Make sure your company's name correctly classifies it so you can comply with the Companies Act
If you want to set up a company, it can either be a private, public, personal liability or State Owned company. Your company's name must reflect which of these categories it falls into. The Companies Act requires this. So make sure you name your company correctly.
To help you do this, here's how to name your company depending on your classification.
The Act says private companies must have Proprietary Limited or (Pty) Ltd after their name.
Remember: If your company is a private company, you can't offer shares to the public or transfer them.
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There are 11 law changes from the Companies Act that directly affect the financial manager. Do you know what they are?
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Your company will have Limited or Ltd. after its name.
You can choose to list this company type on the JSE or not. For example, SABMiller and AngloGold Ashanti are public companies.
Personal liability company:
Your company will have Incorporated or Inc. after its name. This is a form of private company for people like doctors, auditors or lawyers.
This kind of company uses succession to keep the business growing. In this case, all the directors are equally liable for any company debts.
State Owned Company:
These have to have SOC Ltd after their names.
These are government and regulatory bodies, like Johannesburg Water SOC Ltd, TELKOM SA SOC Ltd, etc. Generally, this company type serves a particular government or public purpose.
A state-owned company is a profit company and must be either:
1) A listed public entity as listed in Schedule 2 or 3 of the Public Finance Management Act
2) Owned by a municipality as per the Local Government: Municipal Systems Act
As evident in the name, the State owns State-owned companies.
If you're setting up a non-profit company, you have to follow a different rule.
If you own a non-profit company, here's what you must do
The Companies Act says you must have NPC behind your company's names if it's non-profit. NPC stands for 'Non-profit Company'.
If your company's a non-profit company, it must be for a public benefit. In other words, the company's aim must be to help the community or promote an interest in the community.
If, as a non-profit company, you make a profit, you can't distribute it to your shareholders. You must put any profits back into the company. As a non-profit company you'll treat profits as a 'surplus'.
As you can see, classifying your company has everything to do with what you put at the end of your name. So make sure your company's name complies with the Companies Act and has the right classification.
To make sure your new company complies with the rest of the Companies Act's rules, check out The Companies Act: 11 law changes for the financial manager.