https://www.polity.org.za
Deepening Democracy through Access to Information
Home / Legal Briefs / Bowmans RSS ← Back
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Sponsored by

Close

Embed Video

Directors of companies that fail to pay retirement fund contributions now personally liable

Directors of companies that fail to pay retirement fund contributions now personally liable

17th April 2014

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

In terms of amendments to South African pension law, which became effective on 28 February this year, directors of companies that fail to pay their employees’ pension fund contributions to the fund face a fine of up to R10 million and 10 years imprisonment.

According to Hannine Drake, Senior Associate at pan-African corporate law firm, Bowman Gilfillan: “These amendments have dramatically expanded the consequences of late or non-payment of pension contributions for participating employers and their management.”

“The pre-28 February legislation provided that only the employer company could be held liable for late or non-compliance. The consequences for the corporate entity were limited to late payment interest, which remains in place, and administrative penalties of up to R1 000 a day of non-compliance at the discretion of the Registrar of Pension Funds.”

She added that all directors involved in the company’s “financial affairs” are now at risk of being caught by the net of the new amendments.

It is unclear which directors will be viewed as being involved in the company’s financial affairs, but it could well include all executive directors. The amendments require pension funds to request the details of these directors from employers. Should employers fail to provide these details, all directors may be held personally liable.

“The late or non-payment of pension fund contributions by employers is unfortunately not uncommon in the pensions industry. While most employers would not default on salary payments, there are instances where pension contributions are deducted from the member’s salary but not paid over to the pension fund.

“Late payment can negatively affect members’ investment interest and risk benefit coverage and the non-payment of contributions essentially constitutes theft,” said Ms Drake.

She noted that the success of the new personal liability regime will depend on how effectively it is enforced.

“Pension funds can report non-payment of contributions but do not have the statutory enforcement power to lead the charge themselves. Instead, a coordinated effort from the Financial Services Board, the police and pension funds will likely lead to more success. Such an effort will by extension strengthen fund governance and serve the best interests of funds and their members.”

Advertisement

EMAIL THIS ARTICLE      SAVE THIS ARTICLE

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options
Free daily email newsletter Register Now