Allowances and Fringe benefits: Part 1


Travel allowance as opposed to the right of use of a business vehicle: What is the difference?

The Income Tax Act defines a travel allowance as an allowance and the right of use of a motor vehicle as a taxable fringe benefit. Although these two terms, allowance and fringe benefit, are closely related, their treatment for tax purposes differs.

Travel allowance

A travel allowance is normally paid to an employee to compensate the employee for the use of his/her own vehicle in the execution of his/her duties (e.g. a sales representative who has to visit clients to market an employer’s products). This allowance is usually calculated according to the distance that the employee will travel in the execution of his/her duties, the value of the employer’s vehicle, and also the maintenance costs and fuel usage of the vehicle. This can be either a fixed amount or a compensatory allowance based on the distance (tariff per kilometre) that the person has travelled.

The employer is obliged to calculate employee tax on 80% of the travel allowance paid to the employee, unless he is convinced that the employee has travelled more than 80% of the total distance for business purposes, in which case employee tax needs to be calculated on only 20% of the travel allowance.

The employee may, in turn, when submitting his/her personal tax return, claim a deduction against the travel allowance received for the portion of business kilometres travelled during the year. This deduction is calculated by apportioning the actual cost of the vehicle (wear and tear, fuel and maintenance) between the business and private kilometres, or by applying the cost scale of the South African Revenue Service (SARS), whichever is the most advantageous.

Right of use of a motor vehicle

As distinct from a travel allowance, the right of use of a motor vehicle occurs when a motor vehicle belonging to the employer is allocated to an employee to use either for private purposes or for private and business purposes. This is an example of a fringe benefit that is not paid in cash but has tax consequences for the employee in the sense that the employee is taxed on the private portion of the use of the motor vehicle. Employee tax is thus calculated monthly on 80% of the cash equivalent of the right of use, or on 20% thereof if the employer is convinced that more than 80% of the distance travelled was for business purposes.

The value placed on the private use of a motor vehicle is 3.5% (or 3.25% if the vehicle is subject to a maintenance plan), of the ‘determined value’ of the vehicle for each month or part of a month during which the employee was entitled to use the vehicle.[1] The determined value of a motor vehicle is generally calculated to be the cash value of the vehicle at the time of purchase (excluding financing costs). It should be noted that the determined value includes VAT on the vehicle. There is, however, a reduction if the employee is given the use of a vehicle owned by the employer, that was not previously allocated to someone. This reduction in value is calculated at 15% of the determined value per annum according to the reducing balance method, for each completed year during which the vehicle was not allocated to an employee.

The cash equivalent (the 3.5% or 3.25%) can also be reduced by the amount that the employee contributes with regard to the use of the vehicle, excluding license, maintenance and fuel costs. (For example: The determined value of a motor vehicle without a maintenance plan is R114 000, inclusive of VAT. The employer expects the employee to contribute R1 500 for the use of the vehicle. Thus the monthly cash equivalent of the fringe benefit is R2 490 [(R114 000 x 3.5%) – R1 500]).

An employee who has the right of use of a motor vehicle is also entitled, when submitting his/her income tax return, to claim a deduction for business kilometres travelled during the year. The deduction is calculated by multiplying the cash equivalent of the benefit with the business kilometres and dividing by the total kilometres. (For example: The taxable benefit for the year amounted to R50 000, business kilometres were 12 500 and the total kilometres amounted to 18 000. Thus the deduction that may be claimed is R34 722.22 [R50 000 x 12 500km ÷ 18 000km]).

Which of the two methods is the most advantageous from a tax point of view?

This is, unfortunately, a difficult question to answer because it depends on several factors, viz.:

  • The value of the vehicle;
  • The total distance travelled;
  • The ratio between private kilometres  an business kilometres;
  • Who receives the travel allowance / right of use;
  • To what degree the employer contributes towards the fuel, maintenance and insurance of the vehicle;
  • If the vehicle is a delivery vehicle, in which instance VAT may be claimed.

Therefore, each case must be considered individually to ascertain the most beneficial choice for both the employer and the employee. You are welcome to contact Jaco van Straaten at or at 021 840 1600 should you require further information regarding allowances and fringe benefits. 

Important to remember

  • The distance between a taxpayer’s home and place of work is regarded by SARS as private kilometres and cannot be claimed as a deduction against a travel allowance or reduction in the right of use.
  • If an employee wishes to deduct business kilometres for tax purposes, full records must be kept in the form of a logbook with particulars of business trips and the odometer reading of the vehicle.
  • Supporting documentation should be kept of fuel and maintenance expenditure since this could be more beneficial than using SARS’s cost scale.
  • Where the employee has the right of use of more than one vehicle, further considerations and tax implications, which are not discussed in this article, apply. Please contact us for more information in this regard.        

[1] Silke: South African Income Tax 2013 (LexisNexis)



Toelaes en Byvoordele: Deel 1

really-need-auto-insuranceReistoelae teenoor die reg op gebruik van ’n besigheidsvoertuig: Wat is die verskil?

Die Inkomstebelastingwet definieer ʼn reistoelae as ʼn toelae, en die reg  van gebruik van ‘n motorvoertuig as ‘n belasbare byvoordeel. Alhoewel hierdie terme, toelae en byvoordeel, nou verwant is, is die belastinghantering van elk verskillend.


‘n Reistoelae word normaalweg aan ‘n werknemer betaal om die werknemer te kompenseer vir die gebruik van sy/haar eie voertuig in die uitvoering van sy/haar pligte (bv. ‘n verkoopsverteenwoordiger wat kliënte moet besoek om ‘n werkgewer se produkte te bemark). Hierdie toelae word gewoonlik bereken volgens die afstand wat die werknemer in die uitvoering van sy/haar pligte sal reis, die waarde van die werknemer se voertuig en ook die onderhoudskoste en brandstofverbruik van die voertuig. Dit kan óf ‘n vasgestelde bedrag óf ‘n vergoedende toelaag wees wat gebaseer word op die afstand (tarief per kilometer) wat die persoon afgelê het.

Die werkgewer is verplig om werknemersbelasting te bereken op 80% van die reistoelae wat aan die werknemer betaal word tensy hy oortuig is dat die werknemer meer as 80% van die totale afstand vir besigheidsdoeleindes afgelê het, in welke geval die werknemersbelasting op slegs 20% van die reistoelae bereken hoef te word.

Die werknemer kan op sy/haar beurt, met die indiening van sy/haar persoonlike belastingopgawe ‘n aftrekking eis teen die reistoelaag ontvang vir die gedeelte van besigheidskilometers in die loop van die jaar afgelê. Die aftrekking word bereken deur die werklike koste van die voertuig (slytasie, brandstof en onderhoud) proporsioneel toe te deel tussen die besigheids- en privaatkilometers, of deur die Suid-Afrikaanse Inkomstediens (“SAID”) se kosteskaal toe te pas, welke die voordeligste is.

Die reg  van gebruik van ‘n motorvoertuig

Anders as ‘n reistoelaag vind die reg  van gebruik van ‘n motorvoertuig plaas wanneer ‘n motorvoertuig wat aan die werkgewer behoort aan die werknemer toegeken word vir sy/haar gebruik, hetsy vir privaatdoeleindes of vir privaat- en besigheidsdoeleindes. Hierdie is ‘n voorbeeld van ‘n byvoordeel wat nie in kontant uitbetaal word nie maar wat belastinggevolge vir die werknemer inhou in die sin dat die werknemer belas word op die privaatgedeelte van die gebruik van die voertuig. Werknemersbelasting word dus maandeliks bereken op 80% van die kontantekwivalent van die reg van gebruik of op 20% daarvan indien die werkgewer oortuig is dat meer as 80% van die afstand wat met die motor afgelê is, vir besigheidsdoeleindes was.

Die waarde wat op die privaatgebruik van ‘n motorvoertuig geplaas word is 3.5% (of 3.25% indien die motorvoertuig onderworpe is aan ‘n onderhoudsplan) van die ‘vasgestelde waarde’ van die voertuig vir elke maand of gedeelte van ‘n maand waartydens die werknemer geregtig was om die voertuig te gebruik.[1] Die vasgestelde waarde van ‘n voertuig word algemeen bereken as die kontantwaarde by aankoop van die voertuig (uitgesluit finansieringskoste). Daar moet op gelet word dat die vasgestelde waarde BTW op die voertuig insluit. Daar is wel ‘n vermindering indien die werknemer die gebruiksreg verkry van ‘n voertuig wat deur die werkgewer besit word maar nie voorheen aan iemand toegeken was nie. Hierdie waardevermindering word bereken op 15% van die vasgestelde bedrag per jaar volgens die verminderendesaldo-metode vir elke voltooide jaar wat die voertuig nie aan ‘n werknemer toegeken was nie.

Die kontantekwivalent (die 3.5% of 3.25%) kan ook verminder word met die bedrag wat die werknemer bydra ten opsigte van die gebruik van die voertuig, uitgesluit lisensie-, onderhouds- en brandstofkostes. (Byvoorbeeld: Die vasgestelde waarde van ‘n voertuig sonder ‘n onderhoudsplan beloop R114 000, BTW ingesluit. Die werkgewer vereis van die werknemer om R1 500 per maand by te dra vir gebruik van die voertuig. Dus is die maandelikse kontantekwivalent van die byvoordeel R2 490 [(R114 000 x 3.5%) – R1 500]).

‘n Werknemer wat die reg van gebruik van ‘n motorvoertuig geniet is ook geregtig om met die indiening van sy/haar belastingopgawe ‘n aftrekking te eis ten opsigte van die besigheidskilometers wat gedurende die jaar afgelê is. Die aftrekking word bereken deur die kontantekwivalent van die byvoordeel te vermenigvuldig met die besigheidskilometers en te deel deur die totale kilometers. (Byvoorbeeld: Die belasbare byvoordeel vir die jaar het R50 000 beloop, die besigheidskilometers was 12 500 en die totale kilometers gereis was 18 000. Dus is die aftrekking wat geëis kan word R34 722.22 [R50 000 x 12 500km ÷ 18 000km]).

Watter een van die twee metodes is die voordeligste uit ‘n belastingoogpunt?

Dit is ongelukkig ‘n baie moeilike vraag om te beantwoord aangesien dit afhang van verskeie faktore, nl.:

  • Die waarde van die voertuig;
  • Die totale afstand afgelê;
  • Die verhouding tussen privaat- en besigheidskilometers;
  • Wie die reistoelaag ontvang / reg van gebruik geniet;
  • In watter mate die werkgewer ‘n bydrae maak tot brandstof, onderhoud en versekering van die voertuig; en
  • Of die voertuig ‘n afleweringsvoertuig is in welke geval BTW geëis kan word.

Daarom moet elke geval individueel oorweeg word om die gunstigste keuse vir sowel die werkgewer as die werknemer vas te stel. U is welkom om vir Jaco van Straaten by of by 021 840 1600 te kontak vir verdere besonderhede in verband met toelaes en byvoordele.

Belangrik om te onthou

  • Die afstand tussen ‘n belastingpligte se woning en werksplek word deur die SAID as privaatkilometers beskou en kan nie as aftrekking teen ‘n reistoelaag of ‘n vermindering in die reg van gebruik, geëis word nie.
  • Vir ‘n werknemer om besigheidsritte vir belasting te kan aftrek moet volledige rekords in die vorm van ‘n logboek met besonderhede van  besigheidsritte en die odometerlesing van die voertuig, bygehou word.
  • Stawende dokumentasie van brandstof- en onderhoudsuitgawes moet gehou word aangesien dit moontlik meer voordelig kan wees as om die kosteskaal van die SAID te gebruik.
  • Waar die werknemer die reg van gebruik van meer as een voertuig geniet is daar verdere oorwegings en belastingimplikasies wat nie in hierdie artikel bespreek is nie. Kontak ons gerus vir meer inligting hieroor.

[1] Silke: Suid-Afrikaanse Inkomstebelasting 2013 (LexisNexis)

The effect of the new Companies Act on the financial management of your company

Calculating savingsWhen the new Companies Act 71 of 2008 (“the Act”) came into effect on 1 May 2011, it placed an administrative burden on the financial management of a company, especially on the smaller, owner-managed companies that, in the course of their business operations in the past, granted loans to related entities and paid directors’ remuneration without too much trouble.  The Act restricts this in a manner and now requires much more paperwork to be in place before certain actions can be performed.

You will note, from the discussion that follows, that in terms of Section 4 of the Act, the performance of a solvency and liquidity test is often required although this was not the case in the past.

The solvency and liquidity test

A company satisfies the solvency and liquidity test when, taking into consideration all reasonably foreseeable financial circumstances of the company, and based on the accounting records and financial statements:

  • the assets of the company, fairly valued, equal or exceed the liabilities of the company, as fairly valued; and
  • it appears that the company will be able to pay its debts as they become due in the ordinary course of the business, for a period of 12 months following the date on which the test is carried out.

Now, when performing the tasks detailed below, financial managers and directors should take reasonable care and make sure that they adhere to the provisions of the Act, in order to prevent incurring personal liability.

1. Declaration of dividends to shareholders 

Section 46 of the Act deals with the declaration of dividends[1] to the shareholders of a company, and determines that no dividend may be declared unless:

  • it reasonably appears that the company will satisfy the solvency and liquidity test immediately after finalizing the proposed distribution, as in terms of Section 4 of the Act;
  • the board of the company has acknowledged that it has applied the solvency and liquidity test, and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing payment of the dividend; and
  • the board of the company has authorised the payment of the dividend by signing a resolution to that effect.

In the event that the correct procedures have not been followed, the financial manager, as a prescribed officer of the company, as well as the directors of the company who participated in making the decision that a dividend should be declared, can be held personally liable for any losses incurred as a consequence of their breach of fiduciary duty regarding the matters of the company.

2. Providing financial assistance to related persons or entities

Financial assistance is defined in Section 1 of the Act as lending money, guaranteeing a loan or other obligation, or securing any debt or obligation by the company, but does not include the lending of money in the ordinary course of business by a company whose primary business is operating in the loan industry.

According to Section  45 of the Act, financial assistance may not be provided to any director, prescribed officer, related or inter-related company, corporation or trust, unless:

  • the shareholders, by way of a special resolution adopted within the previous two years, authorise the approval of financial assistance, either to the specific recipient, or generally for a category of potential recipients;
  • the board is satisfied that the company will satisfy the solvency and liquidity test immediately after providing the financial assistance;
  • the board is satisfied that the terms under which the financial assistance is proposed, are fair and reasonable to the company;
  • the board is satisfied that any conditions or restrictions as set out in the company’s Memorandum of Incorporation, have been adhered to; and
  • the board subsequently adopts a resolution giving effect to the financial assistance, and provides written notice of such resolution to all the shareholders and to any trade union representing the company’s employees.

Any agreement with respect to the provision of any such assistance (i.e. loan agreements) is void to the extent that the provisions of section 45 have not been met.  Directors will incur personal liability for any losses sustained as a consequence of their breach of fiduciary duty.

3. The payment of directors’ remuneration

The payment of directors’ remuneration is also regulated by the Act, in terms of Sections 66(8) and 66(9).

Section 66(8) provides for the payment of remuneration to directors, to the extent that the company’s Memorandum of Incorporation does not provide otherwise.

The Act goes further, and imposes the condition in Section 66(9) that no remuneration may be paid to directors unless a special resolution approving the remuneration payable to the directors, has been passed and approved by the shareholders within the previous two years.

You will agree that these provisions are often just another statutory burden placed on the management of companies, especially the smaller, owner-managed companies.  But the effects of non-compliance may be severe!

Should you require assistance in the preparation of any of the solvency and liquidity tests or the adoption of certain resolutions, please do not hesitate to contact Joanie Viviers at our office at (021) 840 1600 or .    

[1] Section 46’s scope is wider than just the declaration of dividends and will be applicable to all distributions made by the company.  Distributions are not discussed in detail in this article.

ASL se 15de verjaardag-personeelfunksie

ASL het op 1 Augustus sy 15de bestaansjaar gevier en ons personeel het op 2 Augustus hierdie geleentheid volgens tipiese ASL-tradisie gevier: gesellig, hartlik en ontspanne.

ASL 01

Vroeg die oggend het al die personeel mekaar ontmoet by by die House of JC le Roux buite Stellenbosch. Na ons aankoms en die gepaardgaande verwelkomingsdrankie is ons na die lesinglokaal waar Mnr. Jannie Mouton van PSG ons met ‘n kort toespraak verras het. Hy het ons ‘n terugblik gegee op sy lewensreis en was ook nie suinig met die uitdeel van lewensfilosofiëe en beleggingsadvies nie. En wie gaan nie luister as die legendariese Jannie Mouton raad uitdeel nie? Vir ons was daar baie te leer en nadat ons almal na hom geluister het, het ons besef dit is nie verkeerd om groot te droom nie. Na die toespraak het ons beweeg na ‘n vonkelwyn- en nougatproe. Dis alombekend dat ‘n JC le Roux-vonkelwyn altyd heerlik is maar in kombinasie met die onweerstaanbare nougat en turkish delight wat saam met dit bedien is, was dit voortreflik.

Daarna is ons na Middelvlei vir ‘n boere-middagete, spesiaal op kole en met ‘n rooster voorberei. Vir ‘n ekstra bederf het die weer perfek saamgespeel en kon ons buite in die heerlike wintersonnetjie sit en die landelike omgewing met sy groen grasvelde en koeie wat wei, geniet. Hier is die lekker kuier en gesels wat al vroeër die oggend by die House of JC le Roux begin het, voortgesit. Wie ook al van mening is dat ‘n ouditeur soms maar vervelig en oninteressant is, het beslis nog nie ‘n ASL-partytjie bygewoon nie! Belastingsperdatums en finansiële jaareindes is vir hierdie dag met groot sukses uit die gedagtegang en woordeskat verban. Die saamkuier is uitgerek tot lank na middagete, almal traag om die lekker dag tot ‘n einde te bring.

ASL se eerste 15 jaar is afgesluit met ‘n dag van gesels, saamkuier en sonskyn. Ons glo die volgende 15 gaan met net soveel “sonskyn” en seëninge gevul wees as die afgelope 15 jaar!



ASL 04

ASL 08

ASL 09

ASL 23

ASL 41

ASL 18

ASL 16

ASL 14

ASL 15

Tax clearance certificates

Untitled-7A tax clearance certificate (TCC) is a document issued by SARS confirming that the applicant’s tax affairs are in order.

TCCs are required for tender applications, to reflect “good standing”, for foreign investment, and for emigration purposes.

The Tax Administration Act, which came into effect on 1 October 2012, contains requirements and time frames for the issue of tax clearance certificates. SARS has also issued guidelines in this regard.

TCCs pertaining to tenders and “good standing” are of particular importance for many of our clients since these TCCs are often required by businesses in order to bid for a tender or render a particular service. Following is a brief overview of the application process and requirements relating to these two types of TCC.

In any application for a TCC, for whatever purpose, the reason for the application must be properly stated. The TCC is only valid for one year from the date of issue, provided the taxpayer remains compliant with SARS requirements. The proviso confirms that SARS is entitled to withdraw a TCC at any time if it was issued in error or if it was obtained on the basis of fraud, misrepresentation or non-disclosure of material facts.

SARS requires certain conditions to be met before a TCC is issued. These conditions are that:

  • the taxpayer must have registered for income tax prior to applying for a TCC;
  • the taxpayer should have no outstanding debt for any taxes (including income tax, Value Added Tax (VAT), dividend tax, administrative penalties and employees’ tax);
  • any deferred arrangements made are being adhered to;
  • all returns and/or declarations are up to date and in the process of being assessed by SARS;
  • all tax reference numbers must be active and correct, e.g. the tax reference number must not be deregistered or suspended on the SARS system; and
  • the registration details on the application form (TCC-001) must correspond with the information on the SARS system.

It is important to bear in mind that SARS has 21 business days following the submission of an application to issue or decline a TCC and that, to be on the safe side if one is in a hurry, the full period should be allowed for. It goes without saying that, to avoid an application being declined, one should be 100% sure that one’s tax affairs are indeed in order before applying for a TCC.As we are dealing with these applications on a regular basis we invite you to contact our Tax Compliance Department at if you have any queries about TCCs, or if you wish to submit an application for a TCC.

Sekere kostes bly onveranderd

In ‘n tyd waar die meeste van ons kliënte besonder bewus is van kostes is dit vir ons belangrik om te verseker dat hulle ingelig is oor die kostes wat hulle vir ons dienste moet betaal en gerus kan wees dat hulle waarde vir hulle geld kry. Daar word deurlopend meer belasting-, statutêre- en ander vereistes aan besigheidsentiteite, werkgewers en belastingpligtiges gestel en dit is ons erns om te verseker dat daar aan hierdie vereistes voldoen word. Hierdie voldoening gaan vanselfsprekend gepaard met koste-implikasies en dit is gewoonlik kostes waaroor nie ons of ons kliënte beheer het nie.

In ons nuusbrief van Oktober 2012 het ons ons kostestruktuur in besonderhede uiteengesit ten einde dit vir ons kliënte makliker te maak om ons fakture te verstaan en te beoordeel.

Indien daar aanpassings aan ons tariewe aangebring moet word, gebeur dit gewoonlik aan die begin van die jaar, in Januarie.

Dit is vir ons aangenaam om u in kennis te stel dat ons geen aanpassings aan ons tariewe vir 2013 aangebring het ten opsigte van ons maatskappy-sekretariële dienste (van toepassing op maatskappye en beslote korporasies) nie, en ook nie vir ons trustadministrasiedienste (insluitende ons optrede as onafhanklike trustee van u trust) nie. Dit beteken dat hierdie dienste steeds aan u gelewer sal word teen die 2012-tariewe, en in sommige gevalle selfs dié van 2011.

Dit is vir ons belangrik om voortdurend ons kostes te beoordeel aan die hand van wat in die mark gebeur en ons is bly om te sê dat ons kostestruktuur baie gunstig vergelyk met dié van ons mededingers. Ons wil egter ook nie ons gehaltediens inboet deur ons tariewe te laag vas te stel nie.

Indien daar enige onduidelikheid oor ons kostestruktuur bestaan is u welkom om die direkteur wat met u sake werk hieroor te skakel. U is natuurlik ook welkom om ons te skakel sou u ‘n kwotasie verlang vir die lewering van bepaalde dienste.


Certain costs remain unchanged

In a time when most of our clients are especially aware of costs it is important to us to ensure that they are properly informed of the costs they have to incur in making use of our services while remaining satisfied that they are receiving value for their money.

Business entities, employers and taxpayers are continuously being confronted with more tax, statutory, and other requirements and we are serious about ensuring that these requirements are being complied with. This compliance obviously has cost implications that neither we nor our clients can control.

In our October 2012 newsletter we explained our cost structure in detail to make it easier for our clients to understand and evaluate our invoices.

If adjustments are to be made to our tariffs this usually happens at the beginning of the year, in January.

We are pleased to announce that no adjustments have been made to our tariffs for 2013 for our company secretarial services (applicable to companies and close corporations) and also not for our trust administration services (including our acting as an independent trustee of your trust). This means that these services will still be rendered to you at 2012 tariffs and, in some instances, even the tariffs for 2011.

It is important for us to continually evaluate our costs on the basis of what is happening in the market and we are pleased to say that our cost structure compares very favourably with that of our competitors. However, we do not want to sacrifice our quality service by fixing our tariffs at too low a level.

Should you have any uncertainty about our cost structure please feel free to contact your relationship director in this regard. You are, of course, also welcome to approach us if you require a quotation for specific services.


Companies Act 2008: What happens after 30 April?

As the transitional period for all pre-existing companies has come to a close, the question for many business owners remains: What happens if my Memorandum of Incorporation (MOI) wasn’t registered by 30 April?

It is important to remember what the intention of the transitional period was. In terms of this arrangement the legislator granted companies a two-year period during which they had to ensure that their initial founding documents were in agreement with the provisions of the Companies Act of 2008. Business owners could, inter alia, register their MOI with the Companies and Intellectual Properties Commission (CIPC) free of charge.

Although it was highly anticipated that the grace period would be extended we were surprised to see, as 30 April 2013 approached, that no extension was granted.

In this article we would like to address questions you might still have concerning your company’s MOI.

What happens after 30 April if I haven’t yet registered an MOI?

Firstly, it is important to bear in mind that it is not compulsory for a pre-existing company to convert its initial founding documents to an MOI. Pre-existing companies that have not registered an MOI with the CIPC will continue to be governed by their old memorandum and articles of association until such time as these initial founding documents are converted to an MOI. The government will not arbitrarily assign an MOI to your company if you haven’t done so by 30 April.

It is, however, important to note that the company will only be governed by the initial founding documents to the extent that the provisions of these documents are consistent with the 2008 Act. All provisions that are inconsistent with the 2008 Act, will be deemed void and the provisions of the Act will prevail.

In essence your founding documents might:

  • contain void provisions; and/or
  • contain unnecessary information and requirements.

While an MOI could have been registered with the CIPC at no cost during the transitional period, a charge of R250 applies for all registrations that are done after 30 April.

What are the implications of not having an MOI, for the audit requirements of my company?

In terms of the provisions of the 2008 Act, with certain exceptions companies might, based on their Public Interest Score, qualify for alternatives to an audit, i.e. either an independent review or, in very limited circumstances, a compilation.

However, if a company’s Articles of Association specify that an auditor shall be appointed, that company, governed by its Memorandum and Articles of Association, shall appoint an auditor and an audit shall be performed for the company in terms of the requirements of Chapter 3 of the 2008 Act. In essence, this is a statutory audit with much more stringent requirements. The most significant of these requirements is Section 90(2)(b)(iv) which stipulates that, in the case of a statutory audit, no accounting or secretarial services shall be performed by the appointed auditor.

Accordingly, in order to avoid the application of certain requirements of Chapter 3, either of the following has to be performed:

  1. Registration of the new MOI with the CIPC in terms of the 2008 ActThis will ensure that the company is allowed to use alternatives to an audit, based on its Public Interest Score.Should the company elect to have an audit performed even if it is not required in terms of the Act, based on its Public Interest Score, such audit will be deemed a voluntary audit.In the case of a voluntary audit the requirements of the 2008 Act are far less onerous and the most significant provisions of Chapter 3 will not be applicable.


  2. Amendment of the Articles of Association (the deemed MOI) by means of a special resolution registered with the CIPC.It is advised that in both the following circumstances a special resolution be passed by the shareholders in order to remove the requirement regarding the appointment of an auditor, from its Articles of Association:
  • All companies that are still in the process of formalising their MOI before the expiration of the transition period; and
  • Companies of which the old Memorandum and Articles of Association will be deemed the MOI after the transition period.It is also important to note that either option (i) or (ii) above should be performed before your company can exercise any of the following options:
  • Voluntary audit (i.e. not statutory in terms of Chapter 3);
  • Independent review; or
  • Compilation (in the case of owner-managed businesses).

What are the risks for me as a director for not putting in place an MOI?

As mentioned earlier, you are allowed to use your old Memorandum and Articles of Association, so there are no implicit risks for you as a director of a company following this route. Note, however, that in this case you are using a MOI (in terms of the old Act) and that you may not be certain which of its provisions apply and which are deemed void.

Theoretically, there is also no risk for third party claims against a company for not having an MOI. However, because the directors might not always know what their responsibilities are, due to the fact that certain provisions are stipulated in the act and not in the deemed MOI (old memorandum and articles), they might incur liability in instances of non-compliance.

We therefore do not recommend that companies use their old memorandum and articles but urge them the get their MOI in place in terms of the 2008 Act as soon as possible. Ultimately, saving the cost is not just worth the risk for both you and your company.

During the last few months we have assisted numerous clients to successfully register their MOI with the CIPC.


Should you require assistance in this regard you are most welcome to contact Christa Swart, our corporate governance department ( or your relationship director.


SARS going fishing?

Untitled-6In an article in Business Day of 16 May 2013, Evan Pickworth refers to “Open-ended fishing expeditions by the South African Revenue Service (SARS)”, and we can certainly identify with all he said.

Aside from the issues raised in the article we have experienced an increased tendency by SARS to approach our clients directly, without first approaching us as the tax practitioner representing the client. Unfortunately this practice is not following set rules since in some instances we receive copies of correspondence, while in other instances the first we hear about any SARS correspondence is the concerned and sometimes traumatic calls and emails we receive from clients when approached directly by SARS.

We can testify that SARS has placed much emphasis on collections, sometimes even raising the threat of legal action with taxpayers while payments have not yet fallen due or are still being / could still be disputed.

We realise that this state of affairs might cause uncertainty and undue concern with our clients and therefore invite you to forward any SARS correspondence to our Tax Compliance Department at for verification and follow-up.

We will advise you whether any amount is in fact due, and request you to be patient while we deal with the matter.

Deadline: 30 June 2013


Employers are reminded to submit their Workplace Skills Plan (WSP) and Annual Training Report (ATR) to their respective SETAs no later than 30 June 2013 to qualify for the relevant benefits.

Contact your Skillls Development Facilitator, alternatively Jana Burger of our office at  for more details.

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