The Contours of Profit-Making Activities of Non-Profit Companies: An Analysis of the New South African Companies Act

Abstract

AbstractWhile for-profit companies regularly embark on non-profit activities, the converse issue has recently come to attention, namely whether non-profit companies may embark on profit-making activities. This has given rise to a confusing conundrum of practical importance, not only in South Africa but also in other jurisdictions. This article discusses whether non-profit companies, under the South African Companies Act of 2008, may have purely commercial objects. It also addresses the intertwined question of the contours of permissible profit-making activities. Since the non-profit company is the modern successor to the section 21 company under the previous Companies Act of 1973, this article considers the recent case of Cuninghame v First Ready Development 249, in which the Supreme Court of Appeal was faced with the problem of a section 21 company with a commercial object. The article also explores the administration of rental pool agreements by non-profit companies, which arose in the Cuninghame case.