DOING BUSINESS IN SOUTH AFRICA.

This article’s purpose is to give you a summary of types of business entities that may be of interest to anyone wishing to conduct business in South Africa. Please note that this article is not intended to be definitive on each and every aspect of the applicable law, but rather is indicative of the considerations applicable from a commercial, and general regulatory point of view. The views expressed in this article are for information only and are also not intended to constitute legal advice, unless the contrary has been specifically agreed.

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TYPES OF BUSINESS ENTITIES

1. Private Companies
Private companies are identified by the words “Proprietary Limited” or “(Pty) Ltd” after the name of the company. A private company must have a minimum of one shareholder and at least one director and there is no requirement that there be local shareholders or directors. A quorum at meetings of shareholders where there is more than two shareholders is three shareholders with voting rights. Voting rights in a private company may be unequal.

2. Public Companies
Public companies are identified by the suffix “Limited” or “Ltd”, with a minimum of one shareholder and three directors. The quorum for general meetings where there is more than two shareholders is three shareholders with voting rights. The company’s MOI(Memorandum of Incorporation) does not restrict the right to transfer shares of the company.

3. Personal Liability Companies
Companies may be incorporated in terms of section 8(2) (c) of the Companies Act. In short, companies incorporated in terms of this section provide, in terms of its MOI(Memorandum of Incorporation, that 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. Companies incorporated under section 8(2) (c) are identified by the suffix “Incorporated” or “Inc”.

4. Partnerships
A partnership is not a legal entity distinct from the persons comprising the partnership, including for income tax purposes. However, for Value Added Tax (“VAT”) purposes, a partnership is a person and therefore registers as a vendor in its own name. Every partner in a general partnership is liable jointly and severally for all the debts and obligations of the partnership.

5. Business Trusts
A business trust is constituted by the lodgment of a deed of trust with the Master of the High Court of South Africa. Trusts obtain separate legal personality only for certain purposes, such as for taxation and perpetual succession is usually provided for in the deed of trust. Ownership of the trust assets rests in the trustees who are limited to a maximum of 20 persons. Limited liability can be achieved via the business trust. Trusts are regulated by the Trust Property Control Act 57 of 1988.

6. Sole Proprietorship
A sole proprietorship does not give rise to separate legal personality, perpetual succession or limited liability. There are few formal requirements for the establishment and maintenance of a sole proprietorship.

7. Non-profit Companies
Companies may also be incorporated under the Companies Act which regulates the incorporation of non-profit companies / associations not for gain. Such companies must have a public benefit object or an object relating to one or more cultural or social activities, or communal or group interests and must apply all of its assets and income to advance its stated objects.

IMAGE COURTESY OF GOOGLE.

By: TEBOGO SERITHI

Edited By: K

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