Private Company (Pty Limited) South Africa

Private Company (Pty Limited) South Africa
Private Company (Pty Limited) South Africa

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 The Companies Act, No 71 of 2008 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.

Previously the number of shareholders was restricted in a Private Company ((Pty) limited) to a maximum number of 50. This restriction was, however, withdrawn in the The Companies Act, No 71 of 2008. The rights and obligations of the shareholders vis-a-vis each other and vis-a-vis the company are set out in a memorandum of incorporation and 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. Please bear in mind that close corporations are no longer available as new entities so most new structures will be Pty Ltd.

Advantages of a Private Company ((Pty) limited)

  • Life span is perpetual
  • Shareholders have limited liability
  • Act only 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

Key points of a Private Company ((Pty) limited)

  • Subject to many certain legal requirements depending on turnover size.
  • Difficult and expensive to establish compared to Close Corporations and Sole Proprietorship, although it is now unlikely you will be able to purchase a new close corporation following their withdrawal in 2011.
  • A Private Company ((Pty) limited) must have at least one shareholder. This can be a foreign entity or another Pty Ltd or close corporation.
  • 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 Memorandum of Incorporation provides otherwise.
  • The voting rights of shareholders of a Private Company ((Pty) limited) must be determined by the Memorandum of Incorporation.
  • Certain Private Company’s ((Pty’s) limited) have to have their annual financial statements audited.

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