The Two main types of companies that may be
incorporated under the Act, are
A) NON-PROFIT Companies
B) PROFIT Companies
A) NON-PROFIT Companies (NPC) :
•A company incorporated for public benefit or other
object relating to one or more cultural or social activities,
or communal or group interests; and
•The income and property of which are not distributable
to its incorporators, members, directors, officers or persons
related to any of them.
An external company is a foreign company
that is carrying on business or non-profit activities within
the Republic. It must register with the Companies and Intellectual
Property Commission (CIPC) within 20 business days after it
first begins to conduct activities within the Republic as
an external non-profit company (NPC) or as an external company.
•They are incorporated for a “public benefit purpose”.
•Income and property may not be distributed to the incorporators,
members, directors or officers of a non-profit company, except
for reasonable compensation for services rendered by them.
•The name of a non-profit company will end with “NPC”.
•A minimum of three persons, called incorporators, must
complete and sign the MOI.
•A minimum of three directors must be appointed.
•All of a non-profit company’s assets and income
must be used to advance its stated objectives, as set out
in its MOI.
•Non-profit companies are subject to a varied application
of the Act, as set out in section 10.
A special set out fundamental rules for non-profit companies
is set out in Schedule 1 of the Companies Act, 2008. According
to these rules, the objects of non-profit companies remain
subject to the current principles. Furthermore, on their dissolution,
non-profit companies are restricted in terms of the distribution
of any residual assets. These special rules also include various
other matters unique to non-profit companies.
- DIFFERENT PROFIT COMPANY DESCRIPTIONS
1) Private Companies (Pty) Ltd - What
is a Private Company?
The name of a private company must end with
the expression “Proprietary Limited” or its abbreviation
A Private Company is a separate legal entity
distinct from its shareholders. A private company is liable
for its debts and creditors cannot sue the shareholders for
the payment of these debts. . A private company are no longer
limited to 50 members as was the case under the current Companies
Act. Other companies and CCs can hold shares in a company,
which is an advantage over a CC, which cannot have a company
as a member. There is a slight advantage to writing (Pty)
Ltd after your company's name because it will be perceived
to have a more stable and established image.
The board of a private company must comprise
at least one director, or any other minimum number as stipulated
in its MOI. Each incorporator is a first director of the company
Private companies under the new Act are prohibited
to offer securities to the public and the transferability
of their shares are also restricted.
But there are many disadvantages, like e.g.
the structure of a private company is more complex than a
CC, because it must have separate ownership and management.
The shareholders own it and the board of directors manages
The decision making process is complex because
there are prescribed general meetings, notice periods and
formalities for the passing of resolutions. The law &
new act requires a company to audit its books once a year
by a registered Auditor or Accountant. This can run into thousands
of rands every year, depending on the size of the company.
The law strictly governs the conduct and
duties of company directors and officers. For example, not
keeping minutes of board meetings or not holding an annual
general meeting is illegal. If you are going to register a
company, make sure that you are aware of all the legal requirements
that must be complied with.
2) Public Companies (Ltd) - What is a Public Company?
A Public company under the new Act, only
requires one member for incorporation compared to the 7 members
under the current companies Act.
A Public Company is a company that wishes
to raise capital from the public and shares are easily transferable.
Many public companies are listed on the Stock Securities Exchange
where their shares are traded in large volumes every week
day. They are called listed companies.
Examples include the following Sasol, Anglo
America , Old Mutual, Pick and Pay and Richemont.
Many foreign-owned or multinational companies also operate
in South Africa these include Shell, Microsoft , Siemens and
Personal Liability Companies (Inc) - What is a personal
The directors and past directors (where applicable)
of such companies are jointly and severally liable together
with the company for any debts and liabilities arising during
their periods of office.
A personal liability company is comparable
to companies contemplated in section 53(b) of the Companies
Act, 1973. Its name must end with the word “Incorporated”
it meets the criteria for a private company, and its MOI provides
that the directors and past directors are jointly and severally
liable, together with the company, for any debts and liabilities
of the company that were contracted during their respective
terms of office.
A personal liability company must meet the
criteria for a private company, and its Memorandum of Incorporation
should state that it is a personal liability company. If a
company is a personal liability company the directors and
past directors are jointly and severally liable, together
with the company, for any debts and liabilities of the company
as are or were contracted during their respective periods
of office (clause 19(3)). The board of a personal liability
company must comprise at least one director. As is the case
with a private company, a personal liability company is not
required to comply with the extended accountability requirements
set out in Chapter 3, except to the extent that the company’s
Memorandum of Incorporation provides otherwise.
3) State-Owned Companies (SOC Ltd) What is a State
A State owned company is either a company
defined as a “state-owned enterprise” in the Public
Finance Management Act 1 of 1999 or a company owned by a municipality.
The majority of the provisions of a public company will apply
to state-owned companies as well.
State-owned companies were often incorporated
or registered under the Companies Act, 1973 but were not recognised
in that Act as requiring separate legislative treatment in
respect of certain matters to avoid conflict or overlap with
other legislation specifically applicable to them, and not
to companies. An SOC is either a company defined as a “state-owned
enterprise” in the Public Finance Management Act 1of
1999, or is owned by a municipality as contemplated in the
Municipal Systems Act 32 of 2000, and is otherwise similar
to an enterprise as referred to above. The name of a state-owned
company must end with the expression “SOE Ltd”
4) Foreign and External Companies
A foreign company is a company incorporated
outside of South Africa , irrespective of whether it is a
profit or non-profit company or carrying on business in South
Africa or not. A foreign company is prohibited from offering
securities to the South African public unless it follows the
specific provisions of the companies Act, relating to offers
to the public.