COMPANY & ITS

INCORPORATION &
REGISTRATION
 Introduction
◦ The Companies Act, 2008 recognises the right of any person to form a company.
◦ . You can register a company as a non-profit company or profit company with the Companies and Intellectual Property Commission (CIPC).
◦ A company is a legal person which has capacity and powers to act on its own.
◦ CIPC was established by the Companies Act, 2008 (Act No. 71 of 2008) as a juristic person to function as an organ of state within the public
administration, but as an institution outside the public service
◦ Main functions of the Commission (CICP):
◦ Registration of Companies, Co-operatives and Intellectual Property Rights (trade-marks, patents, designs and copyright) and maintenance thereof;
◦ Disclosure of Information on its business registers;
◦ Promotion of education and awareness of Company and Intellectual Property Law;
◦ Promotion of compliance with relevant legislation;
◦ Efficient and effective enforcement of relevant legislation;
◦ Monitoring compliance with and contraventions of financial reporting standards, and making recommendations thereto to Financial Reporting
Standards Council (FRSC);
◦ Licensing of Business rescue practitioners; and
◦ Report, research and advise Minister (Department of Trade & Industry (DTI) on matters of national policy relating to company and intellectual
property law.
 The Commission’s role in the incorporation of a company
◦ The Commission may reject a notice of incorporation if it is incomplete or improperly completed.
◦ A deviation from the design or content of the prescribed form does not invalidate the action taken by
the person completing the form, unless the deviation negatively and materially affects the substance of
the notice of incorporation, or where the deviation would reasonably mislead a person reading the
notice.
◦ In each instance, the particular completed form will determine whether the notice of incorporation is to
be regarded as invalid.
◦ The Commission is also compelled to reject a notice of incorporation if the number of initial directors
of the company is fewer than the prescribed minimum number of members.
◦ The Commission is also compelled to reject a notice of incorporation where one or more of the
suggested directors is disqualified from becoming a director and the remaining directors are fewer than
the required minimum.
 Incorporation of a company
◦ The incorporation of a company involves the filing of a notice of incorporation.
◦ A notice of incorporation is defined as the notice to be filed in terms of s 13(1), by which the incorporators of a
company inform the Commission of the incorporation of that company for the purpose of having it registered.
◦ In terms of s 13, the notice must be filed together with the prescribed fee, and must be accompanied by a copy of the
MOI.
◦ NB these steps are very important and are discussed in page 62 of the prescribed book.
◦ One or more persons may incorporate a profit company, whereas three or more persons may incorporate a non-profit
company.
◦ Steps to be taken in order to incorporate a company as provided for in terms of section 13 of the Companies
Act
◦ 1. Each person should complete and sign the MOI
◦ 2. The notice of incorporation must be filled with the Commission.
◦ 3. Together with the prescribed fee,
◦ 4. Accompanied by a copy of the MOI
 STEPS TO INCORPORATE A COMPANY:
◦ NB these steps are very important and are discussed in page 62 of the prescribed book.
◦ One or more persons may incorporate a profit company, whereas three or more persons may incorporate a
non-profit company.
◦ Steps to be taken in order to incorporate a company as provided for in terms of section 13 of the
Companies Act
◦ 1. Each person should complete and sign the MOI
◦ 2. The notice of incorporation must be filled with the Commission.
◦ 3. Together with the prescribed fee,
◦ 4. Accompanied by a copy of the MOI
 MEMORANDUM OF INCORPORATION
◦ A company’s MOI is a flexible document and determines the nature of a company and the rights, powers and duties
of stakeholders. The term “MOI” is an abbreviation for “Memorandum of Incorporation”.
◦ MOI is the founding document of a company. It replaces both the Memorandum and the Articles of Association that
were required for the formation of a company in terms of the Companies Act, 1973.
◦ The MOI must meet certain core requirements which are that certain provisions of the Companies Act must apply
to all companies and these cannot be changed in a company’s MOI – they are known as the unalterable provisions
of the Act.i.e. Thus, for example, all companies must prepare annual financial statements.
◦ All other issues and matters affecting a company and its stakeholders are default positions that can be altered to
meet the needs and interests of stakeholders, known as the alterable provisions of the Act. For example, there is
great flexibility when it comes to allocating rights to shares, and an MOI can vary the rights of shareholders in such
matters as the right to receive dividends and to vote.
◦ However, every provision in the MOI must be consistent with the Companies Act, 2008, unless the Act expressly
allows a deviation. In other words, a company cannot contract out of the Act.
◦ Every company registered in South Africa needs to have an MOI. The purpose of an MOI is to set out the rights,
duties and responsibilities of the shareholders, directors and other persons involved in the company structure.
 MEMORANDUM OF INCORPORATION
◦ A Memorandum of Incorporation is one of the key documents that needs to be decided on and agreed upon when setting up
a business in South Africa.
◦ The companies Act applies to all companies (whether they be private, public listed, unlisted) what makes companies
different from each other is the contents of the company’s MOI.
◦ The contents of a company’s MOI is accordingly critical in determining the nature of the company and the rights and duties
of stakeholders.
◦ It is the contents of a company’s MOI that:
◦ 1. distinguish one company from another
◦ 2. determine whether it is a public, private or other type of company
◦ 3. determine the rights of shareholders and the duties of directors
◦ 4. determine what body has power in a company in respect of any transaction – whether the board is all-powerful, or
whether the approval of shareholders or other stakeholders must first be obtained before certain transactions can take place.
◦ Standard Memorandum of Incorporation. The Companies and Intellectual Property Commission (CIPC) has made
certain standard Memorandums of Incorporation (MOIs) available. It should be noted that these do not include some
significant clauses, such as voting percentages required for passing resolutions, restrictions on transferability of shares in
private companies and finances and distributions.
 Flexibility within the Memorandum of Incorporation-p5457

◦ The Companies Act, 2008 makes provision that there are certain:
◦ 1. unalterable provisions (which an MOI cannot abolish). While the Act uses the word ‘unalterable’, this is
not entirely correct because s 15(2)(a)(iii) provides that the MOI of a company may include any
provision imposing on the company a higher standard, greater restriction, a longer period of time or any
similarly more onerous requirement than would otherwise apply to the company in terms of an
unalterable provision of the Act. They are unalterable in the sense that they cannot be abolished or made
more lenient by any provision in a company’s MOI.
◦ 2. alterable provisions (which an MOI can change considering the specific needs and requirements of those
wishing to make use of the company structure),
◦ 3. default provisions (which will automatically apply if an MOI does not deal with that specific matter – that
is, the default provisions will apply unless they are altered by a company’s MOI).
 Legal status of the Memorandum of Incorporation and the
rules developed by the board of directors

◦ In terms of section 15 (16) A company’s MOI and any rules of the company
are binding:
◦ 1. between a company and each shareholder
◦ 2. between or among the shareholders of the company
◦ 3 between the company and each director
◦ 4 between the company and each prescribed officer of the company, or other
person serving the company as a member of the audit committee or as a member of
a committee of the board in the exercise of their respective functions within the
company.
 Amending the Memorandum of Incorporation

◦ A company’s MOI may be amended in three ways:

◦ 1. Amendment of MOI in compliance with a court order: Section 16(4) provides that an amendment to a company’s MOI that
is required by any court order must be effected by a resolution of the company’s board. Such an amendment does not require a
special resolution of shareholders.
◦ 2. Amendment of MOI when directors act in terms of section 36(3) and (4). Page 59 of P.BOOK.
◦ 3. Amendment by way of special resolution of shareholders: This type of amendment may take the form of: a. A new MOI
in substitution for the existing MOI b. one or more alterations to the existing MOI by changing the name of the company
deleting, altering or replacing any of its provisions inserting any new provisions into the MOI making any combination of
alterations.
◦ Where the amendment of the MOI of a profit company results in the company no longer meeting the criteria for its particular
category of profit company, the company must also amend its name at the same time, by altering the ending expression to reflect
the category of profit company into which it now falls.
◦ For example, if an amendment to a company’s MOI has the effect that the company’s shares become freely transferable,
that company will no longer qualify as a private ‘(Pty) Ltd’ company, and it will become a public ‘Ltd’ company.
◦ Generally there is no restriction as to what can be changed in an MOI, unless of course the MOI contains some restrictive
conditions (as provided for in s 15(2)(b) and (c)),77 and provided that an amendment does not attempt to change an unalterable
provision (except to the extent it imposes a greater burden).
 Alterations to correct errors in a
Memorandum of Incorporation and rules
◦ The board of a company, or an individual authorised by the
board, may alter the company’s rules or its MOI in order to
correct a spelling error, punctuation, reference, grammar or
similar defect on the face of the document.
◦ This can be done simply by publishing a notice of the alteration,
in any manner required or permitted by the MOI or the rules of
the company, and filing a notice of the alteration.
 Translations of a Memorandum of Incorporation
◦ A company that has filed its MOI may file one or more translations of it in any
official language or languages of the Republic.
◦ A translation of a company’s MOI must be accompanied by a sworn statement by
the translator, stating that it is a true, accurate and complete translation of the
MOI.
◦ Should the provisions of the MOI of a company conflict with a translated
provision, the provisions of the MOI will prevail.
 Consolidation of a Memorandum of
Incorporation
◦ At any time after a company has filed its MOI and subsequently filed one or more
alterations or amendments to it, the company may file a consolidated revision of its
MOI as so altered or amended.
◦ The Commission may also require a company to file a consolidated revision of its
MOI.
◦ A consolidated revision of a company’s MOI must be accompanied by a sworn
statement by a director of the company, or by a statement by an attorney or notary
public, stating that the consolidated revision is a true, accurate and complete
representation of the company’s MOI, as altered and amended up to the date of the
statement.
 Authenticity of versions of the Memorandum of Incorporation

◦ Where there is a conflict between different versions of the MOI, the following rules apply for resolving
the conflict:•
◦ 1. The MOI, as altered or amended, prevails in any case of a conflict between it and a translation filed in
terms of s 18(1)(a).
◦ 2. The MOI, as altered or amended, prevails in any case of a conflict between it and a consolidated revision
filed in terms of s 18(1)(b), unless the consolidated revision has subsequently been ratified by a special
resolution at a general shareholders’ meeting of the company.
◦ 3. The latest version of a company’s MOI endorsed by the Commission prevails in the case of any conflict
between it and any other purported version of the company’s MOI in terms of s 18(2).
 Registration of company names
◦ Section 11 (2) of the Companies Act provides that the name of a company may not generally offend persons of a
particular race, ethnicity, gender or religion.
◦ When choosing a name for the company, care must be taken to ensure compliance with the provisions of the Act,
and also not to offend the common-law rule against passing off. Passing off occurs when one business adopts a
distinguishing feature of a competitor – for example, the competitor’s trade name.
◦ The harm this may pose to the competitor is that the offending business relies on a confusion of identity in the
marketplace to attract business to itself, effectively using the goodwill of its competitor for its own benefit.
Passing off is unlawful at common law.
◦ Case law relevant to Company names Peregrine Group (Pty) Ltd v Peregrine Holdings Ltd
◦ Act of 2008 provides that if the name of a company (as entered on the notice of incorporation) is a name that the
company is prohibited from using, or if it is reserved for a person other than one of the incorporators, the
Commission must use the company’s registration number as the interim name of the company in the
companies register and on the registration certificate. The Commission must then invite the company to file an
amended notice of incorporation using a satisfactory name.
◦ Most importantly, the Commission cannot refuse the registration of a company on the grounds that the submitted
name is undesirable.
 Registration of company names
◦ Section 11(2) specifically provides that the name of a company may not be the same as (or confusingly similar to)
the name of another company, registered external company, close corporation or cooperative.
◦ A name will be confusingly similar if the name has the ability to make a potential client think that the company is
the same as, or is affiliated to, another company with either the same or a similar name.
◦ The name of a company may also not falsely suggest that the company is part of or associated with any other person
or entity, is an organ of state, is owned by a person having a particular educational designation or that is a regulated
entity, is owned or operated by a foreign state, government or an international organisation.
◦ In Lucky Star Ltd v Lucky Brands (Pty) Ltd, the appellant sought relief in terms of s 11(2)(b)(i) and (iii) and s 11(2)
(c)(i) declaring that the company name of the first respondent was confusingly similar to the appellant’s registered
trademarks. An order was accordingly sought directing the first respondent to change its name and trading name.
The court held that the appellant had to show in terms of s 11(2)(b) that the company name of the first respondent
was confusingly similar to the appellant’s registered trademarks, or that in terms of s 11(2)(c), the first respondent’s
name falsely implies or suggests, or is such as would reasonably mislead a person to believe incorrectly that the first
respondent is part of, or associated with, the appellant. The court concluded that there was no basis to conclude that
any person would be led to believe that the respondents were part of, or associated with the appellant, or that their
names are confusingly similar to the name of the appellant. The appeal was dismissed with costs.
 Reservation of a name for later use
◦ A person may reserve one or more names for use at a later time.
◦ These reserved names may be used for newly incorporated companies or as an amendment to the name of an
existing company.
◦ The Commission is compelled to reserve each name that the applicant applies for, unless the name applied for is
the registered name of another company, close corporation or cooperative, external company or has already been
reserved by someone else.
◦ The reservation continues for a period of six months from the date of the application for reservation.
◦ A person for whom a name has been reserved may transfer the reservation to another person by filing a signed
notice of transfer.
◦ In terms of the Companies Act, 2008, a company may be registered with or without a company name. When a
company is registered without a reserved name, its registration number automatically becomes the company name.
◦ Such a company may transact with a trading (business) name, or may apply to add a reserved name at a later stage.
In this case, the company will need to first reserve a name and then apply for a name change, which constitutes a
change to its Memorandum of Incorporation(MOI)
Registration of a company and registered
office
◦ The registration of a company is dealt with in section 14 of the Companies Act.
◦ Upon acceptance of the notice of incorporation, the Commission assigns a unique registration number to
the company.
◦ The commission must enter the prescribed information relating to the company in the company register.
◦ This register is the one opened by the Commission and does not refer to a register that is kept at the
relevant company..
◦ If all formalities are in order, a registration certificate will be issued and delivered to the company.
◦ Such certificate is conclusive evidence that all requirements for the incorporation of the company have
been complied with and that the company is incorporated from the date stated in the certificate.
◦ The date of incorporation on the certificate is the date on which the company comes into existence as a
separate legal entity.