Are non-profit companies required to have an independent review?
A Non Profit Company does not have any shareholders, only directors. There is a minimum of three directors required for the registration. A Non Profit Company is registered with the purpose of not gaining profit for self gain; therefore it cannot have shareholders with shares that are valued at a certain amount. In short, the company is seen to have no ownership; it is basically run by the directors of the Non Profit Company.
Only a company that makes a profit can have shareholders as each shareholder needs a certain amount of shares that are valued, and make a profit from the company depending on how many shares they own. A Non Profit Company cannot make a profit; the income raised or received needs to be used within the company for the certain purpose it was registered for.
Therefore, the owner-managed exemption from an Independent Review/ Audit will never apply to a non-profit company.
Non-profit companies that are required to be audited by the Companies Act, 2008 or regulation 28, must file a copy of the latest approved Audited Financial Statements on the date that they file their annual return with the CIPC.
The following non-profit companies are required to have their annual financial statements audited:
1. Any non-profit company if, in the ordinary course of its primary activities, it holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
2. Any non-profit company that was directly or indirectly incorporated by the state, an organ of state, a state-owned company, an international organisation, foreign state entity or a foreign company;
3. Any non-profit company incorporated to fulfill a statutory or regulatory function in terms of legislation or to carry out a public function at the initiation or direction of an organ of state, a state-owned company, an international organisation or a foreign state entity.
Unless the company has opted to have its annual financial statements audited or is required by its Memorandum of Incorporation (MOI) to do so, a non-profit company may be subject to independent review if:
1. It compiles its financial statements internally and its Public Interest Score is less than 100;
2. It has its financial statements compiled independently at its Public Interest Score is between 100 and 349;
3. Non-profit companies that are not required to have their financial statements audited, may elect to voluntarily file their audited or reviewed statements with their annual returns. If such companies choose not to file a full set of financial statements, they must file a financial accountability supplement with their annual return.