The Companies Act No. 71 of 2008 distinguishes between profit and non-profit companies. A non- profit organisation is incorporated for public benefit, and its income and assets are utilised to pursue the organisation’s charitable goals. On the other hand, profit companies exist to generate a profit for its stakeholders. The most common forms of legal entities are:
Limited Liability Companies represent business entities in which both current and previous directors may be held jointly and severally liable for any debts and liabilities which occurred during their time in office. This form of business enterprise is most often used for firms of professionals, such as doctors, lawyers and accountants.
A private company may be founded and managed by just one director, which is known as a One-Man Company, and must have at least one shareholder, but no more than 50. The owner enjoys limited liability.
Public companies issue shares to their shareholders, and are often listed on a stock exchange. Public companies are liable to shareholders and management is invested in a Board of Directors.
External companies are foreign companies engaging in business or nonprofit activities in South Africa. They are considered to be doing this if they are:
Registration as an external company grants branches of foreign companies legal status, although they are not separate legal entities (other than for exchange control purposes).
An external company must register with the Companies and Intellectual Properties Commission within 20 business days after it begins to conduct business in South Africa.
A trust is established by an individual “the Settlor/Donor/Founder” and is a means whereby property referred to as “the Trust property” is held by one or more persons called “the Trustees” for the benefit of others referred to as “the Beneficiaries”, or for specified purposes.
In law, the Trustees must manage the Trust property in accordance with the provisions of the law relating to Trusts and the rights of the Beneficiaries as set out in the Trust Deed.
State Owned Companies are business entities which are either state-owned, like South African Airways, Metrorail, or owned by a municipality, like eThekwini Electricity.
South African law used to allow Close Corporations to be incorporated as business entities, until the Companies Act 71 came into force on 1 May 2011. While Close Corporations may no longer be created, existing Close Corporations will continue to operate until they are converted into companies.