Business & FinancePost Social

Financial Reporting Requirements

For businesses in South Africa.

In South Africa, business entities can operate in various forms; the first form is what is referred to as incorporated – for example a Company or a Close Corporation. Other businesses can trade as a registered Trust, a Partnership or a sole proprietor., but they all have one aspect in common – they have to prepare and income statement and balance sheet. By Thys Buitendag CA (SA).

According to various Acts that are applicable, e.g. the Companies Act, the Close Corporation Act, the Trust Property Control Act and Income Tax Act, business entities must, for each financial period, prepare financial statements of some sort.

This month we look at companies and close corporations.

All companies and CC’s are required to:

  • have a registered office;
  • maintain certain categories of records for seven years;
  • make the register of shareholders/members and register of directors available for inspection during business hours;
  • file an annual return (similar to the current annual reports under the 1973 Act) in the prescribed form with the Commission (CIPC). This requirement also applies to external companies;
  • have a fixed financial year;
  • maintain accurate and complete accounting records; and
  • prepare annual financial statements.

Annual financial statements must (Pty and CC):

  • satisfy the prescribed financial reporting standards which may vary for different categories of companies;
  • be audited in the case of public companies. Other profit and non-profit companies must have their financial statements audited if the Regulations require it.
  • If not, the annual financial statements of such companies must be either:
  1. audited voluntarily if the company’s MOI, a shareholders’ resolution or the company’s board requires it;
  2. or independently reviewed in accordance with the Regulations.
  • In certain circumstances an independent review will be not be required:

Exemptions from independent review are provided for private companies where every shareholder is also a director subject to certain exceptions.

  • Include an auditor’s report if the statements are audited; or Accounting Officer report if not audited;
  • include a directors’/member’s report on the state of affairs, business and profit or loss of the company/close corporation;
  • be approved by the board and signed by an authorised director/member and;
  • must, if they are required to be audited, include a detailed disclosure of the remuneration and benefits payable to directors or others holding any prescribed office in the company.

In conclusion; although the Act allows certain companies and CC’s not to be audited or independently reviewed it does not remove the requirement for annual financial statements.

The minimum is a proper set of financial statements signed off by a registered Accounting Officer.

The exemption from audit/independent review is only applicable where all the shareholders are also the directors.

Where a business trades in a form that is not a Pty or CC, e.g. Trust, sole proprietor, partnership, the legal requirements for financial statements falls away. But SARS still requires some sort of financial statement for income tax purposes.

A request for financial statements can also come from a requirement in the Trust Deed, your banker, a purchaser or invester, or the membership compliance criteria of a trade association, such as the Southern Africa Tourism Services Association (SATSA).

For advice or assistance telephone +27 (0)11 475 8422 or for more information visit: You can also send an mail to [email protected].

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