Registration of an external company in South Africa. Image credit: AdobeStock
As a foreign company, if you are looking to expand your business operations into South Africa then going the route of establishing an “external company” might just be the best approach.
Registration of an external company in South Africa. Image credit: AdobeStock
As a foreign company, if you are looking to expand your business operations into South Africa then going the route of establishing an “external company” might just be the best approach.
Before a foreign company is allowed to conduct business in South Africa, it must establish a branch office by registering itself as an external company with the Companies and Intellectual Property Commission (“the CIPC“). An “external company” is defined in section 1 of the Companies Act, 71 of 2008 (“the Companies Act“) as “a foreign company that is carrying on business, or non-profit activities, as the case may be, within the Republic, subject to section 23(2)“.
The requirements for the registration of an external company in South Africa in terms of section 23(1) of the Companies Act is that an external company must register with the CIPC within 20 business days after it first begins to conduct business in South Africa either as:
For the purposes of the above, the Companies Act specifically points out that a foreign company must not be regarded as conducting “business activities” or “non-profit activities” in South Africa solely on the ground that the foreign company concerned is or has engaged in one or more of the following activities:
Once the foreign company has been registered as an external company with the CIPC, it will be assigned a unique registration number to differentiate it from a typical South African private or non-profit company. The registration number of an external company usually ends with the number “10” rather than an “07” or and “08” as in the case of a South African private company or non-profit company, for example.
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As can be seen, while there is no requirement for a physical presence of any shareholder or director in South Africa, there is a requirement for a South African resident to be appointed as a local representative of the external company, who will be the person largely responsible for its operations and accepting service on behalf of the external company.
There are numerous issues one would need to consider when setting up a local branch and our international structuring team and CoSec department will be able to advise on the appropriate set-up, legal structure, tax and exchange control implications if you want to set up a branch office in South Africa.
This article was originally published by Dommisse Attorney’s Inc