06/10/2025
CIPC UPDATE AND ISSUES
The new Companies Act is a power for good in the new legal structure options, flexibility and reporting and transparency measures it has introduced. And the CIPC has online systems which are clear, navigable (mostly), reliable, efficient and which have created speedy, accessible and secure mechanisms for business and nonprofit entities to be registered and updated.
• A new (standard form) NPC can be registered online in a matter of hours;
• Director changes are processed within 24 hours;
• Director and other changes have incorporated security protocols such as OTPs being sent to all affected by changes;
• Amended founding documents are registered within 4-6 days;
• Name reservations take less than 24 hours;
• The system requires all director details to be updated, building better public credibility and transparency;
• Online search facilities make the registered details of companies and their directors immediately accessible;
• ‘Back office’ links to Home Affairs systems allow for verification and pre-population of forms (though dependency on these systems routinely causes delays for CIPC processes);
• Those who serve as directors of companies are required to take responsibility for their own CIPC profiles, building engagement with and understanding of the systems;
• The annual reporting requirement provides deadlines and impetus for companies to keep proper records, adhere to reporting standards and stay current with administrative and governance matters;
• These same annual reporting requirements allow CIPC to clear from its system the ‘debris’ of failed or discarded companies, as deregistration follows non-compliance;
• The CIPC annual compliance checklist filing requirement (if understood and engaged with by the board itself) keeps matters of adherence to the law ‘on the radar’ and current.
The building, rolling out and integration of systems has not been without issues, but, even with these, the CIPC system we have today is a giant leap forward and, on the whole, effective, useful and user-friendly. (And, with each advance, it leaves the dusty and disorganised Master’s office further behind, clinging doggedly to outdated protocols and searching endlessly for lost files).
Like most systems, the CIPC systems have been built primarily to service business and its needs. And this is to be expected, as business is the main CIPC client and having an efficient and supported economy would be one of the main aims of the Department of Trade and Industry under which CIPC falls.
However, the non-profit sector also plays a major role in the functioning of our society and our economy, and needs to be properly served by the CIPC. Some current difficulties which are being experienced by NPCs include:
1. A lack of understanding of the largely voluntary and independent nature of NPC boards. (CIPC is, at the moment, insisting that at least one director is recorded as ‘executive’ even if there are no executive directors on the board and the MOI or organisation culture prohibit or discourage executives from serving on the board);
2. For ‘beneficial ownership’ filing, the CIPC fields require that each ‘beneficial owner’ is allocated a percentage of the ‘voting rights’ as though they were all shareholders. If it is a no-members NPC with five directors, then it is easy enough to allocate each director 20%. But in a with-members NPC, we report on the board and the members. The directors exercise oversight of ongoing management. The members appoint the directors. Each group has their own sphere of power and responsibility. And if there are five directors and 15 members, it makes no sense to ‘give’ each of them 5%, as the directors have more power on an ongoing basis, but the members greater ultimate power. The system should either remove the percentage requirement for NPCs or allow the percentage of each group to be separately added.
A NOTE ON NPC AFS AND ANNUAL RETURNS TO CIPC
Each year, all registered companies, including NPCs, must file their ‘annual return’ which includes an annual fee based upon ‘turnover’. Now, ‘turnover’ is routinely interpreted to mean ‘total sales’ so, for most NPCs, this number is low and the fee to be paid should be a minimal R100 a year (R150 if you file late) or, if the turnover is between R1 000 000 and R10 000 000, R450 a year (R600 if you pay late.)
Regulation 164(4) to the Companies Act defines ‘turnover’ as follows:
4) At any particular time, the annual turnover of
(a) a company …. is the gross revenue of that company from income in, into or from the Republic, arising from the following transactions or events, as recorded on the company’s most recent annual financial statements:
(i) the sale of goods;
(ii) the rendering of services; or
(iii) the use by other persons of the company’s assets yielding interest, royalties or dividends ….
Regulation 164(5) specifically excludes from ‘turnover’, VAT or gains from ‘foreign currency transactions’, as well as any amounts excluded from ‘gross revenue’ in terms of the accounting standards applicable to the company.
Based on these Regulations (and the IFRS for SMEs accounting standard, which most NPCs use), it is clear that most non-profits will pay the minimum annual return fee, as their ‘turnover’ will be limited to any income from sales of goods or services, interest earned on money in the bank, or interest and dividends earned on other investments.
To allow proper calculation of the annual return (and, indeed, of tax which might be due) it is important that the financial systems and records of the company distinguish between different types of funds received, and that these are accurately identified in the Annual Financial Statement of the company:
o Donations, grants bequests and other amounts which are ‘fund raised” should be grouped together;
o Sales income (from goods or services) should be on a separate line; and
o Interest and dividends should be clustered together.
We often find that there is no such distinction made in the Annual Financial Statements of our clients, or that the categories of funds received are incorrectly labelled. Quite often donations are just called ‘Sales’. Which they are not. Though compilers of Annual Financial Statements and those who review or audit them should be aware of the importance of these classifications and ask questions to check they are correct, it is usually the actual financial records and the ‘codes’ assigned when the systems are set up, that are to blame for the misidentification of funds. Those who compile, review or audit do so based on the records and materials provided to them, so these need to be set up correctly.
The misidentification of income sources has consequences for the annual return classification but also, importantly, for calculation of tax. For instance:
• For a non-profit which does not (or not yet) have tax exempt status, it is important to correctly identify donations and grants received as these fall outside of ‘gross income’ as defined in the Income Tax Act, and so are not taxable;
• For an organisation which has PBO or one of the other ‘partial’ exempt statuses, one must distinguish ‘Sales’ income (which may be taxable trading income) from donations, interest and other non-taxable funds;
• The obligation to register as a VAT vendor (and charge VAT to any customers) arises when you make ‘supplies’ of over R1 000 000 in a year. If donations are incorrectly classified as ‘Sales’, then it could seem that you need to register as a VAT vendor, when you do not.
As ever, proper planning and preparation and attention to these (yes, boring for most of us) details are really important.
