There are two different sections of companies in South Africa, namely:
a) Profit Companies
b) Non Profit Companies
More information on the above-mentioned companies follow:
a) Profit Company
A business that produces a profit
Profit companies are divided into these four sections:
- A Pty Company (Private Company)
- A Public Company
- A Sole Proprietor
- A Partnership
Definitions and features of profit companies:
1. Pty Company
Definition: A Pty company is the opposite of a state owned company. It cannot offer any of its securities to the public according to the MOI (Memorandum Of Incorporation), and the transfer-ability of its securities are also not allowed.
- A minimum of one director is needed.
- One or more incorporator can start a Pty company.
- A Pty company does not need to register a company secretary, audit committee or an auditor.
- A Pty company’s financial statements has to be independently reviewed, but auditing of its statements are not necessary.
- Shareholders have the right to issue new shares by the company.
- A Pty company can operate as a large company or a small company.
- In the Companies Act of 2008 only the directors that were directly involved in an action against the law, can be held responsible.
2. Public Company
Definition: A company whose shares are traded freely on a stock exchange. It is more restrictive than a Pty company.
- The board of Directors must consist of three Directors.
- An audit committee, auditor and company secretary have to be appointed by the Public company.
- An ethics and social committee have to be appointed.
- All its financial statements have to be audited.
- A Public company can consist of any number of shareholders.
- A Public company has to have an annual meeting with all the shareholders present.
- The Public company’s shareholders have no pre-emptive rights over new shares being issued.
3. A Sole Proprietor
Definition: It’s a business where there is no distinction between the owner and business.
- You are your company’s only resource.
- Creditors are more likely to extend credit, although some problems can occur due to unlimited liability for company debt.
- Creditors might take the owners possessions to settle outstanding accounts.
- In the case of the owner’s death, some problems can arise due to the fact that the new owner must take responsibility for everything.
- The owner receives all the profit.
- Time flexibility
4. A Partnership
- Both of the partners will take responsibility for each other.
- All of the owners are responsible for the business’ debt.
- The incorporators can decide on the amount of shares given to each partner.
- A Partnership can be initiated easily and without big investments.
- A Partnership can offer some favourable tax breaks.
b) Non Profit Company
These are called NPO’s and can only be registered directly with CIPC.