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Trade and Investment

Companies (Private and Public)

Companies, common investment vehicles for foreign investors operating in South Africa, may be public (Limited) or private ((Proprietary) Limited). They exist as separate legal entities from their shareholders and/or members. The Companies Act makes no distinction between companies that are locally-owned and those that are foreign-owned and, once formed, a company has an unlimited lifespan. Both public and private companies must be incorporated and registered with the Registrar of Companies.

Companies incorporated in South Africa must have a registered office and maintain certain statutory and accounting records in South Africa. If the accounting records are maintained outside of the Republic, the company must receive financial information and returns that will enable the statutory financial statements to be prepared. Approval of the name of the company must be obtained from the Registrar of Companies before incorporation.

Public companies may offer their shares for sale to the public, although they need not be listed on the stock exchange for the public to hold an interest in their shares. The number of shareholders is unlimited, and there are no restrictions on the transfer of their shares. They must file a copy of their annual financial statements with the Registrar of Companies, and these statements are available for public inspection.

Private companies, on the other hand, may not offer their shares for sale to the public. The right of transfer of their shares is restricted and the number of members is limited to 50. Private companies are not required to file their annual financial statements with the Registrar of Companies; thus, the statements are not available to the general public. They must include the word ‘Proprietary’ or (Pty) at the end of the registered name immediately before the word ‘Limited’ or ‘Ltd’. For both public and private companies, an audit by a registered accountant and auditor is obligatory.

The Companies Amendment Act, No. 37 of 1999 makes provision for:

• A company to acquire its own shares under certain circumstances, thereby providing a mechanism to restructure the company’s capital and unlock shareholder value;
• Disclosure of beneficial interest in securities to enable companies to ascertain who its shareholders are; and
• The mandatory appointment of a company secretary for all public companies, excluding a share block company.
In order for a company to buy back its own shares, the following conditions must be met:
• The company’s articles of association must permit share buy-backs.
• Shareholders must be circularised regarding the proposed buy-back, and a special
resolution must be passed by the shareholders, authorising the buy-back.
• The company should be solvent and liquid, otherwise the directors will be jointly and
severally responsible.
• Following the buy-back, the company’s share capital should not consist wholly of
redeemable shares.

Ms. TSD Nxumalo Consul-General
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