In terms of the new companies act, what are all the legal...

In terms of the new companies act, what are all the legal and accounting requirements for someone starting a privately owned company?

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The legal requirements for registering a private company are very similar to that under the old Act. Shelf companies are still available, and most people would still prefer to buy a company that has already been incorporated, rather than incorporate a company from scratch. A private company requires at least one director, and at least one shareholder. This can be the same person.

All private companies are required to prepare annual financial statements, but whether or not these financials have to be audited depends on the size of the business and the manner in which the financials are prepared. The regulations of the Act set out a formula to determine what is called a ‘public interest score’.

If a private company’s public interest score is more than 350, or if it is between 100 and 349 and the financials were prepared internally, the company must have its financials audited. Even if it is not required by the Act, a company may choose to have its financials audited.

If a company is not required to audit its financials, and does not choose to do so voluntarily, they must be independently reviewed by an independent reviewer. For companies with a public interest score exceeding 100, a registered auditor (or a member of a professional body accredited in terms of section 33 of the Auditing Profession Act) is required to perform the review.

A company’s public interest score is calculated by allocating one point for each of the average amount of employees of the company during the financial year, one point for every R1m of debt that the company has at the financial year end, one point for every R1m in turnover during the financial year, and one point for every shareholder of the company at the financial year end.

Small privately owned companies generally fall below these thresholds.