There are several types of companies in South Africa, but all were formed and established under the companies act. Actually, the country has passed through different changes in its business policies but has a reputation for being one of the most advanced countries in Africa.
The country has done a lot in establishing a business environment where many foreign investors can confidently put their money, and it is cool for the economy. In this article, I listed all the different types of companies in South Africa.
Types of Companies In South Africa
1. Non-Profit Companies
These are specially formed companies established only for lawful purposes. A company in this category can only be created by three or more persons, and the main essence must be for the benefit of the people.
Also, non-profit companies can be created with an aim that relates to multiple cultural or social activities (or interests) of the groups. Think about such things as having the aim of promoting religion, Science, Education, charity, etc. It is easier for such companies to get tax exemption unlike those that are majorly out to get profit for their investors.
2. Profit Companies
These types of companies are created simply to make money and give profit to investors and shareholders. This is their major concern. They might play in different markets – telecommunications, manufacturing, agriculture, and so on. The shareholders invested their money in such ventures so they can gain financially, and of course, they share what they make.
A company that falls in this category can be formed by one or two or more people (such can also be formed by the State). It is usual for them to pay tax to the Government, and due to the nature of their operations, such demands are high.
3. State-Owned Companies
The Government can also have her own companies serving some purposes. South Africa is a dynamic country. Private folks can own and run their own companies and make a profit, and the State can go the same path when necessary. Such organizations owned by the Government belong to the State and not any individual. The State is responsible for the smooth running of the company and its operations. They might be created simply to help alleviate some issues faced by the citizens of the country, which private individuals couldn’t settle due to lack of resources.
4. Private Companies
A Private Company in South Africa belongs to at least one individual. It is owned by a person or a group of persons, and not the State. Hence, the owners are bedevilled with the responsibility of running its affairs. Another important thing that must be stated is that such companies as these shouldn’t (and can’t) sell shares to the public.
The board of such companies (if they have one), or its owner, can make significant decisions and steer the wheels of the company anywhere and anyhow they want. Since they provided the resources used for the operations of the organization, they are not required to wait to please anyone outside, unlike a public company that is listed and has massive shareholders.
5. Personal Liability Companies
This form of organization is regarded as a successor to the 1973 act in South Africa. Indeed, not all companies can be regarded as personal liability companies, but only those that meet the criteria. They should have directors and should move in line with what the law has laid down.
One easy way to know the companies that fall under this category is that their names end with ‘incorporated’ or simply ‘Inc’. Of course, it should be noted that even organizations that are not for profit can carry the “Inc” tag too.
6. Public Companies
There are also public companies in South Africa (just as they are in other places in the world). This is formed when one or more people are associated with a lawful purpose to incorporate a company. It should be noted that such companies usually have their capital raised by the general public. In the firm, shareholders experience transferability of shares as well as interest.
Companies that list their shares publicly, where anyone can buy shares in the company, is a public company. It should be noted that a company can start from a private level and eventually transform into a public company. For instance, an individual can start a company from the scratch with capital provided by him. But at some point, it can become a public company when shares and stakes in the company are sold to others. What it means is that the company is no longer that of the man alone. Rather, everyone who has shares in the company are all shareholders.
Depending on certain frameworks, the highest shareholders might be required to have a representative on the board. It means they have the right to exert a decision as far as the company is concerned. If the company was started by a person or group of persons as a private company, as soon as it has been listed, the company is no longer theirs alone, but belongs to everyone who bought shares (the money they put into the venture made them investors too). There can be majority shareholders (those who have the largest percentage of shares in the company).
7. External Companies
These are companies that were set up and being operated by foreign investors. They belong to folks which are of origin other than South Africa. Such firms might be a for-profit company or even for non-profit. But they are referred to as external companies as they are operated by foreign investors.
It is quite pretty when foreign investors have confidence to put their money to work in South Africa. Actually, due to some factors, South Africa is a country where investors don’t mind creating firms that should help them grow their money. Their activities helps in creating more jobs for the populace. It should however be noted that many foreign coys with investments in the country are legally required to be registered as external companies.
8. Close Corporations
There are a lot of Close corporations in the country that are regulated by Close corporation’s acts. When we talk about a close Corporation, we are talking about an individual that is considered different from its members. It should also be added that succession in enjoyed by their members.
Corporations that are in this category may actually be formed by a single individual. It should be noted that such coys do not offer share capital and shares. Rather, there are member interests which are based upon the ownership percentage.
They can run their activities internally without having to bother much about what the public is saying, as they are the investors whose money is at work. So, as far as this is concerned, there are no strict rules about capital maintenance. Such corporations are set up by collective efforts from the members, and they are all equals. They don’t really have directors, but all members agree on how best they want the corporation to be operated.
Unlike a public company, these corporations are not under obligation to make known their accounts and major internal activities to the general public. You know, public companies can’t but publish their major stuff to the general public – where everyone will see their expenses, income, and so on. They have directors and managers working with a complex inaugurated system – unlike the close corporation with simplicity in management. It should also be added that these corporations are usually small, and since 2011, are restricted by the government of the country.
9. Domesticated Companies
Previously, we have talked about external companies, and have explained that they are coys set up by foreign investors and entities in South Africa (and are managed by them). Now, when such companies have had their registration transferred to South Africa, and will be as a firm in terms of the Companies Act, such will now be called a domesticated company.
Such companies will now be as if they have been originally incorporated and registered in South Africa by their owners. This makes things easier for everyone.
10. Sole Proprietor
This of course is a popular one, not just in South Africa alone, but in different places in the world (and for several reasons too). This is usually referred to as a one-man-owned business and is actually regarded as the simplest form of business in the country.
Anyone can decide any day to rise up to start a business, and they operate under their name. In a sole proprietorship, there is actually no separation between the firm and the individual that owns the company.
Some people (two or more) can decide to come together to establish a business. This is known as a partnership. Before business activities commence, they will come to terms and embrace some agreements that will spell out certain important things to avoid issues in the future. The partners are co-owners, and they share profits made as agreed in their deal.
When an autonomous group of individuals comes together voluntarily to meet a common economic or social need in the country, it is regarded as cooperative. Their activities are based on the principles of the cooperatives.
This is when a firm is holding or managing a property or venture on behalf of another person. Their activities are not directly for their own benefit, but that of the owner/owners.
In conclusion, as we have seen, there are different types of companies in South Africa with different principles, aims and objectives. One of the beautiful things about all is their positive effects on the economy.