A company director is member of a board of a company or an alternate director of a company.

To register a company, the minimum number of Company Directors in South Africa

• one director and
• one shareholder

The number of Directors

In South Africa, the minimum number of company directors must be

• A Private Company must appoint at least one director upon company registration.
• A Public Company and a Non-Profit Company must appoint at least three directors.

In the event of the minimum requirement of directors not being met, a shareholder meeting has to be called by the board within 40 business days, to appoint the prescribed number of directors.

The maximum number of directors a company can have

• is unlimited as it all depends on what was initially decided amongst all those involved in the company. This requirement is only for a PTY (LTD) company.

Shareholder vs Director

The roles are different –

• directors manage the day-to-day operations of a company and
• shareholders own the company by the shares they hold.

Should a director want to be a shareholder

• the director of the company will be issued with a share certificate indicating they are a shareholder of the company and
• it will indicate the number of shares they own in the company.

Important distinctions

• a shareholder does not have to be a director.
• Should a shareholder wish to be a director they must be added to the company’s registration document with the CIPC.
• under the new Company’s Act (2011), directors are usually found in Pty (Ltd) or private companies, while a member is found in a CC.
• Directors don’t automatically own shares in a private company
• members of a CC hold the percentage of shares they own.

Can a company be a shareholder?

A company can be a shareholder of another company.

• This is called a Juristic Shareholder, it owns shares in another company that has a different registration number.
• A registered trust can also be a company’s shareholder
• For a company to be a juristic shareholder the company needs to be registered with CIPC and have a registration number.

Can a company own its own shares?

• A company cannot own its own shares.
• The company can either have a natural person as a shareholder with an ID number or passport number or another company that is fully registered and has a company registration number (a Juristic Shareholder).
• The director of the company can also be the shareholder of the same company and own the full amount of shares that is within the company.

A Directors liability for company debts

• A director is not personally liable for company debts.
• Should the company be sued for for outstanding debt and the company cannot afford to pay the outstanding debt the company assets are then at risk not the personal assets of the director(s).
• This however does not absolve the director if they have signed personal liability in terms of surety. If an asset is bought under the name of the company (car, house, laptop, etc) this will then be classified as the company’s assets and not the personal assets of the director.

Transferring shares between shareholders

• This process is called a share transfer.
• You can give shares to a new shareholder or to an existing shareholder.
• When doing a share transfer the new or existing shareholder will be issued with a new share certificate depending on the change.
• A share register will then keep a record of all share changes that took place within the company. It will also state what share certificate numbers were cancelled and the date it was cancelled and the new share certificates were issued.
• The CIPC does not keep track of share changes.

Shareholders as minors

• A minor can be a shareholder of the company however it is not advisable.
• A director of a company has to be 18 in order to be a director on the company as this is a requirement from CIPC.

Decision making and delegation

• Directors appoint and supervise management, while
• shareholders hold ultimate responsibility for the company & have the power to re-appoint directors or not to re-appoint them.
• directors have a duty to monitor management’s performance.
• Directors hold overall responsibility over management.
• As a director it is responsibility to ensure the smooth running of the company.

Director Types

The act does not distinguish between these directors but an important distinction is made between these in the King III Report.

Executive company director

• a full time salaried employee and under a contract of service with the company.
• Involved in the day to day running of the business.

Non-executive

• a part time director and not an employee of the company and not involved in the day to day running of the business.
• This person brings objective judgement, independent from management.

Independent non-executive officer

• one who does not have a relationship with the company outside his/her directorships.

Prescribed officers – Section 1, Section 66(10) defines it as follows:

• exercises general control over and management of the whole, or a significant portion, of the business and activities of the company.
• regularly participates to a material degree in the exercise of general executive control over and management of the whole, or a significant portion, of the business and activities of the company.
• Normally known as the Chief Executive Officer, Financial Director and the Chief Operating Officer.

Director Changes

To change directors on companies a CoR 39 form must be completed. This is a relative cumbersome process, and usually takes about 2 days for CIPC to complete the process. Step one is to You have to apply for a password to unlock the company online and then scan and email certain signed documents to CIPC. They will then unlock the company and then Bookkeeping Services Overberg can process the changes.

Note: When a new director is appointed the effective date is when the directors minute the changes and not when CIPC process the changes.

Shareholder vs Member

When we talk about a company, the terms shareholders and members are commonly used as synonyms, as one can become a member of the company, except by way of holding shares. In this way, a member is a shareholder and a shareholder is a member. The statement is true but not completely, as it is subject to certain exceptions, i.e. a person can become the holder of shares through transfer, but is not a member, until the transfer is entered in the register of members.

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