COMPANIES
- Kabelo Nchabeleng
1. The theory on companies
A company is defined as a form of business enterprise that is started by an
association of people with a common profit motive.
A company is a separate legal entity and has its own legal personality under the
enabling Companies Act 71 of 2008.
The legal personality of a company means that it can sue, get sued, enter legally
binding contracts and institute legal proceedings in its own name as a natural person
would.
This thus leads to the following concepts:
- Shareholders: The owners of a company, also the investors into the company,
i.e. they provide the company with capital, each with a certain stake of the
company’s capital called ‘shares’.
- Limited liability: Since a company is a legal person, the shareholders cannot
be held liable for its debts in their personal capacity. The shareholders cannot
be asked to settle the company’s debts in the event of insolvency.
- Continuity: A company has the capacity to exist entirely on its own distinct
from its shareholders. This means the company will continue operating even if
one shareholder dies, provided it is solvent (i.e assets > liabilities)
- Company name: No two companies can have the same name, each company
must have its own name with the word “Limited” or “Ltd.” behind it, because a
company has “limited” liability.
Company capital is divided into shares, and each share is a representation of an
equal portion of capital and entitles the shareholder with one vote at an Annual
General Meeting (to be discussed).
A public company obtains capital by inviting the public to buy shares by issuing a
prospectus - these shares can be acquired with the help of a stockbroker on the
Johannesburg Securities Exchange (JSE)
For a company to exist, it must send to the Companies and Intellectual Properties
Commission (CIPC) its Memorandum of Incorporation (MOI). An MOI lays down the
company’s rules which govern:
- the objectives of the company
- the rights, duties and responsibilities of owners, directors and other
associates
- the annual preparation and audit of financial statements.
- Kabelo Nchabeleng
1. The theory on companies
A company is defined as a form of business enterprise that is started by an
association of people with a common profit motive.
A company is a separate legal entity and has its own legal personality under the
enabling Companies Act 71 of 2008.
The legal personality of a company means that it can sue, get sued, enter legally
binding contracts and institute legal proceedings in its own name as a natural person
would.
This thus leads to the following concepts:
- Shareholders: The owners of a company, also the investors into the company,
i.e. they provide the company with capital, each with a certain stake of the
company’s capital called ‘shares’.
- Limited liability: Since a company is a legal person, the shareholders cannot
be held liable for its debts in their personal capacity. The shareholders cannot
be asked to settle the company’s debts in the event of insolvency.
- Continuity: A company has the capacity to exist entirely on its own distinct
from its shareholders. This means the company will continue operating even if
one shareholder dies, provided it is solvent (i.e assets > liabilities)
- Company name: No two companies can have the same name, each company
must have its own name with the word “Limited” or “Ltd.” behind it, because a
company has “limited” liability.
Company capital is divided into shares, and each share is a representation of an
equal portion of capital and entitles the shareholder with one vote at an Annual
General Meeting (to be discussed).
A public company obtains capital by inviting the public to buy shares by issuing a
prospectus - these shares can be acquired with the help of a stockbroker on the
Johannesburg Securities Exchange (JSE)
For a company to exist, it must send to the Companies and Intellectual Properties
Commission (CIPC) its Memorandum of Incorporation (MOI). An MOI lays down the
company’s rules which govern:
- the objectives of the company
- the rights, duties and responsibilities of owners, directors and other
associates
- the annual preparation and audit of financial statements.
