7.3 SPECIAL RESOLUTION REQUIRED
1. A review of the financial statements is required but the client does not wish to change the MOI at this stage.
Owing to the complexity and all the different alternatives of the alterable provisions you may have a situation where the client wants a review instead of an audit simply because of costs but at this point it is still too early for the client to make the necessary changes to the MOI.
What you can do is pass a special resolution to the effect that the shareholders want a review or no audit. It would be best to change the MOI and submit it to the CIPC even if you are out of time as below.
2. Where you are going to make a change to the standard short form MOI OR Long form MOI.
If you go through the short form MOI you will note that nothing is said about audit or review. I have also looked through the long form and nothing is said about audit. There is no reason to have anything in the new MOI as the requirement for audit or review is governed by the act and the regulations. We have however noted that in some of the MOI’s attorneys are in fact dealing with the audit, within the MOI which then makes the MOI unique. See the examples below.
Audit Clause 1 – The Company shall prepare annual financial statements in accordance with the Act and Regulations and shall only to the extent required by the Act and the Regulations have those annual financial statements audited or reviewed.
Audit Clause 2 - The shareholders may by ordinary shareholders resolution elect to have an audit in the event that the company is not required to do an audit in terms of the Act or the Regulations.
Table B does not specifically say that an audit will be done because it assumes that because all companies have to do an audit under the old act, it is not very specific, it however does say that an auditor will need to be appointed and this kind of makes the wording of the special resolution a little difficult in the event that you have not changed the old MOI.
3. Where the audit requirement is to be retained and the company still has an old MOI nothing needs to be done.
Where the old MOI is in existence which is table B in a smaller company situation an audit is required. Owing to the transitional arrangements in the 2008 act where there is a conflict between the old and new act the old MOI prevails. This means that all companies with an old MOI require to be audited if their yearend falls within two years from the 1st May 2011.
4. If the client wishes to comply with the letter of the law and they wish to dispense with the audit or have a review because the public interest scores falls below the required limits then the following is the procedure;
It is necessary to change the existing old MOI to take out the requirement of an audit by completing a form COR 15.2 and filing the special resolution. It’s important to include the fact that notice is to be waived owing to the timing if applicable.
The wording for the special resolution should be as follows. Change or modify to suit your own requirements.
“PREAMBLE:
The Company has not changed its MOI (i.e. the old memorandum of incorporation and articles of association) which was created under the old Companies Act 1973. As we are still in the transitional period of two years from 1st May 2011, the provisions of the old act apply and require that the company's Annual Financial Statements be audited. The transitional arrangements in the new 2008 Companies Act provide that where the old MOI is still in existence the terms in that old MOI take precedence over any conflicts between the old and new act, therefore an audit of the Financial Statements is required.
In terms of the Companies Act 2008, as amended and the Regulations the company's Annual Financial Statements are required to be reviewed and not audited.
It is resolved;
That the following article 95 is to be added to the MOI with immediate effect;
95. The company shall prepare Annual Financial Statements in accordance with the Companies Act 2008 and the Regulations and shall only to the extent required by the 2008 Act or the Regulations have those annual Financial Statements audited or reviewed.
All existing clauses in the existing MOI and sections to the Company's Act 1973 referring to the fact that an audit is to be undertaken are to have no force or affect.”
95 should be the next available article in the Table B.