In the complex landscape of corporate governance, understanding the Public Interest Score (PIS) is crucial for any company operating within South Africa. This score determines a company’s compliance obligations and influences how it manages its regulatory responsibilities. In this article, we will break down what a Public Interest Score is, how it is calculated, and the different outcomes it could have on your company’s compliance requirements.
What is a Public Interest Score (PIS)?
A Public Interest Score (PIS) is a metric used in South Africa to measure the level of public interest in a company. It was introduced by the Companies Act, 71 of 2008, to ensure that companies with significant social and economic impact adhere to stringent governance and transparency standards. The score is calculated annually and influences a company’s reporting and auditing obligations.
How is the Public Interest Score Calculated?
The PIS is determined using a specific formula outlined by the Companies Act. The calculation involves four main components:
- Number of Employees: 1 point for each employee or the average number of employees during the financial year.
- Third-Party Liability: 1 point for every R1 million (or part thereof) in third-party liabilities at the financial year-end.
- Turnover: 1 point for every R1 million (or part thereof) in turnover during the financial year.
- Beneficial Shareholders: 1 point for each individual who, at the financial year-end, is a beneficial shareholder of the company.
For example, if a company has 50 employees, R10 million in third-party liabilities, R50 million in turnover, and 10 beneficial shareholders, its PIS would be 50 + 10 + 50 + 10 = 120 points.
Did you know?
Our platform prides itself on using [and sharing] credible data between different departments in an organisation. Our PI-Score calculator:
- automatically checks your ownership against the share register
- syncs your Turnover and 3rd party liability directly from your accounting software [Currently Xero, with Sage & Quickbooks underway]
- populates your employee count directly from your payroll software [SimplePay & PaySpace]
Compliance Requirements Based on PIS
The compliance requirements for a company vary significantly based on its Public Interest Score. Here are the different thresholds and their corresponding obligations:
PIS Below 100
Companies with a PIS below 100 generally have the least stringent compliance requirements. These companies are typically required to prepare annual financial statements, which do not need to be audited or independently reviewed unless the company’s Memorandum of Incorporation (MOI) stipulates otherwise.
PIS Between 100 and 350
Companies falling within this range face moderate compliance obligations. They must have their annual financial statements either independently reviewed or audited, depending on the company’s specific circumstances and MOI. An independent review is less rigorous than an audit and involves a review by an independent accounting professional.
PIS Above 350
Companies with a PIS exceeding 350 are subject to the most stringent compliance requirements. These companies are required to have their annual financial statements audited. An audit provides a higher assurance level than an independent review and must be conducted by a registered auditor.
Other Considerations
In addition to the PIS thresholds, certain types of companies, such as public companies and state-owned enterprises, must always have their financial statements audited regardless of their PIS. Furthermore, companies that hold assets in a fiduciary capacity exceeding R5 million at any time during the financial year must also have an audit.
Importance of Monitoring Your Public Interest Score
Regularly monitoring your company’s Public Interest Score is essential for staying compliant with the Companies Act. Failure to comply with the required governance standards can result in legal penalties and damage to your company’s reputation. By understanding your PIS and its implications, you can ensure that your company meets its regulatory obligations and maintains good corporate governance practices.
Conclusion
The Public Interest Score is a vital tool for assessing a company’s compliance requirements in South Africa. By accurately calculating your PIS and understanding the associated compliance obligations, you can effectively manage your company’s regulatory responsibilities and avoid potential legal issues. Stay informed and proactive about your PIS to ensure your company remains compliant and upholds high standards of corporate governance.
