THE BIZPORTAL STEPPING STONE

Author: Jonathan Arumugam 

President Cyril Ramaphosa mentioned the improvements made to the South African company registration process in the State of the Nation Address of 2020. “It used to take months to have a company registered. Through the BizPortal platform one can now register a company in one day, register for UIF and SARS and even open a bank account,” said the President.

As per the provisions of the Companies Act, 2008 (Act), all companies in South Africa are incorporated through the Companies and Intellectual Property Commission (CIPC). Since about 2017, the CIPC online incorporation process would typically takes between 5 and 20 business days. On rare occasions, applications were processed within 2 business days. Does the BizPortal platform really improve this process? We put the tool to the test and were pleasantly surprised with the results.

The pilot phase of BizPortal launched in November 2019. It is open to members of the public and one needs to only provide a few particulars to register an account, such as an email address, cell phone number and South African identity number. Presumably for the purpose of complying with the Act, incorporation applications are processed through the CIPC database and once a company is registered the accountholder receives the usual CIPC registration documents. Currently, BizPortal only processes registration applications of private for-profit companies and non-profit companies.

We found the entire process to be simple and efficient and the online platform was both intuitive and informative. The intention of BizPortal is clear: to make the company incorporation process as effortless as possible so that anyone can incorporate a company while making informed decisions on the process. On selecting the option to register a company you are reminded of the minimum director requirements as prescribed by the Act, being one director for a private, for-profit company and three directors for a non-profit company. You are also reminded of the information and documents required to register the company: a South African identity number; proposed company names (if any); and director identity documents. At the time of this article, a fee of R125 is charged to register a company and if you would like your company to be registered with a bespoke name, the fee will increase by R50.

For the sake of simplicity, we incorporated a private for-profit company with a bespoke name and one director. Twenty clicks later and our paperless application was complete. Within 90 minutes after that, we received a registration certificate and a welcome letter from the CIPC with a guide on how to download the standard form memorandum of incorporation from the CIPC’s website, as well as confirmation of registration for income tax with the South African Revenue Service.

Automatic income tax registration upon incorporation is not a new feature and was available on CIPC’s platform. During the BizPortal application process you are presented with the option of registering with the Unemployment Insurance Fund if the company will have employees, as well as the Compensation Fund. The added service of being offered a bank account with one South Africa’s major banks is a convenient option, although, not unexpectedly, this service is not automatic. BizPortal merely asks the bank to contact the company to initiate the account opening process.

What was not mentioned by the President in his 2020 address was BizPortal’s free Broad Based Black Economic Empowerment (BEE) certificate service. As one of the last legs of the BizPortal application process you are prompted with the option of applying for a free BEE certificate if the company meets the requirements of an Exempted Micro Enterprise (EME), namely, having an annual turnover of no more than R10 million. Once selected you are provided with a BEE calculator which explains the concept of Black People as contemplated in the BEE legislation (the Broad Based Black Economic Empowerment Act, 2003 and the Codes of Good Practice on Broad-Based Black Economic Empowerment), being Africans, Coloureds and Indians:

(a) who are citizens of the Republic of South Africa by naturalisation; or

(b) (b) who became citizens of the Republic of South Africa by naturalisation:

1. before 27 April 1994; or
2. on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalization prior to that date.

Ordinarily, a director or shareholder of an EME would have to complete a sworn affidavit and depose to the Black ownership of the EME in order to evidence the BEE level and percentage of Black ownership of the entity. The BEE calculator simplifies that process by prompting you to fill in the number of Black shareholders of the company and their genders.

As with the sworn affidavit, the calculator also allows you to insert the number of shareholders which fall under Black Designated Groups to account for unemployed Black People, Black Youth, Black People with disabilities, Black People living in rural and under developed areas and Black military veterans. Based on the information provided, the calculator uses the flow-through principle to determine the company’s BEE level, procurement recognition percentage, Black ownership percentage, Black women ownership percentage and percentage of ownership by each Black Designated Group.

We did not receive a certificate per se which reflected the BEE level and ownership percentages of the company we incorporated. Instead, BizPortal loaded the BEE credentials of the company onto a searchable portal. The information could have relatively easily been made available on an official document generated by BizPortal or CIPC, but this function was not made available. Could this be an indication that the Department of Trade and Industry will dispose of the requirement for EME’s to produce sworn affidavits?

CIPC’s database is linked to that of the Department of Home Affairs, which allows the information uploaded to CIPC to be verified with the Department of Home Affairs. This would place confidence on the reliability of the demographic information available on CIPC, and therefore BizPortal. A centralised database for company information with verified BEE credentials is a welcomed approach.

Overall, BizPortal’s service is a refreshing improvement on the company incorporation process and the promised one day turnaround time has held true. However, the service is a focussed one. BizPortal only processes incorporation applications with directors who have valid South African identity numbers. It does not allow the incorporator to upload a bespoke memorandum of incorporation with different classes of shares on incorporation. It does not process the registration of external companies. The platform is not for the benefit of multinational investors or large South African corporations with intricate shareholding relationships.

BizPortal is an economic enabler for South African entrepreneurs, created in the spirit of empowerment. It will, for instance, afford a lone mining supplier the chance to effortlessly and affordably create a juristic entity through which she could submit a bid. In the same manner it will assist a small store owner seeking favourable distribution arrangements with large wholesalers, or even a charity worker seeking tax benefits for providing aid to her community. This is a necessary step forward to empower small business development in South Africa.

For more information, please contact Jonathan Arumugam or your usual Herbert Smith Freehills contact: