REQUIREMENT TO VOLUNTARILY DISCLOSE SOLVENCY AND LIQUIDITY TEST PERFORMED IN THE ANNUAL
The CIPC Notice 15 of 2021 highlights the need to determine solvency and disclose the test for each of the following instances:
- Financial assistance for the subscription of securities (s44). e.g. Loans to aquire shares;
- Loans or other financial assistance to related parties, including subsidiary companies, holding companies and directors (s45);
- Dividends declared to shareholders (s46);
- Other distributiones to shareholders (s46). e.g. writing off a debt to the company by its shareholders;
- Capitalisation of shares, whereby the recipient can choose whether to take the shares of take cash (s47);
- Company or subsidiary acquiring the company’s shares (s48); and/or
- Amalgamations and mergers;
Besides the regulatory requirements, the solvency test is important to maintain strong cash flows and liquidity in the business, and allow operations to continue.
It is proposed that the part of the Directors Report should include a statement in the Annual Financial Statements:
“Solvency and liquidity test
The directors have performed the required solvency and liquidity tests required by the Companies Act of South Africa.”
We at Business Soul Accounting are in support of such a statement and are happy to assist with any liquidity and solvency tests needed by Directors or Shareholders. Please contact us should you need any further support in this regard.