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IS YOUR BUSINESS A PUBLIC INTEREST BODY UNDER THE AMENDED FINANCIAL REPORTING ACT SINCE APRIL 1, 2022?

IS YOUR BUSINESS A PUBLIC INTEREST BODY UNDER THE AMENDED FINANCIAL REPORTING ACT SINCE APRIL 1, 2022?

by | Jul 9, 2023 | Business

1. The Financial Reporting Act (“Act”) was passed by the Parliament of Botswana on the 1st of April 2011. It provides a legal framework through the Botswana Oversight Authority (“BAOA”) for oversight of public interest entities.

2. According to the Act, a “public interest entity” is defined as:

2.1. Any entity that has issued equity or debt securities for public subscription and is listed on a stock exchange.

2.2. Any bank, deposit-taking institution, or other institution supervised by the Bank of Botswana.

2.3. Any insurance company, pension and provident fund, collective investment undertaking, or other institution supervised by the Non-Bank Financial Institutions Regulatory Authority.

2.4. Any entity where any two of the following conditions exceed amounts or numbers prescribed by the Minister in the Regulations:

2.4.1. Annual revenue,

2.4.2. Number of employees,

2.4.3. Total assets, or

2.4.4. Total liabilities, excluding shareholder’s equity, as of the end of the preceding accounting year.

2.5. Any partly or wholly funded public body.

3. Using his powers under Section 71 of the Act, the Minister introduced the first set of Financial Reporting (Public Interest Entities) Regulations, which took effect on the 15th of January 2016. These regulations set thresholds as:

3.1. An annual revenue of P300 million.

3.2. 200 employees.

3.3. Total assets of P200 million.

3.4. Total liabilities of P100 million, excluding shareholder’s equity.

4. These thresholds were subsequently revised by the amended Financial Reporting Regulations (“Regulations”), effective from the 1st of April 2022. The new thresholds are:

4.1. An annual revenue of P200 million.

4.2. 150 employees.

4.3. Total assets of P150 million.

4.4. Total liabilities of P50 million, excluding shareholder’s equity.

5. These new Regulations broaden the definition of public interest entities to include more businesses due to the reduced thresholds:

5.1. The revenue threshold was lowered to P200 million.

5.2. The employee count was reduced to 150.

5.3. The asset threshold was decreased to P150 million.

5.4. The liability threshold was dropped to P50 million.

6. If your business meets any two of the aforementioned thresholds, it qualifies as a public interest entity. Under Regulation 4 of the Regulations, such an entity must register as a public interest entity.

7. Once the BAOA approves a registration application, they will issue a registration certificate valid for one year, renewable before the 1st of January annually.

8. After registration, public interest entities must adhere to two primary obligations.

9. The first obligation requires notifying the BAOA upon appointing new directors, managers, or auditors to maintain an updated register as per Section 23 of the Act.

10. This obligation is clear and unequivocal.

11. The second obligation, according to Section 56(5) of the Act, states: “Where a public interest entity or other entity files any annual financial statement or report with a Government department or Authority, the entity shall also file a copy of the financial statement and report with the Authority, following the rules.”

12. Essentially, if a business must submit financial statements to a government department by law, they must also submit them to the BAOA.

13. This mandate necessitates reviewing the licensing under which one’s business operates. If there’s no obligation to file financial statements or reports with a regulator, there’s no need to submit them to the BAOA.

14. Additionally, the Regulations mandate auditors to seek evidence of BAOA registration before auditing a public interest entity. If an entity cannot provide evidence, the audit is postponed until they produce a registration certificate.

15. Notably, under Regulation 21 of the Regulations, if a public interest entity, board member, or employee breaches the Act or Authority rules, the BAOA may impose a fine not exceeding P500,000.

16. Lastly, we acknowledge that the BAOA is drafting the Pula Code of Corporate Governance, which will be obligatory for public interest entities once enacted. The draft can be viewed here: Invitation for Comments – Botswana Code Of Corporate Governance – BAOA.

17. Apart from the above, we see no other significant considerations for businesses recently classified as public interest entities, as detailed in paragraph 4.

18. For further information, please contact Simon at simon@armstrongs.bw or call +267 395 3481.

 

 

Armstrongs active in African Labour Law Society

Armstrongs active in African Labour Law Society

by | Feb 28, 2023 | Updates

As part of Armstrongs’ continuous commitment to ensuring its international footprint worldwide, the Armstrongs Labour and Employment Law Department is proud to have two of our team members as active members of the African Labour Law Society.
Partner, Moemedi Tafa is currently the Botswana representative in the Society and is also a member of the Management Committee. Associate, Thato Batisani, is now an active member of the society and will be participating and, assisting in facilitating the 5th African Labour Law Society Conference to be held in Mauritius between the 29th and 30th of March 2023. Join Thato and others from across the continent for this great opportunity to interact and broaden your knowledge of labour law in this day and age.
JUDGMENT UPDATE – UNITRANS BOTSWANA (PTY) LTD

JUDGMENT UPDATE – UNITRANS BOTSWANA (PTY) LTD

by | Feb 27, 2023 | Updates

JUDGMENT UPDATE
In a recent decision of the Court of Appeal (PHILLIP NGUNOVANDU & 53 OTHERS v UNITRANS BOTSWANA (PTY) LTD), wherein, Armstrongs Attorneys successfully acted for Unitrans Botswana, the Court of Appeal reaffirmed the position that, it is of paramount importance that a party seeking to institute legal proceedings, should do so in the appropriate form, and that where this was not done, the Court had the discretion to dismiss the matter in its entirety. Unitrans had argued that the nature of the relief sought by the 54 Appellants could not appropriately be determined by way of affidavit and that same required that oral evidence should have been lead. The Court held that the election by the Appellants (to proceed by affidavit) was inappropriate and they, therefore, had to suffer the consequences of their election, being the dismissal of their case with costs.
Managing Partner in Arbitration Powerlist: Africa 2023

Managing Partner in Arbitration Powerlist: Africa 2023

by | Feb 13, 2023 | Updates

Armstrongs is excited to announce that our Managing Partner, John Carr-Hartley, has been included in the Legal 500 Private Practice Arbitration Powerlist – Africa Region. This is in recognition of his industry-leading Arbitration expertise. The Arbitration Powerlist: Africa 2023 showcases the leading arbitration practitioners working across Africa today. Congratulations!
Dispute Resolution in Botswana, should you Litigate or Arbitrate

Dispute Resolution in Botswana, should you Litigate or Arbitrate

by | Nov 15, 2022 | Updates

This article is only intended to be a very high-level overview of some of the differences between litigation and arbitration. It is not intended to cover all of the differences, nor is it intended to provide legal advice.

The fundamental difference between litigation and Arbitration is the forum.

Litigation is conducted in the Courts and is generally presided over by a Judge. In arbitration proceedings, the parties either agree on the person who will act as the Arbitrator or agree on a mechanism by which the Arbitrator will be appointed.

In many commercial agreements, the parties pre-agree to have any disputes which arise between them resolved by Arbitration, and there is a growing trend to include a referral to arbitration in commercial agreements, when these are drafted.

The reasons for parties often preferring to resolve disputes through arbitration are that:

  • The parties are at liberty to choose their Arbitrator, which is especially advantageous when the dispute involves a question where an expert in a particular field might have better knowledge in that particular field than a judge;
  • Arbitration proceedings are not open to the public and the details of the dispute, therefore, remain private;
  • Arbitration proceedings are generally (but not always) completed faster than litigation proceedings;
  • The parties are at liberty to choose whether the arbitration proceedings will be conducted formally, or informally, and are at liberty to choose the rules which will govern the proceedings.

Where formal arbitration proceedings are held, the procedure is very similar to that of litigation. The parties exchange Submissions (the Pleadings in litigation) which set out the nature of the claim or defence, as the case may be. Pre-arbitration meetings are held with the Arbitrator in order to regulate the proceedings and the issues to be decided (similar to Case Management Conferences in the High Court); and the dispute(s) to be decided by the Arbitrator may or may not require the leading of evidence through witnesses in the same manner as matters which go to litigation.

There are, however, some fundamental differences between litigation and arbitration. The most important of these are:

  • The Arbitration Act requires that there must be a “submission to arbitration” which requires a written agreement between the parties to refer the dispute(s) to Arbitration;
  • Generally, an Arbitration Award is final and binding on the parties, and is usually not subject to an Appeal;
  • The parties are jointly and severally liable to pay the fees of the person appointed as the Arbitrator;
  • The basis upon which the Courts can intervene in Arbitration proceedings, or an Arbitrator’s Award can be reviewed and set aside by the Courts, is very limited.

In the event that the parties pre-agree to arbitrate disputes, such as when they agree in a written contract to refer any and all disputes to Arbitration, then they are generally bound by that agreement and may not choose to litigate instead.

Section 6 of the Arbitration Act gives the High Court the power to stay any proceedings commenced in a court where the parties have agreed to refer any dispute to Arbitration. Any party wishing to stay the court proceedings must make application to the High Court for a stay of proceedings pending the outcome of the Arbitration.

Where the parties have agreed to refer disputes to arbitration, the court will usually stay any legal proceedings commenced in court and will generally require the matter to be determined by arbitration.

In the case of in BM Packaging (Pty) Limited v. PPC Botswana (Pty) Limited [1998] BLR 309 HC, the court held that once it is satisfied that a dispute falls within the ambit of an arbitration agreement, the court will require the dispute to be submitted to arbitration and will stay the action before the court, pending the delivery of the Award by the Arbitrator. The court stated that it would require a strong reason to refuse to exercise its discretion to enforce the operation of the arbitration agreement. This decision has been followed in numerous other Judgments of the High Court.

That having been said, in the case of Fencing Centre (Pty) Limited v. Murray & Roberts Construction [2002] (2) BLR 269 HC, the Court held that the existence, or otherwise, of an arbitration agreement between the parties (a submission to arbitration) is a matter of interpretation and is an issue solely for determination by the court.

The courts have the power to assist arbitral proceedings and have various powers to order interim measures, as provided by section 16 of the Arbitration Act. These powers include ordering security for costs, ordering document discovery, preserving the subject matter of the arbitration and issuing subpoenas.

Every so often, it happens that one party (having agreed to arbitrate a dispute) is dissatisfied with the result and because (generally) there is no right to appeal an Arbitrator’s Award, the dissatisfied party seeks the intervention of the Court to try and set aside the decision or Award.

There are very limited grounds on which an Arbitral Award can be reviewed and set aside in Botswana. Section 13 of the Arbitration Act limits the grounds on which an Arbitral Award will be set aside to the grounds of (i) where the Arbitrator has misconducted the proceedings; or (ii) where the Award has been improperly procured.

Arbitration Awards are recognised by the Botswana Courts and may be made an Order of a Court of competent jurisdiction and then enforced in the same way as a Judgment. Section 20 of the Arbitration Act provides that ‘[a]n award on a submission may, by leave of the Court or a judge thereof, be enforced in the same manner as a judgment or order to the same effect, and where leave is so given, judgment may be entered in terms of the award.’

In summary, unless the parties have pre-agreed to resolve disputes by Arbitration, the decision on whether to litigate or arbitrate is a matter of personal choice. Where, however, the subject matter of the dispute involves a highly technical or specialized field or where the parties require their dispute to be resolved quickly and informally, arbitration proceedings will generally be preferred.