Registration of foreign companies as external companies in South Africa : some practical considerations and challenges

• Jurisdiction: South Africa
• Author: Heather Ashe
• DOI: 10.10520/EJC174136
• Published date: 01 March 2013
• Date: 01 March 2013
• Pages: 30-39
• Published By: Siber Ink

30 © SIBER INK

Registration of Foreign

Companies as External

Companies in South Africa

SOME PRACTICAL CONSIDERATIONS AND

CHALLENGES

HEATHER ASHE1

ABSTRACT

The Companies Act 71 of 2008 introduced a new dispensation to regulate the

requirement for foreign companies to register as external companies with the

Companies and Intellectual Property Commission (‘CIPC’). However, as with

all new legislation, in the absence of case law, challenges may arise as to the

interpretation of these new provisions. The author discusses some practical

considerations and challenges that may arise in relation to the practical appli-

cation of sections 23(2)(b), 23(2A) and 23(6) of the Companies Act, namely:

• At what point does a foreign company engaging in one or more of the

activities listed in section 23(2A) need to register as an external company?

• Interpreting section 23(6) in the context of section 23(2)(b) for purposes

of determining when CIPC is entitled to issue a compliance notice to a

foreign company to register as an external company.

INTRODUCTION

On 1 May 2011 the Companies Act 71 of 2008 (‘the Companies Act’) came

into effect, replacing the Companies Act 61 of 19732 (‘the Companies Act

1973’).

The purpose of this article is to discuss certain challenges in the prac-

tical interpretation and application of sections 23(2)(b) and 23(2A) of the

Companies Act3 pertaining to when, in the absence of case law, a foreign

company is required to register as an external company4 with the CIPC.

1

Associate director in KPMG’s Corporate Law Advisory Practice.

2

Save for Chapter 14 of the Companies Act 1973, which continues to apply with

respect to the winding-up and liquidation of companies.

3

References in this article to a section are to a section in the Companies Act.

4

Note that an external company is often colloquially referred to as a ‘branch’,

however this is not a term used in the Companies Act.