Sage advice on administration of surety bonds

As we know, the Commissioner for SA Revenue Service requires security to be furnished prior to registration or licensing of certain business activities with the Department of Customs and Excise. This security must be in the form of a surety bond or a provisional payment when this option is allowed. Sars only accepts surety bonds issued by a South African-registered bank or an insurer registered with the Financial Services Board for the purpose of issuing guarantees. A change in circumstances may require a bond to be cancelled. A notice of cancellation by the client or a notice of withdrawal by the financial institution must provide the following information: • the name of the principal; • the type of activity secured; • the bond number; and • the office where the bond is valid. The surety bonds issued by financial institutions usually do not reflect the type of security or the office where the bond is valid. It is therefore the responsibility of the principal to ensure that a copy of the confirmation letter issued by Customs is attached to the relevant surety bond. This letter acknowledging that the bond has been registered with Customs should reflect the information mentioned above. These documents must furthermore be stored in a safe place, separate from documents that are usually destroyed after five years (the statutory time period for which documents need to be kept according to the Customs and Excise Act). Failure to do so may result in the documents being lost or destroyed. This would complicate a relatively simple cancellation process and one may even have to seek relief from the courts to have the bond/s cancelled. Does your company have surety bonds in place which are no longer needed? Are you aware of the fees that your financial institution is charging on these "obsolete" bonds? Does your company have a system in place that provides for the easy tracking of existing bonds, even though these bonds may be 10 or 20 years old? Does your company conscientiously notify Sars if there is a change in the name or legal identity of your company, including details of mergers or takeovers? These are all issues that we recommend you address.