I am having a problem with getting statu...

Asked by jsve1961 on 13-01-2015 15:57:37
Question posted in the General Law category relating to Western Cape
Question value: R 400.00

I am having a problem with getting statutory documents with regards to a small company, of which I am the only director, from the auditors. The auditors has been the same team for 15 years. The auditors keep all statutory document, secretarial documents, minutes, Capri documents ext. The auditors just blatantly refuse to release the document as mentioned above. The reason for withholding the documents as mentioned is that I refuse to pay the fees requested in full. The reason for withholding the fees is that the auditors did not complete the instructions given which is the reconciliation of the companies SARS account. I have paid the fees in full to the auditors reflected in the financial statements as a provision and refused to pay the full invoiced amount received after receiving the financial statement. I have written to the auditors on more than one occasion to try and solve the matter but the partner involved does not even bother to react. (As an aside, is a company also protected under the consumers protection act or is it only for individuals).The question that I want answered, do the auditors have retention right on the documents as mentioned above or only if any only on the financial statement of the period for which they have billed?

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Answer to the Question

Posted by Att. Patrick on 14-01-2015 09:35:07
Hi there and thank you for your question,

I'm sorry to hear about your issues with your companies auditors.

"Is a company also protected under the consumers protection act (CPA) or is it only for individuals?" --> The CPA typically applies to consumers of goods or services who are either an individual, or a "small" company. The CPA does not apply to a consumer who is a juristic entity whose asset value or annual turnover exceeds R1 million. If your company's asset value or annual turnover exceeds R1 million then the CPA won't apply to your company in this situation.

"Do the auditors have retention right on the documents as mentioned above or only if any only on the financial statement of the period for which they have billed?" --> The short answer is NO, they don't.

First, the documents belong to the company and not the auditors. The auditors are merely holding the documents on the company's behalf. The company is therefore entitled to demand the return of the documents whenever the company wants.

Second, the auditors could claim a right of retention over certain documents until their fees have been paid, BUT that right of retention is only over documents that could be considered to be "work product" of the auditor. This would be (for example) reports generated, audits performed, documents created, etc. This would certainly not apply to company documents such as statutory document, secretarial documents, minutes, Capri documents ext, etc - most certainly not.

My suggestion is that you write a formal letter to the auditors and entitle it "Final demand to return documents prior to institution of legal proceedings", and include what I've said above in your own words. Explain to the auditors that you have obtained legal advice that they can't simply refuse to return the documents. Explain that you will institute legal proceedings (an application in Court) for the return of the documents if they don't comply.

You'll need all of the letters, etc for the application if you want to bring one as proof that you've done everything that you can!

If you want to bring the application, I would seriously suggest hiring an attorney to assist you in drafting the application. You'll need to consult with the attorney in person first! I can't refer you to a specific attorney, but I can direct you to the following two websites, www.findanattorney.co.za OR www.attorneys.co.za, where you can find a list of qualified attorneys in your area who will be able to assist you further with drafting the application!

If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.

Att. Patrick

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