Requirements relating to appointment of close corporations as accounting officers (Practice note 1 of 2006)

Section 60 (4) of the Close Corporations Act, 1984, in its amended form, now provides:–

1. A corporation may appoint as its accounting officer –
   1. any person who is a member of a recognised profession listed in a notice referred to in subsection (2);
   2. a firm as defined in subsection (1) of the Public Accountants’ and Auditors’ Act, 1991 (Act No. 80 of 1991);
   3. any other firm, if each partner in the firm is qualified to be so appointed; or
   4. any other corporation, if each member of such corporation is qualified to be so appointed.
2. The liability of a partner in respect of debts and liabilities incurred by a firm contemplated in paragraph (a) (iii) during the partner’s period as a partner and the liability of a member in respect of the debts and liabilities of a corporation contemplated in paragraph (a) (iv) during the member’s period as a member may not be excluded by operation of law or in any other way.
3. For purposes of paragraph (b), "debts and liabilities incurred” means debts and liabilities incurred by a firm or corporation, as the case may be, in connection with the performance by the firm or corporation, as the case may be, of its duties in terms of section 62."

From these provisions it is evidently clear that for a firm to be appointed as an accounting officer it must either be a common law partnership or a firm of accountants and auditors as defined in the Public Accountants’ and Auditors’ Act, 1991. A sole proprietor conducting his or her business under a business name (i.e. a name other than the name of its proprietor), therefore, cannot be appointed as a firm but will have to be appointed in his or her personal capacity under paragraph (i) of section 60 (4) (a).

In the past this distinction was not clearly drawn and a number of appointments of firms as accounting officers were allowed where the “firm” was in fact a sole proprietor that had to be appointed in a personal capacity. These appointments will be regarded as appointment in a personal capacity of the person whose particulars appeared in the relevant letter of consent and any reference to the firm will be deemed to be a reference to the relevant person. No re-appointment will be required but such accounting officers must ensure that all future acts performed by them as accounting officers under the Close Corporations Act, 1984, or any other law must be performed in their personal capacities and not by or on behalf of a “firm”. Of particular importance in this regard is the use of the correct letterhead by accounting officers who are deemed to be or are appointed in their personal capacities – such a letterhead should reflect the personal particulars of the appointed accounting officer and not that of a firm.

In order to ensure that a firm or a close corporation qualifies for appointment as accounting officer of a close corporation, the firm or close corporation to be appointed must furnish the following additional information in its letter of consent to its appointment:–

• The names of all the partners of the firm or members of the close corporation;
• the recognised professions to which each such partner or member belongs;
• the individual membership or practice number of each such partner or member; and
• the practice number of the firm or close corporation allocated by the relevant recognised profession to the said firm or close corporation (Note: the membership or practice number of individual partners or members will not be accepted as the firm or close corporation will be appointed as accounting officer and not the individual partners or members).

Prospective accounting officers must, furthermore, note that the letter of consent to their appointment must be typewritten –

• on a letterhead containing the personal particulars of the accounting officer, if the appointment is made in a personal capacity [section 60 (4) (a) (i)];
• on the letterhead of the firm, if a firm is appointed [section 60 (4) (a) (ii) and (iii)]; or
• on the official letterhead of the close corporation, if a close corporation is appointed [section 60 (4) (a) (iv)]; and that it must be dated not earlier than three months prior to the date of lodgment.