01 June 2012 |
The Companies Act No. 71 of 2008 (New Companies Act) commenced on 1 May 2011, and introduced the concept of the public interest score of a company. This is an important new development, as it will be crucial in determining the financial reporting standards that the company must adopt (these provisions apply equally to close corporations). The public interest score of a company will also determine whether the company is required to appoint a social and ethics committee.
This circular sets out how the public interest score is calculated. More detailed information can be found in our Companies Act Circular Number 1, dated April 2011.
Each company must calculate its public interest score at the end of each financial year. The score is calculated by points being awarded for:
Points for employees
The number of points allocated for employees equals the average number of employees of the company during the financial year.
Points for Third Party Liability
One point is allocated for every R 1 million (or part thereof) in third party liability of the company at the financial year end.
Points for turnover
One point is allocated for every R 1 million (or part thereof) in turnover during the financial year.
Points for individuals
A company with a public interest score of 350 or more points in a financial year, must have its annual financial statements for that financial year audited.
A company with a public interest score of between 100 and 349 points (both inclusive), must have its annual financial statements audited only if they were internally compiled. In terms of the Regulations, annual financial statements are “internally compiled” unless they are prepared by an independent accounting professional on the basis of financial records provided by the company in question, and in accordance with relevant financial reporting standards.
More detailed information on accounting requirements and financial statements can be found in Companies Act Circular Number 1, dated April 2011.
Every state owned company and listed public company is obliged to appoint a social and ethics committee. Any other company which, in any two of the previous five financial years, has attained a public interest score of over 500 points, is also obliged to appoint a social and ethics committee. More detailed information about Social and Ethics Committees can be found in Companies Act Circular Number 1, dated April 2011.
Should you require advice or assistance on public interest scores or the New Companies Act, please contact Michael Jackson (031 – 536 8512 email@example.com); Keren Oliver (031 - 536 8518 firstname.lastname@example.org); Themba Zikhali (031 – 536 8529 email@example.com); or Carol McDonald (031 – 536 8529 firstname.lastname@example.org).