CIPRO forges ahead with improvements

Pretoria, Thursday, 16 September 2010 The Companies and Intellectual Property Registration Office (CIPRO) at a media conference today revealed that improvements to current legacy systems will continue to ensure safety of corporate information on the CIPRO database.

Following various challenges earlier this year an Acting Chief Executive Officer and an Acting Chief Information Officer were appointed to deal with the operations at CIPRO. Immediately thereafter the management adopted an Interim Stabilisation Plan which included the following issues among others:

• Stabilisation of ICT
• Customer Service Improvement
• Dealing with fraud and corruption Issues

Progress has been made in these areas and additional interventions continue to be implemented in this regard. CIPRO has been responsive to feedback received from various stakeholders and has hence continued to introduce control measures. In addition to the introduction of a customer verification process in 2009 for vetting of online users who lodge CM29 transactions; the following controls were also implemented in the past few months, namely:-

• The discontinuation of electronic credit card payments;
• The introduction of a requirement of identification documents for all transactions;
• The introduction of additional requirements for manual CM29's i.e notice of the meeting and extract of the minutes where resolution was taken; and
• CIPRO is also working closely with the banks to mitigate fraudulent activities as they have access to CIPRO database.

The introduction of the  customer verification process  was meant to create a capability to track transactions relating to the electronic form CM29 (change of directors) for better accountability for transactions. The customer verification process is conducted by an external service provider and includes requirements like ID, Water and Lights Bill, among other things, before a customer can come into the CIPRO environment.

For a user of such a service to access the environment, a one day password is issued for them to lodge a CM29. The electronic CM29 service means that there is no need for back-office/human intervention from CIPRO. Like any other company, the controls are reviewed regularly to mitigate against risk exposure or as new developments or situations warrant.

Many companies have company secretaries, accounting officers, legal practitioners and other intermediaries who register as CIPRO customers and transact on their behalf, however, it remains the company's responsibility to ensure that there is compliance to the prescripts of the Companies Act, Act 61 of 1973 as amended, in Sections 204 - 220.

Some of these customers (mostly playing the role of intermediaries) belong to professional institutes/ societies as well and have signed a code of conduct/ practice with their own professional organisations. As professionals, they can assist in the process by also ascertaining validity of the instruction given (in line with the prescribed processes in the Companies Act). They can also assess the standing of the individual before transactions are authorized.

CIPRO Website Terms and Conditions of Use provides that CIPRO has a right to revoke the credentials of a registered customer should the actions be suspected to be violating the established terms and conditions for website use.

Kalahari Resources Case

CIPRO learnt about the case of Kalahari Resources (Pty) Ltd when it was first published in the newspapers. In this case, CIPRO launched an investigation which revealed that on 27 August 2010 new directors were added to Kalahari Resources (Pty) Ltd by a customer of ours who happen to have included himself as a director. The changes were done electronically using form CM29 (change of directors) following the established process.

However, the media revealed that no authorisation was obtained from the company to make the amendments and an email was subsequently received from the lawyers acting on behalf of the removed directors informing us of the matters and requesting advice.

A case was opened by the original directors and an urgent application was lodged at the High Court. CIPRO learnt on Monday the 13^th of September 2010 that the matter was postponed and that an interim order was issued to CIPRO to restore the original directors until the matter is heard. This was immediately implemented. CIPRO is now awaiting the final order on the matter which it will duly implement. Furthermore, the customer account of the customer who processed this transaction was revoked due to the violation of the conditions.

Further Controls

It should further be noted that CIPRO does not form part of general meetings nor attend board meetings of various corporate entities and thus does not become aware of company amendments until notified as duly required by section 216 (2) of the current Act. In fact CIPRO is the last to be notified of the changes after all the requirements are fulfilled by a company. CIPRO is also not authorised to change any information of any entity without completion of the prescribed forms in terms of the Act.

Mr Lungile Dukwana, CIPRO Acting CEO, announced that: "Henceforth, the process of the change of Directors for companies will be further enhanced for the protection of corporate information.

The following measures will apply:

•·         A further layer will be introduced to enhance security before an electronic CM29 is finalised. This layer will involve another password which will be issued to a company by CIPRO and this will be the responsibility of a Company Secretary/Accounting Officer.

•·         A written mandate from a company's CEO/MD will be required as part of the process for submission before a CM29 transaction is finalised. This requirement will apply to Manual CM29's as well.

•·         A certified copy of an ID of the person who will have to be authorised to effect the changes on behalf of the company is required.

•·         An email notification process will also be introduced to notify the company Secretary/Directors of any changes in Directors".

This modification is in the process of development and should be implemented by 1 October 2010 at the latest.

With effect from 16 September 2010 the Electronic CM29 is suspended to allow the implementation of the functionality and to protect the database.

In the interim only the manual CM29 will be the avenue to change directors. The processing period for the CM29 applications will be affected as a result of this. However, measures will be taken to mitigate against unnecessary delays.

The public must be aware that any person who makes changes to information on the CIPRO database without the company or close corporation authorisation is committing an offence and will be subjected to prosecution. As such any unauthorised change must be reported to the police and other relevant authorities immediately. CIPRO further encourages companies and close corporations to regularly check their profiles on the CIPRO database to ensure information is correct and up to date. A notice to this effect was published last year and is available on the CIPRO website.

On the CIPRO website a fraud-alert mail address is displayed, [email protected], where clients can disclose and report fraud should they be aware of areas where fraud can occur or has occurred.

Statement issued by Dr Elsabé Conradie CIPRO, September 16 2010

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