A Private
Company ((Pty) limited) is treated by South African law
as a separate legal entity and has to register as a tax payer in
its own right. A Private Company ((Pty) limited)
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 ((Pty) limited)
are shareholders.
A company may not have an interest in a close corporation.
The Act restricts the number of shareholders in a Private
Company ((Pty) limited) to a maximum number of 50. The
rights and obligations of the shareholders vis-a-vis each other
and vis-a-vis the company are set out in a shareholders agreement.
The name of a private company must end with the words '(Proprietary)
Limited' or '(Pty) Ltd'.
Details here
comparing a Private Company ((Pty) limited) to a close corporation
Advantages of a Private Company ((Pty) limited)
- 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 of a Private Company ((Pty) limited)
- Subject to many legal requirements
- Difficult and expensive to establish compared to Close Corporations
and Sole Proprietorship
- A Private Company ((Pty) limited) must have at least one and
no more than fifty shareholders
- A Private Company ((Pty) limited) must have at least one director
- A Private Company ((Pty) limited) 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 ((Pty) limited) 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 ((Pty) limited)
(except in the case of a one-person company), unless the articles
provide otherwise
- The voting rights of shareholders of a Private Company ((Pty)
limited) must be determined by
the articles or as set out in a shareholders agreement
- A Private Company ((Pty) limited) has its annual financial
statements audited
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