The global body for professional accountants Presentation to
The global body for professional accountants
Presentation to Parliament: Companies Amendment Bill 2010 Presented by: Nicolaas van Wyk Technical Executive, ACCA (South Africa) www. acca. co. za
Introduction • Appreciation to the DTI for their engagement with business community since 2004 • Commitment to clear and concise legislation • Our submission in two parts – General comment – Comment on specific sections 2021 -06 -05
Summary - 1 • An act for big and small companies • This means minimum requirements for all companies and • Selective application for others based on public interest and company activities – Financial crises = Banks – Audit = public interest • Guard against overburdening the SME sector 2021 -06 -05
Summary - 2 • Move away from audit as sole means of protecting public – Act provides much more approach to public protection sophisticated • New emphasis on preparers of financial statements • Improving accounting officer regime by introducing independent review 2021 -06 -05
Summary - 3 • Use Accounting Officer regime to model regulation for Independent Review • Use IFAC education standards and quality control standards to determine the qualification of independent review providers. 2021 -06 -05
General comments • Fundamentals of Companies Act 2008 – Entrepreneurship – Enterprise development – Simplification – Reducing costs – Flexibility in design – Transparency and standards of governance – International harmonious 2021 -06 -05
General comments • Drafting framework – Align with Constitution and Bill of rights – Unitary statute incorporating Companies Act and Close Corporations Act – Single legislation for all types of companies – Accountability to minority shareholders and stakeholders – Emulate international best practice • Amendments should adhere to these principles 2021 -06 -05
General comments • Examples: – Section 7: require compliance with Bill of Rights – Section 11: allowing registration number as name of company – Section 30: simplify management of companies via audit exemption and new alternative to audit – Section 30 and regulations: align independent review with international best practice 2021 -06 -05
General comments • Examples: – Section 72: social and ethics committee for types of companies – Section 164: Dissenting shareholder appraisal rights – Section 165: Derivative actions for shareholders and registered trade unions 2021 -06 -05
General comments • Differential governance: – Public companies, Listed companies, Nonowner managed private companies, Ownermanaged private companies • The late Deputy Minister of Agriculture and corporate law expert, Dirk du Toit: “Thus the legal system looks beyond the class interest of the business elite, doing justice to all classes, applying the moral imperative” 2021 -06 -05
Differential reporting Close Corporations Act Companies Act 1973 -Owner = Manager -Public owners -No agency -Agency -US/Canadian -UK perspective -Gaap as appropriate -IFRS or IFRS for SME -Accounting officer -Auditor Companies Act 2008 Draft companies regulations 2010 2021 -06 -05
Differential reporting IFRS Audit 5% Public interest and Public Co (57500) Independent review IFRS for SME 10% Non-public interest non-owner managed (115000) ED 275/ OCBA ISRE 2400 / FEE survey Accounting officers Qualification MOI/Bank 85% Non-public interest owner managed (977500) 2021 -06 -05
Tax collection - Estimate IFRS Audit Public interest and Public Companies 85% IFRS for SME Non-public interest and non-owner managed Independent review 10% ED 275/ OCBA Non-public interest nonowner managed 5% 2021 -06 -05 MOI/Bank
General comments • Enhanced enforcement powers - Reckless trading prohibited by (Section 22 and draft Regulation 21) - Administrative penalties for not keeping and safeguarding accounting records (S. 28 and R. 24) - Administrative penalties if financial statements are not prepared in accordance with a prescribed standard (S. 29 -30, R. 28 -29) - Administrative penalties if a person is party to the preparation of misleading financial statements (S. 214) - Retention of the audit for public companies, state owned companies and private companies classified as public interest. (S. 30(2)(b)(i) and draft R. 28 - 29) - Additional accountability requirements for certain companies (S. 34) 2021 -06 -05
General comments • Enhanced enforcement powers – Codifying standards of directors conduct and providing for director and prescribed officer liability (S. 76 and S. 77), – Establishing a new Companies Commission with extensive enforcement powers • • • Appoint investigators Actively monitor compliance Compliance notices Issue summons Search and seizure Companies Tribunal – “Enlightened shareholder value” approach with regard to the governance of companies • Judge Davis, D et al, Companies and other Business Structures in South Africa, 2009 2021 -06 -05
Specific comments 2021 -06 -05
Specific comments 2021 -06 -05
Specific comments 2021 -06 -05
Specific comments 2021 -06 -05
Specific comments 2021 -06 -05
Specific comments 2021 -06 -05
Specific replies • SARS – Verification is inherent in the Act via Sections 28 – 29 – Extensive requirements on form and content of accounting records and how they should be kept • SARS – Reportable irregularities additional burden to SMEs – Tax collection from SME’s are limited – IR do not provide a check on internal controls, this limits potential to become aware of fraud – Act provides abundant alternative monitoring in the new Companies Commission • IRBA – IRBA regulates auditors who act in public interest, IR not designed to protect public interest indeed IR not applicable to public interest companies – IR standard = International standard = ISRE 2400 = Subject to IFAC quality control and qualification requirements = FEE survey – Monitoring has many forms – Regulator or Professional Body – International precedent 2021 -06 -05
Specific replies • IRBA – Qualification for IR provider is important – IFAC Education and other standards should apply to all IR providers 2021 -06 -05
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