Why a Company and not a CC?

  • With a limited amount of exceptions, only natural persons may be members of a close corporation. No such limitation applies to a company.
  • The Companies Act prohibits the formation of any association or partnership consisting of more than twenty persons for the purpose of carrying on any business for gain, unless it is registered as a company. The number of members in a close corporation is restricted to a maximum of ten.
  • In a company there is a division between management and membership, but in a close corporation every member has a right to participate in the management and the power to incur obligations for the close corporation.
  • Companies are juristic persons, which is a person that exists separate from its members. It has limited liability and will acquire its own rights and liabilities. Members of a close corporation will be held personal liable should they contravene any of the provisions in the Act or jeopardise the rights of its creditors.
  • Close corporations are seen to be used for small businesses whereas a company is adaptable to both small and medium to large business. It is easier to raise capital and expand business when a company is used. The perception in the market is that successful people make use of companies.
  • A member’s interest in a close corporation can normally only be transferred with the consent of all the members, whereas the shares in a private company may not be offered to the public for subscription and the transferor must first offer his/hers shares to the remaining shareholders before he/she is allowed to sell them to an outsider.
  • Both close corporations and companies are required to keep proper financial records.
  • Both close corporations and companies are separate tax entities and treated alike for income tax purposes.
  • Both close corporations and companies must be registered at the Department of Trade and Industry.
  • A flat rate of 8% on the value of the immovable property is payable if property is transferred to a close corporation or company.

Registration of a Company

To register a private company the following documents will have to be prepared:

  • A name must be reserved on form CM5.
  • An original and a notarially certified copy of the memorandum consisting of forms CM2, CM2A, CM2B, CM2C/CM2D must be prepared for a company with a share capital. The persons incorporating the company must sign the memorandum and will immediately become the first shareholders of the company.
  • An original and a notarially certified copy of the articles of association consisting of forms CM44A and CM44C must be prepared. The articles must:
    • restrict the right to transfer its shares; and
    • limit the number of its members to fifty; and
    • prohibit any offer to the public for the subscription of any shares or debentures of the company.
  • A blank certificate of incorporation must be submitted on a form CM1.
  • Application for a certificate to commence business must be made on a form CM46. The CM46 must state the financial year end of the company. No company shall commence business unless the Registrar has issued a certificate to commence business. Until a certificate to commence business is issued, the directors and the subscribers of the memorandum of the company shall be jointly and severally liable for all the debts and liabilities arising from any business conducted by the company.
  • The notice of the situation of the registered office and postal address of the company must be completed on a form CM22.
  • A written consent on a CM31 by a person to his appointment as auditor of the company to be formed must be lodged, and such auditor shall be deemed to have been appointed as such by the company.
  • A register of directors on a form CM29 must be completed.
  • Two copies, one certified by a notary, of any pre-incorporation contracts must be lodged with the Registrar. Any contract made by a company before the date on which it is entitled to commence business shall be provisional only and shall become binding on the company on that date and not earlier.
  • A power of attorney signed by the subscribers in favor of the person who is to lodge the documents must be obtained.

These forms must be submitted for registration to the Department of Trade and Industry located in Pretoria.

Once the company is registered the following changes must be affected:

Back to top

Change of Directors

Every private company shall have at least one director.

Each initial director shall provide the Registrar with a statement on a form CM47 of opinion of the effect that the capital of the company is adequate for the purposes of the company and its business or, if he is of the opinion that it is inadequate, the reasons therefor and the manner in which and the sources from which the company is to be financed and the extent thereof.

Any person who is appointed as a director or officer of a company shall, either before the certificate to commence business is issued or within twenty-eight days after the date of his appointment lodge with the company his written consent to such appointment on a CM27, duly completed and signed by him.

An extract of the register of directors, indicating the status of each director, must be submitted to the Registrar on a form CM29.

No person shall be qualified for appointment as director of a company if he is—

  • a body corporate;
  • a minor or any other person under legal disability;
  • any person who is the subject of any order disqualifying him from being a director;
  • save under authority of the Court:
    • an unrehablitated insolvent;
    • any person removed from an office of trust on account of misconduct;
    • any person who has at any time been convicted of any offence involving dishonesty or in connection with the promotion, formation or management of a company, and has been sentenced therefor to direct imprisonment or to a fine exceeding one hundred rand.
    • any person who has been removed from an office of trust for not being a fit and proper person to serve due to any act involving dishonesty.

Back to top

Change of Shareholders

A private company must have at least one shareholder but not more than 50 shareholders.

The Companies Act prohibits a company to register a transfer of shares in the company unless a CM42 has been delivered to the company. The CM42 must be signed by the transferor and the original share certificate of the transferor will be cancelled. A new certificate, distinguished as such by an appropriate sequence number, will be issued in favor of the transferee.

The registration of any transfer of shares of a company shall be subject to the law relating to stamp duty.

Back to top

Change of Address

Every company shall have in the Republic:

  • a postal address to which all communications and notices may be addressed; and
  • a registered office to which all communications and notices may be addressed and at which all process may be served.

Any notice, order or other document which may be or is required to be served upon any company, may be served by delivering it at or sending it by registered post to the registered office or postal address of the company. At least twenty-one days’ notice of any intended change in the situation of the registered office or of the postal address shall be given to the Registrar on a CM22: Provided that if less than twenty-one days’ notice is given, the Registrar may determine the date on which the change will take effect.

Back to top

Change of Auditors

Any change of auditors consisting of:

  • the written consent by a person to his appointment as auditor of the company;
  • the resignation by the current auditor; and
  • the signature of a director of the company must be submitted to the Registrar on a form CM31.

A company shall at every annual general meeting appoint an auditor or firm of auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting of the company. A retiring auditor shall be deemed to be reappointed at any annual general meeting without any resolution being passed, unless:

  • he is not qualified for reappointment; or
  • a resolution has been passed to the contrary; or
  • he has given the company and the Registrar notice in writing of his unwillingness to be reappointed.

No person shall be qualified for appointment as auditor of a company if he is:

  • a director, officer or employee of the company;
  • a director, officer or employee of any company performing secretarial work for the company;
  • a partner or employer or employee of a director or an officer of the company;
  • a person who by himself or his partner or employee performs the duties of secretary or bookkeeper of the company;
  • a person who at any time during the financial year was a director or officer of the company; or
  • not qualified to act as such.

Registers

Every company having a share capital shall keep, a register of allotments, a register of shares, a register of its members, a register of directors and officers of the company and secretaries thereof and there shall in addition be entered in the said register the name and date of appointment of the auditor of the company.

The registers of a company shall be kept at its registered office. If it is not kept at its registered office the company shall notify the Registrar of the place where such registers is kept and of any change in that place.

The register of members of a company shall, except when closed under the provisions of this Act, during business hours be open to inspection by any member free of charge and by any other person upon payment of an inspection fee.

Back to top

Income Tax

A company needs to be registered for S.A income tax. SARS prescribe for registration an IT 77 form.

Employees Tax

An employee is obliged to be registered for employee tax if he has any employees in his services.

An employer is obliged to deduct monthly UIF, PAYE an SITE from his employee’s salaries and pay it over to SARS.

To register for employees tax one need to complete an EMP 101 form.

Workmen’s Compensation

An employer is obliged to register for workmen’s compensation in accordance with the Compensation for Occupational Injuries and Diseases Act 1993.

The Workmen’s Compensation fund exempts the employer from compensating his employee injured on duty.

Back to top

Download the Company Notes in a printable pdf document.