PRESENTATION

THE
COMPANIES ACT, 2008 (ACT 71 OF
2008)

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THE PRESENTATION WILL COVER

• SCOPE AND CATEGORIES OF COMPANIES

• CHARACTERISTICS OF THE VARIOUS COMPANIES

•COMPANY FORMATION

•COMPANY NAMES AND DISSOLUTION

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 Categories of Companies
The Act provides for 2 categories of companies:

• Not for profit companies, which are the successor to

Companies limited by guarantee and section 21
companies; and
• For profit companies:
– private companies;
– personal liability companies;
– public companies; and
– state-owned enterprises

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CATEGORIES OF COMPANIES
(Cont--)
Non-profit companies, which are the successor to the
current section 21 companies, and which are subject
to—
(i) a varied application of the Act, as set out in section
10; and
(ii) a special set of fundamental rules, set out in
Schedule 1, retaining the current principles concerning
the objects of such companies, and restricting the
distribution of any residual assets on dissolution, in
addition to other matters unique to non-profit
companies.

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 CATEGORIES OF COMPANIES
(Cont--)
For profit companies, which are recognized as being one of the
following types:
(i) Private companies - which are comparable to companies of the
same status under the Companies Act, 1973;
(ii) Personal liability companies, which are comparable to
companies contemplated in section 53(b) of the Companies Act,
1973;
(iii) Public companies- which are comparable to companies of the
same status under the Companies Act, 1973; and
(iv) State-owned companies, which were often incorporated or
registered under the Companies Act, 1973, but were not recognized
in that Act as requiring separate legislative treatment in respect to
certain matters to avoid conflict or overlap with other legislation
specifically applicable to them, and not to companies in general.

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 CATEGORIES OF COMPANIES
(Cont--)
Simplicity & Flexibility
In a further effort to create a flexible regime and to promote
simplicity, a number provisions of the Act make exceptions
for companies that operate under the exceptional
circumstances. These are where —

(a) All of their shares are owned by related persons, which

results in diminished need to protect minority shareholders;
or
(b) All of the shareholders are directors, which results in
a diminished need to seek shareholder approval for certain
board actions.

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CATEGORIES OF COMPANIES
(Cont--)
The transitional provisions set out in Schedule 5
provide for—

(a) The continuation of existing companies

incorporated and registered in terms of the current
Act, and provides for them to be governed henceforth
in terms of the new proposed Act. Allowances are
made for time for them to amend their Articles to
conform to the requirements of the new Act; and

(b) The conversion of existing close corporations

into companies under the new Act.

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 CHARACTERISTICS OF THE DIFFERENT
COMPANIES

PUBLIC COMPANIES

• MOI: permits offer of shares to public and restricts,

limits or negates pre-emption, therefore, providing
unrestricted transferability of shares
• Name: ―Limited or Ltd‖
• Incorporators – 1 person (―person‖ includes a
juristic person – S 1)
• 3 directors minimum

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 CHARACTERISTICS OF THE DIFFERENT
COMPANIES (Continued)

PRIVATE COMPANIES

Private companies. In general they will have less disclosure and

transparency requirements imposed on them but the playing
fields between them and close corporations have been leveled
to prevent regulatory arbitrage. Identical requirements would
apply to private companies and close corporations.

Incorporators – 1 person
Name – (Proprietary) Limited or (Pty) Ltd
1 director (public or a non-profit company – 3 directors)

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CHARACTERISTICS OF THE DIFFERENT
COMPANIES (Continued)
NON-PROFIT COMPANIES

- Incorporated for public benefit object or an object relating to cultural, social,

communal or group activity or interest

- Income and property not distributable to incorporators, members, directors,

officers; (except reasonable compensation for services rendered)

- Name: ―NPC‖

- Incorporators – 3 persons

- Apply all of its assets and income, to advance its stated objects, as set out
in its MOI

- 3 directors

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NON-PROFIT COMPANIES (Continued)

NPC are subject to all the provisions of the Act subject to the exclusions
mentioned in section 10 and the provisions of Schedule 1

This would exclude capitalisation through shares and all the provisions
relating to share capital and related provisions except where an NPC
has voting shares in which case the provisions on voting rights would
apply

NPC would also not be required to appoint a company secretary or an

audit committee

Schedule 1 sets out the basic principles relating to requirements for

membership if the NPC is to have members

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 COMPANY FORMATION
Underlying principle
The Act gives effect to the essential core principle that formation
of a company is an action by persons in the exercise of their
constitutional right to freedom of association combined with
their common law right to freedom of contract.

That being the case, the Act reflects, in both its language and its
substance, the principle that incorporation of a company is a
right, rather than a privilege bestowed by the State.

A company is incorporated by the adoption of a Memorandum

of Incorporation (MOI), which is the sole governing document
of the company. The Act imposes certain specific requirements
on the content of a MOI, as are necessary to protect the
interests of shareholders in the company, and provides a
number of default rules, which companies would be accepting if
not specifically altered when registering the MOI.

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 COMPANY FORMATION
(Continued)

In addition, the Act allows for companies to add to the required

or default provisions to address matters not addressed in the
Act itself, but every provision of every Memorandum of
Incorporation must be consistent with the Act, except to the
extent that it expressly contemplates otherwise. In other words,
a company cannot fundamentally ‘‘contract out’’ of the new
Companies Act.

For companies wishing to, the Act provides for the simplest
possible form of incorporation by use of a standard form of
Memorandum of Incorporation, which permit the incorporators to
accept all required provisions including the default provisions.

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 COMPANY NAMES

The Act retains the broad outlines of the existing

regime for company names, in particular continuing
the practice of name reservation, with some
significant alteration, it would not be compulsory. In
particular, name reservation will be available to
protect a name for an interim period.

In addition, the Act proposes reforming the criteria

for acceptable names in a manner that seeks to give
maximum effect to the constitutional right to freedom
of expression.

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 COMPANY NAMES
The Act restricts a company name only as far as necessary to-

• Protect the public from misleading names which falsely imply an

association that does not in fact exist;

• protect the interests of the owners of names and other forms of

intellectual property from other persons passing themselves off, or
coat-tailing, on the first person’s reputation and standing;

• Protect the society as a whole from names that would fall within the
ambit of expression that does not enjoy constitutional protection
because of its hateful or other negative nature.

• Beyond those purposes, there will be no further administrative

discretion to reject names, as is found in the Companies Act, 1973.

• Aggrieved parties only recourse would also only be the courts.

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WINDING UP AND DEREGISTRATION

The winding-up of insolvent companies will remain as currently

governed by Chapter 14 of the Companies Act, 1973, on an
interim basis until the Law Commission’s reform of the
insolvency laws has been completed.

Apart from that, Chapter 2 retains for voluntary winding up of

solvent companies, a number of the existing grounds for
dissolving a company, adds additional grounds not found in the
Companies Act, 1973, and more narrowly restricts the grounds
on which the regulators may seek to have a company dissolved

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WINDING UP AND DEREGISTRATION

• Grounds for deregistration have also been limited

and a company may only be deregistered –

– due to failure to submit annual returns after two

years of such failure
– if the company has been inactive for at least
seven years
– if so requested by the company itself

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