Companies Act 2008
New Companies Act – Effective 1 May 2011 : Basic Overview
(For a complete overview, please contact us)
1. CC’s cannot be registered from 1 May 2011. Only a profit / non-profit PTY can be registered.
2. Profit Companies can be classified as:
- Private Companies – Pty (Ltd) – Not state-owned
- Personal liability Company – Incorporated / Inc – Directors / Past directors have liability
- State-Owned Company – SOC Ltd – State Owned / Owned by Municipality
- Public Company – Limited / Ltd – Not private / state-owned.
3. Name reservation is not required for incorporation. A company may register without reserving a name, and if this not available, will be issued with a registration number as temporary name until a suitable name has been found.
4. A company name may be predominantly in any official language and must end with the relevant English expression, being
- the word Incorporated or its abbreviation Inc., in the case of a personal liability company
- the expression Proprietary Limited or its abbreviation, (Pty) Ltd., in the case of a private company
- the word Limited or its abbreviation, Ltd., in the case of a public company
5. Accounting records and financial statements (s28 and s29)
All companies are required to maintain accurate and complete accounting records. In addition, all companies are required to prepare annual financial statements. The Act requires annual financial statements to:
- Include an auditor’s report, if the statements are audited
- Include a report by the directors with respect to the state of affairs, the business and profit or loss of the company
- Be approved by the board and signed by an authorized director, and
- be presented to the first shareholders meeting after the statements have been approved by the board.
6. Audit requirement (s30)
The Act requires public companies and state owned companies to have audited financial statements. The Regulations set out additional categories of companies that are required to have their annual financial statement audited, which is discussed below. Notwithstanding the provisions of the Act and the Regulations, the provisions of the Act related to mandatory audits will also apply to any company that voluntarily choose to have audited financial statements, and provides for this choice in the company’s Memorandum of Incorporation.
7. Independent Review
All companies that are not required (either in terms of the Act, or by Regulations) to have their financial statements audited, may opt to either have their annual financial statements audited voluntarily or to have them independently reviewed. In terms of the draft Regulations, an independent review may be performed by an independent accounting professional (the person must be a member of a professional body that is a member of the International Federation of Accountants), and the following standards will apply to an independent review:
- ISRE 2400: Average over the past 3 years of more than R100m in assets or more than R200m turnover
- ISRS 4400: Average over the past 3 years of less than R100m in assets or less than R200m turnover, AND greater than the Independent compilation requirements below:
- Independent compilation: For preceding year the company had less than R5m in assets and R20m turnover
- Independent compilation entails statements compiled by an independent accounting professional, on the basis of records provided by the company, in accordance with any relevant financial reporting standards.
8. Business Rescue
Chapter 6 of the Companies Act replaces the existing regime of judicial administration with a modern business rescue regime. This new regime is largely self-administered by the company, under independent supervision within constraints set out in the Act, and subject to court intervention, at any time, on application by any of the stakeholders.
Business rescue is described as the rehabilitation of a company that is financially distressed by temporary supervision of the company and its management, a temporary moratorium on rights of claimants against the company, and the development and implementation of a plan to rescue the company by restructuring its affairs, business, property, debt and other liabilities, and equity in a manner that maximizes the likelihood of the company continuing to exist on a solvent basis.
The Act provides the Minister with the authority to designate a suitable association to regulate the profession of business rescue practitioners.