Compliance Presentation

Report
Complying with Changes in Legislation
October and November 2012
Agenda
FICA
FAIS
National Credit Act
Consumer Protection Act
Protection of Personal Information Bill
Companies Act and King III
Second-Hand Goods Act
Tax Administration Act
FICA
Money Laundering legislation
POCA
Defines: Money Laundering offence
FICA
Reporting obligation
Definition
• Concealing
• Disguising
•
•
•
•
•
Nature
Source
Location
Disposition
Movement
• Proceeds of
unlawful activities
Financial Intelligence Centre
Not a law enforcement
agency or
investigative body
FIC
IRBA, Estate agents
board, Law society
SARB
Supervisory
Bodies
Attorneys, Estate
agents, Banks,
Insurance broker
Accountable
Institutions
Reporting
Institutions
General
business
Reporting obligations
Any person who:
And who knows or suspects
that:
Carries on a business
Business has received
proceeds of unlawful
activities
Is in charge of a business
Transaction may relate to
money laundering
Manages a business
Party to a transaction
Is employed by a business
Duties of accountable institutions
Accountable and
Reportable
Cash
transactions
Above R 25 000
Electronic
transfers
Conveyance of
cash
Administrative duties for accountable institutions
Register
with FIC
Compliance
officer
Identify
clients
Training
Keep
records
for 5 years
Internal
rules
Responsibility of supervisory body
Administrative
sanctions:
Report on
compliance
Not to repeat conduct
Reprimand
Report any
action taken
against
accountable
institution
Issue or
amend
license,
registration
Fit and
proper test
Remedial action
Restriction or
suspension
Penalty:
Individual: R 10 mil
Company : R 50 mil
Appointment of inspectors
Issue certificate
of appointment
No warrant is
necessary
Head of
supervisory body
Appoint Inspector
Must consult with Centre
Enter and inspect
premises
Question persons
Open strong
room/safe
Institution liable for any costs involved
Copy/seize
document
IRBA inspections
Anti-Money laundering policy document
Proof of registration with FIC (if applicable)
Reporting procedures
• Section 29 Financial Intelligence Centre Act 31/2001
• Protection of Democracy Against Terrorist and Related Activities Act (POCDATARA)
• Protection and Combating of Corrupt Activities Act (PRECCA)
Monitoring procedures in respect of client’s accountability in terms of sec 28
Procedures during an audit to detect possibility of money laundering
Training schedules and programme in respect of staff
Compliance and enforcement
All offences
Sec 55, 61A, 62, 62A, 62B, 62D
Imprisonment 15 years
Imprisonment
5 years
R 100 mil
R 10 mil
FAIS
Definition of advice
Advice is:
Recommendation
Guidance
Proposal
Client
Group of clients
Purchase or investment in any
financial product
Advice is not:
Factual advice
Description of product
Routine administrative query
Objective information
Display or distribution of
promotional material
Analysis without
recommendation
What is FSP?
Duties
Excluding a representative
Any person
Furnish advice
Renders
intermediary
services
Assistance
policies exempt
until 21 August
2013
Display certified copy of license in
prominent place at all business
premises
Include reference to license in all
documentation
Advise registrar of lapsing of
license
•Permanent incapable of carrying
on business
•Sequestrated
•Dies
•Liquidated
•Business is dormant
Appoint compliance officer
Representatives
May only Act if:
There is a contract with FSP
FSP accepts responsibility
Maintain register of representatives
Remove when representative no longer complies with
requirements
Debar any representative who does not comply with fit
and proper requirements
Inform registrar within 15 days of debarment (provide
reasons)
FSP must:
Compliance officer
Suitable qualifications and experience (according to new list
Gazetted 15 August 2012)
Approved by registrar
Ensure compliance of FSP
Submit reports to registrar
Accounting and audit requirements
Audited
Annual
financial
statements
All FSP’s
Monthly
accounting
records
Submitted
within 4
months of
year-end
Trust
account
External auditor must be
approved by Registrar
Reasons for termination
as auditor
May only change year
end with approval of
Registrar
10 Different compliance
reports
Different submission
dates per category
Exemption from audit requirement
Exempt
• Category 1 FSP
limited by product:
Long-term insurance
and friendly society
benefits and who
receives or holds
client money
• Category 1: Does not
receive premiums or
hold clients’ assets or
money
Companies Act, 2008
• Audit
• Review
• Exempt or CC
Duty
• Register exemption
with registrar
• Inform Registrar in
writing of any change
within 15 days
Duty to report irregularities
Reporting duty
• Compliance officer
and auditor
• Material irregularities
Report by compliance
officer
• Immediate reporting
to employer/client
• Notification that
matter will be
reported
• Provide reasonable
opportunity for written
comments as to why
irregularity is not
material or steps that
will be taken to
address
• Without undue delay
to FSB
Report by auditor
• Follow normal
reporting process
• IRBA to notify the
FSB
Fit and proper requirements
Honesty and integrity
Two regulatory
Competence
Not been found
guilty for fraud,
dishonesty etc
for 5 years
Not denied
membership of
any body
License not
suspended or
withdrawn
Different
experience
requirements
for different
categories:
Table A
Qualification
requirements.
List of
recognised
qualifications
(New list
Gazetted 15
August 2012)
examinations
• Level1:
FICA, FAIS,
Code of
conduct (30
June 2012
or 30
September
2012)
• Level 2:
Product
specific
information
CPD
requirements
• 15-60 hours
over 3 year
cycle
• Training
facilitators to
apply for
accreditation
• Log CPD on
the on-line
CPD register
• Keep records
for 5 years
Fit and proper requirements
Operational ability
• Fixed business address
• Access to communication facilities
e.g. telephone line, typing and
duplication facilities
• Adequate storage and filing
systems
• Bank account and separate trust
bank account
• Money laundering control systems
Financial soundness
• Not be an unrehabilitated insolvent
or under liquidation
• Assets (excluding goodwill and
other intangible assets) must
exceed liabilities
Category IIA and III 13/52 weeks of
expenditure
Liquid assets
Category I 4/52 weeks of
expenditure
Category II and IV 8/52 weeks of
expenditure
Professional Indemnity and Fidelity Insurance
Category 11 or
11A and receive
or hold client
funds
Category 1
PI of
R 1 mil
Guarantees
of R 1 mil
Category 1 or
IV and receive
or hold client
funds
FI of R 1 mil
Guarantees of
R 1 mil
PI or FI of
R 5 mil
Guarantees of
R 5 mil
Category 111
and receive or
hold client
funds
PI and FI of
R 5 mil
Guarantees of
R 5 mil
Financial interest and conflict of interest
Avoid or mitigate conflict of interest
• Disclose full nature of conflict in writing and measures taken to avoid
or mitigate the conflict
Financial interest which a FSP may receive from or pay to a third
party
• Restricting fees principally to commissions and fees authorised under
the Long Term Insurance Act, the Short Term Insurance Act and the
Medical Schemes Act.
No financial interest to a representative for giving preference
• Prohibits offering a financial interest to a representative for giving
preference to the quantity of business secured to the exclusion of
quality, or for giving preference to a specific product supplier, or for
giving preference to a specific product of a supplier
Financial interest and conflict of interest
Conflict of interest management policy
• Requires all FSP’s to adopt, maintain and implement a conflict of interest
management policy
Anti-avoidance
• Prohibits any FSP or representative from attempting to collude with
any associate in an attempt to avoid, limit or circumvent compliance
with the Code.
Reporting duty
• Requires the compliance officer to report on the provider’s conflict of
interest management policy, to the Registrar
• Reported on implementation, monitoring, compliance with and
accessibility of the conflict of interest management policy
Offences and penalties
Offences
• 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);
• Deliberately makes a misleading, false or deceptive statement, or conceals
any material fact;
• 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
services provider, and who in any way declares, pretends, gives out, maintains
or professes to be such a person
Penalties
• Fine not exceeding R 10 mil
• Imprisonment not exceeding 10 years
• Both
National Credit Act
Consumer rights
Apply for credit
Not to be
discriminated
against when
applying for credit
To be given reasons
for credit being
declined
To be given
documents in an
official language that
the consumer
understands
To be given
documents in a
clearly
understandable
language
To be given written
documentation
relating to the credit
transaction
The confidentiality of
personal information
To access and
challenge
information held by a
credit bureau
To receive periodic
statements
Registration requirements
Credit providers
No natural
persons
Credit bureaus
> 100 credit
agreements
(Excl incidental)
Principle debt
> R 500 000
Registration fees
Renewal fees
Duties of NCR
Certificate of registration
Enter in register
Fit and proper
No juristic
person
Counsellors
Assign unique registration number
Types of agreements
Intermediate
• Pawn transaction
• Up to R 15 000
• Excluding
mortgage
• Between R 15 001
and R 250 000
• Excluding a pawn
transaction and
mortgage
• More than R 250 000
• Mortgage
Large
Small
Included transactions
Loans and other credit from banks
Mortgages
Overdrafts
Credit cards
Vehicle and
personal finance
Credit from retailers
Furniture finance
Clothing accounts
Other
Micro loans
Pawn transactions
Excluded transactions
Where the consumer is a juristic person
Assets or turnover
Large agreements
State or organ of State
Where credit provider is:
Reserve bank
Outside the Republic
Provider of utility
Other
Insurance policies
Lease of immovable
property
Stokvel
Unlawful and Reckless Agreements
Unlawful
Credit provider
Minors
Cannot sue
Reckless credit
No risk
assessment
Mentally unfit
Must refund:
• Monies paid
• Interest per quote
Under
administration
Negative option
marketing
Unregistered
providers
Assessment
indicates
consumer can’t
afford
Consumer rights
not understood
Pre-agreement statements
Principle debt
Terms and
conditions
Interest rate
Prescribed
forms for all
agreements
Pre agreement
and quote
Total amount
payable
Valid for 5
days
Installments
Fees, charges,
interest
Right to receive statements
Once a month
Every two months
Maximum = 3 months
Installment
Lease
Secured
Mortgage = 6 months
Termination and early payments
Termination
Paying settlement amount
Early payments
May not be refused by credit
provider
No penalty fee for
small/intermediate agreement
Large agreement
Penalty = 3 months interest
First to interest, then charges,
then outstanding balance
Surrender of goods, debt enforcement
Surrender of goods
Can return at any time
Sell and credit account
Proceeds less than debt
10 days to pay
Debt enforcement
Not allowed to retain:
ID
Debit or credit card
ATM card
Pin number
Notify in writing
Refer to debt councilor
Consumer to reply within 10
days
Compliance and reporting
Compliance
report
Annual
financial
statements
6 months after year end
Assurance
report
Statistical
return
> R 15 mil – Quarterly
< R 15 mil – 15th February
Consumer Protection Act
Scope of the Act
Every transaction occurring within the Republic
Promotion or supply of goods and services
Goods and services themselves after the transaction is
completed
Includes franchise transactions
By profit business, or by non-profit entity, the State or entities
contracted by the State and Public Private Partnerships
Excluded transactions
What is excluded?
• Goods or services
promoted or supplied
to the state
• Juristic person with
asset value or
turnover > threshold
(R 2 mil)
• Credit agreements
under NCA
• Services supplied
under employment
contract
Clause 60 and 61
deals with unsafe
goods
• Apply to all goods
introduced to the
market, even when
exempt
Other exemptions
• Minister may grant
industry-wide
exemptions
Meaning of goods
Meaning of goods
Tangible, intangible
Anything marketed
e.g. music,
photograph,
for human
literature, software
consumption
codes, licenses
Legal interest in
land
Any other
immovable
property e.g.
usufructs
Gas
Water
Electricity
Meaning of service
Accommodation e.g. restaurant or
hotel
Provision of:
•
•
•
•
Transportation
Rights of a franchise
Banking and financial service
Work or under-taking
Entertainment e.g. sale of tickets
Access to any electronic
communications infrastructures e.g.
cell phones, 3G
Access to event, premises, activity
or facility
Right of occupancy in land or other
immovable property
Education, information, advice or
consultation (excluding FAIS)
Consumer’s rights
Free and unlimited access
• Suppliers may not:
• Limit access to goods and
services
• Prioritise consumer groups
• Different quality or pricing
• Complain to Equality court or file
complaint with commission
Excluded
• Sales of alcohol to under-aged
minors
• Discounted prices for children,
persons over a certain age
• Separate use of facilities for
different genders
Consumer’s rights
Right to privacy
• No direct marketing at home for
promotional purpose during
Sunday, public holidays, Saturdays
between 9:00 and 13:00 and all
other days between 20:00 and 8:00
• Accept, refuse or block any
unwanted marketing
• Formal demands to discontinue
marketing approach
• Pre-emptive blocking of direct
marketing
Minister to:
• Establish an “Exclusion Register”
Consumer’s rights
Fixed term contracts
• Maximum of 24 months
• Right to cancel without penalty or
charge
• Reasonable cancellation penalty
• Month to month automatic renewal
• 20 Business days cancellation
notice
• Exclude juristic persons
Quotes and estimates
• Provide estimate
• No charge for drawing up cost
estimate
• Consumer to pre-authorise or
refuse additional repairs
• No charge for inspections to do
cost estimates unless with prior
agreement
Consumer’s rights
Cancel advance reservations or
bookings
• May charge deposits
• Reasonable penalties
• Excluding death or hospitalisation
Right to return goods
• Six months to return faulty or
unsafe goods
• Without penalty
• Supplier’s risk and expense
Consumer’s rights
Unsolicited goods or
services
• Retain goods without
payment
• Return at supplier’s
risk and cost
• Entitled to retain after
20 business days
Right to cancel
agreement
• Result from direct
marketing
• Cooling off period of
5 business days
• No need to provide
reasons for
cancellations
• No penalties
• Supplier to return
payment received
within 15 business
days of receiving
cancellation notice
Over booking and
over selling
• Refund in full with
interest
• Claim contractual and
consequential
damages, including
economic losses
Fair and responsible marketing
Prohibited marketing practices
• Bait marketing
• Negative options: Client under no
obligation to pay
• Referral selling
• Offering of prizes with intention of
not providing them
• Informing consumers that they
have won a prize when no
competition has been conducted
• Making prize subject to payment of
consideration
Loyalty programmes, pre-paid
certificates, credits and vouchers
• Loyalty programme:
• Notify consumer of times at which
points may not be redeemed
• Exclusion period limited to 90
days in a year
• Pre-paid certificates
• Supplier obliged to honour them
• Minimum period is three years
Disclosure and information
Notice and document
• Plain and
understandable
language
• Person with average
literacy skills and
minimal experience
must understand
Goods and services
• Compulsory to
display price
• Specify duration of
promotions,
otherwise customers
may purchase goods
at specified prices
• If two prices are
displayed, the lowest
has to be charged
• Trade descriptions
not misleading or
tampered with
Disclosure
• Reconditioned
• Grey market goods
Fair, just and reasonable terms
Right to fair value,
good quality and
safety
• Goods to be in
working order, free of
defects, useable and
durable for a
reasonable period of
time
• Provisions that seek
to limit suppliers
liability must be
brought to the
attention of the
consumer
• No “voetstoots”
clause
Strict liability
Implied warranties
• Producer, importer,
distributor and retailer
• Liable for harm
caused
• Unsafe goods,
product failure,
defects, hazard,
inadequate
instructions or
warnings
• Irrespective if
negligent or not
• Six months on repair,
replace or refund
• Further three months
replace or refund on
repairs
Registration of business names
Prohibited
• Trading name
must be the
registered name
of the entity or
per ID
• May not be the
same or similar to
another
registered entity
or trade mark
• If name is not
registered
Consumer
Commission may
require business
to cease trading
Obligation
Consequence
Safety Recall Guidelines
Purpose
Requirement
Scope of Guidelines
• What a supplier is
required to do when
conducting a product
safety recall
• Supplier to adopt a
system that will
ensure the efficient
and effective recall of
unsafe consumer
products from
consumers and from
within the supply
chain
• The legal
requirements
• The role and
responsibilities of
suppliers and
government agencies
• Requirements for
conducting a recall,
including
• Notification
• Recall strategy
• Retrieval of the
product
• Reporting on the
recall
Penalties
Consequences of non-compliance
•
•
•
•
Fine or imprisonment of 12 months
Disclosure of private information: 10 years
Administrative fines of R 1 000 000 or 10% of turnover
Civil damages
Protection of Personal Information Bill
Promulgated this year or in 2013
Overview
• Purpose of the Bill
• What information is protected?
• Information protection principles
• Unsolicited electronic communication
• Enforcement and penalties
Purpose of the Bill
Everyone wants the right to be left
alone and have control over their
personal information
Promote protection of personal
information processed by public and
private bodies
Establish minimum requirements for
the processing of personal information
Provide for rights of persons regarding
unsolicited electronic communications
and automated decision making
Processing of personal information
Processing
• Collection, receipt, recording, organisation, collating, storage, updating,
modification, retrieval, alteration, use, dissemination and merging
Personal information
• 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
• Education, medical, financial, criminal or employment history
• ID number, symbol, e-mail address, physical address,
telephone number
• Blood type or biometric information
Processing of personal information
Personal information
• 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
Special personal information
• Child who is subject to parental control
• Religious, philosophical beliefs, race or ethnic origin, trade union
membership, political opinions, health, sexual life, or criminal
behaviour
Warning: PI may only be processed after the Regulator has been notified
Exclusions from the application of the Bill
Personal or household activity
De-identified information
State- national security, defence and public safety
State- prevention, investigation or proof of
offences
Journalistic purposes
Cabinet, Executive Council of a province,
Municipal Council and Municipality
Judicial functions
Exemption in terms of section 34
Information protection principles
Processing limitation
•
•
•
•
•
•
•
Consent and objection
Informing data subject of purpose
Retaining data for no longer than needed
Complete, accurate, not misleading
Prevent loss or unauthorised use of PI
Notification to Regulator and data subject
Right to request free of charge a description about PI held and to
whom such data was disclosed
• Right to request correction or deletion of PI that is inaccurate,
irrelevant, excessive, out of date, incomplete, misleading
Unsolicited electronic communication
Prohibited unless:
• Consent from data subject
• Data subject is client
Communication
•
•
•
•
•
Contain details of identity of the sender
Address to which recipient may send request that communication cease
Only goods and services of company may be advertised
Selling of databases prohibited
Unsubscribe address
Directories
• Inform data subject of inclusion and use of directory
• Individuals may object and request withdrawal of information
Enforcement and penalties
Complaints procedure
• Any person may lodge a complaint with the Regulator
• Regulator may apply for warrant to enter and search premises
• Claim for damages irrespective whether there is intent or
negligence involved
Power of regulator
• Contravention of any of the principles in itself is not a criminal
offence
• Regulator may issue enforcement notice
• Failure to comply with enforcement notice is criminal offence
Penalty: Fine and/or 12 months imprisonment (10 years when obstructing the Regulator)
Companies Act and King III
Categories of companies
Companies
Gain vs Public Benefit
Profit
Not stateowned
PFMA definition
Non-profit
Stateowned
MOI
Private
company
Personal
liability
company
Public
company
Stateowned
company
Non-profit
company
Name
(Pty) Ltd.
Inc.
Ltd.
SOC Ltd.
NPC
Private companies
PIS
Audit
Audit
Audit
Audit
None
Audit
Review
Audit
None
None
Review
Review
Independentl
y compiled
Internally
compiled
Independently
compiled
Internally
compiled
350
100
0
Owner managed
Not owner managed
Financial reporting
Public listed/State owned
IFRS/ PFMA
All listing
requirements (require
all companies in group
to be audited)
Public not listed
IFRS/IFRs for SME’s
(meeting scoping
requirements for
SMEs)
Audit
Audit
Secretary, auditor,
audit committee
Secretary, auditor,
audit committee
Profit or non-profit
In ordinary course of its
primary activities hold assets
in fiduciary capacity for
unrelated persons > R 5
mil (aggregate)
NPC incorporated by state,
international entity, foreign
state entity, or foreign
company
“PIS” is 350 or more or at
least 100 and AFS internally
compiled
IFRS/ IFRs for SME’s
(meeting scoping
requirements for
SMEs)
Audit
Reporting framework for private companies
PIS
IFRS or IFRS for
SMEs
IFRS or IFRS for
SMEs
IFRS or IFRS for
SMEs
IFRS or IFRS for
SMEs
iFRS or IFRS for
SMEs or SA
GAAP
IFRS or IFRS for
SMEs or SA
GAAP
IFRS or IFRS for
SMEs or SA
GAAP
IFRS or IFRS for
SMEs or SA
GAAP
350
100
IFRS or IFRS for
SMEs or SA
GAAP
None
IFRS or IFRS for
SMEs or SA
GAAP
Acceptable
0
Independently
compiled
Internally
compiled
Owner managed
Independently
compiled
Internally
compiled
Not owner managed
Financial statements
Financial statements (including
annual financial statements)
• Satisfy financial reporting standards
• Present fairly state of affairs and
business
• Explain transactions and financial
position
• Show assets, liabilities, equity,
income and expenses
• Set out the date when published and
accounting period
• Bear on first page prominent notice
indicating whether audited, reviewed
or not
• Name and professional designation
of individual who prepared or
supervised
Continue
• May not be false or misleading in any
material respect
• Incomplete in any material particular
• Guilty of offence if person is party to
preparation, approval, dissemination
or publication and knowing that it is
materially false or misleading
Financial statements
Annual financial statements
• Within 6 months after year end
• Include:
• Audit report (If applicable)
• Directors report
• Approved by the board
• Signed by one director
• Presented to first shareholders
meeting
• Disclose directors remuneration
of individual directors if statutory
audit required
Access to annual financial
statements
• Shareholders: one copy without
charge
• Judgement creditor: within 5
business days without charge
• Trade union: through CIPC for
initiating business rescue process
Financial year end
Requirements
First financial year
Begins: Date of
incorporation
Ending on date set
out in MOI
Change of year-end
Only once during
financial year
Current year must
not have ended
Ends: Date set out
in Notice of
Incorporation (not
more than 15
months)
Form CoR25
Not more than 15
months after end of
preceding financial
year
Annual returns and financial accountability supplements
Also applicable to NPC and external company
Audited i.t.o Act
or Reg 28
• Latest
approved
audited
financial
statements
Voluntary audit
and review
• Audited or
reviewed
statements
Not
audited/reviewed
• File financial
accountability
supplement
with annual
return
30 Business days after anniversary date
Waived: March 2013 (except for public and SOC)
Deregister : Returns outstanding for two successive years
Legal effect of deregistration: Juristic personality is withdrawn and company or close
corporation ceases to exists
Company records
For 7 years
•
•
•
•
Reports presented at AGM
Annual financial statements
Accounting records
Notice and minutes of
shareholders/ directors/
committee meetings
• Resolutions adopted by
shareholders
• Written communication to
shareholders
Indefinitely
•
•
•
•
•
Copy of MOI
Any amendments to MOI
Copy of rules
Registration certificate
Register of directors (7 years for
past director)
• Securities
register/secretary/auditor
Shareholder: Inspect and copy except for accounting records and minutes of
directors meetings
Accounting records
Complete
Adequate
precaution against
theft, loss,
falsification,
intentional and
accidental damage
or destruction
Accurate
One official
language
Facilitate the
discovery of
falsification
Support
preparation of
F/S, audit and
review
requirements
Capable of being
retrieved to a
readable and
printable form
Warning: Commission may issue compliance notice in respect of any failure to
comply with accounting record requirements
Accounting records
Non current assets
Loans to/from
shareholders,
directors, prescribed
officers and
employees including
related persons
Revenue and
expenses
Daily records of
cash in and out
Date acquired and
cost
Date re-valued,
amount, basis and
reason
Amount, interest
rates, terms
Daily records of
goods purchased
and sold on credit/
names of parties
Stock take records
Date disposed,
value, name of
person
Guarantee, surety
ships, indemnity
Vouchers/supporting
documents
Property held in
fiduciary capacity
NPC: Revenue
received from
donations grants,
members fees
Auditors
Public companies and SOCs
Must not be:
• Director or prescribed officer
• Employee or consultant engaged more than 1 year in maintenance of
financial records or preparation of statements
• Director/officer/employee of the company secretary
• Person who regularly performs duties of accountant/secretarial work
• Was not any of the above in the preceding 5 years from date of
appointment
• A person related to any of the above
Auditors
Rotation after five years
Annually appointed at AGM
The same
individual
Specify the
name of
individual
member
Two year
break
Acceptable
to audit
committee
Other services if allowed by:
IRBA
Audit committee
Appointment of directors
Non-Profit
Companies
• Three
Election
Public
Companies
• Three (or to satisfy
requirement for audit and
S&E Committee
Personal
Liability
Companies
• One
Private
Companies
• One
MOI may
specify higher
%
• Elected by shareholders
• 50% of directors and
alternate directors
• Conducted as a series of
votes (unless MOI provides
otherwise)
• Majority of votes
• Vacancy: board may elect
director on temporary basis
(unless MOI provides
otherwise)
The Board (King III)
Comprise balance
executive and nonexecutive directors
Majority
independent nonexecutive directors
At least CEO and
financial director
(Compulsory for
listed companies)
Composition
1/3 of nonexecutive directors
should retire by
rotation at AGM
Assess
independence of
non-executive
directors after 9
years
Appointed through
formal process
Must be competent
Do background and
reference checks
Not been declared
delinquent nor
serving probation
Appointment
Shareholders
responsible to
appoint the board
Nomination
committee should
play role in process
Independent non-executive director (King III)
• Not a representative of a shareholder who controls or has influence
• Does not have direct or indirect interest(< 5%)
• Has not been employed for 3 preceding years
• Is not member of immediate family of person who was employed in executive capacity
in past 3 years
• Is not a professional advisor to the company
• Free from any business relationship
• Does not receive remuneration contingent upon performance of the
company
Codified regime of directors duties
Fiduciary duty
Degree of care, skill & diligence
• Act bona fide in the interest of the
company
• In good faith and for proper
purpose
• Independent judgement in decision
making
• Not to use corporate property
information or opportunities for
personal profit
• Prevent conflict of interest
• Person with general knowledge,
skill and experience reasonably
expected of a person when
carrying out the functions of that
director; and
• Having the general knowledge, skill
and experience of that director
Includes alternate director, prescribed officer and committee members
These are unalterable provisions
King III requirements
Compliance with laws and regulations
Governance of IT
Managing stakeholder relationships
Governance of risk
Financial assistance to buy securities of company or related
company
Board may authorise (subject to
MOI)
Loan, guarantee, provision of
security
By special resolution (within 2 prior years)
Approving specific recipient or in general for
category of potential recipient
To any person
Solvent and liquid after transaction
For the subscription of any option
or securities
Employee share scheme
(excluded)
Terms fair and reasonable to company and
conditions and restrictions in MOI satisfied
Financial assistance to directors or related entities
Director
Expenses paid on
behalf of director
Or
Or
By special resolution
(within 2 prior years)
And
Prescribed officer
Credit card (unless on
behalf of company)
Solvent and liquid after
transaction
Or
Or
And
Related or inter-related
company or CC
Intercompany
loan/sales
Or
Or
Person related to such
company or director
Treasury function (listed
companies)
Terms fair and
reasonable to company
Board decision has to
be circulated in writing
to all shareholders and
trade unions
Distributions to shareholders
Permitted if:
• Pursuant to an
existing legal
obligation or a court
order
• Authorised by the
Board by resolution
• Satisfies the
solvency and liquidity
test
Examples
• Dividends (paid
within 120 days
otherwise another
board resolution)
Definition
• Transfer of money or
other property, other
than its own shares to
benefit of
shareholders
• Consideration paid
within same group of
companies for
acquisition of any
shares within that
group
• Incurrence of debt or
other obligation for
benefit of
shareholders
• Forgiveness of waiver
of shareholders debt
Solvency and liquidity test
Considering reasonably foreseeable
circumstances:
Assets fairly valued equal or
exceed liabilities fairly
valued
Able to pay debts as due for
12 months after
consideration of test
Able to pay debts as due for
12 months following
distribution
Financial information
Accounting records satisfy
S28
Financial statements satisfy
S29
Fair valuation of assets and
liabilities
Include reasonably
foreseeable contingent
assets and liabilities
Liability of directors: These are unalterable provisions
Fine or imprisonment not > 12 months, or both
Loss, damages or costs
• Breach of fiduciary
duty/delict
• Acted without authority
• Reckless trading
• Defraud creditor/employee
or shareholder
• *Party to falsification of
accounting records
• *Party to false or misleading
financial statements or
Loss, damages or costs
continue
• Present at meeting and
failed to vote against:
• Issuing of unauthorised
shares/securities/options
• Provision of financial
assistance to any person
or director inconsistent
with sec 44 and MOI
• Approving distribution
(does not satisfy solvency
and liquidity test)
• Acquisition of its shares,
or shares of holding
company
Liability
• Joint and several
• Action to recover loss may
not commence more than 3
years after the act
• Court may provide relief if
satisfied that director acted
honestly and reasonably
Board committees
The Board
• Subject to MOI
• May appoint
committees and
delegate any
authority to such
committee
Members
• May appoint nondirectors
• Should not be
disqualified or
ineligible
Prohibited
• Non-director member
will not be allowed to
vote
Audit committee
Compulsory
• Public, SOC, or MOI
• Appointed at AGM
At least three
members who are all
directors
• All non-executive
• All independent
• Third must have
academic
qualifications or
experience in
economics, law,
corporate
governance, finance
accounting etc.
May not be
• Involved in day to day
management
(previous year)
• Prescribed officer or
full time employee
(previous 3 years)
• Material customer or
supplier
• Not related to above
If Duties prescribed in Companies Act and King III
Social and ethics committee
Compulsory
State owned
company
Unless
Must
Subsidiary of
another company
3 Directors (one
not involved in dayto-day
management for
previous 3 years)
Exempted by the
Tribunal (valid for 5
years)
Elect members at
each AGM
Listed public
company
Other company
with “PIS” > 500 in
any 2 of previous 5
years
Other committees (King 111)
Nomination
• Comprise of board chairman
• Non-executive directors only
• Majority should be independent
Remuneration
• Chaired by an independent nonexecutive director
• Non executive directors only
• Majority should be independent
External advisors and executive directors should attend meetings by invitation
Should be free to take independent advice at the cost of the company
Resolutions
Resolutions
• Special: 75% but MOI may specify
less (or more)
• Ordinary: >50% but MOI may
specify more
• Margin of 10%
• No requirement to lodge
• Effective when passed
Special resolutions
• Amend MOI
• Ratify consolidated version of MOI
• Ratify actions by company and
directors
• Approve issue of shares
• Financial assistance
• Re-acquisition of shares
• Compensation to directors
• Voluntary winding up of company
• Approve fundamental transactions
Annual general meeting: N/A to private companies
Frequency
Minimum business
Directors’ report
18 months after date of
incorporation
Auditors’ report
Audit committee report
Election of directors
Once every calendar year but no
more than 15 months after previous
AGM
Appointment of auditor
Appointment audit committee
Round robin not allowed
Other
Registered office
CIPC requirements
MOI
• Office maintained by
company not auditors
• Administrative
business conducted
• N/A to CC’s and coops
• E mail addresses and
cell phone numbers
of directors on CoR
forms
• Physical and postal
address details in
specific format
• Not compulsory to
adopt new MOI after
31 April 2013
• Only if in conflict with
Act
• Consider:
• AGM
• Audit
• No automatic
conversion by CIPC
• Free of charge
Second-Hand Goods Act, 6 of 2009
Purpose
To regulate the business of dealers in second-hand goods and
pawnbrokers, in order to combat trade in stolen goods (Includes
scrap metal dealer)
To promote ethical standards in the second-hand goods trade
Jewellery
Agricultural implements
Bicycles
Household and office
equipment
Factory equipment
Tyres
Communication equipment
Photographic or optical
instruments
Antique goods
Motor vehicles or vehicles
Sporting equipment
Valuables and books
Shopfitting equipment
Exclude: Firearms or
ammunition
Schedule 2 – Controlled Metals
Schedule 1 - Goods
Schedules
Copper
Aluminium
Zinc
Chrome
Lead
White metal
Nickel
Tungsten
Tin
Ferrovanadium, Ferrosilicon,
Ferrochrome
Brass
Bronze
Cobalt
Registration
Obligation
Application
Application to NC
Business as a dealer must register
Register all premises
Other than natural person, when
natural person is responsible for
business
Notify dealer of intent to refuse and
afford 30 days to dealer to object
NC to issue certificate
Registration
Registration valid for 5 years
Amendment of details within 30 days
Renew every 5 years
• Apply not more than 180 days but at least 90 days
Other
• May not transfer a certificate, only business
• Disqualification – Previous 5 years imprisoned without options of fine
for fraud, theft, corrupt activities, unrehabilitated insolvent, under 18
years
• Display of certificate
Dealers
Records by dealers
• ID of seller
• Description of goods and
serial number
• Price
• Number assigned to goods
• Name and signature of
person who conducted
transaction from dealer
side
• Date and time of
acquisition and disposal
thereof and details of
disposal
• Retention of copies = 5
years
False information and
stolen goods
• Suspects false name,
document stolen goods,
tampered goods
• Report to police official
• Transaction may not be
continued with
Restrictions on dealers
and pawnbrokers
• May not acquire from
person < 18 years old
• May not store on premises
for which no certificate
obtained
• If seller is not owner or
titleholder
• Must hold goods for 7 days
• May not accept firearms or
ammunition
Motor vehicles - records
Register of every acquisition and disposal
VIN, chassis, engine, odometer, colour,
distinguishing mark
Seller must give personal particulars and ID
Dealer to keep copy of ID and proof of registration
Dealer to keep copy for 5 years
Controlled metals
Recycler
• Obligation to
register
• In addition to
registering
under
Section 2
NC
Metals
• Application to
be made
• Certificate
will stipulate
recycler
• Suspicion to
be reported
to police
official
• May not
acquire burnt
cable
Communication equipment
• Register
• Disposals and
acquisitions
• Make and model
• IMEI number
• Serial number
• ID copy to be kept by
dealer
• Full name and
address
• Kept for 5 years
Records
Particulars
Person
Powers of police official
ID by police official/
produce appointment
certificate
Routine inspections/
one annual
inspection
Entry, search,
seizure and seal-off
Offences and penalties
3 years
• Registration
• Certificate
• Transitional
provisions
5 years
• Certain provisions of
records by dealers
• Certain provisions of
motor vehicles
10 years
• Obligation to register
• Certain records by
dealers
• False information and
stolen goods
• Restrictions on
dealers and
pawnbrokers
• Certain motor vehicle
sections
• Controlled metals
• Communication
equipment
• Inspections
Schedule 3 – Offences and Penalties (commenced 16 January 2012)
Tax Administration Act, 28 of 2011
Limitation of administrative powers
Acts
•
•
•
•
•
•
•
•
•
Transfer Duty
Estate Duty
Income Tax
VAT
SDL
UIF
Securities Transfer
Diamond Export Levy
Mineral and petroleum Resources
Royalty
• VDP
Tax Ombud
• Address service failures
• Review complaints regarding
service, procedural or
administrative matters
• Process:
• Contact branch/call centre
• Escalation to manager
• SSMO
• Tax Ombud
Registration
Registration requirements
• Single registration platform
• Registration period 21 business
days
• Biometric information
• Inform SARS of changes within 21
business days
• Taxpayer reference number
(compulsory use)
Completeness of taxpayer
registration
• Access to third party information
e.g. vehicle transaction records
• Physical inspections of business
premises
• On-the-spot checks at markets and
other trade locations
• Newspapers and internet
Returns and records
Submission of return
• Prescribed form and manner
• Date specified in Act,
Commissioner or extension date
• Signed by taxpayer
• Non-receipt does not affect
obligation to submit
Statement concerning accounts
• SARS my require person who
submits financial statements or
accounts prepared by another to
submit certificate:
• Extent of examination of books
• Whether or not the entries
disclose true nature
• False certificate or statement
constitutes criminal offence
Returns and records
Duty to keep record
• Extended to
taxpayers who are
not required to submit
a return
• 5 years from
submission of return
or 5 years from end
of tax period
Form of records kept
or retained
•
•
•
•
Original form
Orderly fashion
Safe place
Electronic form at
physical address
• If not in official
language SARS may
require translation
Open for inspection
• SARS can conduct
unannounced
inspection
• Determine
compliance with Act
• Inspection, audit or
investigation
Information gathering
Selection for inspection, verification or audit
• Random or risk assessment basis
Authorisation for SARS official to conduct audit
• Written authorisation
• Must produce authorisation letter
• Taxpayer may lawfully refuse to allow audit if authorisation cannot be
produced
Information gathering
Inform taxpayer of the
stage of audit
Letter of findings
Referral for criminal
investigation
To senior SARS
official responsible
for criminal
proceedings
Intervals of 90 days
Within 21 days
Only in case of in
depth audit or
criminal
investigation
Material gathered
during audit after
referral is not
admissible in
criminal
investigations
Inspections
• SARS official
may:
• Arrive at
premises
• Unannounced
• Reason to
belief trade is
carried on
Inspection
To determine:
• Identity of person
occupying
premises
• Registered for
tax
• Maintaining
proper records
• Enter dwellinghouse or
domestic
premises unless
used for trade
• Without consent
of occupant
May not:
Request for relevant material
Requesting relevant
information
• Tax payer and third
party
• Under oath or solemn
declaration
• Purposes of revenue
estimation
Production of
relevant material in
person
• Written notice
specifying time and
place
• Interview by SARS
official
• Clarify issues
• Not for purpose of
criminal
investigation
• Under oath or solemn
declaration only with
taxpayer’s consent
• Decline > 200km
Field audit or
criminal investigation
• Prior notice of 10
business days
• Notice to state:
• Place date and time
(normal business
hours)
• Initial basis and
scope
Assistance during audit or criminal investigation
Provide reasonable
assistance
Making available
appropriate
facilities
May not:
Costs incurred
Obstruct a SARS
official
May recover costs
for use of
photocopying
facilities
Refuse to give
access or
assistance
Fees as prescribed
in PAIA
Answering
questions
Submitting relevant
material
Inquiry
Notice to appear
• Notice in writing by
presiding officer
• Appear before inquiry
• At place and time in
notice
• To be examined
under oath or solemn
declaration
Confidentiality
• Private and
confidential
• May use evidence
given under oath in
subsequent
proceedings
Incriminating
evidence
• May not refuse to
answer a question on
grounds that it may
incriminate person
• Incriminating
evidence obtained
not admissible
unless:
• False evidence or
statement
• Failure to answer
questions lawfully
and satisfactorily
Search and seizure
Application for warrant
SARS official may:
• SARS must apply to judge for
warrant:
• Enter premises
• Search premises and any person
present on premises
• Seize relevant material
• Exercised within 45 business days
• SARS official must produce warrant
to person in charge of premises
• Inventory of relevant material
• Open or remove anything that
contain relevant material
• Seize any relevant material
• Seize and retain a computer or
storage device
• Make extracts or copies of relevant
material (May not remove originals)
• Require explanations from persons
of relevant material
• May stop and board vessel, aircraft
and vehicle
• Only search person of same
gender
Search and seizure
Search of premises
not identified in
warrant
• Grounds to believe:
• Relevant material is
not at premises
identified in warrant
• Warrant cannot be
obtained in time to
prevent removal or
destruction
• Delay in obtaining
warrant would
defeat object
Search without
warrant
• Owner consent in
writing
• Imminent removal or
destruction of
material
• Warrant will be
issued if applied for
• Delay in obtaining
warrant would defeat
object
Rights of taxpayer
• To examine and copy
seized material
• Request SARS to
return material
• Compensation for
physical damage
• Protection of material
if legal professional
privilege is asserted
Confidentiality
General prohibition
• SARS confidential
information
• Taxpayer information
including biometric
information
• Oath of secrecy by
SARS officials
Disclosure
• PAIA
• Financial regulatory
agencies
• Disclosure under Act
e.g. POCA, FICA
• Criminal, public
safety or
environmental
matters e.g. SAPS
• By order of High
Court
• To taxpayer of own
record
Publication of name
of offender by
Commissioner
• Name and residence
area
• Particulars of offence
• Particulars of fine or
sentence
Assessments
Types
• Original assessment
• Additional
assessment
• Reduced assessment
• Jeopardy
assessment
Jeopardy
assessments
• In advance of due
date
• Secure collection of
tax in jeopardy
• Approved by
Commissioner
• SARS to prove it is
reasonable
Estimates
• Failure to submit
return
• Return incorrect or
inadequate
• Agreed in writing with
taxpayer
• Not subject to
objection and appeal
• Subject to
understatement
penalty
• Burden of proof on
SARS
Assessments
Notice of assessment
•
•
•
•
•
•
•
Name of taxpayer
Reference number
Date of assessment
Amount of assessment
Tax period
Payment date
Summary of process for lodging
objection
Period for issuance of
assessment
• Three years
• Original assessment by SARS
• Five years
• Self assessment
• Payment of tax if no return
required
• N/A if due to fraud,
misrepresentation, non disclosure
Tax liability and payment
•
•
•
•
•
Meaning of taxpayer
Responsible third parties
Person chargeable to tax
Representative taxpayer
Withholding agent
Responsible third party
Person who is subject to request to
provide assistance under an
international tax agreement
• Holding or owing money and
appointed by SARS to satisfy debts
• Involved in financial management
• Shareholders acquiring assets of a
wound-up company (excluding
listed company)
• Transferee receiving assets below
market value
• Assists in obstruction of tax
collection
Tax liability and payment
Pay now argue later
• Apply for suspension
• Collection steps
prohibited during
consideration of
suspension and 10
days after notice of
denial
• Unless SARS has
reason to believe
there is risk of
dissipation of assets
Security by taxpayer
• SARS may require
security
• Also by members,
shareholders or
trustees who
controls/manage
taxpayer
• Preservation order
where debtor
dissipates assets
Taxpayer account
• Single taxpayer
account with rolling
balance
• First in first out
payment allocation
• Formal application for
deferral of payment
Recovery of tax
Methods
•
•
•
•
Personal liability of third parties
Appointment of “agent”
Application for civil judgement
Court order for repatriation of
offshore assets
• Limitation of right to travel outside
republic
• Surrender passport
• Withdraw authorisation to conduct
business in Republic
Period of limitation
• Prescription period reduced to 15
years
Interest
General interest rules
• SARS may
charge/pay interest
• From effective date
• Prescribed rate
• Refunds on
provisional tax and
employees tax: 4%
below
• Calculated on daily
basis
• Compounded
monthly
Waiver of interest
• Circumstances
beyond taxpayers
control
Limited to:
• Natural or human
made disaster
• Civil disturbance or
disruption in services
• Serious illness or
accident
Refunds
Refunds of excess
payments
Authorisation by
SARS
• SARS may set-off
against outstanding
debts except
instalment payment
agreements and
suspended disputed
tax
• Must be paid if
security is given
• Interest
• Not refundable if less
than R100 but carried
forward on account
• Only after verification,
inspection or audit
• Limitation if
outstanding IT and
VAT returns
Time period
• Assessment by
SARS: 3 years
• Self assessment: 5
years
Penalty system
Administrative
non-compliance
penalty
Penalty system
Mandatory
Fixed amount
Non-Compliance
Percentage
based
Non-payment
Understatement
penalty
Offences listed
in chapter 17
Criminal
offences
Offences listed
in tax Acts
Understatement penalty
Tax practitioners
Registration of tax
practitioners
• Recognised
controlling body
• SARS
Refusal for
registration
Recognised
controlling body
• Previous 5 years:
• Removed from
related profession
or professional
body; or
• Convicted of theft
fraud or uttering a
forged document,
dishonesty, perjury
or corruption with a
sentence of two
years imprisonment
without option of a
fine
• IRBA
• SA Legal Practice
Council
• Other body with 1000
members
Thank You
Fasset Call Centre
086 101 0001
www.fasset.org.za

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