Compliance_Training_Slides_V2.pptx

September / October 2013
1
Compliance with Changes in Legislation
Update

2
Agenda
FICA, POCA and POCDATARA
FAIS
National Credit Act
Consumer Protection Act
Protection of Personal Information Bill
Companies Act and CIPC notices
Tax Administration Act
Estate Agency Affairs Act
Licensing of Businesses Bill
Proposed changes to B-BBEE
2

Money Laundering Legislation
POCA FICA
Defines: Money Laundering offence Reporting obligation
4

What is Money Laundering?
Involves criminals trying to hide the fact that proceeds and funds come from illegal activities
A criminal must be able to enjoy whatever it is they have taken and are not entitled to
Criminals channel dirty money through legitimate businesses and institutions such as banks, casinos,
estate agencies, brokers, etc.
Involves the proceeds of criminally derived property rather than the property itself
Any criminal activities could lead to money laundering
5

Financial Intelligence Centre
6
Attorneys, Estate agents,
Banks, Insurance brokers
IRBA, Estate Agents
Board, Law Society
SARB
Not a law enforcement
agency or investigative
body
FIC
Supervisory
Bodies
Accountable
Institutions
Reporting
Institutions
General
business
Assist in identifying proceeds of unlawful activities and
combating of money laundering and terror financing
Make information available to investigating
authorities, SBs, intelligence services and SARS

Reporting obligations (Suspicious Transaction Reports)
Any person who:
Carries on a business
Is in charge of a business
Manages a business
Is employed by a business
And who knows or suspects
that:
Business has received proceeds
of unlawful activities
Transaction may relate to
money laundering
Party to a transaction
7
Tax evasion
STR’s have no
cash threshold
Time period for
reporting –
ASAP (not later
than 15 working
days)
May NOT be
posted
Protection of
person making
report

Reporting obligations for accountable and reportable institutions
Cash Threshold Reporting
Introduced for all AIs and RIs on 1 December 2010
Threshold amount is R24 999.99
Report within 2 business days after becoming aware
Accumulation: 24 hour period
8

Reporting Statistics
2011/2012 reporting period
More than 5.5 million CTRs to the minimum value of R138 billion
A total of 53 506 STRs were received from businesses and
individuals
FIC froze 482 bank accounts
9

POCDATARA
10
• Report to FIC:
• If property which you control or are managing has become associated with terrorist
or related activities, you must submit the report within five days of discovering the
fact
• If you are involved in a transaction and discover or suspect that the property is
associated with terrorist or related activities, or is to be paid for with the proceeds
of such activities, you must report it within fifteen days
• International listing of persons or entities involved in funding terrorist activities
• Report to a police official
• Any person or business who knows or suspect that a transaction by an organisation
or individual may be involved in the financing of terrorism or related activities, or
have knowledge of any property which may be connected to an offence relating to
these activities
Protection of Constitutional Democracy Against Terrorist and Related Activities Act (Act
33 of 2004, the “POCDATARA”)

Prevention and Combatting of Corrupt Activities Act
11
SAPS Amendment Act 2012
• Amended duty to report corrupt transactions
on 14 September 2012
• Report a corrupt transaction to the police
official in the Directorate for Priority Crime
• The offence of theft, fraud, extortion, forgery
or uttering a forged document, involving an
amount of R100 000 or more
Who must comply with this duty?
• Manager, secretary or a director of a
company
• A member of a CC
• Executive manager of any bank or other
financial institution
• Any other person who is responsible for the
overall management and control
• CEO or an equivalent officer
• The Director-General or head, or equivalent
officer, of a national or provincial
department
• A municipal manager
• Any public officer in the senior management
service of a public body
• Any head, rector or principal of a tertiary
institution
• Any partner in a partnership

Administrative duties for accountable institutions
12
Registration
• Each AI to be registered
separately (including
franchises, branches)
• Registration online –
unless impossible then
manually
• Registration deadline was
1 March 2011
• Existing before 1 March
2011 still encouraged to
register
• New – 90 days to register
from business start
• No registration fees
Duty to establish and verify
the identity of clients
• May not establish a
business relationship or
conclude a single
transaction unless the
prescribed steps have
been taken to establish
and verify the identity of
the client
• Official identity document:
• Green bar coded ID
• Identification smart
cards
• Use a risk framework
Duty to keep records
• Documents kept for 5
years
• Policy that outlines the
access control to these
records

Administrative duties for accountable institutions
13
Internal rules
• An AI must formulate and
implement internal rules
to document procedures
Appointment of compliance
officer
• Formally appointed by the
board
• Formal appointment letter
• Responsible for FIC Act
compliance
• Have general knowledge of
the overall operations of
the institution
• Sufficient authority and
seniority
• Be at the management or
executive level
• Can be employee or
independent contractor
Training and monitoring of
compliance
• On the FIC Act and internal
rules
• Employees not allowed to
deal with clients if they
have not received training
• Responsibility of
compliance officer
• Training manual must
frequently be updated
• Training must be ongoing
• Assessments
• Attendance registers

Responsibility of supervisory body
Report on
compliance
Issue or amend
license,
registration
Fit and proper
test
Report any
action taken
against
accountable
institution
14
Administrative
sanctions:
Not to repeat conduct
Reprimand
Remedial action
Restriction or
suspension
The FIC and supervisory bodies cannot use their inspection powers to
investigate any criminal conduct

Appointment of inspectors
Head of supervisory
body
Enter and inspect
premises
Question persons
Open strong
room/safe
Copy/seize document
Appoint Inspector
No warrant is
necessary
Issue certificate of
appointment
Must consult with Centre
Institution liable for any costs involved
15

Inspections
16
Inspection is based on a questionnaire
The questionnaire covers all the compliance duties of an accountable institution
The compliance officer and/or CEO/Director/Head of the institution is required to attend the
inspection
Documentation requested prior to the inspection
• Appointment letter of compliance officer
• Internal rules
• Training manual & documents

Inspections
17
Employees will also be questioned
Sampling of client files will be done to determine:
• Client identification and verification
• Record keeping
• Reporting
The process, procedure or system for detecting and reporting CTRs and STRs
Collecting evidence
• Seize original documentation against issue of a receipt
• Documents may also be scanned
• Maintain evidence register

Appeals
18
The appellant must pay a fee of R10 000 to the FIC
If the Appeal Board sets aside the decision of the FIC or SB, the R10 000 must be refunded
If the Appeal Board varies a decision of the FIC or SB, it may direct that the whole or part of the
R10 000 be refunded
Any party to an appeal is entitled to be represented by a legal representative
Complete the notice of appeal form within 30 days from the date of notice

IRBA inspections
19
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

Financial Intelligence Centre Compliance Contact Centre
20
Dedicated telephone service
• Whether or not a business is required to register with the FIC
• How to register with the FIC
• What types of businesses are required to register with the FIC
• Technical issues relating to the registration process
• Queries relating to complying with the provisions of the FIC Act
0860 222 200

Compliance and enforcement
21
Duty Administrative sanction Criminal sanction
Establishment of
identity of clients and
other persons
Duty to keep records
Reporting duties
Formulating and
implementing of internal
rules
Training of employees
regarding the FIC Act
and internal rules
Appointment of the
compliance officer
Registration with the
Centre
R50 million for legal person
R10million for natural person
Has failed to comply with:
• FIC Act
• Condition of a licence,
registration, approval or
authorisation
• Directive
• Administrative sanction
R100 million or 15 years
imprisonment

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
23

Advice vs. intermediary services
• Facilitate clients decision in
relation to financial product
Advice
• Facilitate the administration
of the product
Intermediary service
24

What is a Financial Service Provider?
Any person
Furnish advice
Renders intermediary
services
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:
Permanently incapable of
carrying on business
Sequestrated
Dies
Liquidated
Business is dormant
Appoint compliance officer
Duties
Excluding a representative
25

Representatives
May only act if:
• There is a contract with FSP
• FSP accepts responsibility
Maintain register
• FSPs will no longer be able
to:
• Submit foreign juristic
representatives
electronically
(1 June 2013)
• Add a representative that
should have written the
regulatory exams and not
passed it (1 June 2013)
• Qualification codes from 1
January 2014
• Appointment date as
representative validated
against the dates provided
per financial product
Debarment process
• Debar if not compliant with
fit and proper
requirements
• Inform registrar within 15
days
• Registrar to publish details
and reasons in public
media
• Provide following:
• Reasons for the
debarment
• Copy of the service
contract or mandate
• Transcript of the
disciplinary hearing
• Forensic/investigation
report (if any)
26

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
27

Accounting and audit requirements
28
Accounting requirements
• Applies to all FSP’s
• Monthly basis
• Full set of F/S prepared on
annual basis and submitted
to Registrar
• Sole proprietor who does
not collect premiums:
Income statement and
balance sheet
• May only change year-end
with approval of Registrar
Auditing requirements
• All F/S must be audited
unless exempt
• External auditor approved
by Registrar
• Trust account audited
separately
Submission of financial
statements
• Submitted within 4 months
after financial year-end
• Electronic submission or
registered post
• No faxes
• Application for extension
15 days prior
• Penalty for non-submission:
• R 1 000 per day
• Suspension of license

Exemption from audit requirement
Exemptions
• Category II, IIA, III and IV
FSPs: Audited financial
statements
• Category I FSPs
• Do receive client funds
or premiums:
• Audited financial
statements
• Do not receive client
funds or premiums:
• Companies: Refer to
Companies Act
• Sole proprietors and
close corporations
• Unaudited financial
statements
Companies Act, 2008
• Audit
• Review
• Exempt or CC
Duty
• Register exemption with
Registrar
• Inform Registrar in writing
of any changes within 15
days
29

Compliance reports
30
Predetermined questionnaire completed by compliance officer and reviewed by the key individual
Also submit if dormant. Provide reason and expected date when activities will resume
Reporting dates determined by type of FSP. Not the same as financial year-end
Submit only one report for highest category
Submitted hardcopy (posted, couriered or hand delivered) or online
No extensions and penalty for late submission

Compliance reports
31
Type of FSP Reporting Date Submission Date
Category I FSP without a Compliance
Officer
31 December
2013
28 February 2014
Category I FSP with a Compliance
Officer
31 May 2013 15 August 2013
Category II and IIA FSPs (Bi-Annual
Report)
30 June 2013
31 December
2013
31 August 2013
28 February 2014
Category III FSP (Bi-Annual Report)
30 June 2013
31 December
2013
31 July 2013
31 January 2014
Category IV FSP 31 August 2013 31 October 2013
Foreign FSP 31 August 2013 31 October 2013
Compliance Officer Handover Report
One month after FSP informed of
resignation
Key Individual / Sole Proprietor
Handover Report
One month after compliance officer
appointed

Duty to report irregularities
Reporting duty
• Compliance officer and
auditor
• Material irregularities
• By own compliance officer:
FAIS Supervision
Department
• By another compliance
officer: FAIS Complaint
Department
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
32

Fit and proper requirements
Honesty and integrity
Not been
found guilty
for fraud,
dishonesty
etc. for 5
years
Not denied
membership
of any body
License not
suspended
or
withdrawn
Competence
Different
experience
requirements
for different
categories:
Table A
Qualification
requirements
List of
recognised
qualifications
Two regulatory
examinations
• Level 1: FICA,
FAIS, Code of
conduct
• Level 2:
Product
specific
information
(Suspended
until further
notice)
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
33

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
• Liquid assets
• Category IIA and III 13/52 weeks of
expenditure
Category I 4/52 weeks of expenditure
Category II and IV 8/52 weeks of
expenditure
34

Annual Expenditure
“Annual Expenditure” means the expenditure
set out in:
• Latest financial statements; or
•Budgeted expenditure, in the case of an
applicant commencing with business, less:
•Staff bonuses
•Employees’ and directors’, partners’ or
members’ share in profits
•Emoluments of directors, members, partners
or a sole proprietor
•Other appropriation of profits to directors,
members and partners
•50% of commissions/fees paid to
representatives for the rendering of services
that did not form part of their remuneration
•Depreciation
•Bad debts
•Any loss resulting from the sale of assets
Liquid assets
•Cash and cash equivalent that can be liquidated
without realising a loss on liquidation provided
that:
•25% capable of being liquidated in 7 days
•Further 25% capable of being liquidated in 30
days
•Remaining 50% capable of being liquidated in
60 days
35

Application for exemption: Qualifications and Regulatory Exams
36
Letter on letterhead to Registrar
Application fee is R 5 700. For exemption of fee: 6 months bank statements
Detailed and factual explanation/motivation including previous attempts to meet
requirements
Supported by verifiable evidence e.g. medical grounds a letter from specialist
Certified copy of ID

Professional Indemnity and Fidelity Insurance
Category 1
PI of R 1 mil
Guarantees
of R 1 mil
Category 11 or
11A and receive
or hold client
funds
PI or FI of R 5
mil
Guarantees of
R 5 mil
Category 1 or
IV and receive
or hold client
funds
FI of R 1 mil
Guarantees of
R 1 mil
Category 111
and receive or
hold client
funds
PI and FI of
R 5 mil
Guarantees of
R 5 mil
37

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
• 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
38

Who and what does the Act regulate?
40
The National Credit Act regulates the following credit providers:
• Banks
• Micro lenders
• Retailers such as clothing and furniture stores
• All businesses, companies, close corporations and individuals who do business on credit, provide
loans, or charge interest on overdue accounts
• Credit bureaux and Debt Counsellors
The Act regulates the following credit agreements:
• Mortgage bonds
• Credit facilities like store cards, bank overdrafts, credit cards, garage cards, personal loans,
instalment sales, leases, pawn and discount transactions
• Developmental credit
• Incidental credit
• Credit guarantees

Excluded transactions
41
Agreements which are not covered by the Act:
• Agreements where the credit provider and the consumer are related, for example where a
husband lends money to his wife
• Agreements where a member of a stokvel borrows money from the stokvel
• Agreements where the director of a company lends money to his company
• Agreements where a government institution lends or borrows money from any source. For
example if a bank borrows money from the South African Reserve Bank

Types of agreements
42
• Pawn transaction
• Up to R 15 000
• Excluding mortgage
Small
• Between R 15 001 and
R 250 000
• Excluding a pawn
transaction and mortgage
Intermediate
• More than R 250 000
• Mortgage
Large

Registration requirements
43
Credit providers
Credit bureaus
Counsellors
> 100 credit
agreements
(Excl incidental)
Principle debt
> R 500 000
Registration fees
Renewal fees
No natural
persons
Fit and proper
No juristic person
N.B. Certain credit providers
do not have to register with
the NCR but their agreements
are still subject to the
provisions of the Act.

Unlawful and Reckless Agreements
44
Unlawful
Minors
Mentally unfit
Under administration
Negative option marketing
Unregistered providers
Reckless credit
No risk assessment
Assessment indicates
consumer can’t afford
Consumer rights not
understood
Only a court can declare
an agreement reckless
Only by a court
Cannot sue
Must refund:
Monies paid
Interest per quote

Prohibited marketing practices
45
Permission from consumer to:
Increase credit limit automatically
Receive marketing communication
No marketing at home or work
Only if:
Invited by consumer
To sell goods or services, and
incidentally offers credit
Arrange with employer/trade union
Development credit
Terminate the agreement within 5
business days

Consumer rights
46
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

Pre-agreement statements
47
Pre agreement
and quote
Terms and
conditions
Principle debt
Interest rate
Valid for 5 days
Total amount
payable
Installments
Fees, charges,
interest
Do not sign a blank document. The credit provider may include additional terms
after you have signed the contract, which you have not agreed to.
Prescribed
forms for all
agreements

Right to receive statements
48
Installment
Lease
Secured
Once a month
Every two months
Maximum = 3 months
Mortgage = 6 months

Changes, termination, early payments
Changes
Reduce debt
Sign initials
In writing
Termination
Paying settlement
amount
No penalty fee for
small/intermediate
agreement
Large agreement
Penalty = 3 months
interest
Early payments
May not be refused by
credit provider or
penalise
First to interest, then
charges, then
outstanding balance
49

Surrender of goods, debt enforcement
50
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 councellor
Consumer to reply within 10 days

Cost of credit
51
Interest
• Interest rate must
be reflected on
the credit
agreement
• Maximum interest
rates: 31%, using
the current repo
rate for unsecured
loans
• The in duplum
rule: Arrears
interest may never
exceed the
outstanding
capital balance
Initiation fee
• Option of paying
upfront
• No interest may be
charged on the fee
• May not exceed
15% of the loan
amount
Service fee
• Monthly or annual
basis or per
transaction
• Maximum service
fee is R 50-00 a
month or R 600-00
per year
Credit insurance
• May not exceed
the outstanding
obligation
• Reduce cover as
the outstanding
balance reduces
• Home loan: may
not exceed the
value of the
property
• May not be forced
to take insurance
offered by the
credit provider

Debt counselling
52
What is debt counselling?
• Process intended to help
restructure the debt
obligations of consumers
who cannot pay their
debts
• Debt restructuring
• Proposal to all credit
providers
• Credit providers may not
take any legal action
• Not allowed to apply for or
receive more credit
• Once all debt settled: Must
receive a “Clearance
Certificate”
Access debt counselling
• Voluntarily
• Referred by a credit
provider
• Referred by the court
• Until June 2012:363 000
individuals and R 8.5
billion has been
distributed to credit
providers
What is over-indebtedness?
• Debt Counsellor completes
an assessment and reach a
conclusion that a
consumer will not be able
to meet his/her debt
commitments at the end
of a month
• Otherwise: Letter of
rejection
• 20 business days to
approach a court

Compliance and Reporting
Compliance
report Statistical return
Annual financial
statements
Assurance report
> R 15 mil – Quarterly
< R 15 mil – 15th February
6 months after year end
53

In summary
54
Read and understand before entering into a credit agreement. Once a credit agreement is
signed the consumer is obliged to honour its terms and conditions. Do not sign unless you fully
understand the content including the terms and conditions of the credit agreement
Be honest - Make sure that you honestly disclose all the information required by the credit
provider. Dishonesty may cause you to lose the protection offered by the National Credit Act
Out of the 19.69 million credit active consumers, 53.0% are in good standing and 47.0% have
impaired records. If a consumer finds themselves in financial distress, they must contact the
National Credit Regulator on 0860 627 627 for advice

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
56

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
57

Meaning of goods
Meaning of goods
• Anything marketed for human consumption
• Tangible, intangible e.g. music, photograph, literature, software codes, licenses
• Legal interest in land
• Any other immovable property e.g. usufructs
• Gas
• Water
• Electricity
58

Meaning of service
Work or
undertaking
Provision of:
Transportation
Rights of a
franchise
Banking and
financial
service
Accommodation e.g. restaurant or hotel
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)
59

Consumer's right to choose
Right to restrict unwanted direct marketing
• All communication for the purposes of direct marketing
• Telephone calls, e-mails, brochures or letters in the mail, etc.
• May refuse to accept, pre-emptively block, or require another person to discontinue any
communication
• 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
• Establishment of a registry
Cooling-off period after direct marketing
• 5 business days
• Cancel without giving a reason or incurring a penalty
• Return any payment received within 15 business days
60

Consumer's right to select suppliers
• “Tying” or bundling are prohibited unless:
• Convenience in having goods or services bundled outweighs the limitation of the consumer's
right
• Results in economic benefit
• Offers bundled goods or services separately and at individual prices
Expiry and renewal of fixed-term agreements
• Does not apply to transactions between juristic persons regardless of their annual turnover or
asset value
• Maximum of 24 months
• Month to month automatic renewal
• Without penalty or charge cancel the agreement upon the expiry of fixed term
• Cancel the agreement by giving 20 business days notice in writing
• Remains responsible for any amounts owed
• Reasonable cancellation penalty
61

Pre-authorisation of repair or maintenance services
• Provide estimate of charges
• May not charge for preparing an estimate unless disclosed beforehand
• Obtain pre-authorisation, prior to carrying out any work
• Inform consumer of additional estimated charges
Cancel advance reservation, booking or order
• Consumer has the right to cancel any advance booking, reservation or order for any goods or
services to be supplied
• May require payment of a reasonable deposit in advance
• Reasonable charge for cancellation unless because of death or hospitalisation
62

Choose or examine goods
• Pick and choose from goods that are openly displayed
• Cannot be held liable for any loss or damages unless caused by gross negligence, recklessness,
malicious behaviour or criminal conduct, despite the existence of any notice or statement to the
contrary
• Refers to the ‘If you break it, consider it sold’ notices
Delivery of goods or supply of service
• Agreed date and time, at the agreed place of delivery or performance
• At the cost of the supplier
• Goods to be delivered remain at the supplier's risk until the consumer has accepted delivery of
them
• Opportunity to examine goods for the purpose of ascertaining whether the consumer is satisfied
that the goods are of a type and quality reasonably contemplated in the agreement
• Returned within 10 business days after delivery
63

Right to return goods
• May not charge any amount if the goods are in their original unopened packaging
• If opened: May charge a reasonable amount for:
• Use of the goods
• Any consumption or depletion of the goods
• Restoration costs to render the goods fit for re-stocking
Unsolicited goods or services
• Can’t be forced to pay for unsolicited goods, cost of delivery, or for unsolicited services
• Not responsible for the cost of recovery, redelivering or any loss or damage
• Recipient can decide to keep the goods
• The supplier has the right to recover goods delivered within 20 days after the date of informing
the consumer that the goods were delivered in error
64

Right to disclosure and information
Right to information in plain and understandable language
• Right to receive notices, documents and/or other visual representation in plain language which
an ordinary customer with average literacy skills and minimal experience, can be expected to
understand without undue effort
Disclosure of price of goods or services
• A retailer who displays goods for sale must display a price in relation to those goods
• Disclose full price, including transport costs, taxes and other hidden costs
• Supplier is bound by displayed price and may not charge a price higher than the displayed price
• Specify duration of promotions, otherwise customers may purchase goods at specified prices
• Trade descriptions not misleading or tampered with
65

Right to disclosure and information
Disclosure of reconditioned or grey market goods
• Suppliers must warn consumers with a conspicuous notice when branded goods had been
reconditioned, rebuilt or remade, or that they have been imported without the approval or
licence of the registered owner of the trade mark (grey market goods)
Identification of deliverers, installers and others
• A person engaged in direct marketing in person, at the premises, of a consumer must visibly
wear or display a badge or similar identification device, or provide suitable identification on
request by the consumer
66

Right to fair and responsible marketing
Bait marketing
• A supplier must not advertise any goods or services as being available at a specific price, when
they are not available, or are not available at that price
• A supplier must not promote goods or services or offer to enter an agreement for the supply of
goods or services on the basis that the agreement will automatically come into existence, unless
the customer declines the offer
• Such agreements will be considered void
67

Customer loyalty programmes
• Notify consumer of times at which points may not be redeemed
• Exclusion period limited to 90 days in a year
• No service charge must be levied in respect of administration, processing or handling of such a
transaction
Promotional competitions
• One may not inform another person that such a person has won a competition or a prize, if:
• No competition has in fact been conducted
• The person has not in fact won the competition
• The prize for that competition is subject to a previously undisclosed condition
• The person is required to buy something or pay something for the prize (usually an
‘administrative fee’)
• The costs of a sms may not exceed the minimum that a consumer is likely to pay for an ordinary
sms message
68

Referral selling
• A person must not market any goods or services to a consumer on the representation that the
consumer will receive a rebate, commission or other benefit if the consumer subsequently gives
the supplier the names of consumers
Pyramid and related schemes
• The act classifies multiplication, pyramid and chain letter schemes together
• All these schemes are prohibited outright
69

Right to fair value, good quality and safety
Implied warranty of quality
• The producer, importer, distributor or retailer is liable for damage caused wholly or partially as a
consequence of supplying unsafe goods, product failure or inadequate instructions or warnings
irrespective of whether the harm resulted from any negligence
• Where more than one party is liable the liability is joint and several
• In case of malfunction the consumer may within 6 months return goods to be repaired, replaced
or for a refund.
• No “voetstoots” clause
Warranty on repaired goods
• If repaired, the goods or components have a 3 months guarantee
• Any warranty is concurrent with any other deemed, implied or expressed warranty, but is void if
the goods were misused or abused and does not apply to normal wear and tear
70

Consumer’s right to assume supplier is entitled to sell goods
• Every consumer has the right to assume the supplier has the legal right or authority to supply the
goods
Over-selling and over-booking
• A supplier must not accept payment or other consideration if the supplier cannot deliver or has
no intention to deliver the goods or services or intends to supply goods or services that are
materially different from the goods or services originally contracted for
• Consumer can claim damages plus interest and any consequential damages which directly
resulted from the overbooking
71

Warning concerning fact and nature of risks
• The supplier of any activity or facility that is subject to unusual risk or risk of which the consumer
could not reasonably be expected to be aware of or risk that could result in serious injury, must
specifically draw the fact, nature and potential effect of that risk to the attention of the
consumer
• A person who packages any hazardous or unsafe goods must display in plain and understandable
language a notice providing the consumer with adequate instructions for the safe handling of the
goods
Prepaid certificates, credits and vouchers
• A prepaid certificate, card, voucher or similar device does not expire until the earlier of the date
its full value has been redeemed or 3 years after the date on which it was issued
72

Business names
Identification of supplier
• A person may only carry on business under the following names:
• Natural person in his full name as recorded in his ID
• Juristic person in its full registered name
• A business name registered under the Act
• Informal “trading names” will no longer be allowed
• Relief for businesses which were actively conducting business under such a name for a period of
at least one year before a date to be announced by the Minister
• This notice by the Minister must be given 6 (six) months prior to the implementation date
73

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
74

75
Protection of Personal Information Bill
75

Overview
• Purpose of the Bill
• What information is protected?
• Information protection principles
• Unsolicited electronic communication
• Enforcement and penalties
76

Purpose of the Bill
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
Everyone wants the right to be left alone and
have control over their personal information
77

Processing of personal information
Processing
• Collection, receipt, recording, organisation, collating, storage, updating, modification, retrieval,
alteration, use, dissemination and merging, erase or destruction
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, online identifier
• Blood type or biometric information
78

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
79

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
80

Information protection principles
Processing limitation
• Purpose for processing is adequate, relevant and not excessive
• Consent and objection
Purpose specification
• Informing data subject of purpose
• Retaining data for no longer than needed
Quality of information
• Complete, accurate, not misleading
• Evaluate changes to the purpose for which originally collected
Security safeguards
• Prevent loss or unauthorised use of PI
81

Information protection principles
Openness
• Notification to Regulator and data subject
Data subject participation
• 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
82

Unsolicited electronic communication
Prohibited unless:
• Consent from data subject
• Data subject is client
Communication
• 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
83

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)
84

85
Companies Act, 2008 and latest CIPC notices
85

Categories of companies
Name
MOI
PFMA definition
Gain vs Public Benefit
Companies
Profit
Not state-
owned
Private
company
(Pty) Ltd.
Personal
liability
company
Inc.
Public
company
Ltd.
State-
owned
State-
owned
company
SOC Ltd.
Non-profit
Non-profit
company
NPC
86

Company names
87
Rules
• No need to be descriptive
(reflect nature of business)
• Any letters, words and
some symbols (* + & # @
% = “()
• No requirement to reserve
a name (may reserve to
protect)
• Name reservation: valid 6
months, with 60 day
extensions
• If name is already in use
Commission will use
registration number
Suffixes
• If number used:
• “(South Africa)”
• If MOI contains special
conditions (restrictive or
procedural conditions):
• “(RF)”“Ring Fenced”
Use of “RF”
• Old Act: The doctrine of
“constructive notice”
applied to all outsiders
• Presumed to be aware of
contents of documents
• Fallen away under new Act
• A person who interacts
with a company can accept
that the company has the
necessary power and
capacity to participate and
to bind the company
• Setting higher standard for
unalterable provision does
not require “RF”
• N/A to NPC’s

Private companies
Audit Audit Audit Audit
None Audit Review Audit
None None Review Review
Independently
compiled
Internally
compiled
Independently
compiled
Internally
compiled
Owner managed Not owner managed
PIS
350
100
0
88

89
Independent accounting professional
Registered auditor i.t.o APA
Member in good standing of a professional
body accredited i.t.o sec 33 of APA (only
SAICA)
Qualified to be appointed as an accounting
officer of a close corporation
Not involved in day-to-day
management (previous 3 years)
No personal financial interest in
company/ related or inter-related
company
Not a prescribed officer or full time
executive employee (previous 3 years)
Not related to any person listed above

90
Independently compiled and reported
The financial statements are prepared:
• By an independent accounting professional;
• On the basis of financial records provided by the company; and
• In accordance with any relevant financial reporting standards.
All three requirements must be met
Default: Internally compiled unless asserted they are independently compiled

Compulsory audits
Public listed/State owned
IFRS/ PFMA
All listing requirements
(require all companies in
group to be audited)
Audit
Secretary, auditor, audit
committee
Public not listed
IFRS/IFRs for SME’s
(meeting scoping
requirements for SMEs)
Audit
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
91

Section 90(2)
92
Statutory audit
• Required by the Act,
Regulations or by a MOI or
a CC’s Association
Agreement
• Sec 90 applied
prospectively with effect
from 1 May 2011
• Extended date for
prospective compliance:
1 January 2014
Voluntary audit
• Elected by the
shareholders, directors or
CC members
• Sec 90 does not apply
• Consider paragraphs
290.171 to 174 of the
Code
Independent review
• Provisions of Section 90
are not applicable
• Independent review must
not be carried out by the
independent accounting
professional who was
involved in the preparation
of the financial statements

Section 90(2)
93
Application
• Apply to both the firm
appointed as auditor and
the individual Registered
Auditor
Must not be:
• Director or prescribed
officer
• Employee/consultant
engaged more than1 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
• A person related to any of
the above
Rotation
• Rotation after five years
• Two year break
Prohibits an auditor to provide audit and certain specified services to the same client

Section 90(2)
94
Activities that would be
classified as maintenance of
financial records
• Assisting clients with
outsourced payroll systems
• Maintenance of fixed asset
registers
• Compilation of purchase
orders
• Preparing time records for
payroll
• Compilation of customer
orders
Activities that would not be
classified as maintenance of
financial records
• Completion of
Compensation Commission
forms
• Completion of tax
computations
• Completion of VAT returns,
income tax returns,
provisional tax returns, UIF
and SDL
• Suggesting adjusting
journal entries as a result
of audit findings
Activities that would be
classified as preparation of
financial statements
• The preparation of the
Statement of Financial
Performance, Statement of
Financial position, cash
flow statement and notes
• Converting financial
information from a trial
balance or a reporting
package to financial
statements
• Using an automated system
(software) to produce
financial statements
• Posting journal entries to
ensure compliance with
IFRS

Reporting framework for private companies
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
IFRS or IFRS for
SMEs or SA GAAP None
IFRS or IFRS for
SMEs or SA GAAP Acceptable
Independently
compiled
Internally
compiled
Independently
compiled
Internally
compiled
Owner managed Not owner managed
PIS
350
100
0
95
SA GAAP will no longer apply: Financial years commencing on or after 1 December 2012.

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
Annual financial statements
•Group: Each company to prepare
separate F/S and consolidate
i.t.o reporting framework
•Within 6 months after year end
•Approved by the board
•Signed by one/authorised
director
•Presented to first shareholders
meeting
•Disclose directors remuneration
of individual directors if
statutory audit required
96

Annual returns and financial accountability supplements
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
Annual returns for companies and close corporations may only be filed electronically.
No manual filings will be accepted
30 Business days after anniversary date
Copy of the audited financial statements must be filed on the same date that the annual return is filed by sending e-mail
to: financialstatements@cipc.co.za
Waiving of late filing fees and penalties in respect of annual returns on both close corporations and companies that
became due 1 April 2011 or thereafter, up until 30 September 2013
Deregistration if not filed and paid for 2 consecutive years: 30 September 2013
97

Right to access information
98
Security holders
•Enhanced rights
•MOI and rules
•All registers
•Annual financial
statements and all
reports at AGM
•All information
relating to
shareholders
•No right to accounting
records, minutes of
directors or committees
•No cost
Creditors
•Judgement
creditor where
disposable
property
insufficient to
satisfy judgement.
•5 Business days
•Copy of most
recent AFS
•Without charge
Trade union
•Through CIPC
•Access to F/S
•Initiate business
rescue proceedings
•5 Business days
Provided within 14 days
Offence not to provide or refuse

Codified regime of directors duties
Fiduciary duty
• 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
Degree of care, skill &
diligence
• 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
Business judgement rule
• Diligent steps to become
informed about subject
matter
• Does not have material
personal financial interest
• Disclosed financial interest
• Rational basis for believing
the decision was in best
interest
Includes alternate director, prescribed officer and committee members
These are unalterable provisions
99

Meaning
• Exercise judgement as to
the best decisions or
courses of action available
to a company
• Process directors followed
in arriving at decision
• Applies to all decisions
that a director may take as
it relates to the
performance of powers
and functions
Taking reasonably diligent
steps to be informed
• Responsibility of individual
director
• Actively seek out
information rather than
being passively ignorant
• “knowing”, “knowingly” or
“knows”
• Had actual knowledge
• Was in a position to ask
or investigate
• Not accepting information
presented at face value
but probing and forming
own point of view before
meetings
Not having a material
personal financial interest
• A direct material interest,
of a financial, monetary or
economic nature, or to
which a monetary value
may be attributed
• Does not include any
interest held by a person
in a unit trust or
collective investment
scheme
• Extend to persons,
related to the director
100

Actions required where a
personal financial interest is
present
•Must disclose:
•The interest and its general
nature before the matter is
considered at the meeting
•To the meeting any material
information relating to the
matter, and known to the
director
•Leave the meeting
immediately after making any
disclosure
•Must not take part in the
consideration of the matter
Rational basis for believing
the decision was in the best
interest of the company
•Enquiring mind
• Asking appropriate questions
of those that are experts in
the field
•Board pack must contain all
the relevant information that
indicates the different
options or choices that were
available to the directors
•Minutes of the meeting must
reflect material points of
discussion
•Not sufficient to record only
the outcome, without the
rationale for the decision
being documented
Reliance on information
prepared by others
•Information high in quality,
has integrity and has been
prepared through a robust
process that will withstand
challenge
•Reviewed by senior
management before
presented to the board
•Entitled to rely on
information provided by:
•Employees of the company
who director believes to be
reliable and competent
•Legal counsel
•Accountants
•Other professional persons
•Committee of the Board
101

Financial assistance to buy securities of company or related
company
Employee share scheme (excluded)
For the subscription of any option or
securities
To any person
Loan, guarantee, provision of security
Board may authorise (subject to MOI)
Terms fair and reasonable to company and
conditions and restrictions in MOI satisfied
Solvent and liquid after transaction
By special resolution (within 2 prior years)
Approving specific recipient or in general for
category of potential recipient
102

Financial assistance to directors or related entities
Person related to such
company or director
Related or inter-related
company or CC
Or
Prescribed officer
Or
Director
Or
Treasury function (listed
companies)
Intercompany loan/sales
Or
Credit card (unless on
behalf of company)
Or
Expenses paid on behalf
of director
Or
Board decision has to be
circulated in writing to all
shareholders and trade
unions
Terms fair and reasonable
to company
Solvent and liquid after
transaction
And
By special resolution
(within 2 prior years)
And
103

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
104

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
105

Liability of directors: These are unalterable provisions
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
Fine or imprisonment not > 12 months, or both
106

Indemnification of Directors
107
Company may purchase insurance to protect a director against liability
May not indemnify when
Acted without
authority
Reckless trading
Defrauding a
creditor
employee or
shareholder
Wilful
misconduct or
breach of trust
Fines (except if
all shareholders
and directors
related)
Indemnify directly or indirectly for litigation expenses
Advance expenses to defend litigation

Deregistration of companies
108
When?
• Upon request
• Has ceased to carry on
business
• Has no assets
How?
• On an original letterhead
• Statement and sufficient
documentary proof
confirming:
• No business is carried
on/dormant
• No assets
• Tax clearance certificate
• Tax number
• Signed by each active
director or member
• A certified ID copy of any
of the persons signing the
letter
Other considerations
• If all annual returns are up
to date, CIPC will regard
the business as being
active and will return the
request
• If deregistered due to non-
filing of returns: Cancelled
upon the filing of all
outstanding annual returns
• Upon final deregistration,
CIPC will not protect
names
• The entity name will
immediately become
available for any other
third party to register such
name

Re-instatement
109
How?
•Original signed form CoR40.5
•Certified ID copy of the applicant (director/
member/customer)
•Deed search (reflecting ownership of immovable
property or not)
•Letters from National Treasury and the Department
of Public Works that they have no objection
•Advertisement in a local newspaper giving 21 days’
notice
•Affidavit indicating reasons for the non filing of
annual returns
•Affidavit indicating reason for deregistration
•Sufficient documentary proof that the company
was in business or that it had any outstanding
assets
Other considerations
•All outstanding annual returns submitted within 30
business days from date of the re-instatement
•CIPC will not re-instate a company solely based on
a statement that the company is in business, or will
be in business in the near future

Rejections: Close Corporation Amendments
110
Process
•To amend details of members use CK2/CK2A
•Capture same information as in ID
•One member must sign the CK2A and the attached
certified ID copy when a new practice number is
allocated for an existing accounting officer
•Letter of consent from accounting officer
Process (Continue)
• New accounting officer: All members must sign
and submit certified ID copies
•Where the signatures of the application/s
submitted do not correspond with the signatures
already on file at CIPC, an affidavit from that
member is required to explain the reason for the
difference in signature
•Where the signature is not that of a member, an
appropriate Power of Attorney must be attached
•Executor must sign the application forms on behalf
of a deceased member, and attached to the
application must also be a certified copy of the ID
of the executor, as well as an executor’s letter
•All annual returns must be up to date before
lodging a form CK2/CK2A
•An accounting officer of a close corporation cannot
be a company

Other
Alternative Payment
Method
• January 2013: Debit Cards
• No credit cards
• Cash Office Closure: From
1 July 2013
• Deposit transaction fees at
any ABSA Bank
• Reflect on customer
account within 1 hour
Fax to Email
• 1st February 2013
• Name and Defensive name
reservations and
extensions
• New company applications
• CC to company
conversions
• Company changes
• Company and CC
deregistration
• Company and CC re-
instatements
Refunding of Customer
Deposits
• Refunding deposits if in
CIPC account more than 60
days
• Letter to request the
customer to provide
information
• If no reply account will be
de-activated
111

Other
Drop-off Box for
Registration and
Amendments
• From the 8th of April 2013
• Enable customers to
submit documents 24
hours a day
• Documents must be sealed
in an envelope
New Company Registration
Certificate
• System automatically
dispatches a registration
certificate to a customer’s
email address
• 25 working days after
receipt of application
• Follow up via e-mail
Address of Actual Business
Premises Required
• Actual business premises
i.e. the site from where
the business operates
• Not the address of a
representative or a
director
112

Other
Online verification of CIPC Certificates
• Banks do not accept due to the fact that it may be in black or white, or that the authenticity of
the documents cannot be verified by the bank concerned
• Banks must register a customer to view documents on line
• R 30 per disclosure
113

114
Tax Administration Act , 28 of 2011
114

Limitation of administrative powers
Three tier decision making
levels
• Commissioner
• Senior SARS official
(Authorised in writing)
• SARS official
SARS officials
• May not become involved
if in previous 3 years had
personal, family, social,
business, employment or
financial relationship
• Issued with ID cards
Tax Ombud
• Appointed by 30
September 2013
• Secondment of SARS
employees
• Address service failures
• Review complaints
regarding service,
procedural or
administrative matters
• Process:
• Contact branch/call
centre
• Escalation to manager
• SSMO
• Tax Ombud
115

Registration
Registration requirements
• Single registration platform
• Registration period 21 business days
• Biometric information
• Inform SARS of changes within 21 business
days. Strict requirements for change in
banking details
• 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
116

Returns and records
Submission of return
• Taxpayer must keep records, books of
accounts or documents
• Prescribed form and manner
• Date specified in Act, Commissioner or
extension date
• Contain information prescribed by Act
• 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
117

Notice to third parties
Reporting institutions
• Banks
• Regulated financial
institutions
• Listed companies and
connected persons
• State-owned companies
• Organs of state that issue
bonds, debentures
• Co-operative who
purchases livestock,
produce, timber, ore,
mineral or precious metals
from primary producer
• Registered medical
scheme
• Estate agent or attorney
IT3 Returns
• Money invested, loaned to
and deposited
• Interest received or
accrued
List of information
• ID number
• Registration number
• Tax reference number
• Monthly totals of all
credits and debits
• Account verification status
i.t.o FICA
118
Due dates
31 May 2013
31 October 2013

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 or until audit
or appeal is concluded
Form of records kept or
retained
• Original form
• Orderly fashion
• Safe place
• Electronic form at physical
address
• Obtain permission
• DTA between SA and
other country
• Keep manuals
• 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
119

Information gathering
• Random or risk assessment basis
Selection for inspection, verification or audit
• Written authorisation
• In addition to ID card
• Must produce authorisation letter
• Taxpayer may lawfully refuse to allow audit if authorisation cannot be produced
Authorisation for SARS official to conduct audit
120

Information gathering
Inform taxpayer of the stage of
audit
Intervals of 90 days
Only in case of in depth
audit or criminal
investigation
Letter of findings
Within 21 days
Taxpayer also has 21 days to
respond
Referral for criminal investigation
Serious tax offence
To senior SARS official
responsible for criminal
proceedings
Material gathered during
audit after referral is not
admissible in criminal
investigations
121
Constitutional rights
Right to remain silent
Consequences of not
remaining silent
Right not to be compelled
to make any confessions
Represented by legal
practitioner

Inspections
• SARS official may:
• Arrive at premises
• Unannounced
• Reason to believe
trade is carried on
Inspection
• Identity of person
occupying premises
• Registered for tax
• Maintaining proper
records
To determine: • Enter dwelling-house
or domestic premises
unless used for trade
• Without consent of
occupant
May not:
122

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
• Interview
• Written notice specifying
time and place
• Interview by SARS official
• Clarify issues
• Not for purpose of
criminal investigation
• Third party may not be
interviewed regarding
another person’s tax
• 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
• Asking questions, examine
systems and downloading
relevant material
123

Assistance during audit or criminal investigation
Provide reasonable assistance
Making available
appropriate facilities
Answering questions
Submitting relevant
material
May not:
Obstruct a SARS official
Refuse to give access or
assistance
Criminal offence
Costs incurred
May recover costs for
use of photocopying
facilities
Fees as prescribed in
PAIA
124

Inquiry
Notice to appear
• Ex Parte to judge of High
court
• Notice in writing by
presiding officer
• Appear before inquiry
• At place and time in notice
• To be examined under
oath or solemn declaration
• May have representative
present
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
125

Search and seizure
Application for warrant
• 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
• Carried out with decency and order
• Inventory of relevant material
SARS official may:
• Open or remove anything that contains
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
• Search any person on the premises
• May stop and board vessel, aircraft and
vehicle
• Only search person of same gender
126

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
• To avoid destroying
records and evidence of
fraudulent activities
• Owner consent in writing
• Imminent removal or
destruction of material
• Warrant will be issued if
applied for
• Delay in obtaining warrant
would defeat object
• Inform taxpayer of tax
offence
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
• Seal material if attorney
is not present
• Hand to attorney
• Attorney to decide
within 21 days whether
privilege applies
127

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
• General publication for
admin purposes e.g. VAT
vendors
• To taxpayer of own record
Publication of name of
offender by Commissioner
• Name and residence area
• Particulars of offence
• Particulars of fine or
sentence
128

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
• Taxpayer to apply to high
court for review
• SARS to prove it is
reasonable
Estimates
• Failure to submit return
• Return incorrect or
inadequate
• Agreed in writing by senior
SARS official
• Not subject to objection
and appeal
• Assessment is regarded as
final
• Subject to understatement
penalty
• Burden of proof on SARS
129

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
130

Tax liability and payment
Meaning of taxpayer
•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
Responsible third parties
•Holding or owing money and
appointed by SARS
•Involved in financial
management (negligent or
fraudulent)
•Shareholders acquiring assets
of a wound-up company
(Excluding listed company)
•Within one year prior
•Transferee receiving assets
below market value
•Connected person
•Without consideration/below
market value
•Assists in obstruction of tax
collection
Right of recovery of taxpayer
•May recover from taxpayer tax
paid on behalf of taxpayer
•Taxpayer cannot recover from
withholding agent tax
deducted or withheld
131

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
• Senior SARS official may
revoke at any time if
delaying tactics employed
by taxpayer
Security by taxpayer
• SARS may require security
• Also by members,
shareholders or trustees
who controls/manage
taxpayer
• Not subject to objection
and appeal
• Preservation order by High
Court where debtor
dissipates assets
• If urgent: SARS may seize
and remove realisable
assets up to 24 hours prior
to application
Taxpayer account
• Single taxpayer account
with rolling balance
• First in first out payment
allocation
• Formal application for
deferral of payment
132

Recovery of tax
Methods
• Notice to taxpayer demanding payment
within 10 days
• Judgment: Assets can be attached
• Liquidation and sequestration
• Personal liability of third parties e.g.
employers
• 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
133

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
134

Refunds
Refunds of excess payments
• 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
Authorisation by SARS
• SARS may withhold:
• To determine
correctness
• Taxpayer failed to submit
income tax, provisional
tax, Vat or PAYE
Time period
• Assessment by SARS: 3
years
• Self assessment: 5 years
135

Penalty system
Penalty system
Mandatory
Administrative non-
compliance penalty
Fixed amount
Non-Compliance
Percentage based
Non-payment
Understatement
penalty
Criminal offences
Offences listed in
chapter 17
Offences listed in tax
Acts
136

Penalty system
137
Fixed amount penalty
• For non-compliance
• Excludes:
• Failure to pay tax
• Understatement penalty
According to table
• Increase with same amount per month
• Known address: 35 months
• Unknown address: 47 months

Penalty system
138
Understatement penalty
• Penalty which is based on two considerations:
• The taxpayer’s behaviour at the time of the default
• How the taxpayer behaved after SARS detected the understatement

Penalty system
139
Understatement Penalty
• In accordance with table
• Based on shortfall
calculated
• Ignore assessed loss or
other benefit from
previous tax year
Substantial
understatement
• Prejudice to SARS
exceeds greater of 5% of
tax properly chargeable
or R 1 000 000
Definition of
understatement
• Prejudice to SARS as
result of:
• Default in submitting
return
• Omission from return
• Incorrect assessment
• Failure to pay correct
amount of tax if no
return is required

Voluntary disclosure programme
141
Qualifying person
• A person may apply,
whether in a personal,
representative,
withholding or other
capacity, for voluntary
disclosure relief, unless
that person is aware of:
• A pending audit or
investigation
• An audit or
investigation that has
commenced, but has
not yet been concluded
Requirements
• Be voluntary
• Involve a ‘default’ which
has not previously been
disclosed
• Be full and complete in all
material respects
• Involve the potential
imposition of an
understatement penalty
• Not result in a refund due
by SARS
• Be made in the
prescribed form and
manner
Voluntary disclosure relief
• No criminal prosecution
• Relief in respect of any
understatement penalty
• 100% relief of an
administrative non-
compliance penalty

Registration of tax practitioners
Registration of tax
practitioners
•Provides advice to another
person or completes or assists
in completing a return
•1 July 2013 Register with:
•Recognised controlling body
•SARS
•Exclude persons who perform
these functions under the
direct supervision of a person
who is a registered tax
practitioner who has accepted
accountability for actions of
other persons
Exclusions
•Provides
advice/completes/assists in
completing return solely:
•For no consideration
•In anticipation/ in course of
litigation to which
Commissioner is a party
•As an incidental part of
providing goods or services
•I.r.o employer if employed
on full-time basis
•Under direct supervision
who has accepted
accountability
Recognised controlling body
•IRBA
•SA Legal Practice Council
•Institute of Accounting and
Commerce - IAC
•South African Institute of
Chartered Secretaries and
Administrators - ICSA
Chartered Accountants -
SAICA
Professional Accountants -
SAIPA
•South African Institute of Tax
Practitioners - SAIT
142

Other
Complaint to controlling bodY
• Senior SARS official may lodge a complaint
• SARS must deliver to the taxpayer and the
person against whom the complaint is to be
made notification of the intended
complaint
• Taxpayer has 21 business days to lodge an
objection
Tax clearance certificates
• Reason for the application properly stated
• Valid for one year from the date of issue
• Conditions:
• Be registered for income tax prior to
application
• No outstanding debt for any taxes
• Any deferred arrangements made are
being adhered to
• All returns and/or declarations are up to
date
• All tax reference numbers must be active
and correct
• The registration details on the application
form must correspond with the
information on the SARS system
• SARS must issue within 21 business days
143

144
Estate Agency Affairs Act
144

Accounting and auditing requirements
Accounting records
•All moneys received and
expended
•Trust accounts
•Assets and liabilities
•Financial transactions and
financial position
•Required to register as an
accountable institution with the
FIC
Auditing requirements
•Irrespective of legal form i.e.
Sole Proprietor, CC, PTY,
Partnership
•Both business and trust account
•Within 4 months from the last
day of financial year end
•No extension granted
•Auditor registered with the IRBA
•Only auditor to submit audit
report and findings, to EAAB
without changes or deletions
•Do not attach financial
statements
•No automated receipt
•Retain proof of submission
Non-compliance
•Not be issued with Fidelity Fund
Certificate
•Contraventions referred to
Enforcement Department for
formal investigation
•Administrative penalty of R500
per audit report
•Fine up to R25 000
•Formal reprimand
145

Other
Interest payable to the Fund
•Interest earned on monies held
in trust or savings or other
interest-bearing accounts,
which have not been
specifically nominated for the
benefit of a contracting party
stipulated in a mandate
•May deduct and retain 50% of
interest earned
•Cannot charge the EAAB a fee
for the administration of its
trust account
•Interest payments are to be
made when submitting the
audit report
Change in registered auditor
•Notified EAAB in writing within
14 days
•Newly appointed auditor must
submit letter, confirming the
appointment
Open additional trust or other
interest-bearing accounts
•Notify EAAB in writing within
14 days
•Submit bank letters detailing
the proper account
designations
146

Educational requirements
New entrant
•Serve as an intern estate agent
for a continuous period of 12
months
•Certificated against the NQF
Level 4
•Pass the PDE 4
•Certificated against the NQF
Level 5
•Issued with a full status
principal’s fidelity fund
certificate
•Granted period of 2 years to pass
the PDE 5 to acquire professional
status as a principal estate agent
Use of designations
•Passed PDE 4 + valid fidelity
fund certificate : Professional
Practitioner in Real Estate
(“PPRE”)
•Passed PDE 5 + valid fidelity fund
certificate: Master Practitioner in
Real Estate (“MPRE”)
Inspections
•Inspectors appointed by EEAB
•Written inspection authority
•Written report to EAAB 14 days
after inspection
•No need to give prior written
notice
•Routine inspections: Once in 5
years
•Powers:
•Enter premises
•Produce fidelity fund certificate
•Produce any book, record or
other document
•Examine or make extracts or
copies
•Seize and retain
•Issue a receipt for anything
seized
147

148
Licensing of Businesses Bill
148

Licensing of business Bill
149
Published on 18 March 2013 for public comment
Requires every business in the country to obtain a licence. Valid for five years
Applies to every provider of any goods or services
Criminalise all businesses, existing or new, who don't obtain a licence
Licensing authorities will be municipalities
Can impose any licence condition in their sole discretion, and amend any licensee's licence
conditions unilaterally
Draconian consequences for persons convicted of contravening the counterfeit-goods, tax, food-safety
or immigration laws

150
Proposed changes to B-BBEE
150

Proposed changes
151
The number of elements
reduced from seven to five
• Employment equity +
management control
• Preferential procurement +
enterprise development
:Called enterprise and
supplier development
• Ownership
• Skills development
• Socio-economic
development
Qualifying turnover
• EMEs: From R5 million to
R10 million
• QSEs: From R10 million to
R50 million
Procurement
• Claimed from value adding
suppliers
• Profit before tax added to
salary costs is to exceed
25% of turnover
• Favouring businesses with
high labour content

Proposed changes
152
Ownership
• Given priority in the suggested codes
• Contributor status will drop 2 levels if < 40%
compliance in this element
QSEs
• Currently QSEs can choose the best four of
the seven elements
• Proposed codes require QSEs to comply
with all five elements
• Drop one level if not compliant

Fraudulent B-BBEE Certificates
153
Annual turnover > than R5 million
• Verification agencies, accredited by the
South African National Accreditation
System (SANAS); or
• Registered auditors, approved by IRBA
Annual turnover < than R5 million
• Accounting officers
• Verification agencies, accredited by SANAS
• Registered auditors (registered auditors do
not need to meet the prerequisites for
IRBA’s approval)

Thank You
For more information
please contact the
Fasset Call Centre
on 086 101 0001
or visit www.fasset.org.za
Fasset Update
May 2013

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