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Month: August 2019

WHAT HAPPENS WHEN ANNUAL RETURNS ARE NOT FILED?

WHAT HAPPENS WHEN ANNUAL RETURNS ARE NOT FILED?

In terms of Section 33 of the Companies Act 71 of 2008 (“the Act”), read with Regulations 28, 29, 30 and 33 of the Companies Regulations of 2011 (“Regulations”), companies and close corporations must submit Annual Financial Statements or a Financial Accountability Supplement (“FAS”) together with their Annual Return with the Companies and Intellectual Property Commission (“CIPC”) annually.

All companies (including external companies) and close corporations are required by law to file their annual returns with the CIPC on an annual basis, within a prescribed time period. The purpose of filing such annual returns is to confirm whether a company or close corporation is still in business/trading, or if it will be in business in the near future.

Therefore, if annual returns are not filed within the prescribed time period, the assumption is that the company or close corporation is inactive, and as such CIPC will start the deregistration process to remove the company or close corporation from its active records. The legal effect of the deregistration process is that the juristic personality is withdrawn, and the company or close corporation ceases to exist.

Companies and close corporations are required to file annual returns once a year within a given time period. Companies must file within 30 (thirty) business days after the anniversary date of its incorporation date while close corporations must file within the anniversary month of its incorporation up until the month thereafter.

A clear distinction must be made between an annual return and a tax return. An annual return is a sort of ‘renewal’ and has the purpose of confirming whether CIPC is in possession of the most up to date information of a company or a close corporation and that the company or close corporation is still conducting business. A tax return focuses on the taxable income of a company or close corporation in order to determine the tax liability of the company or close corporation to the State and is filed with SARS. Compliance with one does not mean that there is automatic compliance with the other.

In determining the appropriate fee for the filing of an annual return, a distinction must be made between a company and close corporation filing, and the date on which the annual return became due, since different fee structures are used for companies and close corporations. If the annual return became due on 1 May 2011 or thereafter, the fee structure under the Act must be used. If it became due before 1 May 2011 the Companies Act, 1973 fee structure must be used. (Please refer to the CIPC website at www.cipc.co.za for the various filing fees applicable based on the company or close corporation’s turnover for a particular filing year.)

During February 2016, CIPC launched a programme to implement eXtensible Business Reporting Language (“XBRL”) as a digital financial reporting standard for qualifying entities in South Africa by mandating submission of annual financial statements to the CIPC together with its Annual Return submission from July 2018.

Regulation 30 of the Act stipulates that a company that is required by the Act or Regulation 28 to have its annual financial statements audited must file a copy of its audited statements:

  1. on the date that it files its annual return, if the company’s board has approved the statements by that date; or
  2. within 20 business days after the board approved the statements, if they had not been approved by the date on which the company filed its annual return.

A company that is not required to have its statements audited, in terms of the Act or Regulations, may, at its option:

  1. file a copy of its audited or reviewed statements together with its annual return; or
  2. undertake to file a copy of its audited or reviewed statements within the time provided.

A company that is not required to file annual financial statements in terms of the regulations, or a company that does not elect to file, or undertake to file, a copy of its audited or reviewed annual financial statements in terms of the regulation, must file an FAS to its annual return in Form CoR 30.2.

Should a company be required to file its annual financial statements in terms of the Regulations with its Annual Return with CIPC, these Annual financial statements need to be submitted in XBRL format. The idea behind XBRL is that instead of treating financial information as a block of text – as in a standard internet page, spreadsheet or printed document – it provides an identifying tag for each individual item of data. For example, company net profit or net current assets have their own unique tags that are understandable to computers. These tags contain information about the item, including its description, e.g. ‘accounts receivable’, its value and currency and whether the amount is a debit or credit.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

WHAT ARE THE BENEFITS OF CO-WORKING SPACES?

WHAT ARE THE BENEFITS OF CO-WORKING SPACES?

When walking into a co-working space, the first thing you will notice is that the atmosphere feels completely different from a regular office. You will feel a sense of excitement and collaboration in the air with a mixture of occupants who are deep in focus at their very own private desks, as well as other occupants who are engaged in conversation at the larger shared tables.

In essence, co-working spaces are shared work spaces. They are more affordable alternatives for those who want to escape their isolated home offices and noisy coffee shops.   People who make use of co-working spaces are usually freelancers, entrepreneurs, start-up companies and small teams who want to take advantage of flexible space and hours. Co-working spaces offer these occupants office-like amenities, such as hot-desks, boardrooms and kitchens.

When it comes to co-working spaces, the allure lies in the affordability. You can rent out what you need, instead of renting an entire office, which can be very expensive. Co-working spaces can work on membership-based models, and usually, occupants can decide between paying a daily fee or a monthly fee. It’s important to note that these membership fees can vary depending on whether you work at a shared desk or want a single desk to yourself.

Benefits of co-working spaces:

1. Professional environment

Co-working spaces allow entrepreneurs and freelancers the opportunity to work in a professional environment with flexible terms without having to empty their pockets.

2. Networking

Co-working spaces are open to anyone and attract freelancers and entrepreneurs from all walks of life. This means that you are in close proximity to a wide range of professionals which provides you with the perfect opportunity to build connections and network with other professionals, both inside and outside your field.

We have seen a massive rise in the popularity of co-working spaces. This is mainly due to the increasing numbers of contractors and start-up companies who seek office space that is affordable. Co-working spaces are innovative, and it changes the way that people work. In the future, we will likely see even more people ditching coffee shops and home offices to work in co-working spaces. The need for co-working spaces will always be there, therefore, this could be a very profitable investment.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

ARE MUSLIM MARRIAGES RECOGNISED IN SOUTH AFRICA?

ARE MUSLIM MARRIAGES RECOGNISED IN SOUTH AFRICA?

All marriages entered in terms of Islamic law, are currently not recognised as valid marriages.

For a valid marriage to be recognised in South Africa one must get married in terms of civil law which is regulated by the Marriage Act 25 of 1961 or two people can enter into a civil union partnership under the Civil Union Act 17 of 2006.

Everyone has the right to freedom of religion, belief and opinion. The Constitution allows for legislation to recognise marriages that are entered under any tradition or religion and there are certain rights and obligations that arise from a civil marriage.

Couples married in terms of Islamic law will not be able to benefit from these rights and therefore this non-recognition and non-regulation violate the rights of women and children when it comes to divorces as well as the law of succession. Leaving them unprotected and in a vulnerable state.

The law has developed to some extent over the years and a surviving spouse as defined in the Law of Intestate Succession includes a spouse in a Muslim marriage, therefore he or she can inherit a portion of the estate of the deceased spouse.

Dissolution of an Islamic marriage which is not registered under civil law would have the same effect as the dissolution of a marriage out of community of property with no accrual or a civil union without a contract. One party would not have any lawful claim to institute against the estate of the other upon divorce as there was no valid marriage and therefore the Divorce Act 70 of 1979 (“Divorce Act”) will not be applicable.

The Women’s League Centre Trust (“WLCT”) brought an application in the Cape High Court to which a full bench heard the case. The WLCT prayed for a Bill to provide for the recognition of Muslim marriages as a valid marriage for all purposes in South Africa and to make an order that the government failed to fulfil their constitutional obligation to protect, promote and fulfil various constitutional rights. The Judgment was handed down and it makes provision for legislation to be enacted within 24 months of the date of Judgment.

The new legislation will recognise marriages solemnised in accordance with Sharia law as valid marriages and to regulate the consequences of such recognition. It was founded in the Judgment that the President, Cabinet and Parliament failed in their constitutional obligation as set out above.

If legislation is not enacted within 24 months of the date of Judgment, a union validly concluded as a marriage in terms of Sharia law and which is still in force when the order becomes operative, may be dissolved in accordance with the Divorce Act and all the provisions of that Act will be applicable. It will not apply to marriages that were validly terminated in terms of Sharia law prior to the order becoming operative.

It is also ordered that in the case of a husband who is a spouse in more than one Muslim marriage, the court will consider all relevant factors. This includes any contract or agreement and must make any order that it deems just and may order that any person who, in the court’s opinion, has a sufficient interest in the matter, be joined in the proceedings.

This is a major step in family law as women and children will finally have the protection they need.

Reference List:

Women’s Legal Centre Trust v President of the Republic of South Africa and Others, Faro v Bingham N.O. and Others, Esau v Esau and Others (22481/2014, 4466/2013, 13877/2015) [2018] ZAWCHC 109; [2018] 4 All SA 551 (WCC); 2018 (6) SA 598 (WCC) (31 August 2018)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

HOW TO PUT TOGETHER AN EXIT STRATEGY

HOW TO PUT TOGETHER AN EXIT STRATEGY

Preparing yourself and your business for your inevitable exit from that business, whether by choice or fate, is one of the most neglected aspects we see in small and medium enterprises.

That being said, we believe an exit strategy is critical not only in ensuring you achieve the best possible sale price on eventual exit, but also ensures that you realise the best possible returns from that business while you’re still around.

But what is an exit strategy? Essentially it is a plan for wrapping up your continued and essential involvement in a business, and can also be called succession planning. Depending on the available capacity in the business or your personal mind space, it is something that could take years to put in place, so best to start with it as soon as possible.

What are the essential aspects of a succession plan?

1. Define your planning window – how soon do you want out?

With a planning window comes urgency and focus. It defines whether you will exit at once or in stages, and also defines how resources should be concentrated in order to formulate the plan and execute on its ideals.

2. Get your accounting and legal frameworks in place

Astute buyers, whether external or internal, will most probably want three years of accounting records in place and will require full disclosure around all business dealings when conducting their due diligence in order to evaluate the commercial potential of the business.

3. Write down how things are done in your business

Standard operating procedures need to be documented, from simple things on how the shop is opened and closed on a daily basis, all the way through to how you can ensure that each and every client has the same service experience when dealing with your business. Templates for repeating tasks and formal job descriptions / detailed role clarifications for employees also form part of this aspect.

4. Remove yourself from the equation

You will realise the best possible sale price on exit from the business if it can thrive without you. If you have staff, give them the training and authority they require and delegate as far as possible.

5. Get a guideline valuation of your business

A professional opinion on the value of your business tends to manage not only your expectation of your eventual proceeds from an exit but also equips you with the requisite knowledge to ensure you can maximise the valuation of the business.

6. Work on your elevator pitch

Present the story of how you became involved in the business, the journey that you had and why you want to exit, as well as the future potential in the business.

Use the numbers as corroborating evidence and incorporate external facts and statistics to support your view on future potential.

The best potential outcome of this succession plan might even be for you to remain involved, but then having a more profitable and efficient business – one where you don’t need to be there every day.

And should you indeed exit, you will be able to realise a better price and increase the chances of your legacy being continued in the form of a successful and sustainable business.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)