Johannesburg — CHANGES to SA's Companies Act will benefit most businesses, although many companies will still have to prepare themselves for extensive changes under the new law.

Overall, however, analysts say the changes are mostly good news for business.

Last week the Department of Trade and Industry released the long-awaited regulations to the new Companies Act of 2008.

Although the regulations were officially released by the government, they are only expected to appear on the department's website during the course of the week.

Nicolaas van Wyk, chief director of the Research Centre for Independent Review (RCIR), who has studied the new regulations and the proclaimed Companies Act in detail, says the new law is something to be excited about, with benefits for most businesses.

"Corporations will have to reassess and possibly amend their founding statements and shareholder agreements," Van Wyk says. "But the good thing about the new act is that companies will be offered flexibility. The act contains 53 provisions that may be amended according to the needs of a particular company."

The new legislation also aligns the financial reporting requirements of close corporations and companies. This is expected to increase the usefulness of the financial statements for users such as lenders, the South African Revenue Service (SARS) and shareholders. Another benefit for companies is the manner in which financial reporting will be categorised.

A senior researcher at RCIR, Prof Tshepo Mongalo of the University of Cape Town, says all companies will be required to prepare annual financial statements. But the regulations will determine the financial reporting standard to be followed.

"The financial statements of companies that are required to be audited, such as public, state- owned and private companies, will have to be consistent with the highest reporting standards," Mongalo says.

All other private companies may select a standard to follow in preparing their annual financial statements. "This means that owner-managed private companies are empowered to choose a reporting framework that best suits their needs," says Mongalo. "More than 90% of all companies fall within this category and prepare financial statements only for lending, tax or management purposes."

"A cash, tax or cost basis of accounting is all that is needed and can be provided at a fraction of the cost of traditional reporting standards."

The regulations also make provision for members of professional bodies affiliated to the International Federation of Accountants, a global professional body, to perform independent reviews. Van Wyk says this will address the shortcomings of the accounting officer regime.

"Currently, accounting officers do not follow a recognised standard before issuing a report for a close corporation. There is no way of monitoring the competence level of accounting officers, sometimes resulting in their quality of work being suspect," says Van Wyk.

"The independent review is required of those private companies that are not ownermanaged and are not regarded as having a public interest."

The audit is reserved for public, state-owned and public interest private companies. However, according to Prof Walter Geach of the University of KwaZulu- Natal, an RCIR associate researcher, auditing becomes applicable if a nonprofit company accepts donations from the public and holds assets in excess of R60m, or if its operating budget for the relevant year exceeded R120m.

"In addition, any company may be required by a compliance notice issued by the Companies Commission to have its annual financial statements audited for that particular year."

The regulations will form part of the new Companies Act, which was promulgated on April 9 and aims to replace the old act and amend certain sections of the Close Corporations Act.

The new act is expected to come into effect on July 1 next year. Comments on the regulations may be submitted to the department until February 28.