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Clearly, becoming a director is no casual decision. It should not mean that you
should shy away from becoming a director, but rather that it should make you
aware that a thorough understanding of the responsibility of being a director
is vitally important, as a breach of your duties as director can hold serious
consequences. If you are still unsure about your decision, contact your attorney
to discuss your concerns and responsibilities towards the business should you
wish to take on the role of director in the new business venture.

Commercial When do you have to appoint an auditor for

your company?

August 2018

“I’ve just started my own private IT company. As a new business, I want to limit
unnecessary expenses. I know there will be accounting costs but am not sure
if I already have to appoint an auditor for the business. I would like to avoid
this cost if I can?”

To answer your question, one must look at what the Companies Act 71 of
2008 (“Companies Act“) determines in respect of auditing and accounting
requirements for a private company like yours. Unlike the previous Companies
Act of 1973 which required all companies to be audited, the current Companies
Act is less onerous in that it only requires certain categories of companies to be
audited.
Whether a company must be audited by a registered auditor or simply be
independently reviewed by an accountant will depend on the type of company.
The Companies Act classifies companies as either profit companies or non-profit
companies. With profit companies, the Companies Act further distinguishes
between four different types of companies, namely, private companies, personal
liability companies, state owned companies and public companies. In your
case, we are dealing with a private profit company, which is a company that
is not a state-owned company, has a Memorandum of Incorporation (“MOI”)
prohibiting it from offering any of its securities to the public and restricts the
transferability of its securities.
So, the question then is - when will a private profit company need to appoint
an auditor?
The Companies Act states that private companies must have their financial
statements audited if it is in the ‘public’s interest’ to do so. Regulation 28 of the
Companies Act provides the framework to determine when it is in the public’s
interest to have the financials of a company audited, by requiring that a private

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