The Companies Act 71 of 2008 distinguishes between profit and non-profit companies.
A non-profit company is incorporated for public benefit, and its income and assets are not to benefit the organisation’s stakeholders, but rather used to pursue the organisation’s charitable goals.
A Profit company, on the other hand, exists to generate a profit for its stakeholders.
There are five options available to individuals or groups of people wanting to start and run a company for profit. In short, these are:
1 - Sole Proprietor
2 - Partnership
3 - Private Company (Pty) Ltd
4 - Public Company Ltd
5 - State Owned Company SOC
For most the choice will be between Sole Proprietor, Partnership or Private Company.
Each of these have pros and cons, and these change depending on your needs. If you are not sure which is best for your business, complete the form on the side and we'll advise and guide you. Otherwise, browse through our YouTube videos for more in depth information and guidance.
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Compliance with the Companies Act 71 of 2008
The Companies Act contains mandatory requirements for all registered companies. These depend on the size and type of company and are managed and recorded by the Companies and Intellectual Property Commission (CIPC).
Below we will look at what is needed for a typical SME, registered as a (Pty) Ltd company.
Company Records
The Companies Act requires all companies to maintain their company records. A company must at all times have a copy of its Memorandum of Incorporation (MOI) and any amendments or alterations to it, as well as any rules that apply to the company in terms of its MOI. The company is also required to keep a register of its shares and its company secretary and auditor, to the extent that the company is required to make such appointments.
Accounting Records
The Companies Act requires all companies to keep accurate and complete accounting records, which must be kept and be accessible at the company’s registered office.
Annual Returns
All companies and close corporations are required by law, to lodge their annual returns with CIPC, within a certain period of time every year. An annual return is a statutory return in terms of the Companies and Close Corporations Acts and therefore MUST be complied with.
Failure to do so, will result in the Commission assuming that the company is not doing business, or is not intending on doing business in the near future. Non-compliance with annual returns may lead to deregistration, which has the effect that the juristic personality is withdrawn and the company or close corporation ceases to exist.
Financial Statements
Each year, a company must prepare annual financial statements, within six months after the end of its financial year. Depending on the companies' public interest score, these statements may also need to be either audited or independantly reviewed in a manner that satifies the regulations made in the Companies Act.
Solvency and Reckless Trading
The Companies Act states that a company must not carry on its business recklessly, with gross negligence, with the intent to defraud or trade under insolvent circumstances. If a company trades in such circumstances, the Commission may require the company to cease carrying on business.
Obligation to notify the CIPC of certain changes