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The owners of many start-ups find it difficult to wade through legal jargon to ensure their businesses are compliant. In addition, South Africa’s highly regulated business environment makes it difficult and expensive for novice entrepreneurs to achieve this.
Here is a checklist of some of the most important areas of compliance.
The first area of compliance applies right at the beginning of starting a business. While it is not mandatory to register a business to begin trading, entrepreneurs will find that running as a sole proprietor has its limitations. The most important of these is that the owner is not protected. In other words, the finances of the owner and the business are not legally separated. This means that should the business get into financial trouble, the owner stands to lose his/her personal assets (such as house, car, and other items of value).
Therefore, most entrepreneurs register a new business with CIPC. There is a small cost associated with the registration and thereafter the owner must provide CIPC with annual turnover updates to keep the business registered (there is a small fee attached to this annual submission).
The new Company’s Act, effective since 2011, completely changed business law. It provides the rules for appointing directors, their resignation and removal from the Board of Directors. It also states the obligations and duties of directors and regulates the formation, operation and liquidation of all companies.
This Act also includes a business judgment test that states is important to read as it defines the circumstances under which directors will not be held liable for a breach of duty.
The majority of startups are not compliant with this Act. It would be worth their while to read it and understand what they would need to do when the company become large enough to have a board of directors.
The aim of this Act is to promote the protection of personal information processed by public and private bodies. Digitisation of business has led to a wealth of private information being held by many businesses and shared or sold by many companies for a profit (for example, unsolicited sales calls). This Act forces businesses to develop policies that define minimum requirements for the processing of personal information according to the codes of conduct determined by the Act. It also regulates the flow of personal information across the borders of South Africa. A regulator has been appointed and businesses have until May next year to become compliant.
This Act aims to promote a fair, accessible, and sustainable marketplace for consumer products and services. To do this, it has established standards relating to the protection of consumers in this marketplace. These provide a framework for maintaining a fair, accessible, and efficient marketplace for consumers, protect consumers from unfair trade practices; encourage responsible consumer behaviour, promote consumer empowerment and provide a system to address consumer complaints.
Broad-based black economic empowerment (BEE) is a government policy to advance economic transformation and enhance the economic participation of Black people (African, Coloured and Indian people who are South African citizens) in the South African economy. Whilst this Act predominantly impacts on larger businesses, small businesses do need to be aware of the Act and make sure that they have at least a letter from their accountant stating their turnover and percentage shareholding by previously disadvantaged people. This is a minimum requirement to enable them to take advantage of the BEE regulations that seek to open economic opportunities.
Certain industry sectors are further regulated by sector specific industry bodies. For example, FICA membership is a requirement for businesses operating in the financial/insurance sector.
This act aims to prevent money-laundering and provides compliance with international obligations to fight organised crime and terrorism. FICA regulations apply to banks, financial institutions and professionals as well as all businesses such as estate agents, brokers, attorneys and insurance companies.
PSIRA (the Private Security Industry Regulatory Authority) regulates the Security industry ,the CIBD (Construction Industry Development Board) regulates the Construction sector and Health professionals are required to register with the Health Professions Council of South Africa.
There are many sector specific industry bodies and whilst membership is optional for some sectors, for the majority it is mandatory. In all instances, these regulatory bodies are there to provide consumer protection and attempt to also ensure professional quality services are provided.
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About the Author
Robynne Erwin is a Fetola mentor.
