Company Types in Company Law

Company Types

• Public Company (Ltd): Not state-owned, private, or personal liability companies.
• State-Owned Company (SOC): Shares are wholly owned by public entities, controlled by the Department of Public Entities.

Non-Profit Companies (NPC)

• Purpose: Formed for public benefit with objectives documented in the Memorandum of Incorporation (MOI).
• Profit Regulations: Profits cannot be distributed to members or directors; all income must advance the NPC's objectives. Only compensation for services rendered is allowed.
• Membership Structure: Unlike companies with shareholders, NPCs have members who possess equal voting rights, which can be modified by the MOI.
• Voting Rights: MOI can define different classes of shares, including voting and non-voting shares.

External Companies (EC)

• Definition: Foreign companies doing business in South Africa but incorporated elsewhere.
• Requirements: Must have at least one employment contract in SA and engage in activities for at least six months.

Domesticated Companies

• Process: An external company can transfer its registration to be recognized as a domesticated company, treated as if originally incorporated in South Africa.

Ratification of Actions

• Shareholder Authority: Shareholders can ratify actions that contradict the MOI through special resolutions. This ratification impacts internal company operations but does not affect third-party contracts.

Representation

• Organs vs. Agents: Organs (e.g., shareholders, board of directors) automatically have authority to act. Agents require specific authority granted by the MOI or board.
• Authority Types:
  • Actual authority (express or implied)
  • Common law Turquand rule allows third parties to assume compliance with internal rules.
  • Estoppel: Company cannot contest claims of authority if it facilitated unauthorized acts.

Control and Subsidiaries

• Control Criteria: Control established through voting shares, ability to appoint directors, and overall voting rights.
• Subsidiaries and Shareholding: A subsidiary can hold up to 10% of non-voting shares in a holding company.

Company Meetings

• Notice Requirements:
  • 15 business days for public companies and NPCs; 10 business days for others.
• Quorum:
  • Votes quorum: 25% of voting shareholders present.
  • Person quorum: At least three shareholders needed if a company has more than two.

Types of Directors

• Executive Directors: Active in daily operations, full-time salaried.
• Non-Executive Directors: Provide oversight without daily involvement, not salaried.
• Independent Directors: Non-executive directors with no other affiliations, not influenced by company relationships.

Director Election and Appointment

• Election Rights: Shareholders entitled to vote can appoint directors; at least 50% of directors in profit companies must be shareholder-appointed.
• MOI Provisions: The MOI may stipulate the appointment process and allow for alternate directors.

Director Removal

• Removal Process:
  • Shareholders can remove directors via ordinary resolution, which cannot be altered by the MOI.
  • The director must be notified of the meeting and given a chance to present before removal decisions are made.

This quiz explores different types of companies including Public Companies (Ltd), State-owned Companies (SOC), and Non-Profit Companies (NPC). Test your knowledge on the characteristics and purposes of each type. Ideal for those studying company law and corporate structures.