Basic Business Law. Lesson 8. Companies

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Other features of the Act are the following: • Shareholders have extensive rights to obtain information from the company. • A higher degree of accountability is demanded from directors. • Transparency is improved through stakeholder participation rules. • High standards of corporate governance are encouraged. • Minimum accounting standards is set for annual reports. • There are stricter provisions governing directors’ conduct and liability. • Companies are classified as either profit or non-profit companies. • Take-overs and fundamental transactions are strictly regulated. • Companies are allowed to merge into one new entity, provided that both companies are in a financially sound position in that they have more assets than liabilities and can pay their debts as the fall due. • Provision is made for a modern business rescue regime. • There is a move towards the decriminalisation of company law and the establishment of bodies for the effective enforcement of the legislation. • Minority shareholders and other stakeholders, such as employees, have better protection, powers, and remedies under the Act, including the ability to bring class actions. • Provision is made for new insolvency laws. • An act of a company is not void anymore solely because the company did not have the capacity to do the act, or the directors did not have the authority to perform the act on behalf of the company. • Companies are specifically prohibited from reckless, negligent, or fraudulent trading and persons who were knowingly a party to such conduct are guilty of an offence. 3. The Companies and Intellectual Property Commission The Companies and Intellectual Property Commission (CIPC) was established in terms of section 185 of the Companies Act when the Office of Companies and Intellectual Property Enforcement (OCIPE) and the Companies and Intellectual Property Registration Office (CIPRO) amalgamated in 2010. The CIPC receives its directives from the Minister of Trade and Industry. It’s a juristic person that functions as an organ of state within the public administration but outside the public service. The main functions of the Commission are to … • register companies, co-operatives and intellectual property rights, • disclose information on its register, • promote awareness of, company and intellectual property law, • promote compliance with the relevant legislation, • ensure the efficient and effective enforcement of the legislation, • monitor compliance with and contraventions of financial reporting standards, and make recommendations in this regard and • report to, conduct research for, and advise the Minister of Trade and Industry, on matters of national policy relating to company and intellectual property law.
4. Types of companies 4.1. Non-Profit Companies Non-Profit Companies are incorporated for a public benefit purpose, including cultural or social activities, communal interest, or group interest. The income and property may not be distributed to the incorporators, members, directors, or officers, but they may be reasonably compensated for services rendered. The MoI must be completed and signed by a minimum of three persons, called incorporators and a minimum of three directors must be appointed. All of a non-profit company’s assets and income must be used to advance its stated objectives and the name of a non-profit company must end with “NPC”. The distribution of residual assets is restricted on the dissolution of a non-profit company. For example, if a NPC is dissolved and there is money left, this money cannot go to the members of the NPC, but must be donated to another NPC. Membership can be held by juristic persons including profit companies and the votes of members have equal standing unless it is otherwise indicated by the MoI. Example The South African Guide-Dogs Association is an NPC that has been in operation in South Africa since 1953. They train guide dogs for the blind and service and social dogs for the physically disabled. These dogs provide the beneficiaries with independence, mobility and companionship. They also train sighted students as Orientation and Mobility practitioners. These practitioners return to their communities and train blind people to enable them to become independent and mobile. It costs a lot of money and time to train the dogs over an 18 month period and the recipients only pay a nominal R5 plus R100 board and lodging when they receive their dogs. As such the South African Guide-Dogs Association rely on the financial support of private individuals, corporates and service groups. The South African Guide- Dogs Association receives no government funding. 4.2. Profit Companies Profit companies can take one of four different forms: a state-owned company, a public company, a private company, and a personal liability company. 4.2.1. State-owned companies State-owned companies are treated separately from other companies because there might be legislation that pertains to them specifically that are not in line with the general provisions of the Companies Act and persons doing business with the State should be aware of these other laws. The name of a state-owned company must end with the expression “SOE Ltd.”. 4.2.2. Public companies Public companies are not state-owned companies and the name of a public company must end with the word “Limited” or its abbreviation, “Ltd.”. The incorporators of a public company must consist of at least one person and a public company must have at least three directors. The person(s) doing the incorporation can be a juristic person or a natural person.
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Basic Business Law. Lesson 8. Companies

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