Since 1 May, the Companies and Intellectual Property Registration Office (CIPRO) ceased to exist and was replaced by the Companies and Intellectual Property Commission (CIPC). The New Companies Act came into being at the same time, changing the way business owners register their companies.
The Act stipulates that no new close corporations (CC) can be registered, but those registered prior to 1 May can continue to operate as CCs.
Registering your company
The Companies Act provides for two categories of companies, namely non-profit and profit companies. Each of the different entities under these categories has specific requirements in terms of the documentation that is required.
1. Types of entities
A company incorporated for public benefit or another object relating to one or more cultural or social activities, or communal or group interests. The income and property are not distributable to its incorporators, members, directors, officers or persons related to any of them.
Profit companies are categorised as companies without restrictions on the transferability of their shares and that do not prohibit offers to the public (larger public companies), and companies that do contain restrictions on the transferability of their shares and that prohibit offers to the public (smaller private companies). They may take one of four different forms: a personal liability company, a state-owned company, a public company and a private company.
Personal liability companies
The directors and past directors are jointly liable with the company for any debts and liabilities arising during their periods in office. The company name ends with the word ‘incorporated’.
This is a company defined as a ‘state-owned enterprise’ or a company owned by a municipality. The names of a state-owned company must end with the expression ‘SOE Ltd’
The definition of a public company is largely unchanged. The only difference is that a public company now only requires one member for incorporation compared to seven members in the past.
While comparable to private companies under the old Act, these are similar to previous close corporations. Some of the changes made to private companies include fewer disclosure and transparency requirements, no longer being limited to 50 shareholders, and a board that must comprise at least one director. The name of a private company must end with the expression ‘Proprietary Limited’ or ‘(Pty) Ltd’.
A company is incorporated by the lodging of a Notice of Incorporation (CoR 14.1) and Memorandum of Incorporation (CoR 15.1 A-E). These forms are available for download from the CIPC’s website.
Memorandum of Incorporation
The Memorandum of Incorporation (MoI) contains the following information:
- Details of incorporators
- Number of directors or alternate directors
- Share capital (maximum issued)
Notice of Incorporation
The Notice of Incorporation, which is lodged with the MoI, contains the following information:
- Type of company
- Incorporation date
- Financial year-end
- Registered address (main office)
- Number of directors
- Company name
– Whether the company name will be the registration number
– The reserved name and reservation number
– List of four names to be checked by the Commission
To register a private company you will complete either a CoR 15.1A (for a standard private company) or a CoR 15.1B (for a customised private company) and a CoR 14.1. The supporting documents required include:
- Certified ID copies of all indicated initial directors and incorporators
- Certified ID copy of applicant if not the same as one of the indicated initial directors or incorporators
- If an incorporator is a juristic person, a power of attorney is required for the representative authorised to incorporate the company and sign all related documents
- If another person incorporates the company and signs all related documents on behalf of any of the incorporators and initial directors, a power of attorney and certified ID copy of the person is required
- If a name was reserved before filing of incorporation documents, a valid name reservation document is necessary
The basic filing fee is R175. According to Elsabie Conradie, head: communication, marketing & stakeholder relations for CIPC, a private company can be registered within one day if the company registers without reserving a name first.
3. Register online
The CIPC’s website allows business owners to register their companies online. Once you are registered as a CIPC customer you will be able to access the transactional website. After you have logged in, look for the ‘New Companies’ link under the ‘Companies’ tab.
4. Naming your company
Under the new Act, name reservation is no longer mandatory before registering a company. If a proposed name is rejected the company may still be registered and the registration number then becomes the name of the company at incorporation until an appropriate name has been reserved. Furthermore, symbols are allowed in company names and all languages are accepted.
To register a company name, you need to complete a CoR 9.1 form. The fee for a manual application is R75 for each name, while electronic is R50. You should indicate up to four alternatives to be considered for reservation in the listed order while only one will be registered. You are also required to indicate whether any word, number or other element constitutes a registered trademark, and provide supporting documents for an associated name. The applicant of a name reservation must be the applicant on the new company registration documents, and will need to include a certified copy of their ID.
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When it comes to the New Companies Act you better start getting used to the words responsibility and accountability. Here’s why
4 Vital Differences Between King III And King IV™ On Corporate Governance
Ilana Steyn, unpacks some of the most significant differences between the Institute of Directors in Southern Africa’s (IoDSA) latest report on corporate governance, the King IV Report, and its former version, King III.
April 2018 marks a year since the effective date of the IoDSA’s (Institute of Directors in Southern Africa) latest report, the King IV Report on Corporate Governance ™ (King IV™), on effective and ethical corporate governance.
What is the King Report?
If you’re not familiar with the King Reports: it’s a series of reports that translate international standards and big-time happenings on corporate governance into set of local principles. Each new Report replaces the former.
The aim of the King Report is to set up actionable principles for South African company leadership to act as modern, good corporate citizens.
It also ensures those in leadership positions act in the best interest of the company and all parties influenced by the company. The first Report, King I, published in 1994, and was the first officiated document of its kind in South Africa.
Why is it useful to my business?
The Report also promotes transparency within your company’s leadership to ensure transgressions aren’t hidden that will eventually damage the company. The Report also ensure blunders can be evaluated, found and corrected ASAP. Today, its mandatory for all JSE listed companies to implement the Report into their company policy.
If you’re a smaller business or a non-profit, you can comply with the Report voluntarily; by applying the principles you’re essentially ensuring the long-term sustainability and survival of the business.
It also helps that create a healthy corporate culture and when your business’s foundation is healthy, growth is unthreatened.
If you haven’t applied any of the former Reports in your business, you’re in luck; King IV™ is the simplest, and seemingly the most practical, Report in the family of four reports.
Why was King IV™ needed?
Companies, especially smaller businesses, often struggled to apply the King III due to its long-winded structure.
King IV™ was needed because King III, published in 2009, was out-dated in terms of present-day concerns like technological advances, the increased need for online transparency, long-term resource sustainability and information security.
Here’s the rundown of the most significant differences between King IV™ and King III.
1. King IV’s™ structure is much simpler to apply
While King III did a good job of summarising the extensive scope of effective and ethical governance into 75 principles, the Report still lacked clear guidance on real-world application.
Ensuring the effective incorporation of all 75 vague, ethical principles was too exhaustive for most companies to implement, monitor and account for.
That’s why King IV™ took a different structural approach. King IV™ boiled good corporate governance down to 17 simplified principles, each supplemented with various recommended practices to make it easier for smaller companies to implement the principles within their day-to-day running.
2. King IV™ spotlights practical implementation
King III lists multiple ethical principles and then commands companies to explain how their management and actions honour those principles. Unfortunately this meant companies approached it like a mindless compliance checklist.
King IV™ also states principles, but more importantly, requires organisations to actively report on the implementation of the recommended practices thereof.
Mervyn King, the chair of the King Committee, dubs this the shift from a “apply OR explain” mentality to a “apply AND explain” mentality. The Report also allows organisations to report on alterative-implemented practices – provided they support and advance the principle.
To make the application simpler to grasp, King IV™ clearly differentiates between the long-term Outcomes, the ethical Principles and the recommended Practices. Essentially the new structure and its requirements mean companies have to engage in thoughtful implementation and reporting of those practices.
3. King IV™ is inclusive to more than just large companies
After King III, there was a significant demand for the inclusivity of smaller businesses, and governmental or non-profit organizations in the King Report.
Consequently, King IV™ dedicates an entire supplement chapter to guiding municipalities; non-profit organizations; retirement funds; small and medium enterprises and state-owned entities in the implementation of the Report.
Also, where King III used terms like “companies” and “boards”, King IV™ very purposefully uses more inclusive terms like “governing bodies” and “organizations” throughout the report. It’s clear that King IV™ aims to move the principles on good corporate governance into real-world action – for all organisations.
4. Difference 3: King IV™ pushes for more accountability, transparency and reporting
What King IV™ does quite differently from King III, is recommending the application of its principles within set timelines, reports and committees within it’s recommended practices.
King IV™ strongly propagates transparency, the delegation of responsibility and the implementation of accountability by putting pen to paper in term of officiated aims, bodies responsible for those aims and the provisions of consistent reports.
Take leadership as an example, where King III would just stipulate what being a good leader means, King IV™ advises you to set goals, delegate responsibility and evaluate progress through reports and accountability.
An example would be to set up a committee, consisting of lower management levels, with clearly identifiable responsibilities and then to measure their progress via reports. It comes down to the ignorance no longer being a valid excuse. Directors should be aware of all issues within your company.
Directors should take responsibility for everything that happens within their organisation – you can’t plead innocence on the grounds of not knowing. There should rather be reports in place to identify and uncover any discrepancies early on.
Essentially, where King III lacks in the aim of ensuring the actualization of good corporate citizenship, King IV™ steps up the game.
Can Your Words Be Used Against You?
Yes, they most certainly can. Here’s what the RICA Act has to say about recordings.
“This call may be recorded for quality control and records purposes…” Anyone who has been on hold with insurance companies would be familiar with these words — but what are the implications of a recorded conversation and when is it legal?
In essence, the Regulation of Interception of Communications and Provision of Communication-Related Information Act of 2002 (mercifully shortened to ‘RICA’) permits any person, who is a party to a conversation to record that conversation, provided that it is direct communication — which is defined as oral communication between two or more persons that occurs in the immediate presence of those persons.
Section 4 of the RICA Act governs this aspect of our monitoring law. What is unclear, however, is the degree to which this extends to legal persons, such as a company that monitors a call centre agent’s performance, for example.
Related: Understanding Shareholder Agreements
Evidence in legal cases
While limited to direct communications and not covered by third party interception, such as an eavesdropper, the lesson here remains pretty stark — you could legally be recorded during any conversation you have.
The implications of this are significant — just ask former Springbok player Luke Watson, who had a conversation recorded during a function in 2008 that was subsequently leaked to the media.
Furthermore, with the widespread use of smartphones, together with applications freely available on the relevant app stores, designed to record cellphone calls, the likelihood of you being recorded — whether you know it or not, is ever increasing.
Beyond the moral or ethical ambiguity of this, the legal ramifications of what is recorded are more certain — the recording may be used against you as evidence in any criminal proceedings, or equally as possible, in civil proceedings where, for example, agreement to a contract or term thereof is in question, or in the insurance company’s case, whether or not to repudiate a claim based on the information you provide to them.
Related: Protect Your SME From PoPI
Know the business exception
Section 6 of the RICA Act contains a course of business exception that allows the interception of indirect communication:
- a) By means of which a transaction is entered into in the ordinary course of business
- b) Which relates to that business
- c) Which otherwise takes place in the course of that business.
While there has not, to my knowledge, been a reported case that deals with this aspect of the RICA Act, the implications regarding the use of this information to evidence the valid conclusion of a contract or as to the intentions of the parties to a contract are significant, particularly given that the scope is relatively broad, although limited.
The matter has, however, come before the Constitutional Court in the 1999 criminal case of S v Kidson, where the court held, per Justice Cameron, that unless a “reasonable expectation of privacy exists” it would be difficult to prevent the recording or interception falling within the ambit of the RICA Act.
Where to from here?
From both a commercial and criminal perspective, this should serve to remind us all of our wise grandmother’s words — if you have nothing nice to say, rather say nothing at all (especially because you never know whether you are being recorded).
Why You Shouldn’t Be Sweating The Fine Print
Signing a contract is a big deal, and you never want to sign anything you don’t fully understand.
While it is almost always a grudge purchase, ensuring that you have had a legal eye cast over a contract you intend to conclude means that you are protected, that you understand the nature of the obligations you are taking on and perhaps, an even better deal for you.
Given that legal agreements are an important aspect of commerce, we have distilled key points for you to consider, before engaging with external counsel. This will make the process more efficient and, hopefully, less expensive.
Reviewing a contract is a tricky business, not entirely different from asking a builder to finish building a half built house. However, there are some useful techniques to ensure you get the most out of the exchange with your lawyer.
Always create a timeline
You have lived and breathed your business and this transaction, while your attorney is possibly hearing about the matter for the first time.
Setting the scene correctly puts your attorney in the picture and explains what you want out of the exchange. Print this out for your attorney.
It will help an attorney identify key areas of risk which you might not have anticipated. Be sure to also tell your external counsel how quickly you need the review to be done. Setting expectations means there is less chance of disappointment later.
Provide supporting documents
It wastes your time and money when your attorney has to come back to ask you for supporting documentation.
Try to anticipate which documents will be relevant to your transaction and bring copies of them to the meeting for your attorney to consider. If you have previous versions of the agreement, for example, bring those too.
Remember, the more background work you do, the simpler and more efficient the process will be.
Understand your needs
Are you looking for a high level overview of your document to highlight some key contractual risks or are you looking for a thoroughly sanitised document reviewed from every possible angle?
I recently had to look over Jim’s Sale of Business Agreement for the potential acquisition of his Technology Company. He came to me with limited areas of risk which he had identified and wanted me to look at these clauses.
I was able to advise him to push back on certain clauses he had already negotiated and the resulting document placed him in a stronger legal and financial position. It was easy to justify the costs associated with the review.
This is not always necessary though — where there is limited legal exposure, or you have no bargaining power, the role of the attorney can be restricted, but still worth the investment since you have assurance that your legal exposure is as restricted as possible.
Be guided by the relative value of the document and the ensuing legal responsibilities — is this a standard supply agreement with a strange payment clause or a multi-national acquisition of intellectual property? The type of expert you engage with will vary, as will the cost of the review.
Areas of concern
Directly related to knowing your business and understanding your needs, is your responsibility to communicate specific areas of concern to your attorney.
A recent client’s business processed a lot of personal information, in accordance with the Protection of Personal Information Act, but, the contractor they were about to sign a service supply agreement sought to have access to some of this personal information.
Seen alone, there was little risk, but within the context of this business, we were able to avoid this. A trusted and qualified expert will help you navigate the complex commercial world.
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