When an owner-managed company needs no review
When a South African owner-managed private company is exempt from an independent review, when it can still choose one, and when its score forces an audit.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
A husband and wife own all the shares in their engineering company and run it themselves. Their accountant has compiled the statements for years. A new bank manager, reviewing their overdraft, asks why the statements carry no review report, and the owners phone their accountant in a mild panic. Have they been breaking the law?
Probably not. South African company law treats companies whose owners are also their managers differently from companies run by people who do not own them. But "probably" is not good enough for a firm's file, and there are cases where the owner-managed status does not help at all. This article sets out when the exemption applies, when a review is still sensible, and when the score overrides everything.
Companies run by their owners
The logic of the exemption is simple. An independent review exists largely to give outsiders some assurance about statements prepared by others. Where everyone who owns the company also manages it, there are fewer outsiders who need that protection.
SAICA's resource on independent reviews puts it plainly: independent reviews are not required for owner-managed profit companies, but may be done voluntarily. CIPC frames the same idea from the other side. It says that, unless it opts for an audit or its MOI requires one, a private company not managed by its owners may be subject to independent review if it compiles its statements internally with a public interest score below 100, or has them compiled independently with a score between 100 and 349.
The phrase "not managed by its owners" is the hinge. A company where some shareholders are not involved in management sits outside the owner-managed category and needs a closer look.
The section 30(2A) exemption
The Companies Regulations, as published in April 2011, state when an independent review does not apply. According to regulation 29(2), it does not apply to a company that is exempt under section 30(2A) of the Act, to a company that must be audited under its MOI, the Act or regulation 28, or to a company that voluntarily had its statements audited.
Section 30(2A) is the statutory home of the owner-managed exemption. Read the section itself before concluding that a client qualifies, because its conditions are precise and a summary is no substitute. Check, in particular, whether anyone holds an interest in the company's shares without also being involved in managing it. The CIPC page on audit and independent review requirements explains which private companies must be audited and which may be reviewed, and helps place the exemption in context.
Voluntary reviews and MOI requirements
Exempt does not mean forbidden. SAICA's point that owner-managed companies may have a review done voluntarily is important for clients like the engineering couple:
| Situation | Sensible response |
|---|---|
| The bank or a landlord asks for reviewed statements | Discuss a voluntary review; it may cost less than losing the facility |
| The owners plan to bring in an outside investor | A review now may ease the investor's due diligence |
| The MOI requires a review or an audit | The MOI governs; the exemption does not override it |
| The owners want an independent check on their bookkeeper | A voluntary review gives them one |
Always read the client's MOI. A company that would otherwise be exempt may have bound itself to a review or audit when it was formed, and many owners have forgotten what their MOI says.
When the score still forces an audit
The owner-managed exemption is an exemption from review, not from audit. CIPC says a private or personal liability company must be audited if it compiles its statements internally and has a public interest score of 100 or more, or if they are compiled by an independent party and its score is 350 or more.
So a large owner-managed company, or one that keeps its statement preparation in-house with a score of 100 or more, can find itself facing an audit despite being run by its owners. Before relying on the exemption, confirm that the score does not push the company into the audit category. The full set of audit triggers, including those that apply whatever the score, is set out in when a company must be audited.
Recording the decision and the engagement type
In Achekam, for a South African client, staff prepare a public interest score for a financial year from the client's records, a different person reviews it, and Achekam then says whether an audit or an independent review is required. Missing inputs are named, never assumed, and the thresholds come from the approved rule book. A partner records the engagement type.
Whether the owners also manage the company is a fact the partner must confirm from the share register and the list of directors; the score alone cannot settle it. When creating the engagement, staff choose its type, such as annual financial statements compilation, independent review or statutory audit, and a firm can add its own named types.
Record on the client's file:
- Who holds the company's shares, and whether each is involved in managing it.
- The conclusion on section 30(2A), with the reason.
- What the MOI says about review or audit.
- The public interest score and how the statements were compiled.
- The owners' decision on a voluntary review, if one was offered.
If a review is chosen, who may perform it depends on the score, as explained in who may perform an independent review.
Take the list of company clients the firm compiles without a review. For each, confirm from the share register that every shareholder is involved in management, read the MOI, and record the conclusion on the file before this year's statements are issued.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
