South African company law is complex and business owners are required to keep track of the multiple requirements that can impact on their day to day business, as failure to do so could result in your company incurring a fine of up to R1 million or ten percent of your turnover.

One of the factors that affects whether greater accountability and transparency is required of you is your company’s public interest score. The Companies Act uses a public interest score to indicate a company’s social and economic impact.  The public interest score is calculated as the sum of the following:

1. the average number of employees of the company during a particular financial year;

2. one point for every R1 million (or part thereof) in outstanding unsecured debt of the company held by creditors, at the financial year end;

3. one point for every R1 million (or part thereof) in turnover during the financial year; and

4. one point for every individual who is a shareholder or who has the right to receive or participate in any distribution in respect of a company’s shares.

Every company must calculate its public interest score at the end of each financial year so that it will be aware of the obligations which it must comply with.

If your company has a public interest score of 350 points or more or if your company has a public interest score of 100 points or more and its annual financial statements are not prepared by an independent accounting professional; the following requirements will be applicable to you:

1. Your company’s annual financial statements must be audited.

2. Your company’s annual financial statements will have to be prepared within six months of the end of your company’s financial year.

3. You will have to appoint a company secretary and an audit committee. The audit committee must be comprised of at least three members, who must all be directors of the company. The audit committee is required to appoint an auditor for the company.

If your company has a public interest score less than 100 points, or if your company has a public interest score between 100 and 350 points and its annual financial statements are prepared by an independent accounting professional, you need only have its annual financial statements independently reviewed by an independent accounting professional. The requirement of independent review does not apply to companies in which every shareholder of the company is also a director of the company.

If your company has a public interest score of more than 500 points, you must appoint a social and ethics committee to monitor the company’s activities with regard to matters relating to social and economic development. At least three directors or prescribed officers of your company must be members of the social and ethics committee.

Therefore, in order to meet the requirements for audit committees and social and ethics committees, companies with a greater social and economic impact require at least three directors, whereas companies that have a lesser social and economic impact only require a minimum of one director.

Please do not hesitate to contact our Commercial Department at Kevind@dmkisch.comorMerciaf@dmkisch.com or 011 324 3025/33 for further information or if you require our assistance in ensuring your company’s compliance with company law.

Publication Name:

Date:

May, 2015