The Companies Act no. 71 of 2008 is the legal framework within which companies have to operate.

A group of individuals who decides to form a company is called promoters.

A new company is registered with the Companies and Intellectual Properties Commission (CIPC) that issues a certificate to commence business.

A Memorandum of Incorporation (MOI) prescribes the rules and regulations for the management and operations of the company. It is submitted to the CIPC.

A prospectus is an invitation to the public to buy shares in a particular company.

The capital of a company is divided into small units, called shares. These shares are sold to the public.

A person becomes a shareholder when they buy a share. Shareholders are the owners of the company. The rights of shareholders include to have access to information about the company, to vote at annual general meetings for the appointment of directors and the appointment of independent auditors, and to be entitled to dividends declared on the shares they own.

Each ordinary shareholder has voting rights. A shareholder is usually entitled to one vote for every share they own.

The JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the South Afrikan market situated in Sandton, Johannesburg, where shareholders can buy and sell shares through stockbrokers.

The shareholders elect a board of directors to determine company policy. The board acts on behalf of the company. There are statutory acts that hold directors personally liable for non-compliance. They are paid an annual directors' fee.

Statutory control allows for the separation of ownership from control. The shareholders are the owners who provide the capital, while the directors act on behalf of the company and are entrusted with the use of the capital.

A company has its own rights and operates separate from its shareholders. It owns assets in its own right and is a legal person that can enter into contracts, can sue and be sued.

Companies do not all have the same financial year-end. Most traders choose 28 February as the date of their financial year-end, to coincide with South Africa’s tax year.

Directors must have audited annual financial statements of the company prepared for every financial year.

Independent auditors express an opinion on the fair presentation of the financial statements. An auditor has to be a qualified chartered accountant registered with the South African Institute of Chartered Accountants (SAICA). Auditors report to the shareholders.

Companies pay income tax to the South African Revenue Service (SARS). The income tax is controlled by the Minister of Finance. The Minister announces the tax rate yearly in his budget speech.

The profits of a company belong to the company. Distributable income is the income available for distribution to shareholders after income tax has been paid.

Profit is distributed to the shareholders in the form of dividends. Dividends are declared by the board of directors.

Retained income is the portion of the profit that is not distributed to the shareholders in the form of dividends, but which is kept for future expansion.

The Annual General Meeting (AGM) must be held once per year for the presentation of the directors’ report and the audited financial statements, to elect directors and to appoint independent auditors.

The liability of the shareholders is limited to the amount paid for the shares. If the company becomes insolvent, the amount a shareholder paid for shares is the only amount they will lose.