The law and SMMEs

The number one risk facing companies in South Africa today is regulation and compliance.

This is according to the Ernst & Young 2010 Business Risk Report which found that, “The average South African company has to comply with 2 897 statutes, 3 000 to 5 000 subordinate measures as well as voluntary codes and standards.”

But Sirdar Legal Associate and Attorney of the High Court Eugene Botha argues that the cost of not complying is greater.

“You could lose a lot business if you don’t comply,” Botha says. "Say a prospective client asks for your business’ tax certificate and you can’t produce one. They are not likely to give you their business."

Investment Solutions Chief Economist Chris Hart has been quoted as saying that the regulatory environment in South Africa is extremely hostile to small businesses because the cost of compliance is potentially crippling to a fledgling enterprise.

It is for this reason that Sirdar, through its Legal Expedition Foundation, helps businesses navigate this complex environment. The corporate law firm takes clients on a minimum 12-month contractual basis and ensures that the requisite regulations are complied with.

Botha advises those whose businesses are still registered as Close Corporations (CC), to amend their Memorandum of Incorporation and convert to private companies.

“From an image point of view it gives the impression that you know what you are doing,” he says.

The Companies Act of 2008 prohibits the formation of new Close Corporations (CC) as a form of business entity. The CC Act as it stood in the Companies Act of 1973, however, remains intact allowing existing CCs to continue trading. The intention is to see CCs eventually phased out.

Botha also points out that in the near future companies would not be able to use the "Trading as" tag. No person will be allowed to trade under any name unless that name has been registered as a trademark, is the business’ registered name or a natural person’s name in the case of a sole proprietor, Botha says.

He also reminded business owners that they had to comply with the provisions of the Promotion of Access to Information Act of 2001 (PAIA), as non-compliance could result in fines. The purpose of the act is to promote transparent, accountable governance and gives citizens the right to request information from government, companies and in some cases individuals.

In accordance with the act, companies – both private and public - are required to compile and submit a Section 54 Manual to the South African Human Rights Commission (SAHRC).

The manual should include basic contact information, company records available for public scrutiny and the cost of accessing them. “Templates for the manual are widely available on the Internet, download one and tweak it to suit your needs,” Botha advises.

However, companies have been given an a submission extension until 31 December 2015, according to the SAHRC website.
He also says that with the amendment of the Broad-Based Black Economic Empowerment Act currently in process, business people had to be aware that anyone found guilty of fronting would be liable for fines equivalent to 10% of turnover or 10 years imprisonment.

Business owners also have to register as credit providers if they offer goods in excess of R500 000 on terms, Botha says. This is as per the National Credit Act. The R500 000 threshold is accumulative per year.

Any company in possession of client personal information has to ensure it complies with the regulations of the Protection of Private Information Act.

For more information visit: www.sirdargroup.com