Company registrations

What legislation applies to companies?

The Companies Act of 1973 has undergone numerous amendments during the past decade. The New Companies Act 71 of 2008 was assented to by the President of the Republic of South Africa on 9 April 2009. It finally came into force on 1 May 2011.

A need for a New Companies Act came about due to the constantly changing business trends and significant political and economical changes in South Africa.

What types of different companies exist?

The New Companies Act makes provision for two types of companies namely “profit companies” and “non-profit companies”.

Profit Companies are incorporated for the purpose of financial gain for its share holders. These may be incorporated by one or more individuals (there is no maximum). Profit Companies are further divided into the following four separate types of entities:

• A public company ends with the suffix “Ltd” – provisions of the Memorandum of Incorporation will determine whether the company is a public company.
• A state owned enterprise ends with the suffix “SOC” – for example the Waterboard which is owned by a municipality.
• A personal liability company ends with the suffix “Inc” – used mainly by professionals such as attorneys and accountants. The directors of these companies are jointly and severally liable for all debts incurred during their terms of office.
• A private company ends with the suffix “(Pty) Ltd” – whose Memorandum of Incorporation prohibits the offering of its shares to the public and restricts its transferability.

Non-profit companies end with the suffix “NPC” and will replace those companies incorporated under Section 21 of the Old Companies Act. They have at least as one objective, a public benefit object relating to one or more cultural or social activities. All assets and income must be used to further the companies stated objectives.

What are transitional provisions for CCs?

There are approximately 1.9 million close corporations (CCs) registered according to the current Close Corporations Act.

The New Companies Act recognises that CCs should be free to retain their current status until such time as the members decide to convert to a company under the New Companies Act.

Existing CCs may continue trading as such, but new CCs will not be able to be formed once the New Companies Act commences. In other words, if you have an existing registered CC, you will be allowed to continue trading as such indefinitely. The New Companies Act prevents registration of new CCs.

A CC which intends to convert to a company, when the New Companies Act is implemented, will have to file a Notice of Conversion with a certified copy of a Special Resolution approving the conversion and either the new Memorandum of Incorporation or a prescribed fee. Every member of a converted CC is entitled to become a share holder of the new company. All assets, liabilities, and obligations that existed in the CC before the conversion will exist in the new company.

Need further advice?

The above information is general information. Please contact us directly for formal advice or assistance with close corporation or company registrations or conversions.