The importance of knowing your Public Interest Score (“PIS”)
From the local barber to the multinational, they all must know or be aware of their PIS. If you own a
company or are a director of a company, it is part of your duty as an owner and director to know
your company’s PIS. For the simple reason being that it allows to you to be compliant with Section
30 and the Regulations of the Company Act. Section 30 of the act obligates companies to compile
annual financial statements which must be presented at the annual general meeting that must be
held during a financial year. The type of company together with the PIS will determine when those
annual financial statements must be audited or independently reviewed. This is only applicable to
profit and non – profit companies. Public and listed companies must have their annual financial
statements audited, regardless of the PIS obtained. This is due to the type of company a public
company is, regardless of being listed or not.
What is a Public Interest Score (“PIS”)?
A PIS indicates the Public Interest in your company. In essence it determines whether your annual
financial statement must be audited or only must be independently reviewed. Regulation 28
differentiates between four different levels of PIS. Level 1 – 0 -100, Level 2 – 100 – 350, level 3 – 350<
and level 4 being 500<. In terms of Regulation 28 of the act, a company other than a public company
with a PIS on level 1, usually owner – managed companies only need to compile annual financial
statements that does not need to be audited or independently reviewed unless the Memorandum of
Incorporation determines otherwise. Companies on Level 2, must have their annual financial
statements independently reviewed if the statements were internally compiled and not audited,
unless the Memorandum of Incorporation determines otherwise. Companies with a PIS on level 3
must have their statements audited regardless of what the Memorandum of Incorporation
determines. Companies with a PIS of 500< (level 4) is legally obligated to appoint and establish a
Social and ethics Committee (“SEC”) and have their annual financial statements audited.
Regulation 26(2) sets out the method for calculating your company’s PIS. In terms of Regulation
26(2) your PIS is calculated as follows:
– A number of points equal to the average number of employees of the company during the
financial year.
– One point for every r million turnover or part thereof for the financial year.
– One point for every R 1 million or portion thereof in third party liability of the company, at
the financial year end and one point for every individual, who at the end of the financial
year, is known by the company –
– In the case of a profit company, to directly or indirectly have a beneficial interest in any
of the company’s issued securities; or
– In the case of non – profit company, to be a member of the company, or a member of an
association that is a member of the company.
All of these must be added up and the grand total will then be your company’s PIS. This will then
confirm whether your annual financial statements must be independently reviewed or audited and
whether the company must appoint and establish an SEC.
For any further assistance with the calculating of your company’s PIS or any other queries regarding
your company’s corporate governance and compliance, contact the team at Stratlaw (Pty) Ltd for
assistance.
