SOUTH AFRICA Law and Practice Contributed by: Professor Michael Katz, Matthew Morrison and Madison Liebmann, ENS
1. Introductory 1.1 Forms of Corporate/Business Organisations
debts and liabilities incurred during their tenure in office. Businesses offering professional ser - vices, such as audit and law firms, are examples of such entities. Non-Profit Companies In addition to the various types of profit com - panies discussed above, the Companies Act provides for the incorporation of non-profit companies, which may be incorporated with or without members. Names of non-profit compa - nies end with the expression “NPC” . Non-profit companies are also limited liability corporations and are exempt from various provisions of the Companies Act. Ring-Fenced Companies When a company is ring-fenced (indicated by “(RF)” in its title), third parties are regarded as having notice and knowledge of any restrictive conditions contained in its MOI. Other Business Entity Models Further business entity models used in South Africa include: • partnerships, which are not separate legal entities distinct from persons comprising the partnership; • trusts, which have a separate legal person - ality for certain purposes, usually provided in the deed of trust, such as taxation and perpetual succession; • sole proprietorships, in which a sole propri - etor trades under their own name with no limited liability – ie, there is no separation between their personal assets and liabilities and those of the business; and • close corporations, which are corporations that do not exceed a limited number of mem - bers and are simplified limited liability corpo - rations (it should be noted that the ability to
A company incorporated in terms of the Com - panies Act, No 71 of 2008, as amended (the “Companies Act” ), is the principal form of cor - porate/business organisation used in South Afri - ca. Companies are separate legal entities with shareholders that provide share capital (equity) and in certain instances debt finance to the com - pany, and have a board of directors that manag - es the company and its affairs. The Companies Act distinguishes between two broad categories of companies: profit companies and non-profit companies. Profit Companies Profit companies include the following entities with their suffixes shown alongside: • 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 incorpora - tion (MOI) must restrict the transferability of its shares/securities. A public company can freely transfer its shares to any member of the public. Public companies are ordinarily listed on a stock exchange, with the primary stock exchange in South Africa being the Johannesburg Stock Exchange (JSE). Personal liability companies are private com - panies in which former and current directors may be held jointly and severally liable for any
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