Section 23 of the Companies Act No. 71 of 2008 (the “Companies Act”) provides that a foreign company must be regarded as “conducting business, or non-profit activities, as the case may be, within the Republic” if that foreign company:
- is a party to one or more employment contracts within the Republic of South Africa; or
- is engaging in a course of conduct, or has engaged in a course or pattern of activities within the Republic over a period of at least six months, such as would lead a person to reasonably conclude that the company intended to continually engage in business or non-profit activities within the Republic.
- In terms of the Companies Act, a foreign company must not be regarded as ‘‘conducting business activities, or nonprofit activities, as the case may be, within the Republic’’ solely on the ground that the foreign company is or has engaged in one or more of the following activities:
- holding a meeting or meetings within the Republic of the shareholders or board of the foreign company, or otherwise conducting any of the company’s internal affairs within the Republic;
- establishing or maintaining any bank or other financial accounts within the Republic;
- establishing or maintaining offices or agencies within the Republic for the transfer, exchange, or registration of the foreign company’s own securities;
- creating or acquiring any debts within the Republic, or any mortgages or security interests in any property within the Republic;
- securing or collecting any debt, or enforcing any mortgage or security interest within the Republic; or
- acquiring any interest in any property within the Republic.
Therefore conducting one or more of the above activities does not in itself qualify as the conducting of business or non-profit activities. It must be of such nature that it can reasonably be concluded that the company intended to continually do so.
The conclusion of, for instance a single employment contract, will therefore make the foreign company subject to registration with the Companies and Intellectual Property Commission (“CIPC”).
The acquisition of ownership and also the right to ownership constitutes an interest in property. The right to a property, for instance a usage or occupational right, will comprise an interest in property. It should be kept in mind though that purely an interest is much wider than a right in property.
If a foreign company is subject to registration as an external company, registration will not make the foreign company resident in the Republic.
If a foreign company is obliged to register or issued a compliance notice to register it must be registered as an external company with the CIPC within 20 business days after it first begins to conduct its business, or non-profit activities, as the case may be, within the Republic or within 20 business days after being be issued a compliance notice from the CIPC.
An external company cannot voluntarily be wound up.
An external company must maintain at least one office within the Republic and register the address of such office.