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Legal Compliance For Small Businesses In South Africa

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Legal Compliance For Small Businesses In South Africa

The current economic conditions in South Africa have resulted in a substantial increase in small businesses being registered.   However, many new business owners are not aware of all the legislation and regulations with which they must complied.

South Africa currently has a well-developed and formally regulated Company Law System, whereby all South African businesses are governed.

Industry Registration:

It is important to note that certain industries (especially the finance industry) require you by law to register with a Professional Association or Industry Organisation.  This means that your business must form part of a Professional body regulating a specific sector, and is usually to promote professionalism, and to avoid subpar businesses influencing the sector negatively.

An example of such a registration will be that an Accounting Firm must be registered with either SAICA or SAIPA depending on the services it will deliver to Clients.

Zoning Laws In South Africa:

Business Zoning Laws are set out in Town Planning Schemes and form part of Municipal Bylaws.  If you are intending to have clients, suppliers and staff arriving regularly at your Business premises, a Business Zoning Application is necessary, especially if your business is situated in a Residential area.  This Application is usually legally and technically complex and may take up to 12 months.

When the Application is submitted to the Municipality, it will be circulated to both the relevant Council department as well as Agencies for comment.  The Application is then processed by a Planning Officer, stating whether the Zoning Application should be approved or not.

If the Planning Official believes that the Application should not be approved and, where an interested party lodges an objection against the Application, a Tribunal Hearing will be scheduled, and the Applicant, Objectors and Council Officials are given the opportunity to argue the case.

Human Resources Legislation In South Africa

Labour Laws And The Unemployment Insurance Fund (UIF):

It is important as an employer to familiarise yourself with the Basic Conditions of Employment Act, as it governs the relationships between employers and their employees, regulating the following:

  • Working hours;
  • Overtime;
  • Leave; and
  • The process that must to be followed should you need to dismiss an employee and is applicable to each and every business in South Africa.

All employees must be registered for UIF. This process takes 48-Hours to register and is free; the purpose being to give short-term relief to workers when they become unemployed or are unable to work because of maternity leave, adoption leave or illness.

Workmen’s Compensation:

The South African government has set up a special fund to compensate employees for injuries or diseases resulting from their occupation and thus all employees must be registered with the Workmen’s Compensation fund.

The Compensation Fund covers permanent, casual workers, trainees and apprentices who are injured or who have contracted a disease in the course of their work, resulting in lost income.

All registered employees pay an annual fee based on their specific workers’ earning and work-related risks.  Employers who register for and pay their annual Workers Compensation fees are protected from being sued by employees who are injured at work.

The Compensation For Occupational Injuries And Diseases Act (COIDA):

COIDA provides compensation for disablement caused by occupational injuries or diseases contracted by employees in the course of their employment.  It also provides compensation when death is the result of such injuries or diseases.

COIDA applies to all employers, as well as casual and full-time workers who, as a result of a workplace accident or disease, are injured, disabled, or killed.  When a worker becomes ill, the employer needs to send a notice to the Department of Labour, and the employee will complete follow up forms and make a statement to claim from this fund.

Skills Development Levy

Monthly employers must pay 1% of their workers’ pay to the Skills Development levy.  The money goes to Sector Educational and Training Authorities (SETA’s) and the Skills Development Fund to pay for training.  Employers who are required to pay the skills development levy must register with SARS.  This levy may not be deducted from the worker’s pay.

Health And Safety Policy In South Africa:

The Occupational Health and Safety Act requires the employer to provide a work environment that is safe and without risk to the health of employees but is not compulsory for all organisations.  An employer is however duty-bound to inform employees of work related risks and dangers.

The Act provides guidelines around aspects of workplace safety such as first aid, protective clothing, machinery, ladders, firefighters and equipment.

Companies Act:

The new Companies Act, which was promulgated in 2009 and has been effective since May 2011, has changed the South African law completely, it stipulates several rules for the appointment, resignation, removal, obligations and duties of directors; as well as regulating the formation, conduct of affairs, and liquidation of all companies.

The Act further includes the “business judgment test” which states that if a director has applied reasonable care, skill and diligence, has no material financial interest and has a basis for believing that the decision made was in the best interest of the company, the director will not be held liable for a breach of duty.

Financial Requirements For Small Businesses

Tax and Vat Registration:

It is important to register as a provisional taxpayer if you are a sole proprietor or in a partnership. While if you are a registered company, make sure to register yourself as a taxpayer as well as your company.

If you have employees, remember to deduct tax from them and pay it to SARS each month.

There are 3 types of Tax registrations:

a     Compulsory registration:

Any person who operates an enterprise and whose total value of taxable supplies exceeds, or is likely to exceed, the compulsory VAT registration threshold, must register for VAT.  The threshold is currently R 1 million in any consecutive 12-month period.

b     Voluntary Registration:

A person can register as a vendor if that person controls an enterprise where the total value of taxable supplies exceeds R 50 000.00 (but does not exceed R 1 million) in the preceding 12-month period.

c     Refusal of Registration:

You will not qualify to register as a Vendor if you don’t fall within these categories, in all other instances, no VAT registration will be allowed if the annual turnover is below the minimum voluntary registration threshold.

Auditing Requirements:

The new Companies Act introduced different levels of assurance for different categories of companies.  All public and state-owned companies require an audit.  Private, personal liability or non-profit companies, however, only require an audit when it’s in the public interest.

Any company may however voluntarily choose an audit either by including an audit requirement in their memorandum of incorporation, by a shareholders’ resolution or a broad decision.

In the case of listed companies, the JSE Limited Listings Requirements clarify that all subsidiaries of listed companies must continue to be audited regardless of their classification within the Act.

Financial Intelligence Centre Act (FICA):

The current comprehensive legislation detailing money laundering controls is FICA and the focus of this Act is on control requirements.  These controls set obligations for banks, financial institutions and professionals, such as estate agents, brokers, attorneys and insurance companies.

Banks are required to obtain certain information and supporting documents from new customers before accounts could be opened.  Make sure that you are FICA-compliant by supplying your bank with the required documentation.

The conclusion is that every small Business owner should adhere to some or all of the abovementioned regulations and legislation to maintain a sustainable and thriving business without any legal hiccups, which will allow you to control your business successfully.


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