Companies

1. What is a company?

A company can be defined as an “artificial person”, invisible, intangible, created by or under law, as a separate legal entity and perpetual succession. A company can be created at law as a legal person so that the company in itself can accept limited liability. Its legal status gives a company the same rights as a natural person which means that a company can incur debt, own property and sue and be sued.

2. What types of companies can be incorporated in terms of the Companies Act, 2008?

Two types of companies may be incorporated under the Act, namely non-profit companies and profit companies.

Profit companies include the following:

  • Private Companies – must have suffix “Proprietary Limited” or “(Pty) Ltd” to its name; may not offer its shares to the public;
  • Public Companies – must have suffix “Limited” or “Ltd” to its name; may offer its shares to the public and may be listed on the Stock Exchange;
  • Personal Liability Companies – must have suffix “Incorporated” or “Inc” to its name; used by professions such as attorneys, auditors, engineers, etc;
  • State-Owned Companies – must have suffix “SOC Ltd” to its name; owned by the South African Government or a municipality.

Non-Profit companies (the former Section 21 companies) – must have suffix “NPC” to its name; must have an object relating to cultural, social, religious, communal or group interest.

3.  What are the benefits of a Private Company?

They are subject to fewer disclosure and transparency requirements than a public company. A private company is prohibited from offering its shares to the public and the transferability of its shares will be restricted. A private company may now have more than 50 shareholders.  The board of a private company must comprise at least one director, or any minimum as determined by the Memorandum of Incorporation. The initial directors will be made up by each of the incorporators.

4. What is a Public Company?

A public company may offer its shares to the public but restricts, limits or negates their right of pre-emption. The name of a limited company must end with the word “Limited” or its abbreviation “Ltd”. A public company must have at least three directors.  The shares of a public company may be traded on a Stock Exchange and the transferability allows the public (shareholders) to buy and sell their shares without affecting the share capital of the company.

5. Director’s Guide

For more information, click here.