A private company is a separate legal person with obligations that continue whether or not it trades. Most of what goes wrong for small companies is a filing that was never made rather than anything to do with the business itself.
This page sets out the ongoing obligations under the Companies Act 71 of 2008 and the related legislation, and what each of them actually requires.
Business Requirements at a Glance
The standing obligations of a private company.
- A Memorandum of Incorporation filed with the CIPC
- At least one director, and the number the Memorandum requires
- A registered office address, notified to the CIPC
- A company secretary and auditor where the Act or the company’s public interest score requires them
- An annual CIPC annual return, filed within the prescribed period
- A filed and maintained beneficial ownership register
- Annual financial statements prepared within the prescribed period after year end
- Statutory records and registers kept at the registered office
- A public officer registered with SARS
Registration and Legal Requirements
The annual return is the obligation most often missed. It is filed with the CIPC, it is separate from anything SARS requires, and non-filing leads to deregistration. A deregistered company loses its bank account, its contracts and its assets vest in the state until reinstatement, which takes time and money.
Beneficial ownership must be filed and kept current. Companies must identify the natural persons who ultimately own or control the entity and file that information with the CIPC. Banks verify against it, and a company whose register is not filed will meet friction everywhere.
Directors have statutory duties under sections 75 to 77 of the Companies Act — to act in good faith and in the company’s best interests, with the degree of care and skill reasonably expected, and to disclose personal financial interests. A director who breaches them can be held personally liable.
Reckless trading is prohibited. Section 22 prohibits a company from carrying on business recklessly, with gross negligence, with intent to defraud, or for any fraudulent purpose. Continuing to trade and incur debt while insolvent is where small company directors most often become personally exposed.
Solvency and liquidity govern distributions. A company may only make a distribution if it satisfies the solvency and liquidity test in section 4, and the board must apply it. Taking money out of a company that cannot afford it is a breach with personal consequences.
Documents and Ownership Information Required
The records a company must keep.
- The Memorandum of Incorporation and any amendments
- A register of directors, with the details the Act requires
- A securities register recording shareholders and their holdings
- The beneficial ownership register as filed with the CIPC
- Minutes of meetings of shareholders and of the board, and written resolutions
- Annual financial statements for the prescribed period
- Accounting records supporting those statements
- Notices and communications required by the Act
- Records of directors’ declarations of personal financial interests
Tax, Licence and Compliance Requirements
Financial statements must be prepared within the period the Act prescribes after financial year end. Whether they must be audited, independently reviewed or neither depends on the company’s public interest score and on who prepares them. Calculate the score and confirm the requirement — assuming no audit is needed is a common error.
Tax obligations run in parallel: income tax and the annual return to SARS, provisional tax, VAT where registered, and PAYE, UIF, SDL and COIDA registration where the company employs anyone, including a director on a salary.
Employment law applies from the first employee. The Basic Conditions of Employment Act 75 of 1997, the Labour Relations Act 66 of 1995, the Employment Equity Act 55 of 1998 above its thresholds, and the Occupational Health and Safety Act 85 of 1993 all apply.
POPIA applies to the company’s personal information. The Protection of Personal Information Act 4 of 2013 requires lawful processing, security safeguards and an information officer, and it applies to employee and customer data alike.
Sector licences and permits apply on top, depending on the activity — municipal business licences, health certificates, liquor licences, financial services authorisation and others.
Keep director details current with the CIPC. A resignation or appointment not filed leaves a person on record as a director, with the duties and exposure that go with it.
Deregistration can sometimes be reversed by application to the CIPC, but it is slow. Filing the annual return on time is far cheaper.
Process, Deadlines and Ongoing Obligations
Diarise the annual return against the anniversary of incorporation, the financial statement deadline against year end, and the SARS obligations against their own dates. Those three calendars cover most of it.
Review the statutory records once a year: are the director details correct, is the securities register current, is beneficial ownership filed, are there minutes for the decisions taken. An hour a year prevents most problems.
- File the CIPC annual return every year — deregistration follows non-filing
- File and maintain the beneficial ownership register
- Keep director details current with the CIPC
- Calculate the public interest score and confirm the audit requirement
- Prepare annual financial statements within the prescribed period
- Keep minutes and resolutions for every board and shareholder decision
- Apply the solvency and liquidity test before any distribution
- Never trade on while insolvent — reckless trading carries personal liability
- Register for PAYE, UIF, SDL and COIDA on employing anyone
- Comply with POPIA for employee and customer information
Frequently Asked Questions
What is the most commonly missed obligation?
The CIPC annual return. It is separate from SARS, and non-filing leads to deregistration — which costs the company its bank account, its contracts and its assets until reinstatement.
Do we need an audit?
It depends on the company’s public interest score and who prepares the statements. Calculate the score and confirm the requirement rather than assuming none applies.
When are directors personally liable?
Where they breach the duties in the Companies Act, or where the company trades recklessly or while insolvent. Continuing to incur debt when the company cannot pay is the common route.
Can a deregistered company be restored?
Sometimes, by application to the CIPC, but it is slow and costly. Filing the annual return on time is far cheaper than reinstatement.
Company obligations, filing periods, audit thresholds and director duties are set in the Companies Act and its regulations and by the CIPC, and are revised. Confirm current requirements with the CIPC, SARS and a professional adviser.