Business entities

Speak out

22 May 2012 | Category: Companies Act, Establishing a presence in South Africa, Publications

Types of business entities based on the Companies Act, 2008
A new Companies Act was promulgated in 2008. The Act, Amendment Act together with the Regulations completely replaces the Companies Act of 1973 however, existing companies registered under the 1973 Act will continue in existence. The Act came into operation on 1 May 2011.

The Act provides for two categories of companies, namely for profit and not for profit companies.

Close corporations continue to exist but no new close corporations can be registered post the implementation date of the new Companies Act, being 1 May 2011.

For profit companies

• State-owned Companies (name ends in “SOC Ltd”)
• Public Companies (name ends in “Ltd”)
• Private Companies (name ends in “(Pty) Ltd” or “Proprietary Limited”)
• Personal Liability Companies (name ends in “Incorporated” or “Inc”)
• For profit companies may be incorporated by one or more persons, except for a state-owned company which may also be incorporated by an organ of state.

Not for profit companies

• a not for profit business (name ends in “NPC”) – previously known as a Section 21(b) company under the Act of 1973
• not for profit companies may be incorporated by three or more persons acting together, an organ of state or by a legal entity.

Annual financial statements

• annual financial statements must be prepared within six months of the financial year end and annual returns must be filed within 30 business days after the anniversary date of incorporation
• the annual financial statements of state-owned companies and public companies must be audited at all times
• annual financial statements of private companies and personal liability companies only require to be audited if:
• the company holds assets for another party in excess of R5 million; or
• the public interest score is 350 or more; or
• the public interest score is 100 or more and the annual financial statements are internally compiled; or
• it is required by the Memorandum of Incorporation or by a shareholder’s or director’s resolution or in terms of an agreement
• in certain instances an independent review of the annual financial statements will be required
• the annual financial statements of non-profit companies only require to be audited if:
• the company holds assets for another party in excess of R5 million; or
• it was incorporated by the state, an international entity, foreign state entity or foreign company; or
• it was incorporated to perform a statutory, regulatory or public function.
• if an audit is not required, the company must have its annual financial statements independently reviewed.

Public interest score
Every company must calculate its public interest score for each financial year.

This is determined as the sum of:

• a number of points equal to the average number of employees during the financial year; and
• one point for every R1 million in third party liability at year end; and
• one point for every R1 million in turnover; and
• one point for every individual who directly or indirectly has a beneficial interest in any of the company’s securities.

External companies
An “external company” is defined as a foreign company that is carrying on business, or non-profit activities, as the case may be, within South Africa, if such a company is party to one or more employment contracts within South Africa, or is engaging in a course or pattern of activities within South Africa over a period of at least six months, which would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within South Africa.

An “external company” must register with the Commission within 20 business days after it first begins to conduct business, or non-profit activities, as the case may be, within South Africa.

The following must accompany Form CoR 20.1 during the registration process:

• the filing fee
• a certified copy of the company’s Memorandum of Incorporation, or similar document filed in the jurisdiction in which the external company is registered, together with a translation of the document if required
• the certificate of incorporation or comparable document issued by the jurisdiction in which the company was incorporated, together with a translation of the document if required
• the address of its principal office outside South Africa and the names of its directors at the time the form is filed
• the address of its registered office in South Africa and the name and address of the person within South Africa who has consented to accept service of documents on behalf of the external company.

Domesticated companies
A “domesticated company” is defined as a foreign company whose registration has been transferred to South Africa and which will thereafter exists as a company in terms of this Companies Act as if it had been originally so incorporated and registered.

Related posts:

Companies Act update The Companies Act in a nutshell New Companies Act points system gives useful guidelines but determinations complicated Audit still vital, despite new Companies Act

--Ends--