Corporate Law Series #1 – Types of Companies

When registering a company, it is important to consider the type of company required, whether by design or law.  This article provides a short overview of the different types of companies available for registration. 

Companies can be divided broadly in two groups, profit companies and non – profit companies.  The details of each type of company are set out below: 

 Private Company

• A private company is a company that is not a state – owned company whose shares may not be sold to the public and the transferability of such shares are restricted.
• The name should end with the words “Proprietary Limited” or abbreviated, “(Pty) Ltd.”
• Must have at least one (1) director.
• Generally, financial statements should be independently reviewed and need not be audited. (An audit is required if the company has voluntarily opted to have its financial statements audited.)

 Public Company

• A public company is a company in which its shares may be sold to the public and listed. (*Note: Listed companies will be subject to additional exchange rules such as the JSE Rules.)
• There are more safeguards imposed by the Companies Act.
• The enhanced accountability and transparency requirements of Chapter 3 of the Companies Act apply to it.
• Must appoint a company secretary, audit committee and independent auditor.
• Must file a copy of its annual financial statements with its annual return.
• Listed public companies must appoint a social and ethics committee.
• The name should end with the words “Limited” or abbreviated, “Ltd.”
• Must have at least three (3) directors. (*Note: the mandatory audit committee requirement will require that a public company also has at least three (3) independent directors.)

 Personal Liability Company

• A personal liability company is a private company whose Memorandum of Incorporation (MOI) states that it is a personal liability company.
• Directors are jointly and severally liable (with the company) for the debts and liabilities of the company.
• The name should end with the words “Incorporated” or abbreviated, “Inc.”
• This type of company is most often used by professionals such as attorneys, doctors, accountants, quantity surveyors etc.
• Must have at least one (1) director

 State Owned Company

• A state – owned company is a company that is:
  • Listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act 1 of 199; or
  • is owned by a municipality.
• Subject to exemptions or inconsistencies with the Public Finance Management Act, state – owned companies must comply with the same provisions of the Companies Act as public companies.
• The name should end with the expression “SOC Ltd.”

Non – Profit Company

• • • A non – profit company is a company that is incorporated for public benefit or an object relating to a cultural or social activity.
    • The income and property of a non – profit company must not be distributed to its founders, members, directors etc.
    • The name should end with the expression “NPC.”
    • Must be formed by at least three (3) persons acting as incorporators.
    • Special rules for non – profit companies are set out in Schedule 1 of the Companies Act.
    • Its annual financial statements require only an independent review. (An audit is required if the company has voluntarily opted to have its financial statements audited.)