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Definition

An organisation which is registered with the Companies and Intellectual Properties Commission and incorporated in terms of the Companies Act (71 of 2008). Companies are juristic persons (as opposed to "natural" persons) which means that are responsible for their own debts and can sue and be sued at law. They are separate persons at law from the people who run them and their shareholders. A company is defined by having limited liability and a separation of ownership from management. Companies developed because it became necessary to have a type of organisation which could finance the massive projects which became possible following the industrial revolution. The types of organisation which existed prior to companies, like partnerships and guilds could not raise sufficient capital easily. The concept of limited liability protects the shareholder from any liability beyond what he or she has paid for their shares. If Standard Bank goes into liquidation the liquidators cannot claim the assets of the shareholders. That is not true for a partnership or sole trader. This limitation enabled companies to raise far greater amounts of capital. The Companies Act came into existence to protect the rights of shareholders by requiring companies to disclose a considerable amount of information - such as their financial statements every six months. This increased disclosure is designed to help prospective investors to make wise decisions when buying a company's shares. Companies can be either private or public. A private company cannot have more than 50 shareholders and cannot offer its shares to the public. A public company can offer shares to the public and may have any number of shareholders. All the companies listed on the JSE are public companies. Companies raise capital by selling their shares to the public by issuing a "prospectus" which gives the investor a great deal of information about the company. The requirements for a prospectus are set out in the Companies Act.

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