NCR and CIPC on Covid-19

National Credit Regulator (NCR)

The NCR issued Circulars on an extension of business days for credit providers, debt counsellors, and credit bureaus with regards to the submission of statutory reports and other functions to be performed by debt counsellors. A proposal was made to the Department of Trade, Industry and Competition ("the DTIC") supporting the waiver and extension of renewal of registration fees for registrants.

How does this affect businesses?

The NCR provided advice to credit providers, the DTIC, South African Reserve Bank (SARB), National Treasury and the South African Future Trust to offer relief to consumers and Small and Medium Enterprises (SMEs). SARB and National Treasury will be creating a loan guarantee scheme for SMEs with an annual turnover of up to R300m and the South African Future Trust is providing relief by allocating R1 billion to fund loans to SMEs where the payments will be made directly to the employees.  Furthermore, the NCR has given SARB access to consumer and corporate credit data to enable SARB to monitor financial stability during the COVID-19 period.

How will this be monitored?

A review will be conducted of the credit agreements entered into between banks and consumers during the lockdown to ensure that no questionable transactions have been entered into. Compliance monitoring will be intensified through inspections and complaints assessments and more specifically by conducting raids in smaller towns, townships and rural areas for illegal collection methods, such as the retention of bank cards, SASSA cards and ID books. The performance of credit providers' loan books will be analysed to monitor the impact of COVID-19 on consumers and a focus will be placed on debt collection practices as it is prohibited at this stage. The NCR will issue a circular for credit providers and credit bureaus that requires the submission of monthly statistical reports to monitor the impact of COVID-19. 

Companies and Intellectual Property Commission (CIPC)

CIPC included a category on BizPortal for applications by COVID-19 essential service companies. The BizPortal and CIPC websites and social media platforms have been used to clarify application criteria and additional information on how to use the system. Furthermore, CIPC has dedicated a query resolution email for all essential service queries as well as training staff to answer and resolve these queries.

What are the application criteria?

The system can only be used by registered companies that have not been struck off,  deregistered or liquidated. The company registration number and name applied for is used to cross-reference the CIPC database to ensure their legal status. It is the applying company's responsibility to ensure that it meets the designation of being an "essential service" as CIPC does not advise in this regard. Subsequently,  the system and certificate state that an applicant becomes legally liable should they submit false information and declarations to the CIPC. The system does not accept any other form of business namely; a sole proprietor, Trading Trust, Partnership etc. as the CIPCs legal mandate only extends to companies in terms of the law. The Department of Small Business, as well as municipalities, have been advised to handle other business types. The CIPC proactively and reactively revokes or withdraws certificates of companies who irregularly applied therefore and informs the Ministry accordingly to ensure action by the South African Police Service. 

What are the relief measures for businesses that do not meet the solvency requirements?

In terms of section 22 of the Companies Act, a company trades recklessly if its Solvency (liabilities exceeds assets) or Liquidity (ability to pay debts as they fall due) is compromised. A practice note issued on 24 March 2020 determines that during the COVID-19 national disaster, the CIPC will not invoke the reckless trading provisions if it has reason to believe that the companies are temporarily insolvent due to the national disaster. Should an entity not meet the solvency or liquidity requirement during the national disaster, it must be able to prove that it is as a direct result of COVID-19 and not pre-existing financial vulnerability.