Regulatory New business South Africa

Law gets tough on compliance

Companies that fail to keep accurate accounting records may be in for hefty fines of up to R1m or their directors could even face jail time, according to new company laws.

Business in SA will need to take the new incoming regulator more seriously in the light of the provisions of the new Companies Act.

The Companies Commission, which is intended to replace the existing Registrar of Companies, may impose an administrative fine of up to 10% of a company's turnover for the period that failure to comply with the act took place.

Stephen Kennedy Good, of commercial law firm Deneys Reitz, said yesterday that under the Companies Act the power of the Registrar of Companies to impose fines was limited.

The Companies Act gives the Companies Commission the power to issue a compliance notice to any person who has contravened the act. The notice may require the person concerned to cease, correct or reverse any action in contravention of the law.

The commission is also compelled to send a copy of the notice to any specific regulator that watches over the affairs of the company concerned. If a company fails to comply with the notice, the commission may apply to court for a fine, or refer the matter to the National Prosecuting Authority for prosecution.

The fine may not be more than 10% of the company's turnover for the period during which it failed to comply with the notice and may not exceed a maximum of R1m.

“Although these provisions may seem a little harsh, they are fair in the sense that a company is given an opportunity to comply with or object to the notice once received,” Kennedy-Good said.

“It will be interesting to see whether the Companies Commission will actively police the provisions of the new act and to what extent it will use its powers in the future,” he said.

Source: Business Day

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