I have authored a few publications around Independent Reviews and Directors Duties and Responsibilities with reference to Chapter 28, 29 and 30 of the Companies Act 2008, amended read together with Companies Regulations 2011, Am saddened by the observation that I made that many stakeholders including boards of Directors and company owners (shareholders) and in some case Accountants and Auditors have neither no working knowledge of these provisions, or if they are aware, they simply choose to ignore the provisions;
When addressing Reportable Irregularities (RIs), the act is very clear that commercial/ technical insolvency is an RI and yet both Directors and Accounting professionals take no required action in relation to the Act.
The test here is very basic and straight forward, are the liabilities of an organisation exceeding their assets and is there a likelihood that the organisation will no be able to meet their obligation as and when they fall due.
Business owners and entrepreneurs please be aware of the following RIs and ensure to get professional advice should these arise;
1) Is the business experiencing cashflow problem and struggling to pay suppliers, lenders and employees? (indication of commercial insolvency);
2) Are the total liabilities of an entity exceeding the entity’s total assets (negative Equity)(Indication of technical insolvency);
3) Are financials signed off by the Directors as well as Auditors/ Independent Reviewers within 180 days after the entity’s financial year end (If FYE is 28 Feb 2018, financials must be signed and filed by 31 Aug 2018)
Any non compliance with the above mentioned sections of the Act will warrant investigation and possible legal action by the CIPC.