I’ve recently had several people tell me that they struggle to get their clients to bother keeping their company secretarial records. So what can you say to get your clients to change their mind? How about telling them they could face a fine of up to a million rand, and even have their directors sent to jail?
According to the Companies Act, every director has a duty to make sure the company’s registers are created and maintained, and that it be available to all shareholders during business hours (s 24, 25 & 26(3)). The Act also requires that it be updated ASAP after receiving consideration for shares (s 40(4)(b)) , so it’s not something that can be put off until it’s needed.
The share register is the evidence of shareholding – to be a shareholder you must hold the share and it must be recorded in the share register(Companies Act Def. ‘shareholder’). If things ever go sour within the company, this could have some serious implications, since it might not be possible to prove shareholding.
If the registers are not kept, it will be reported as a reportable irregularity when the company is audited (APA Act S45 (1) (a) and S1) or reviewed (Reg. 29), and CIPC will issue the company a compliance notice telling them to get their act together and keep their records properly.
If the company doesn’t comply, they could face a fine of up to R 1 million, and since it was the directors responsibly to keep the registers, they could personally face an additional fine and/or imprisonment (s 216). The shareholders can also claim damages from them (s 20(6)).
You don’t need to be a rocket scientist to comply with the Act on this, it costs very little and it could to save a whole lot of pain.