Page 1 of 32
COMPANIES
1.1 COMPANIES THEORY AND CONCEPTS
INTRODUCTION
We look at the main characteristics of a Company.
Shareholders
Separate legal entity
Bound by Companies Act
Profits belong to the company and paid out
to shareholders by way of dividends
Shareholders’ liability is limited – company is
liable for debts/loss
Managed by the board of directors
Memorandum of Incorporation and Notice of https://www.google.co.za/url?sa=i&url=https%3A%2F%2Fbusinesstech.co.za%2Fnews%2Fbusiness%2F1
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LEGAL ENTITY
A company as a legal entity means that it has the legal capacity to enter into
agreements and contracts, assume obligations, incur and pay debts, sue and be sued in
its own right, and to be held responsible for its action.
COMPANY – ADVANTAGES
A legal existence separate from its management and shareholders – A company
may own assets, may incur debt and preform legal acts.
Limited liability - if the business is liquidated, the company is liable, not the
shareholders.
Greater continuity - a company continues to exist despite the fact that the
shareholders changes from time to time.
, Page 2 of 32
COMPANY – DISADVANTAGES
Companies are costly and difficult to administer.
Statutory audit of financial statements for companies with public liability are
required.
Companies are regulated by complex Corporations Law and comprehensive
regulations of the Companies Act.
COMPANIES ACT
Companies Act 71 of 2008 became law in April 2011.
The aims of the Act includes:
Simplifying the procedures of forming companies
To reduce the cost of forming and running a company
To bring relief to smaller companies that could not afford
higher audit fees
The Companies Act is administered by the Registrar of Companies and covers aspects
such as:
Procedures for forming a company
How capital may be raised
How companies should be run
Information to be disclosed in the financial statements
REGISTRAR OF COMPANIES
Registrar of Companies is appointed by the minister of finance.
He shall exercise the powers and perform duties assigned to him by this Act.
The Registrar of Companies will issue a registration certificate as evidence of the
incorporation and registration of a company.
, Page 3 of 32
TYPES OF COMPANIES
Private Company (Pty) Ltd.
Cannot offer securities (shares) to the public
Transferability of shares is restricted
Personal Liabilities Company Inc.
Directors and past directors are jointly liable, together with the company, for any
debts and liabilities that were contracted during their periods in office.
State-owned company SOC Ltd.
They are defined in terms of PFMA (Public Finance Management Act)
Or they are owned by a municipality
Public Company Ltd
Shares offered to the public
Shares are transferred freely
PUBLIC VS. PRIVATE COMPANIES
Public Private
One person may start the company One person may start the company
Name ends in ‘Limited” or “Ltd.” Name ends in “Proprietary Limited” or
(Pty) Ltd.
Minimum of 3 directors Minimum of 1 director
Public is invited to buy shares Public NOT invited to buy shares
Shares can be transferred freely Shares only transferred upon approval by
the Board of directors
They MUST appoint an auditor, audit Appoint audit committee only to the
committee and company secretary. extent provided for in the MOI
Audited financial statements presented to Audited if:
shareholders at the AGM within 6 months Assets > R5 million
after financial year-end. Public interest score > 750 points.
Financial statements were internally
compiled.
MUST appoint Social and Ethics Appoint Social and Ethics committee onli
committee if their public score exceeds 750 points
They raise capital by issuing shares They raise capital by issuing shares to
the owners.
, Page 4 of 32
FORMATION OF A COMPANY
A company is founded in terms of the regulations of Companies Act 71 of 2008.
A Memorandum of Incorporation and Notice of Incorporation must be drawn up
and submitted to the Registrar of Companies (Companies and Intellectual
Property Commission) CIPC
The registrar will:
Approve the name of the company
Capture company information in the Companies Register
Endorse the Notice of Incorporation and Memorandum of Incorporation.
Registration certificate is issued.
A prospectus is compiled, including name and address of the company, details of
directors, etc.
BOARD OF DIRECTORS
Shareholders are the owners of the company.
The Board of directors are coordinating and policy-making body of the company.
The Board must consists of atleast 3 directors, however the MOI may allow for a
higher number of directors.
The directors are elected by shareholders but the Act also allow for a specific
appointment of a director by a specified in the MOI.
A director must exercise his powers and functions:
In good faith
For a proper purpose
In the best interest of the company
With high degree of skill, care and diligence
The directors may be held jointly and severally liable for any loss, damage or
cost resulting from negligence.
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COMPANIES
1.1 COMPANIES THEORY AND CONCEPTS
INTRODUCTION
We look at the main characteristics of a Company.
Shareholders
Separate legal entity
Bound by Companies Act
Profits belong to the company and paid out
to shareholders by way of dividends
Shareholders’ liability is limited – company is
liable for debts/loss
Managed by the board of directors
Memorandum of Incorporation and Notice of https://www.google.co.za/url?sa=i&url=https%3A%2F%2Fbusinesstech.co.za%2Fnews%2Fbusiness%2F1
25379%2Ftop-10-most-reputable-companies-in-south-
africa%2F&psig=AOvVaw1r7GSL3eGV4MnSkOXZwQv6&ust=1612368941607000&source=images&cd=vfe
incorporation &ved=0CAIQjRxqFwoTCLC-lsrMy-4CFQAAAAAdAAAAABAD
LEGAL ENTITY
A company as a legal entity means that it has the legal capacity to enter into
agreements and contracts, assume obligations, incur and pay debts, sue and be sued in
its own right, and to be held responsible for its action.
COMPANY – ADVANTAGES
A legal existence separate from its management and shareholders – A company
may own assets, may incur debt and preform legal acts.
Limited liability - if the business is liquidated, the company is liable, not the
shareholders.
Greater continuity - a company continues to exist despite the fact that the
shareholders changes from time to time.
, Page 2 of 32
COMPANY – DISADVANTAGES
Companies are costly and difficult to administer.
Statutory audit of financial statements for companies with public liability are
required.
Companies are regulated by complex Corporations Law and comprehensive
regulations of the Companies Act.
COMPANIES ACT
Companies Act 71 of 2008 became law in April 2011.
The aims of the Act includes:
Simplifying the procedures of forming companies
To reduce the cost of forming and running a company
To bring relief to smaller companies that could not afford
higher audit fees
The Companies Act is administered by the Registrar of Companies and covers aspects
such as:
Procedures for forming a company
How capital may be raised
How companies should be run
Information to be disclosed in the financial statements
REGISTRAR OF COMPANIES
Registrar of Companies is appointed by the minister of finance.
He shall exercise the powers and perform duties assigned to him by this Act.
The Registrar of Companies will issue a registration certificate as evidence of the
incorporation and registration of a company.
, Page 3 of 32
TYPES OF COMPANIES
Private Company (Pty) Ltd.
Cannot offer securities (shares) to the public
Transferability of shares is restricted
Personal Liabilities Company Inc.
Directors and past directors are jointly liable, together with the company, for any
debts and liabilities that were contracted during their periods in office.
State-owned company SOC Ltd.
They are defined in terms of PFMA (Public Finance Management Act)
Or they are owned by a municipality
Public Company Ltd
Shares offered to the public
Shares are transferred freely
PUBLIC VS. PRIVATE COMPANIES
Public Private
One person may start the company One person may start the company
Name ends in ‘Limited” or “Ltd.” Name ends in “Proprietary Limited” or
(Pty) Ltd.
Minimum of 3 directors Minimum of 1 director
Public is invited to buy shares Public NOT invited to buy shares
Shares can be transferred freely Shares only transferred upon approval by
the Board of directors
They MUST appoint an auditor, audit Appoint audit committee only to the
committee and company secretary. extent provided for in the MOI
Audited financial statements presented to Audited if:
shareholders at the AGM within 6 months Assets > R5 million
after financial year-end. Public interest score > 750 points.
Financial statements were internally
compiled.
MUST appoint Social and Ethics Appoint Social and Ethics committee onli
committee if their public score exceeds 750 points
They raise capital by issuing shares They raise capital by issuing shares to
the owners.
, Page 4 of 32
FORMATION OF A COMPANY
A company is founded in terms of the regulations of Companies Act 71 of 2008.
A Memorandum of Incorporation and Notice of Incorporation must be drawn up
and submitted to the Registrar of Companies (Companies and Intellectual
Property Commission) CIPC
The registrar will:
Approve the name of the company
Capture company information in the Companies Register
Endorse the Notice of Incorporation and Memorandum of Incorporation.
Registration certificate is issued.
A prospectus is compiled, including name and address of the company, details of
directors, etc.
BOARD OF DIRECTORS
Shareholders are the owners of the company.
The Board of directors are coordinating and policy-making body of the company.
The Board must consists of atleast 3 directors, however the MOI may allow for a
higher number of directors.
The directors are elected by shareholders but the Act also allow for a specific
appointment of a director by a specified in the MOI.
A director must exercise his powers and functions:
In good faith
For a proper purpose
In the best interest of the company
With high degree of skill, care and diligence
The directors may be held jointly and severally liable for any loss, damage or
cost resulting from negligence.
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?imgurl=https%3
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