Transcript Categories of Companies

South African
Companies Act
2011
Categories of Companies
Companies
Gain vs Public Benefit
Profit
Not stateowned
PFMA definition
Non-profit
State-owned
MOI
Private
company
Personal
liability
company
Public
company
State-owned
company
Non-profit
company
Name
(Pty) Ltd
Inc.
Ltd
SOC Ltd
NPC
Registration of external companies
(foreign)
Directors or shareholders
meetings
Party to one or more
employment contracts
Bank accounts
Continually engage in
business activities for at
least six months
Maintaining offices or
agencies for transfer of
securities
Acquiring debts or
mortgages or interest in
property
Names of Companies
Prohibited
Suffixes
Other
• Similar to another
company,
business or
person
• Falsely implying
associations
• Propaganda of
war, hate speech,
violence, etc
• If number used:
• “(South Africa)”
• If MOI contains
special conditions
(restrictive or
procedural
conditions):
• “(RF)”
• Personal liability
• “Incorporated”
or “Inc.”
• Any letters, words
and some symbols
• Name reservation:
valid 6 months,
with 60 day
extensions
• Anti-abuse
provisions
Company formation
• Profit company: One or
more persons (or organ of
state)
• Non-profit company: 3 or
more persons
By Whom?
How?
• Filing a “Notice of
incorporation” +
• Copy of MOI
• Issue unique registration
number
• Enter information in the
companies register
• Issue and deliver a
registration certificate
Registrar
MOI + Rules of the company
MOI
Sets out rights, duties,
responsibilities of
shareholders and directors
Board may make rules
Can alter any alterable
provision of the Act.
Effective 20 (10) business
days after published, or date
specified in rule
Can prohibit an
amendment of any
provision
Amended by special
resolution adopted at
shareholders meeting
File notice of
ratification/nonratification within 5
Rules
Permanently binding if
ratified by ordinary
resolution
If published (filed) but not
ratified board may not make
similar rule within 12
months
Amendment of MOI of “Inc.”
Personal Liability
Company
10 business days
advance notice
To any professional or
regulatory authority
Any person who acted
in reliance upon joint
and several liability of
directors
Company records
Accessible from
registered office
Location
If not kept at
registered office file
notice setting out
location
Minimum of 7 years
Retention period
Written form
Form
Another manner that
allows information to
be converted in
written form
Longer period as
per regulations
Company records
Copy of MOI
Reports presented at
AGM
Any amendments to
MOI
Annual financial
statements
Copy of rules
Accounting records
Indefinitely
For 7 years
Registration certificate
Notice and minutes of
shareholders/
directors/ committee
meetings
Register of directors
Resolutions adopted
by shareholders
Securities register
Written
communication to
shareholders
Directors’ register
Full names and former names
ID No or date of birth
Nationality and passport No.
Occupation
Date of most recent
appointment
Name and registration
number of all companies of
which the person is a director
(related parties)
Name and registration
number of any company of
which a person related to
that director is a director or
prescribed officer
Professional qualifications
and experience of a director
who sits on the audit
committee
Access to company records
Who?
• Person who holds or has
beneficial interest in any
securities
• Inspect and copy
information in the
company records
Method
• Direct request, personally or
through attorney in writing
• Access to Information Act
• May not charge a fee to
inspect or copy a record
• MOI and rules
• All registers
• Annual financial statements
and all reports at AGM
• All information relating to
shareholders
What?
Excluded: Minutes and resolutions of directors meetings, committee’s and audit committee
Accounting records
Complete
Adequate precaution
against theft, loss,
falsification, intentional
and accidental damage
or destruction
Accurate
Facilitate the discovery
of falsification
To prepare financial
statements
Capable of being
retrieved to a readable
and printable form
Warning: Commission may issue compliance notice in respect of any
failure to comply with accounting record requirements
Accounting records (Regulation)
• Asset register
• Liabilities and obligations register
• Record of property held in a fiduciary
capacity
• Loans to/ form directors, prescribed
officers, shareholders, employees and to
any person related to them
• Details of interest and repayments
• Statements of every account maintained in
a financial institution in the name of the
company with vouchers supporting
transactions
• Register of guarantees granted i.r.o an
obligation to a 3rd party
• Register of revenue and expenditures
• Register of contractual obligations due to
be performed in the future
• Daily records of cash in and out
• Daily records of goods purchased and
sold on credit
• NPC: Register of revenue from donations,
grants, members, fees, funding etc
Financial Statements
• Annual financial
statements
• Interim or preliminary
reports
• Group and
consolidated financial
statements
• Financial information
in a circular
• Prospectus
• Provisional
announcements of
results
Definition
Must not be
• False
• Misleading
• Incomplete
• Satisfy financial
reporting standards
• Dated and set out the
accounting period
• Bear on first page
whether audited or
independently reviewed
• Name and professional
designation of the
individual who
prepared/supervised
the preparation
Must
Warning: If any financial statements of a company is false or misleading, any person who is a party to the
preparation, approval, dissemination or publication of that statement is guilty of an offence if that person
knew that the statements were materially false or misleading
Financial reporting (page 86)
Listed Public/State owned
Public not listed
- (Pty) Ltd/ NPC and CC’s that
holds assets in fiduciary
capacity, OR
- NPC incorporated by State,
organ of state, international
entity or foreign company
IFRS/ PFMA
IFRS
IFRS/PFMA
All listing requirements
Audit
Audit
Secretary, auditor, audit
committee
Secretary, auditor,
audit committee
Audit
Financial reporting
- (Pty) Ltd subject to
compliance notice, OR
- NPC if it accepts donations
from general public and its
assets > R 60 mil or current
expenditure > R120 mil in
prior year
(Pty) Ltd/NPC that do not take
donations
With assets > R 100 mil or
turnover > R 200 mil
(Pty) Ltd where all shares are
owned by a single
shareholder, or where all
shareholders are directors
With assets between R 5 and
R 100 mil and turnover
between R 20 mil and R 200
mil and
IFRS for SME’s
Agreed upon procedures
IFRS
Engagements to review
financial statements
Audit
Reviewed by independent
accounting professional
No audit
Financial reporting
Independent accounting professional
(Pty) Ltd and NPC with
assets < R 5 mil and
business revenue < R 20 mil
No audit or
independent review
Meaning of independently
compiled and reported
No personal financial interest in
company/ related or inter-related
company
Prepared by
independent accounting
professional
On basis of financial
records provided by the
company
Independently compiled
and reported
Member of professional body that is a
member of IFAC
Not involved in day-to-day
management
Not been in day-to-day management
during previous 3 years
Not a prescribed officer
Is/ has not been an employee for last 3
years
In accordance with
relevant standards
Not a material supplier / customer or
related to such person
Annual return and financial
accountability supplements
Audited
• File financial
statements
with annual
return
Voluntarily
audited
• Choose
between
financial
statements or
financial
accountability
supplement
to file with
annual return
Not audited
• File financial
accountability
supplement
with annual
return
Shareholders Meetings
Notice in writing stating date, time, place and purpose. Include a copy of any proposed resolution. Minimum periods are:
•Public Company:
15 business days
•One shareholder:
no notice
•Other:
10 business days
•May be extended by MOI
May appoint a proxy
May be done electronically
Default quorum
•25% of votes AND
•Three shareholders (if a company has more than 2 members)
Resolutions
•Special:
75% but MOI may specify less (or more)
•Ordinary:
50% but MOI may specify more
•Margin of 10%
Annual General Meeting
Frequency
• 18 months after date of incorporation
• Once every calendar year but no more than 15 months after previous AGM
Minimum business
•
•
•
•
•
•
Present directors’ report
Present auditors’ report
Present audit committee report
Election of directors
Appointment of auditor
Appointment audit committee
Notice
• Same period as other shareholders’ meetings
• Include financial statements
Minimum Directors
Non-Profit
Companies
• Three
Public Companies
• Three
Personal Liability
Companies
• One
Private Companies
(Other)
• One
Private Companies
(Closely Held)
• One
Profit Company (other
than SOC):
Shareholders to elect
50% of directors and
alternate directors
Director includes:
Prescribed officer
Person who is
member of a
committee
Ineligibility and disqualification
of directors
Ineligible
Disqualified
Not disqualified if all shares held
by that or related person
• Juristic person
• Minor or legal disability
• Does not satisfy qualification set out in MOI
•
•
•
•
Prohibited by court or declared delinquent
Unrehabilitated insolvent
Previously removed for dishonesty
Imprisoned without option of a fine for theft,
fraud, forgery, perjury
Disqualification ends
automatically after five years
For single conviction or loss of office only
Director’s personal financial
interest
• Must not influence a decision in which the director has a conflicting
personal financial interest.
• Must disclose interest in advance
• Delivering a notice in writing
• Setting out the nature and extent of that interest.
• Must leave meeting – not entitled to vote on the matter.
• Transaction not void if approved or ratified by ordinary resolution
Does not
apply if:
Decision
affects all
directors
or
only one
director who
is only
shareholder
Liability of directors and officers
Common law
In contravention of Act
or MOI
Breach of fiduciary duty
Liable for loss, damages
or costs suffered
Taking part in a meeting
(formal or informal) and
failed to vote against
following
Issuing of unauthorised shares or options
Issuing of authorised securities without
shareholders approval
Provision of financial assistance to any person for
the acquisition of securities (inconsistent with MOI)
Provision of financial assistance to a director
(inconsistent with MOI)
Conduct does not
need to be
fraudulent or
carried out with
gross negligence
Approving a distribution (solvency + liquidity)
Acquisition by company of its shares or shares of
holding company in contravention of S46 or S48
Exclusion of duties
Any provision
void that is in
Relieve a director of:
Agreement
MOI
Rules of company
Resolution adopted
duty
Directly or indirectly
liability
limit, negate or restrict
any legal consequences
Arising from act or omission that constitutes willful misconduct or breach of
trust
Indemnification
Company may purchase
insurance to protect a
director against liability
Advance expenses to defend
litigation
Indemnify directly or indirectly for
litigation expenses
Only
if
Proceedings are subsequently
abandoned
Director not found liable
Directors’ conduct
• To act honestly, in good
faith, in the best
interest of, and for the
benefit of the company
• Prohibited from using
position to gain an
advantage or to
knowingly cause harm
to the company
Fiduciary duty
Duty of care
and skill
• Exercise a degree of
care, skill and diligence
that would be exercised
by a reasonably diligent
individual performing
same function
• Had taken reasonable
diligent steps to become
informed about the
matter
• Had no material interest
in the matter
• Disclosed the financial
interest to the board
• Reasonably believed
that the decision made
was in the best interest
of the company
Business
judgment rule
Duty to disclose information
When
What
Earliest
practicable
opportunity
Unless reason to believe
Any
information
that comes to
his attention
Immaterial
to
company
Generally
available to
public
Known to
other
directors
Legally or
ethically
not
allowed
Relying on information
Directors are entitled to rely on information provided by:
Employees of
the company
Legal counsel
Accountants
Other
professional
persons
Committee of
the Board
Financial Assistance
Employee share scheme
OR
By special resolution (within 2 prior years)
AND
Solvent and liquid after transaction
AND
Terms fair and reasonable to company
Solvency and liquidity test
Considering reasonably
foreseeable
circumstances:
Assets fairly valued equal or
exceed liabilities fairly valued
Able to pay debts as due for 12
months after consideration of
test
Able to pay debts as due for 12
months following distribution
Include contingent assets
and liabilities
Auditors
Rotation after five years
All
companies
Entitled to attend AGM
Other services if allowed by:
Two year
break
IRBA
Audit committee
Audit Committee
Compulsory
At least three members
Duties
• Public Companies
• State Owned
Companies
• All non-executive
• All independent
• Nominate the auditor
• Determine audit fees
• Pre-approve non-audit services
• Prepare a report for AFS
Social and Ethics Committee
• Desirable in public interest
• Annual turnover
• Workforce size
• Nature and extent of
activities
Unless
• Required by other
legislation
• Exempted by the Tribunal
Compulsory
Valid for 5 years
Business rescue
Minimum qualifications of business rescue practitioner for public and state
owned companies, or a company that is required to have its financial
statements audited
• Attorney: 10 years experience
• Member of professional body that is member of IFAC:10 years experience
• Practicing liquidator, or business turn-around practitioner:10 years
experience
• Recognised degree in law, commerce or business management:10 years
experience in conducting business rescue proceedings
• Other companies:5 years experience
Fees for business rescue practitioners
• R 2 000 per hour, to a maximum of R 25 000 per day for 1st category
• R 1 250 per hour, to a maximum of R 15 625 per day