It’s essential that businesses have at least a basic understanding of the applicable legal requirements of operating a business in South Africa. Riversands I-Hub Senior Legal Advisor, Heather Toman offers advice on where to start.
For many SMMEs, particularly those that are in the start-up phase, the legal requirements applicable to the business are often neglected, but it is essential to understand the law as it pertains to their business and industry. It’s also more cost effective to ensure compliance at the outset and to obtain legal advice where necessary, rather than being forced to do so when something goes wrong.
Legal Entity
When deciding on the appropriate entity for the business such as a company, partnership or sole proprietor, make sure that you are aware of all the legal implications and requirements. If you register a company with the Companies and Intellectual Property Commission (CIPC), you will need to decide on the type of company (public, private, for profit, non-profit etc.) and you will need to draw up a Memorandum of Incorporation (MOI). The MOI is one of the most important documents when forming a company and sets out the rights, duties and responsibilities of directors, shareholders and other persons involved in the company. It is a legally binding document, so it is vital that it is drawn up correctly and that you understand it. It is also advisable when using a “trading as” name, that differs from the registered company name, to ensure that this name is not already registered by another company to avoid potential disputes later. “Trading as” names are not protected by the law unless they have been specifically reserved and registered at the CIPC.
Financial Requirements
It’s also important to understand and comply with the applicable financial requirements that are specific to your business and industry such as the submission of annual financial returns and the payment of tax, including corporate income tax and VAT. If you have employees, you will have to register them for Pay As You Earn (PAYE) if they earn above a certain amount and deduct the required tax amount from their salaries and pay it to SARS on a monthly basis. You will also have to register with the Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL) and pay the required contributions, where applicable. The SARS website provides guidance on the tax obligations for businesses.
Health and Safety
Occupational health and safety is a compulsory compliance requirement for all workplaces, which involves putting measures and procedures in place to reduce or eliminate health issues, injuries, illnesses and even death that may arise from adverse working conditions and hazards and risks in the workplace. It is important to ascertain what your obligations are under the Occupational Health and Safety Act 85 of 1993 and Regulations promulgated thereunder. Certain workplaces, such as food facilities or those where hazardous substances are used will be required to comply with additional regulations and requirements pertaining to food safety and safe storage etc. Failure to comply could result in civil liability and large fines or, in the case of death, criminal liability and imprisonment.
Intellectual Property
Businesses also need to understand intellectual property law and how it relates to them. Branding, names, designs, logos, material created, ideas, inventions etc. are all types of intellectual property that businesses develop and own and that require legal protection in the form of copyrights, trademarks, patents etc. It is important to obtain specialised legal advice and ensure that the proper legal protection is in place so that the rights to the intellectual property are not lost or stolen, which could result in big losses for the business and also to check that there are no conflicts with existing intellectual property that other businesses or individuals own or have rights to and thereby avoid unnecessary disputes and potential costly litigation.
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