BUSINESS VALUATIONS
One of the new requirements of the New Companies Act, applicable to both Companies and Close Corporations is that at any stage in the financial year, these entities must meet the Solvency and Liquidity Test of Section 4 of the Act.
This test might require a comprehensive Business Valuation (Enterprise and Equity Valuation).
In addition to the compliance requirement, a major benefit of doing a Business Valuation is that it provides:
- the definitive scoreboard of business performance and that of its management;
- an indication of how the business is growing value;
- the benchmark to assist with the negotiations in selling or buying a business, possible mergers, joint ventures and acquisitions; and
- for tax planning around potential capital gains tax and estate duty exposure.
AUDIT REQUIREMENTS
Does your business require audit?
The new Companies Act only requires companies and Close Corporations to be audited if their Public interest score exceeds 350 points. Another important factor to consider is that your company Memorandum or Articles may require that your entity be audited. If this is the case, audit becomes compulsory. But, you can change this by changing your MOI.
Public interest Score calculator
If all shareholders/Members of the entity are actively involved in the day-to-day activities of the business your entity is not required to be audited.
No compulsory audit! UNLESS, required by another body or regulation such as auditing requirements for Attorney’s, Estate agents and Financial services providers to mention a few.
CUSTOMISING YOUR COMPANY MOI
(Memorandum of Incorporation)Public interest Score calculator
This is a definitely a must have! The benefit in compiling a customised MOI will out-way the cost thereof. The benefit of having it custom made will give you the protection you require and you will no longer require all the “old” formalities. The benefit of working through this in detail will also give you a clearer understanding of what is included in this document and you will also better understand your responsibilities as director under the new companies act.
