Regulatory Check-List for SMEs And B-BBEE Compliance

Reserve your company name with the Companies and Intellectual Property Commission (CIPC)

Choose up to four proposed company names, in order of preference, as the first name available will be selected. It is possible to purchase a pre-registered company if you want the name of a company which has been shelved (Shelf Company).

Memorandum of Incorporation (MOI)

All companies must have a Memorandum of Incorporation which defines the rules agreed by the shareholders for the management and maintenance of the business. Many standard MOIs are on the internet but to ensure you meet all regulatory requirements, we recommend you create your own with the assistance of a lawyer and customize it to suit your requirements.

Register your company with the Companies and Intellectual Property Commission (CIPC)

Your company must be registered with the South African registrar of Companies within 21 days of the company being formed. The easiest way is to register via the CPIC website where is a list of the required documentation is provided.

Share Certificate

After it has been registered, every company in South Africa must issue shares certificates to its shareholders. A share certificate is a written document signed on behalf of a company and serves as legal proof of ownership of the number of shares owned (indicating percentage of ownership) in that company.

Open a bank account for your business

Aside from your personal account, you need to open a business account and probably will also need a credit card.

Register With The Receiver of Revenue (SARS) for Income Tax and Register with the Department of Labour for Witholding Taxes (PAYE, UIF and SDL). Additional information is provided in Module 6.

You will need to present proof of your identity, the company’s registration certificate and bank statement, inter alia.

  • Pay As You Earn (PAYE) tax is the tax you need to deduct as an employer, from the remuneration which is paid to an employee. Even if there is only one person in your company, and this is you, if you pay yourself a salary, you will need to pay tax once your earnings per month exceed certain levels.
  • Unemployment Insurance Fund (UIF) monies are used to provide short-term relief should staff become unemployed or unable to work for various reasons. As an employer, you are liable to register with SARS for UIF contributions for employees who work more than 24 hours per month. Employers and employees contribute equal portions. The employee contribution is deducted from the earnings by the employer who pays the money over to the Department of Labour each month
  • The Skills Development Levy (SDL) is payable monthly by employers to SARS which uses it to fund education and training as legislated in the Skills Development Act.

Register with the Office of the Compensation Commissioner

According to the Compensation for Occupation Injuries & Diseases Act, the employer is responsible for registering employees with the Compensation Fund. Registration forms can be obtained from the Department of Labour’s website.

Register as a VAT vendor with SARS

Businesses with an annual turnover in excess of R1 million are required to register for VAT.

Register with the Receiver of Revenue

As soon as you employ staff, contact the Department of Labour regarding mandatory contributions to the Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL)

Other procedures include :

  • Check Exchange Control procedures (non-residents are generally not subject to exchange controls except for certain categories of investment (See the Exchange Control page for more information)
  • Obtain approval for building plans
  • Apply for industry and export incentives
  • Apply for import permits and verifying import duties payable
  • Register as an exporter and applying for an export permit
  • Ensuring Exchange Control compliance when remitting payments overseas

Business and Work Permits

In considering whether or not to grant a work permit the Department of Home Affairs will evaluate the validity of the offer of employment by checking whether the Department of Labour has been contacted, whether the position has been widely advertised, and whether the prospective employer is able to prove that he or she tried to find a suitably qualified local employee and that the prospective employee is appropriately qualified and has the relevant experience. Close family members often receive favourable consideration, for example; a father wishing to employ a son.

People who come to South Africa for a holiday may not apply for a work permit or a permit for self-employment in South Africa. Visitors have to return to their country of origin and apply for these permits at the South African Consulate

Foreign nationals who wish to establish their own business or a partnership in South Africa must, apart from having sufficient funds to support themselves and their family, be able to invest at least R2,5 million in the business. The funds must originate overseas, be transferable to South Africa and belong to the applicant (i.e. emanate from the applicant’s own bank account). The business must also create jobs for South African citizens. After six months to a year, proof must be submitted that the business is employing South African citizens or permanent residents, excluding family members of the employer. Applications for work permits for self-employment can only be lodged at the South African Consulate in the applicant’s country of origin. The applicant would also have to lodge a repatriation guarantee with the Consulate equivalent to the price of a one-way flight from South Africa back to his or her country of origin. This guarantee is refundable once the applicant has left South Africa permanently or obtained permanent residence. Any application for an extension of a business permit may be lodged locally. There is a processing fee per passport holder and some countries also require payment for each return visa. A list of countries to which this applies is available from the Department of Home Affairs.

Patents, Copyrights & Trademarks – See previous notes in this module

Business Licences & Permits – See previous notes in this module

Insurance

Contact a short-term and long-term insurance broker for advice. You may need to take out personal liability cover for employees depending on the nature of their work and the degree of personal risk involved. You will probably also want to insure business assets such as vehicles and equipment/machinery.

Legal support

It is wise to contact a lawyer before you sign any legal documents involving partnerships, premises or any aspect which could result in legal repercussions. Make sure you thoroughly understand the contents and consequences of not only what is contained in a legal document, but of what has also not been covered/left out.

Municipal Bylaws

Contact your local municipality for regulations governing noise levels, hygiene, zoning, renovations, waste disposal and in regard to any aspect of your business which may have an impact of suburban environments or natural habitats.

Information Technology (IT)

Stay abreast of the latest technology developments that can be used to make your business life easier and more productive. In plain and simple English too. There are many free and low cost services out there that can greatly assist the small business owner in becoming more productive and profitable. It is our aim to find these products for you.

Memorandum of Incorporation (MOI)

All companies must have a Memorandum of Incorporation which defines the rules agreed by the shareholders for the management and maintenance of the business. Many standard MOIs are on the internet but to ensure you meet all regulatory requirements, we recommend you create your own with the assistance of a lawyer and customize it to suit your requirements.

Broad-Based Black Economic Empowerment (B-BBEE) Compliance

BEE (Black Economic Empowerment) or Broad-Based Black Economic Empowerment (BBBEE) as it is technically known, is an initiative by the South African government to address historical imbalances of the country by facilitating the participation of black people in the mainstream economy.

Start-up and newly registered companies qualify as an Exempt Micro Enterprises (EME) and remain exempt until annual revenue exceeds R10 million. During this time, BEE certificates are not required but you do need to submit a BEE Affidavit in terms of the B-BBEE Codes of Good Practice Government Gazette No. 36928. An affidavit is usually drawn up by your accountant, stating that your annual turnover is less than R10 million.

– Level 1 is issued if black ownership is 100%.

– Level 2 is issued if black ownership is 51% or more.

– Level 4 is issued if black ownership is less than 51%.

Definition : “Black” includes African, Indian & Colored South African Citizens who became SA citizens by birth, descent or naturalization before, on or after 27 April 1994.

Abacus Verification is just one of many companies which will help you with your BEE requirements. The company says that “whilst most business owners are scared off by BEE terminology, BEE is rather a simple government policy. With the implementation of the newly Amended BEE Codes, companies will have to be pro-active in their approach to transformation in order to maintain a good BEE score. BEE is not forced upon any entity by law. However, any entity wanting to do business with the Government or any Organs of State has to be BEE Compliant First. The process of becoming BEE Compliant is known as the BEE Verification process. This is a process where the entity has to come into contact with an SANAS Accredited BEE Verification Agency. Together with the BEE Agency the entity has to undergo a partial or full audit to determine its BEE Compliancy Levels.”

Further information may be found in the economic empowerment section on the DTI website.