4) Incorporation and Co. Categories Flashcards
What are the principles relating to a foreign company carrying on business in SA?
Compelled to register with CIPC (Companies and Intellectual Property Commission) within 20 business days.
- Not sufficient to just have a bank account.
o But if they have employment agreements within SA then yes, a bank account is sufficient enough.
o Or if there is a course of conduct or patent of activities over 6 months that would lead a person to reasonably conclude that the company intended to continually engage in SA.
What are the principles related to profit companies?
Purpose is financial gain for shareholders
One or more incorporators
Any number of shareholders
The Companies Act attempts to create a flexible regime which regulates companies that may impact the broad public, whilst also offering exemptions and measures to also accommodate small, owner-managed entities.
Need at least 1 director/member
What are the principles relating to non-profit companies?
At least one of the objectives must be of public benefit/cultural/social activities.
All of the assets and income is used to further their objective.
May acquire and hold securities;
May carry on a business/a trade/an undertaking which is consistent with, or ancillary to, their stated objective(s);
No financial benefit for company, apart from reasonable remuneration or compensation for expenses incurred in furthering their objectives;
If a non-profit company (NPC) is wound up, then no member/director is entitled to assets etc
Does not have to have members - incorporated by directors
Must have at least three director
What are the characteristics of a public company (Ltd.)?
This is any profit company that is not:
- A state-owned enterprise;
- A personal liability company;
- Or a private company.
Their Shares:
- May be offered to the public
- Are freely transferable
Compliance
- Companies Act
- JSE listing requirements (only applicable to listed, public companies; private companies cannot be listed):
o Must be in-line with the Companies Act: More stringent compliance.
o Mandatory to have audit committee (appointed by shareholders)
o Must have social ethics committee.
o Greater scrutiny on their preparation of financial statements.
o Mandatory to appoint secretary.
What are the characteristics of a private company ((Pty) Ltd.)?
Pre-Emptive Right:
- If you want to sell your shares, you must first offer to sell the shares to the other members of the company where they must accept either all or none of the shares (secondary market) or, if you issue new shares, you must first offer these to current shareholders in accordance with the proportion of shares they own (Pro rata). (primary market)
o This restricts transferability of the shares
Pre-emptive right is a non-alterable provision; if there is no restriction on the transferability of shares, then there is no private company.
What are the characteristics of a personal liability company (Inc.)?
Used by professional associations
Their MOI will state that it is a personal liability company
Liability of directors:
- Jointly and severally liable during the period that they are in office.
Jointly liable: means that the directors are each liable up to the full amount of the obligation.
Severally liable: also called proportionate liability; parties are only liable in respect of their own obligations.
Jointly and severally liable:
- A claimant is able to pursue one defendant and receive payment. The defendant that paid, must then pursue the other member of the company for a contribution to their share of the liability.
What are the characteristics of a state-owned company (SOE Ltd.)?
National government business enterprises
Juristic person under ownership and control of national executive.
Goods or services provided.
Financed fully or substantially from the National Revenue Fund/taxes/levies
Who may incorporate a company?
1 or more persons may incorporate a profit company
3 or more persons may incorporate a non-profit company
What are the requirements of company names?
Must include suffix indicating type (i.e. SOC (RF) Ltd, etc.)
May:
- Comprise words in any language as long as you can say it
- Letters, numbers, punctuation marks
- Symbols: +, &, #, %, =
- Any other symbol permitted by regulations
- Round brackets
- Profit company: may be “[registration number] (South Africa)”
May not:
- Be the same, or confusingly similar to, the name of another company, close corporation, etc.
- Suggest that the company:
o Is part of/associated with entity or person
o Is an organ of state or a court
o Is owned/managed by person with particular education and designation
o Is owned/operated/sponsored/supported by foreign state, head of state, government, international organisation, etc.
- Contain a word or symbol:
o That is propaganda for war
o That incites imminent violence
o That advocates hatred based on race/ethnicity/gender/religion/ incitement to cause harm
What are the principles for non-compliance with company name requirements?
If the name does not contain the suffix at the end; then, the commission may alter the name
If the name is the same as the name of another company, CC etc., or is reserved; then use registration no. as interim name, and invite company to file amended NOI.
If the name confuses/misleads people:
- Notify the person(s) possibly affected
- Refer to tribunal
If the name incites violence, etc.:
- Refer to Human Rights Commission, who may choose to refer it to the tribunal.
What are the principles relating to reservation of company names?
It is possible to reserve a name by filing an application together with the prescribed fee.
The commission must reserve name unless:
- The name that has been applied for is already in use
- It is the name of a registered external company
- The name is already reserved in terms of section 12
- The name is inconsistent with Act
Name reservation continues for 6 months:
- Can be extended for 60 business days at a time
- Reservation may be transferred
- Abuse of name reservation system prohibited
- Defensive name may be registered for period of 2 years
