What is a private company?
A private company is a profit company that is not a public, personal liability, or state-owned company, and its Memorandum of Incorporation (MOI) prohibits it from offering any of its securities to the public and restricts the transferability of its securities.
A company incorporated for the purpose of financial gain for its shareholders is a profit company.
If you are uncertain whether a private company is for you, my colleague Kyle examines the matter here.
When registering a private company, what information will I need to supply?
To register a private company, you will need a unique name. This name may not be the same or similar to another registered company. You may register a similar name if you have permission from the entity. An example of this would be where a holding company wants to register a subsidiary with a similar name.
CIPC does not accept special characters in a company name despite the applicable legislation making provision for them. So aim for a company name without any special characters.
If there is a concern that your name is already taken, we will run a basic search of your proposed name on the CIPC database. The search will display any obviously similar or same names. This will assist in ensuring delays in the process are kept to a minimum. However, there is still an element of discretion that CIPC exercises in approving a name. Therefore a basic search is not always conclusive.
We always recommend supplying three alternative names. We will lodge these three alternative names with your application. Should CIPC reject one of your preferred names, they will assess the alternates. If CIPC rejects all the proposed names, they will notify you accordingly.
In the event that no company name meets your preference, or you simply do not have a preference, you can either register any words or accept an auto-generated number. Thereafter, you can trade under the desired name on condition that you stipulate your trade and registered name in all legal proceedings such as when entering into a contract. We will look at the requirement of “trading as” (or “t/a”) in a later blog post.
Regret your decision, or concerned you might make the wrong decision? We can assist with changing your company name after registration.
Your company will need a registered address in South Africa. This address does not have to reflect the location where the business will take place at all times. Rather, it should reflect a location where you will receive any documents delivered thereto or can at least assist in locating the company. For young startups headed by a single, mobile, individuals, a parents house would be a good example. Should the sheriff serve a notice on this address, it is quite likely to reach you and you can therefore act accordingly.
Changing your address is fairly easy. Either amend it through CIPC, or contact us at Legalese to assist.
Authorised share capital
Before lodging your application, you will need to decide on the authorised share capital. If you have a shareholders agreement, your authorised share capital may be stipulated therein.
Remember, if you have an odd number of shareholders, and you want the share capital divided equally, make sure the authorised share capital is divisible by the number of shareholders. This is on account of CIPC not accepting partial shares. A common example would be 100 shares to be divided equally across three shareholders. CIPC would not accept this, so we usually recommend issuing 120 shares, since this amount would be divisible across three people equally at 40 shares per shareholder.
Incorporators, public officers, Directors, and shareholders
What is an incorporator?
An incorporator is one or more directors who are the founders of the company. There are no major legal effects of who you nominate as the incorporator other than being listed on the incorporation documents.
What is a public officer?
A public officer is one Director who is nominated as the representative to the South African Revenue Service.
What is a Director?
A director is a member of the board of your company. The business and affairs of a company must be managed by or under the direction of its board, which has the authority to exercise all of the powers and perform any of the functions of the company, except to the extent that the Companies Act or the company’s MOI provides otherwise.
You would need to have decided who your Directors will be before lodging your company registration. You will need at least one Director to register a company. Once registered, it is fairly straightforward to amend the Directors. As always, Legalese can assist with this.
A shareholder is the holder of a share issued by a company and who is entered as such in the certificated or uncertificated securities register.
Juristic persons as shareholders
If one of your shareholders is a juristic person, such as another company, ensure you have that company’s documents on hand, as well as the details of the shareholding company’s representative, including the representative’s identity document.
By default, your new company will have a standard MOI. If you intend on deviating from this standard MOI, you will need to file an amended MOI with your company application. An example of a deviation would be where you need different share classes from those in the standard MOI. Legalese can assist with drafting your custom MOI.
In addition to any documents stipulated above, the incorporators and each Director will need to supply a clear, colour copy of an identity document. The only acceptable identity document for South Africans are a green barcoded identity book or both sides of the new identity cards. Non-South Africans require a passport.
Phillip Kent – 20 August 2020
Have any questions? Drop us a message below and we’ll be in touch!