Make sure your Close Corporation complies
The Companies and Intellectual Property Registration Office (CIPRO) handles the name reservation and registration of all companies (Companies, Close corporations or Co-ops) in South Africa. It also processes applications for patents and trademarks. You will probably have dealt with CIPRO when establishing your businesses – usually a simple process involving the reservation of a business name followed by the submission of a founding statement.
But a recent announcement by Keith Sendwe, CEO of CIPRO, means you’ll have to communicate with CIPRO more frequently. From 1 September 2008 all Close Corporations will have to submit an annual return to the registrar. CIPRO says this process is necessary to determine whether registered entities are still in operation, and to confirm that the information held by CIPRO is accurate. Sendwe says: “It is vital to provide Close Corporations with as much support as possible, helping them to remain within the boundaries of the law while achieving the financial success they need in order to survive amidst fierce competition and fluctuating market conditions. The registration [by submission of annual returns] of Close Corporations is just one more way in which CIPRO will be able to lend much needed support.”
A requirement of the Act
Why do Close Corporations suddenly have to submit annual returns? On closer inspection it seems CIPRO’s right to demand these returns are entrenched in the Close Corporation Act. CIPRO quotes from Section 15A of the Close Corporations Act 64 of 1984 in support of its decision. The relevant clauses read as follows:
(1) In order to assist the Registrar to determine whether the information required to be disclosed in terms of this Act by a corporation has been disclosed and is still valid, every corporation shall not later than the end of the month following upon the month within which the anniversary of the date of its incorporation occurs, on payment of the prescribed fee, lodge with the Registrar a return in the prescribed form.
(2) Any corporation which has failed to lodge a return required by subsection (1) within the period prescribed therein, may thereafter lodge such a return, subject to the payment to the Registrar of the prescribed additional fee in respect of each such failure: Provided that the Registrar may, upon good cause shown, waive payment of the prescribed fee concerned.
A real money spinner
Although the reasons given for the lodgement of annual results make sense we’re sure CIPRO will welcome the additional revenue flowing to its coffers. At 31 August 2008 the organisation reveals a total of 1 797 869 active close corporations on their books. If we assume that 1% of these organisations generate more than R50m turnover per annum, and that 10% of these organisations decide to deregister, then CIPRO will be collecting approximately R230m per annum in annual result lodgement fees. A fee of R100 will be levied on a CC with an annual turnover of less than R50m and R4 000 for a turnover in excess of R50m. CIPRO notes that failure to lodge the annual return on time will result in R150 penalty – and that Close Corporations that submit more than six months after the deadline risk being deregistered.
What do you have to do to comply? The first step is to find out what month your Close Corporation was incorporated in. This information should appear your Close Corporation founding statement. The month of incorporation becomes your anniversary month, and you have to submit your annual return in the month following that month. For example, if your CC was incorporated in February 2000 your annual report must be submitted in March 2009 – and in March each subsequent year. The return process is electronic and can be completed from the CIPRO website (www.cipro.gov.za/). For further information we suggest you contact the CIPRO call centre on 086 184 3384!
And remember: failure to lodge an annual return for you Close Corporation within six months of the anniversary month will BREAK result in CIPRO deregistering it. And that’s bound to cause a great deal more hassle than submitting the annual return on time in the first place.
Editor’s thoughts:
Although the submission of an annual return is mandated in the Close Corporations Act 1984 the timing of CIPRO’s decision is interesting. We all know that the new Companies Bill will eventually result in the total phasing out of the Close Corporation as a business entity. Do you think CIPRO’s decision to charge for annual result submission is a money spinner? Add your comments below, or send them to gareth@fanews.co.za
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