Public Companies

• Widely held undertakings are explained in Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd (15854/2013) [2014] ZAWCHC 95; 2014 (5) SA 179 (WCC) (19 June 2014) par 67, for a clear understanding between 'closely' held and 'widely held'.
• A public company is negatively defined in section 1.
• A public company is a profit company that is not a state-owned company, a private company, or a personal liability company.
• Section 8(2)(d) indicates a default profit company is a public company unless otherwise specified.
• Public companies are named "Limited" or "Ltd."/ "Beperk Bpk." under section 11(3)(c).
• A public company has a juristic personality, and its limited liability is often significant.
• Section 13 states all profit companies need one or more incorporators, as seen in sections 66(2) and 67.
• One or more persons may incorporate a profit company by completing and signing a Memorandum of Incorporation (either in a prescribed or unique form) and filing a Notice of Incorporation per subsection (2).
• Public companies are particularly well-suited for attracting large groups of shareholders as investors.
• Shareholder meetings in public companies follow more formal procedures.
• Section 1 and 61(7) pertain to the Annual General Meeting.
• Section 61(10) mandates that shareholder meetings must be accessible within South Africa.
• Section 62(1)(a) requires a 15 business days' notice for shareholder meetings.
• Public companies may be listed on stock exchanges, but it's not mandatory.
• "Listed securities" have the meaning defined in section 1 of the Securities Services Act, 2004 (Act No. 36 of 2004).
• Once listed, shares are traded, and their value is determined by the market.
• Public companies are well suited for listing due to no share transfer limitations or issue restrictions under section 39(1).
• Stock Exchanges are regulated by the Financial Markets Act 19 of 2012.
• The Johannesburg Stock Exchange (JSE) is the primary and historically the only stock exchange.
• Companies can obtain funds from exchanges through an initial public offering (IPO).
• Once an IPO is made, further offers generally take the form of rights offers, comparing section 39 in private companies.
• Chapter 4 and section 95 deal with offers to the public, particularly prospectuses.

Other Exchanges

• CTSE Cape Town Stock Exchange (previously 4 Africa Exchange 4AX), A2X, and Equity Express Securities Exchange (EESE) are other exchanges.
• ZARX's license was cancelled in 2023 due to non-compliance with section 8(1)(a) of the Financial Markets Act, 2012, and related regulations concerning liquidity and capital adequacy, with the suspension effective from August 20, 2021.

Management of Public Companies

• A clear distinction exists between management and shareholders in public companies.
• The separation of ownership and control differentiates between directors (who manage the company) and shareholders/owners (who provide funds).
• Shareholders are investors with voting rights on limited significant issues and not involved in company management.
• Shareholders have voting rights relating to the constitution, important transactions, and board composition.
• Each company incorporator becomes one of its first directors.
• Directors are subsequently appointed by majority shareholders for an indefinite term or as the Memorandum of Incorporation stipulates.
• Board vacancies can be temporarily filled by other board members or according to the Memorandum of Incorporation.
• The board manages the company as per section 66(1).
• The board is authorized to exercise all company powers and functions unless otherwise provided by the Act or the Memorandum of Incorporation.
• The board must consist of at least 3 members, according to section 66(2).
• Requirements of the audit committee section 94(4) and social and ethics committee section 72(4) and 72(4) read with regulation 43(4).
• Day-to-day management is handled by the executives, who may or may not be directors.
• Whether a director, other than the managing director, is an executive director depends on the company's constitution, general meeting conduct, or board decisions evidencing the delegation of executive functions.
• Board approval of a director's employment contract as an executive is a classic example.
• Distinguishing between executive and non-executive directors is important.
• Executives are employed and typically appointed by the board.
• Howard v Herrigel 1991 (2) SA 660 (A)
• Appeal judgment in favour of Old Mutual (Old Mutual Limited and Others v Moyo and Another (A5041/19) [2020] ZAGPJHC 1 (14 January 2020))
• A prescribed officer is defined in s 1, 66(10), and regulation 38.

Prescribed Officer

• The Companies Act introduced the new term "prescribed officer", resulting in debate over who qualifies.
• Per the Companies Act Regulations, a prescribed officer doesn't necessarily need to be a director.
• Traditionally, shareholders exercise control over management.
• The Companies Act of 2008 lets shareholders remove directors from a company board, which maintains accountability, aligning directors with strategic objectives and ethical standards.
• Shareholders have limited control over the company's business activities.
• Conflicts often arise between shareholders and management interests.
• Shareholders bear the residual risk, according to section 37(3)(b)(ii).
• All shares have an irrevocable right for shareholders to vote on proposals that amend share preferences, rights, limitations, and other terms, provided in the company's Memorandum of Incorporation.
• If a company has one class of shares, those shares can be voted on every matter decided by shareholders, and the holders of that class can receive the net assets of the company upon liquidation.
• Shareholders are motivated to maximize profit owed to them.
• Directors' self-interest in their remuneration might cause the company to be directed in a manner that increases their remuneration to the detriment of the profit attributable to the shareholders.
• Directors' remuneration directly impacts the determination of profit attributable to shareholders.
• Strict governance rules are needed to protect shareholders.
• Duties of directors: defined by sections 75, 76, and common law.

Other Stakeholders

• Customers, Suppliers, Creditors, Employees, and the Environment are also relevant.
• Many special provisions regarding transparency in public companies protect wider stakeholders.
• Registered office, Maintaining records, Financial reporting, Financial year, Annual returns, Auditors, Audit Committee, Company Secretary, See also social and ethics committee (section 72(4)ff 72(5) read with regulation 43)