Definition A company is a legal entity which is incorporated in terms of the Companies Act (71 of 2008), (which is also known as “the Act”.It is an entity which exists individualistically of its own, the shareholders. The company as an entity is not physically observable, but the community is alert of the existence of the company. The company partakes in legal intercourse by means of governing bodies.
The company act (71 of 2008) In 2005 the South African corporate law reform progamme was introduced by the department of Trade and Industry and resulted in short-term amendments to the Companies Act (71 of 2008) which was signed by the President and promulgated in the Government Gazette (No 32121) on 8 April 2009. The new Companies Act together with the Regulations of 2011 came into effect on 01 May 2011
According to the companies act (71 of 2008) two typesof companies may be formed and incorporated, namely profit and non-profit companies Non-profit company is a That is incorporated for public benefit, or whose object is related to cultural or social activities or communal or group; Whose income and assets are applied to advance its stated objects in the memorandum of incorporation; and Which might not , directly or indirectly , handover any of its assets or pay any of its income to its members or directors (except as reasonable remuneration for services rendered )
Profit companies A profit company is a company for the purpose of financialgain for its shareholders and can compromise the followingfour types of companies: A state-owned company is a company that: Falls within the meaning of a state-owned enterprise in terms of the Public Finance Management Act; or It is owned by the government A private company It is not state-owned; and Through its Memorandum of Incorporation
A public company A public company is a profit making company that is not a state-owned company, a private company or a personal liability company. It is a company that is permitted to sell its registered securities to the general public. Also referred to as a "publicly-traded company."
Profit companies cont.… A personal liability company this is a company that meets the criteria for a private company (its Memorandum of Incorporation prohibits the offering of its securities to the public and also restricts the transfer thereof);and stipulates in the Memorandum of Incorporation (MOI) that it is a personal liability company The directors and the past directors are liable for the company’s debts.
Company names •A company name must compromise words in any of the official languages•A company’s name must depend on the type of company, end with: Type of company Name mist end with Personal liability company Incorporated or Inc. Private company Proprietary Limited or (Pty)Ltd Public company Limited State-owned company SOC Ltd Non-profit company NPC
Incorporation and registration One or more persons may incorporate a profit company, by: Completing and each signing , in person or by proxy , the Memorandum of Incorporation ;and Filling a note of incorporation (NOI) The Commission for Companies and Intellectual Property will assign the company a registration certificate to the company. The registration certificate is conclusive evidence that all requirements for incorporation have been complied with and that the company is incorporated. If the name of the company stated in the NOI is already in use, the Commission will register the company under its registration number as the interim name.
The Memorandum of Incorporation The Memorandum of Incorporation can be in a standard format or it can be in any format unique to the company.
The memorandum of Incorporation may include provisions dealing with matters the Act does not address, or alteralterable provisions; Impose a higher standard or more onerous provisions than required by the unalterable provisions;not include provisions tha negate ,limit or or alter the effect of unalterableprovisions
Any provision of the MOI that is not consistence with the Act is void. The board of a company may make, amend or repeal rules to thegovernance of the company, which are not addressed in the Act, by publishing a copy of the rules required by the MOI and filling a copy of the rules with the Commission
The MOI and ant rules of thecompany, are binding between:
The MOI can be amended by: A court order; The board ,regarding changes made to the company’s shares (changing the authorized shares and their rights) By a special resolution
No action of the company is void because the MOI limited or such action, or because the directors had no authority to authorize the action. The aforementioned does not apply to legal proceedings between the company and its shareholder, directors, and officers. A person who conducts a business with a company ,except for a director, officer or shareholder is entitled to presume the company’s action complied with the Act, its MOI and the rules of the company , unless the person knew or in all fairness should have known of any neglect by the company to comply.A person is not, solely by reason of being a shareholderor director, liable for any of the liability or obligation of the company, except to the extent provided for in the Act or the MOI.
A MOI inter alia deals with: The nature of the company and its name; the authorized share capital; the issuing of debenture; shareholders meeting; Directors and officers.
REFEREENCES Companies Act (71 of 2008) Marx, Van der Watt and Bourne (2012) Dynamic Auditing, Chapter 2, Tenth Edition (Durban LexisNexis) Delport P (2011) The new Companies Act Manual Including Close Corporations and Partnerships, Second Edition (Durban LexisNexis).