South Africa: Registering a private company

Thinking of starting your own business? We have prepared a guide briefly outlining the steps to register a private company in the Republic of South Africa (“RSA”) and some important considerations when doing so.

Step 1: Registration of your company with the Company and Intellectual Property Commission (“CIPC”) and the South African Revenue Service (“SARS”)

Before considering the registration requirements for your business, the first step is to choose an appropriate business structure, options include (but are not limited to):

1. sole proprietorship: this is ideal for sole traders.

2. partnerships: a partnership may be suitable if one has the intention to partner with 2 or more persons. A partnership is not a separate legal person or taxpayer. Each partner is taxed on his or her share of the partnership profits. CIPC registration is not required for sole proprietorships and partnerships, however the individuals are required to register with SARS for tax purposes.

3. private company: this is the most common choice of structure. The entity is privately owned and operated as a separate legal entity, with limited liability for its shareholders. A private company requires registration with CIPC, and once registered with CIPC, the company will automatically be registered with SARS for income tax purposes.

4. non-profit company (“NPC”): the entity is incorporated for the benefit of the public, or other object relating to one or more cultural or social activities, communal or group interests. An NPC must be registered with CIPC, and will also be automatically registered with SARS.

Further details on the registration process and documentation required for incorporating private companies and NPCs can be found on CIPC’s website at https://www.cipc.co.za/.

We will focus on the incorporation of private companies for the remainder of this article.

Step 2: Corporate governance, regulatory and compliance requirements

There are a number of regulatory and compliance considerations when starting a private company, these include:

1. CIPC compliance: filing annual returns, reporting changes in constitutional documents, directors, auditors, etc.;

2. SARS compliance: income tax, employee tax, VAT, capital gains tax, securities transfer tax and withholding tax, appointment of a public officer; and

3. ensuring good corporate governance by implementing policies for corporate governance, risk management and compliance.

To the extent applicable, there are a number of other considerations which may be applicable depending on the industry in which the company will operate, for example:

1. B-BBEE: compliance with broad-based black economic empowerment regulations, including the Mining Charter;

2. Financial Intelligence Centre (“FIC”) requirements: registration with the FIC for anti-money laundering compliance;

3. National Credit Act (“NCA”): registration as a credit provider if offering credit to clients, subject to NCA thresholds;

4. exchange control regulations: there are strict exchange control regulations applicable to foreign investments, which include the endorsement of shares held by a foreign shareholder;

5. import and export licenses: application to SARS for licenses for importing or exporting products; and

6. financial services: companies and key persons are required to register with the Financial Sector Conduct Authority (FCSA).

Step 3: Understand employment considerations

It is important to consider the applicable labour law framework, importantly, the Basic Conditions of Employment Act No. 75 of 1997 and the Labour Relations Act No. 66 of 1995.

Depending on the industry, there may also be a bargaining council and collective agreements which must be accounted for in the employment relationship.

We suggest that comprehensive employment agreements are in place with all employees from the beginning.

Step 4: Opening a bank account  

The company will need to operate its own bank account. It is important to engage your chosen bank early on, as the process to open accounts and other services may take some time to finalise.

Recently, following the grey listing of RSA in February 2023 by the Financial Action Task Force (FATF), there has been a heightened focus surrounding FICA compliance, particularly for accountable institutions such as banks. The company will need to comply with FICA requirements in order to open and operate a bank account in RSA.

Step 5: Consult a legal expert

This guide provides a high-level overview of some of the important considerations when registering a company. There are various legislative, regulatory, commercial and compliance considerations to take into account when operating a company in RSA.

We recommend that you engage the appropriate advisors (legal, tax, accounting, banking etc.) in an effort to streamline the implementation and continued operation of your company in RSA.

Should you require any advice or assistance in respect of registering your company in South Africa, get in contact with us, we have a team of experts who are happy to assist.