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JIMMY MOYAHA: Around December 4, while you and I were busy ‘Dezembering’ and preparing for a relaxed festive period, the CIPC [Companies and Intellectual Property Commission] made some significant amendments to some of their structures and how things work at the CIPC, particularly in relation to directors.
Among those amendments were some significant things that you and I need to keep an eye on because they now affect those of you and, well, everybody who is intended to be a director of a company. This is in line obviously with wanting to, one, strengthen the CIPC’s oversight over companies in South Africa, and hopefully improve our position and get us off that grey list.
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I’m joined on the line by the founder of InfoDocs, Joshua Alexandre, to take a look at some of these changes that were announced. Good evening, Joshua. Thanks, as always, for the time. Let’s start with the changes. What were the changes that were announced in December?
JOSHUA ALEXANDRE: Hi, Jimmy. Thanks for having me. The changes, as you outlined there, were to the director-amendment system. That means if you want to appoint a new director or remove an existing director, you’re going to have to make use of a new system that includes new steps – those steps being specifically OTPs [one-time pins] that are sent to the directors, [which are] otherwise known as ‘multifactor authentications’. Again, as you highlighted, they are intended to improve the data and security of the CIPC system.
JIMMY MOYAHA: Are all of these changes practical in terms of implementation? We know that some people sit as directors on multiple companies. [With] some companies, it is difficult to update your latest contact information to receive the OTP. Are the changes practical?
JOSHUA ALEXANDRE: I think the intention behind the changes is absolutely practical. This is definitely a step in the right direction, and CIPC have a mandate to fulfil. This is a step in the right direction and a step towards getting us off that grey list, as you said.
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Whether the implementation has been practical? It’s always difficult with software to release a perfect system right out of the gate.
Often you need that critical feedback from customers in order to kind of refine the system and make it work as efficiently as possible.
I would say we’re in that transition phase where the CIPC are getting feedback from customers, implementing that feedback slowly but surely to make the system work as efficiently as possible.
JIMMY MOYAHA: Joshua, are the systems integrated with other organisations? Is there any conversation around organisations speaking to each other with these latest amendments – or is this squarely focused on the CIPC and directors’ positions within the CIPC?
JOSHUA ALEXANDRE: The systems do speak to one another. Specifically the CIPC system is speaking to the Home Affairs system. It is asking Home Affairs whether the individual that is being appointed is someone that is on the Home Affairs database.
Home Affairs’s integration – which so many departments, so many banks, so many institutions rely on – is notoriously unreliable.
It is relying on that system to identify whether this individual is in fact a South African citizen, and this can cause a lot of frustration when the dreaded Home Affairs system is down.
Error messages pop up quite often, creating a lot of frustration and I think quite a bit of backlog both for the CIPC customers and for the CIPC themselves.
JIMMY MOYAHA: Josh, you mentioned something around the implementation taking a bit longer than expected and coming through with a bit of concern around the migrations that have been happening with regard to the new system. Is there an outline of just sort of dates of implementation, or what we expect still needs to be implemented on the one side? And, given that these are just mandatory changes, I imagine there are no concerns for things around non-compliance and all of that, because these seem to be administrative changes.
JOSHUA ALEXANDRE: Yes. I like how you’ve worded that.
They are more administrative changes. This is not a deadline type of transaction or amendment.
Appointing a director can be done weeks after the date of the actual change for the company. So a company can go ahead and decide to appoint yourself, for example, Jimmy, as a director, submit that change two weeks from now with the effective date as today’s date, and CIPC will accept that and process it.
As far as the implementation of the system and how it is disrupting everyone’s timelines a bit, you’re quite right. This was launched perhaps at a not-so-opportune time on December 4, as you said. It was actually launched four days after they had disabled the previous director-change system. So for four days you couldn’t submit director changes.
That said, the director changes that were submitted over December are slowly starting to go through.
Once the system is up and running fully, which it is so far, you just need to rely on Home Affairs being up and running.
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You need to rely on all of the directors either being citizens or having gone through another process for foreign directors – which we can also talk about.
If all of those things align, if all of those things are up and running, then the director change can actually happen almost immediately once those OTPs have been provided.
So this is definitely, like I said, a step in the right direction. It’s just a bit of a rocky start to a new service offered by the CIPC.
JIMMY MOYAHA: I think every South African shares the same sentiments around the capabilities of the Home Affairs system remaining online. That’s a bigger concern that, thankfully, we don’t have to deal with. But let’s look at what you mentioned, Josh, around that foreign director element.
If a director is not on the Home Affairs database and is a director sitting in Switzerland who needs to be a director of a South African company, how does that process work? How is that any different? And is that quicker than the current process, given that it circumvents the Home Affairs system?
JOSHUA ALEXANDRE: The process to appoint a foreign director requires that foreign director to first verify themself through another CIPC service called Foreigner Assurance.
They basically need to submit a certified copy of their passport. The CIPC will then process that verification, probably by having a physical person review those documents. Perhaps they have other tools that they’re using to check whether that passport is indeed valid, whether this is a verified individual [to whom] we’re about to appoint the responsibilities of a South African company.
Once that person has then been verified by the Foreigner Assurance programme, then you can appoint them through this new director-change service.
That foreign director will be considered verified until that certified document expires.
They say it’s a once-off verification, but it’s a once-off verification that a foreign director may have to do every three months, according to the certification.
JIMMY MOYAHA: That sounds like it’s creating a lot of administrative and compliance work. I do understand, obviously, that we are trying to do our best to get off the grey list, but I do wonder if there are more practical measures that we can put in place for this.
Josh, as a parting thought, we last spoke in October around that beneficial ownership submission and those changes that happened there. Do you think that, coupled with this, this actually strengthens the oversight and integrity of the business registry systems that we have in South Africa and would be something that the Financial Action Task Force would be pleased with?
JOSHUA ALEXANDRE: I think, to give a less simple answer, yes and no.
I think if you want people to do something you should make it as easy as possible to do.
CIPC do need to be the single source of truth for director and company information, so they have very strict requirements. It is up to them to set the standard in terms of data and security for company information. So I think this is going to slow us down at first. But [with] all of the professionals, all of the platforms, all of the solutions like InfoDocs that augment the CIPC services, that offer these services in other shapes and forms, we at InfoDocs try to simplify this process and make it as easy as possible.
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All of those are going to adapt to the new system, and eventually things will be running smoothly, I have no doubt.
I have a lot of faith in the CIPC long term. I have a lot of faith in the professionals and the solutions that provide these services, and all of those stakeholders are adapting to this new system – and long term I think it will not be so painful. It’s just during the transition that everyone has to figure out how the system works while the system is notoriously unreliable.
But that reliability will improve and those processes will adapt. I think this will aid us in having better data, better security, better compliance. We just need to hang in there and work with the CIPC to meet their mandate.
JIMMY MOYAHA: If only we could get the Home Affairs system now to stay online.
We’ll leave it at that, Josh. That’s Joshua Alexandre, founder of InfoDocs, giving us a sense of the latest updates from the CIPC with regard to the new process for amending directors.
