Setting up a Private Company (PTY LTD) in South Africa PDF Print E-mail

Setting up a business in South Africa - Private Company ((PTY) Limited) South Africa

The PRIVATE COMPANY ((PTY) LIMITED) SOUTH AFRICA is treated by law as a separate legal entity and has to register as a tax payer in its own right. It has a separate life from its owners and is required by the Companies Act No 61 of 1973 to perform rights and duties of its own. The owners of a private company are shareholders. A company may not have an interest in a close corporation. The Act restricts the number of shareholders in a private company to a maximum number of 50. The rights and obligations of the shareholders viz a viz each other and viz a viz the company is set out in a shareholders agreement. The name of a private company must end with the words '(Proprietary) Limited' or '(Pty) Ltd'.

Advantages

  • Life span is perpetual;
  • Shareholders have limited liability;
  • Act imposes personal liability on directors who are knowingly part of the carrying on of the business in a reckless or fraudulent manner;
  • Ease of transfer of ownership;
  • Easier to raise capital;
  • Efficiency of management;
  • Adaptable to both small and large businesses;
  • Not required to file their annual financial statements with the Registrar of Companies, thus, they are not available to the general public.

Disadvantages

  • Subject to many legal requirements;
  • Difficult and expensive to establish compared to Close Corporations and Sole Proprietorship;
  • A private company must have at least one and no more than fifty shareholders;
  • A private company must have at least one director;
  • A private company's articles must restrict the right to transfer its shares, and prohibit any offer to the public for the subscription of any shares or debentures of the company. A private company cannot, therefore, be listed on the stock exchange. A private company cannot issue share warrants or bearer shares;
  • The quorum for a meeting is two shareholders for a private company (except in the case of a one-person company), unless the articles provide otherwise;
  • The voting rights of shareholders of a private company must be determined by the articles or as set out in a shareholders agreement.
  • Must have its annual financial statements audited.

Back to company structures

The above article was contributed by the Incompass Group. Incompass provides a one stop service for returning South Africans that are considering setting up their own business. They are able to assist with Company formation, business plans, due diligence, marketing strategies and tax structures.

Incompass can be contacted here.
 

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