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Setting up a business

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Setting up a business

SETTING UP A BUSINESS

South Africa

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The principal forms of business entities that can be registered in South Africa include the following:
• Private Company
• Public Company
• Personal Liability Company
• State Owned Company
• External (Foreign) Company
• Non Profit Company

Companies are classified as profit or non-profit companies.
Companies that can be set up for profit include:

Private Company

A private company (Pty) Ltd is a company that is not a state-owned company. Private Companies may not offer shares to the public and restrictions are also placed on the transferability of their shares. Private companies must have at least one director and one incorporator. The director and incorporator may be the same person. The word “person” includes a juristic entity. This means that a legal entity or a trust may be an incorporator of a new company.  Most private companies are owner managed and tend to have a smaller number of directors.

Public Company

This is a company whose shares are traded freely on a stock exchange. Essentially, the securities of a public company are available to the public and are freely transferable. The company is not privately owned, it is not a state-owned company or personal liability company.

Personal Liability Company

In a Personal Liability Company, the directors and past directors (where applicable) of personal liability companies are jointly and severally liable together with the company for any debts and liabilities arising during their periods of office.

State-Owned Company

A state-owned company is either a company defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 (PFMA) or a company owned by a municipality. The majority of the provisions of a public company will apply to state-owned companies as well.

Non Profit Company

This is a not for profit company. It can be registered as a Non-Profit Company without members and with a standard MOI (CoR15.1C) or a non-profit company with members.

External (Foreign) Company

This is a foreign or external company is a company incorporated outside of South Africa, irrespective of whether it is a profit or non-profit company or carrying on business in South Africa. A foreign company is prohibited from offering securities to the South African public unless it follows the specific provisions of the Companies Act, 2008, relating to offers to the public.

A lot of foreign companies are setting up subsidiary companies in South Africa. They register their companies as private companies or as external companies in the form of a branch.

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