Are you a member of a smallish Body Corporate (‘’BC’’) who does not want to pay exorbitant fees to an auditor annually to audit the financial statements?
If the answer is NO, we have the solution for you if you want to save thousands of rands annually by not appointing an auditor to audit your Body Corporate’s financial statements!
Ok… surely that is not correct if we look at the law, specifically the law on sectional titles in South Africa!
The Prescribed Management Rule (‘’PMR’’), which governs the appointment of auditors, states explicitly that an auditor must be appointed!
Let’s have a look at the PMR annexed as Annexure 1 to the Sectional Titles Schemes Management Act No. 8 of 2011 (‘’STSMA’’) dealing with this provision, its PMR 26(1)(c) read together with PMR 26(5), and we quote:
“Unless all the sections in the scheme are registered in the name of one person, the body corporate must present audited financial statements to a general meeting for consideration within four months after the end of the financial year”.
If we look at the above, it is clear that BC’s financial statements MUST be audited by an auditor if there is more than one owner, correct?
Well, it is correct UNLESS you amend the PMRs, substitute them with your very own Management Rules and, of course, use JW Consultants!
JW Consultants assisted one of our clients in amending the PMRs as indicated above, and not only was it approved by the Community Scheme Ombud Service (CSOS), but it was also done in record time!
This is what our client had to say, and we quote (again):
“I am delighted to share with you that CSOS has approved the amended management rules.’’
However, THERE is one small hurdle the BC must overcome to achieve this….. the difficulty of obtaining a unanimous resolution.
How on earth are you going to obtain a unanimous resolution from the members of the BC?
It’s simple: by advising all members within the BC that thousands of rands can be saved by instead opting for an independent review as opposed to having an auditor review the financial statements and the CSOS APPROVES AN INDEPENDENT REVIEW DONE BY AN ACCOUNTING OFFICER – THEREFORE MAKING IT PERFECTLY LEGAL (and cheaper)!
Remember, in the beginning, we said a smallish BC for the simple reason it’s easier to obtain a unanimous resolution in smaller schemes than a 250-sectional title development. HOWEVER, nothing stops more extensive schemes from passing this, as the law applies to all schemes, not a specific size!
So, say the unanimous resolution was passed, let’s look at the legalities:
- All members must be given at least 30 days written notice of the meeting to change the management rules.
- The notice must either be given by hand or sent by registered post, although we can opt to change to email as per PMR 4(5) (‘’An owner may by written notice to the Body Corporate change that address, and the change of service address of the member shall be effected when the Body Corporate receives notice of such change’’)
- The meeting notice must specify the resolution needed and, in this case, a unanimous resolution to amend the Prescribed Management Rules.
JW Consultants will give you the unanimous resolution template for free to pass via an in-person meeting or round-robin. When this is done, we will need the following to draft a new set of Management Rules for the Body Corporate:
- Signed owner unanimous resolution relating to changing from independent audit to having financial statements independently reviewed.
- The meeting minutes held whether in person or via round-robin.
The rest is easy peasy – we will submit it to the CSOS and await confirmation that the BC Management Rules have been approved!
All the above will cost you R 4500.00, including a consultation, should you need further clarity on saving thousands of rands in auditing fees.
BUT YOU ASK THE QUESTION HOW MUCH WILL I SAVE?
Well, we have done our homework, and smaller BCs can save up to R 5000,00 per year. Remember, the amendment stands until the management rule changes! It might not seem like a lot, but it’s a massive saving for smaller BCs!
Okay, lastly, it would not be fitting not to thank Jennifer and Professor Graham of Paddocks Consulting Services for their excellent interpretation (once again) of the law pertaining to this subject!
We look forward to hearing from you!
Image Credit: Mikhail Nilov