checklist team that the CIPC is troubleshooting various options and will communicate its position in due course.
Although the number of Compliance Checklist submissions have been limited, in just over 12 months the CIPC noted (in its Notice 15 of 2021) that there has been a spike in the number of companies that are not adhering to section 4 of the Companies Act (the solvency and liquidity test). The CIPC is without a doubt honing in on non-compliance and will be taking a close look at companies’ Compliance Checklist responses.
This is an appropriate time to remind companies that the CIPC is mandated in terms of section 171(1)(a) of the Companies Act to issue a compliance notice to any person whom it believes, on reasonable grounds, has contravened the Companies Act. If a company fails to correct its non-compliance within the time period specified in the compliance notice, the CIPC may apply to a court for the imposition of an administrative fine in terms of section 175(1), or refer the matter to the National Prosecuting Authority for prosecution as an offence in terms of section 214(3) of the Companies Act.
Furthermore, anyone who knowingly provides false information to the CIPC is guilty of an offence under section 215(2)(e) and could be liable for a fine, imprisonment not exceeding 12 months, or both a fine or imprisonment in terms of section 216(b) of the Companies Act. The board of directors of a company are personally responsible for compliance with the Companies Act, and as such, it is necessary to draw directors’ attention to their responsibilities in respect of the CIPC Compliance Checklist and the accurate completion thereof.
In order to navigate our way through this new requirement, our team at CDH has developed a guidance tool that will assist companies in preparing their responses to the Compliance Checklist. Please contact Vivien.Chaplin@cdhlegal.com and Haafizah.Khota@cdhlegal.com for more information about the Compliance Checklist Guidance Tool.