SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
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1. Corporate Governance Requirements 1.1 Corporate Forms and Governance Requirements A company incorporated in terms of the Companies Act, No 71 of 2008, as amended (the “Companies Act”), is the principal form of corporate/business organisation used in South Africa. Companies are separate legal entities with shareholders that provide share capital and in certain instances debt finance, and have a board of directors (Board) that manages the company and its affairs. The Companies Act dis - tinguishes between profit companies and non-profit companies. Profit Companies Profit companies include: • public companies – Limited/Ltd; • private companies – Proprietary Limited/(Pty) Ltd; • personal liability companies – Incorporated/Inc.; and • state-owned companies – SOC Ltd. A private company cannot offer its securities to the public, and its memorandum of incorporation (MOI) must restrict the transferability of its shares/securi - ties. A public company can freely transfer its shares to the public. Public companies are ordinarily listed on a stock exchange, with the primary stock exchange being the Johannesburg Stock Exchange (JSE). Per - sonal liability companies are private companies in which former and current directors may be held jointly and severally liable for debts and liabilities incurred during their tenure.
Non-Profit Companies Non-profit companies may be incorporated with or without members. They are limited liability corpora - tions exempt from various provisions of the Compa - nies Act. Ring-Fenced Companies When a company is ring-fenced (indicated by “(RF)”), third parties are regarded as having notice of any
restrictive conditions in its MOI. Other Business Entity Models Further business entity models include:
• partnerships, which are not separate legal entities; • trusts, which have separate legal personality for certain purposes; • sole proprietorships trading under their own name with no limited liability; and • close corporations, which are simplified limited liability corporations (noting that the ability to form new close corporations ceased on 1 May 2011). Foreign Companies Foreign companies carrying on business in South Afri - ca may be required to register as an external company in South Africa and comply with certain provisions of the Companies Act. 1.2 Corporate Governance Legislation and Regulation For this chapter and unless otherwise specified, “cor - porate governance” is used widely to include the laws listed below as well as practices and rules imposed through instruments such as the stock exchange rules
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