Okay, So How Do You Register a Company to Buy Property?
Okay, so how do you register a company to buy property in South Africa?
You register a private company, a (Pty) Ltd, with CIPC. You get the registration certificate and the Memorandum of Incorporation, open a company bank account, and pass a directors' resolution before you sign an offer. It costs a few hundred rand and it's done online. Do it before you find the deal.
The first step to owning property in a company costs less than a tank of petrol. Most people never take it. Not because it's hard. Because it doesn't feel like investing. It feels like admin.
It is admin. It's also the one step that makes every deal after it easier. My first purchase inside a company went smoother than I ever expected. It honestly wasn't as hard as I thought it would be.
How do you register a company to buy property?
You register a private company, a (Pty) Ltd, with the Companies and Intellectual Property Commission (CIPC). It's done online. Here's the order.
Create a CIPC customer profile. You'll need your South African ID.
Reserve a name, or skip it. You can apply to reserve a company name, or register with the company's registration number as its name and add a name later. The number-only route is the faster one.
Register the company. You name the directors and the incorporators (the first shareholders) and choose the Memorandum of Incorporation. Most small property companies start on the standard short-form MOI.
Receive the registration documents. The key one is the registration certificate. This is the document the bank, the conveyancer and the seller's attorney will all ask for.
That's it. A few hundred rand in CIPC fees and some paperwork. Fees change, so check the current amount on the CIPC site before you pay anybody to do it for you.
What do you need before you start?
Four things.
Certified ID for every director and shareholder. A tip from experience: on my deals the banks wouldn't accept a police-station certification on my ID, so I had an attorney certify it. Save yourself the delay.
A decision on who owns the shares. One person? Two partners? Decide the percentages now. Changing them later is paperwork and cost.
A decision on who the directors are. Directors run the company and sign for it.
An address for the company's registered office.
You don't need a property. You don't need a deal. You don't need trading history. This is the part people get backwards. They wait for the deal, then rush the company. A rushed company is where the mistakes live.
Step one is the company. The Directors Fortress gives you the blueprint and the investor-friendly offer to purchase. R99 once off. Start here
Ja, but can a new company buy property immediately?
Yup. There's no rule that a company must trade for a set period before it owns property or applies for a bond.
For a new company, the bank looks through the company to you. You sign surety, which means you personally stand behind the company's loan. The bank weighs the deal, the structure and you. I've covered that properly in Can a new company buy property in South Africa?
What do you do straight after registering?
Registration isn't the finish line. Four things turn a registered company into a company that's ready to buy.
Open a company bank account. Company money lives in the company account. From day one.
Check the tax registration. A new company is registered for income tax with SARS. Confirm the details and keep the number on file.
File the beneficial ownership information with CIPC. It's now part of keeping a company compliant.
Prepare a directors' resolution template. When the deal arrives, the company must formally authorise the purchase and the loan. Have the template ready.
Then diarise the annual return. Every company files one with CIPC each year. A company that stops filing can end up deregistered, and a deregistered company holding a property is a mess.
While you're at it, start a document pack. By my third or fourth company purchase I had one folder on my PC with everything the bank and the conveyancer would ask for. I'd send it over and the conveyancer would go, "geez, okay, here's everything."
Should it be one company per property?
Many investors use a separate company for a single property or a small group of properties. You'll hear it called an SPV, a special purpose vehicle. The idea is simple: a problem in one building stays in that building's company.
More companies also means more annual returns, more tax returns and more bookkeeping. One company is fine to start. The decision to split comes later, with your accountant, when the portfolio justifies it.
What I'd watch for
A company has running costs. Annual CIPC returns, a tax return and proper books. Budget for an accountant.
You'll still sign surety on a bond. The company doesn't remove you from the bank debt.
The standard MOI is a starting point. Partners, outside investors or unusual share arrangements may need more than the default.
Registering after you sign the offer is the expensive order. Swapping the buyer's name later can mean a second transfer.
Tax works differently in a company. It isn't automatically better or worse. Speak to a registered tax practitioner about your own numbers.
Where the company fits
This one is the whole point. The company is step one. Before the deal, before the bank, before the offer.
A week from now you could be the director of a company that's ready to buy. The Directors Fortress walks you through where to register the exact entity I use and how my own SPV is set up, so you're not guessing at the form.
FAQ
How much does it cost to register a company in South Africa?
CIPC's own fees are a few hundred rand, depending on whether you reserve a name. Service providers charge extra. Check the current fee on the CIPC website.
How long does company registration take?
It varies with CIPC's workload. Registering without a reserved name is usually the quicker route. Allow time before any deal deadline.
Can one person register a company to buy property?
Yes. A private company can have a single director who is also the only shareholder.
Do I need an accountant to register a company?
No. You can register directly with CIPC. You will want an accountant afterwards, for the books and the tax return.
Can I move a property I already own into the new company?
Often yes, but it's a separate process with tax and bank steps of its own. Read Can you move property you own into a company?
Related reading
Build the wall first
The Directors Fortress gives you the investor-friendly offer to purchase, the blueprint for registering the entity, and a walkthrough of the structure I use. R99 once off, yours to keep.
Education only. This article is general information, not tax, legal or financial advice. Speak to a registered tax practitioner, attorney or financial adviser about your own situation.
Sources
CIPC, company registration: cipc.co.za · Companies Act 71 of 2008: gov.za
About the author
Michael Bowen co-founded ZAHomes. He bought his first property in 2003 on the outskirts of Amsterdam, with a 100% mortgage, at the wrong point in the cycle, and lost over €14,000 on it while sanding the floors himself in a heatwave. Twenty-odd years, 40-odd countries and a lot of property school fees later, he lives in Cape Town and teaches South Africans to buy and hold property inside a company. His view hasn't changed: an investor's greatest assets are the lessons from their failed deals.
