What is a Public Company?
A public company or publicly traded company is a company that has permission to offer its registered securities (stock, bonds, etc.) for sale to the general public, typically through a stock exchange. When a company “goes public” it does so by issuing shares.
As soon as any company does this, that the company must report more information because they are liable to shareholders and must look out for the interests of shareholders.
Directors are elected by shareholders at the company’s annual general meeting and they control the running of the company on behalf of the shareholders. The shareholders’ liability for the debts of the company is limited to the nominal value of their shares. A shareholder obtains his or her shares in a company by either buying shares from a current shareholder or by subscribing when the company issues shares. The liability of members is limited to the amount they contributed.
Typical characteristics
- The Companies Act 61 of 1973 regulates companies and is based on the English law.
- A company attains legal personality as soon as its certificate of incorporation has been issued by the Registrar.
- A company can’t start to operate before the Registrar issued a certificate to commence business.
- This is usually issued at the same time as the certificate of incorporation.
- The status of companies is not affected by a change in membership, and companies therefore have “perpetual existence”.
- Management of the company is vested in its board of directors – the shareholders have nothing to do with the day to day running of the business
- A public company must have a minimum of seven members while the maximum number is unlimited.
How to register a Public company
A Public Company is registered at the Companies and Intellectual Property Registration Office (CIPC). All the documentation need to form a public company are available from Cipro and must be lodged them. These are the necessary documents.
- CM5: Reserve a company name if necessary by completing the CM5, application for reservation of name or translated form or shortened form or defensive name.
- CM22: Notice of registered office and postal address of company (in duplicate)
- CM29: Contents of register of directors, auditors and officers
- CM31: Notice of consent to change of name, or resignation by auditor or removal of auditor
- CM46: Certificate to commence business
- CM47: Statement by each director regarding adequacy of capital of company
- CM2: Memorandum of association of a company having a share capital
- CM44: Articles of association.
Power of Attorney: Notification to act on behalf of promoters. For further information on registering visit the CIPC website.
Is a registration of a Public Company legally required?
Legal registration is required. Due to the complexity of the entity, the assistance of an attorney is recommended.
What are the pros and cons of operating a Public Company?
Pros:
- A company can raise capital from the general public and transfer shares freely
- Can be listed on the stock exchange
- Separate legal entity
- Perpetual succession
Cons:
- Complexity of company law
- Expenses involved in registering a company
- Stringent reporting requirements with the Registrar
- Full disclosure of financial statements
- Public scrutiny
For further information on registering visit the CIPC website.
