How to register a private company in South Africa

If you are considering starting your own business it is important to know how to register a private company in South Africa.

Running your own business means playing by the rules and adhering to all the applicable laws and Greg Shapiro and Sarah Charlton from the law firm Eversheds Sutherland has put together a list of steps to follow, as well as 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). They says before considering the registration requirements for your business, the first step is to choose an appropriate business structure. The options include, but are not limited to:

• A sole proprietorship, which is ideal for sole traders.
• A partnerships, that can be suitable if you want to partner with two or more people. 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 but you are required to register with Sars for tax purposes.
• A private company that 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.
• A non-profit company (NPC), where the entity is incorporated for the benefit of the public, or other objective 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.

Step 2: Corporate governance, regulatory and compliance requirements for a private company includes a number of regulatory and compliance considerations that include:

• CIPC compliance by filing annual returns and reporting changes, such as in constitutional documents, directors and auditors.
• Sars compliance by paying income tax, employee tax, VAT, capital gains tax, securities transfer tax and withholding tax and the appointment of a public officer.
• Ensuring good corporate governance by implementing policies for corporate governance, risk management and compliance.

Shapiro and Charlton say to the applicable extent there are a number of other considerations which may apply depending on the industry, such as:

• B-BBEE compliance with broad-based black economic empowerment regulations, including the Mining Charter
• Financial Intelligence Centre (FIC) requirements where companies register with the FIC for anti-money laundering compliance
• National Credit Act (NCA) where companies register as a credit provider if you offer credit to clients, subject to NCA thresholds
• Exchange control regulations are very strict and apply to foreign investments, which include the endorsement of shares held by a foreign shareholder
• Import and export licenses issued by Sars to import or export products and
• Financial services where companies and key staff are required to register with the Financial Sector Conduct Authority (FCSA).

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Remember the staff of a private company

Step 3: Understanding employment considerations.

Shapiro and Charlton say it is important to consider the applicable labour law framework in the Basic Conditions of Employment Act and the Labour Relations Act. They say 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 have 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 have to comply with FICA requirements to open and operate a bank account in South Africa,” Shapiro and Charlton say.

Step 5: Consulting a legal expert is another important step. These steps are a high-level overview of some of the important considerations when registering a company.