Business Rescue – Directors Responsibility

In the current economic climate, more and more companies are becoming financially distressed. Directors are duty bound to constantly monitor the company’s financial position, to determine whether voluntary business rescue proceedings need to be initiated. Failure to implement business rescue proceedings could result in the director being charged with reckless trading and be exposed to personal liability. It is incumbent upon directors to ensure that they place their companies into either business rescue or liquidation, or to cease trading, when the warning signs become evident. Directors should be aware of the practicalities of business rescue, and the duties and powers of the business rescue practitioner.

Cecil Kilpin | CA(SA) - Accounting & Auditing Specialists >> July 2019 Newsletter

Where the director has reasonable grounds to believe that:

  • The company is financially distressed, and
  • There is a reasonable prospect of rescuing the company

Business rescue proceedings must be initiated by the directors by board resolution. Such resolution must be filed with the Commission before it is of any force or effect and may not be adopted if liquidation proceedings have already been initiated against the company. If a company is financially distressed and directors decide not to place it into business rescue, the directors will be under a statutory obligation to deliver a written notice to each affected person, confirming that the company is financially distressed and is not being placed into business rescue and providing reasons for this.

The ‘Business Rescue’ clause in the Companies Act 71 of 2008, also applies to CC’s.


Implementing NHI One Step Closer

The cabinet has finally approved the National Health Insurance (NHI) bill for tabling in parliament, minister in the presidency for planning, monitoring and valuation Jackson Mthembu announced last Thursday.

He said in a briefing that in 2018, the cabinet had approved the bill for release for public consultation
over a three-month period from June 2018 to September 2018. The input following that process has now been incorporated in the latest version of the bill.

Cecil Kilpin | CA(SA) - Accounting & Auditing Specialists >> July 2019 Newsletter

The full details of the latest version of the bill have not yet been made public. The large degree of uncertainty and lack of common understanding of how the NHI will be implemented and operate is of concern, given the magnitude of the proposed reform. At this stage a few pertinent observations can be made based on the draft NHI White Paper as well as the potential impact on taxes.

  1. There is currently substantial uncertainty about both the costs (R256 billion pa) and funding shortfall (R72 billion pa) of the NHI.
  2. A combination of tax instruments with as broad a base as possible would be preferable.
  3. Given that the NHI introduces a universal benefit, it is appropriate that its financing base be as broad as possible, in the interests of social solidarity.
  4. Excise taxes on alcohol, tobacco or sugar-based beverages are levied primarily to change behaviours, but high increases tend to lead to illicit trade, resulting in reduced collections, and are unlikely to fund a significant proportion of the NHI funding requirement.
  5. Given the considerable size of projected funding shortfalls, substantial increases in VAT or Personal Income tax and/or the introduction of a new social security tax would be required to fund the NHI.
  6. The magnitudes of the proposed NHI fiscal requirement are so large that they might require trade-offs with other laudable NDP programmes such as expansion of access to post school education or social security reform.
  7. The proposed NHI, in its current format, is unlikely to be sustainable unless there is sustained economic growth.

Clearly the proposed implementation of the NHI will have severe repercussions for the fiscus and accordingly requires a substantial review before implementation can be considered.


Your Simulated Calculation From SARS

Did you receive an SMS from SARS showing your tax calculation?

Here’s why you received it: SARS has access to many sources of information about taxpayers, including information already on the SARS system. Based on this information, SARS can make a tax calculation and arrive at an outcome before you even lift a finger. This outcome will show whether you would get a refund or owe SARS money if you were to file a return. So, the reason why you got a tax calculation this year is because you filed a return last year when you were not required to do so. This method was introduced by SARS as a way of assisting taxpayers to avoid unnecessary filing of returns.

Cecil Kilpin | CA(SA) - Accounting & Auditing Specialists >> July 2019 Newsletter

What do you need to do?
 
If your financial circumstances have not changed since February 2018 then you do not need to file a return.
 
Will SARS impose penalties if you do not submit a return?
No. SARS will not impose any administrative penalties and you will not have any outstanding returns under your profile because the taxpayer is not required to file by law.
 
Will you be refunded if you are eligible to receive any refund?
In terms of legislation, SARS is only eligible to refund an amount greater than R100.
 
Can you file a return if your circumstances have changed since February 2018?
Yes, you can. We recommend professional advice be sought in this regard.

Why is SARS not refunding amounts below R100?
Normally there are costs involved to pay out refunds as is the case when SARS needs to collect tax that is due. It is therefore not cost effective to refund or collect an amount as low as R100. This however does not mean that the tax debt disappears, it will still remain due by or to the taxpayer and will be carried forward to either set-off future tax debt for the same tax type or will be added to any refund which is higher than R100 when applicable.

Should you require any assistance in this regard please do not hesitate to contact us in this regard.


Setting up an Online Store

Online stores are great friends to small businesses. They’re an excellent way to get started in retail without investing in bricks and mortar or staff. If you already have a physical store, an online presence can extend your reach beyond your local neighbourhood, while giving existing customers a more convenient way to shop.

If you’ve thought about creating your first online store and given up because it was too hard, take another look. Handling online payments isn’t the chore it used to be. Secure, off-the-shelf services have greatly simplified what used to be a troublesome technical task. And they sync beautifully with online accounting to make bookkeeping painless.

Cecil Kilpin | CA(SA) - Accounting & Auditing Specialists >> July 2019 Newsletter

What should an online store have?
At its most basic, your first online store needs to:

  • showcase your products – including pictures, descriptions and prices
  • include a shopping cart where customers can build their order
  • process payments via a payment gateway (e.g. PayFast in South Africa or PayPal abroad etc.) for credit/ debt card, instant EFT and more
  • always protect important financial data, such as credit card numbers and personal information. Third-party payment gateways assist with this, so that you do not store credit card information on your website that may be a security risk and liability to your business
  • give shipping options

Three ways to start one:
In the early days of ecommerce, you had to build your own shop from scratch. Most of the components were custom made, which meant you spent a lot on design and development. The backend tools that managed the exchange of money were also expensive and needed technical expertise to set up.

Now you have options, some of which give you point-and-click setup. You can:

  • sell through a third-party platform
  • host a store through an ecommerce provider
  • host your own online shop

As with all choices, there are pros and cons, accordingly we recommend professional advice be sought if you decide to go this route.

*Article adapted from a Xero business guide article.


Sincerely,

Cecil Kilpin | CA(SA) - Accounting & Auditing Specialists >>Newsletter Greeting