In terms of the Companies Act No. 71 of 2008 (“Companies Act”), if a company wishes to restrict the nature of its business or powers, or limit the amendment of any provision of its memorandum of Incorporation (“MOI”), the company’s MOI must be amended to reflect this restriction and the letters “RF” (meaning ring-fenced) must be displayed as a suffix to the name of the company. This alerts anyone who deals with the company that the MOI contains one or more restrictive conditions which may have a material effect on anyone dealing with the company concerned. When engaging with a company bearing the “RF” suffix, one should examine such company’s MOI to determine the restrictive conditions placed on it.

Non-Profit Companies (“NPC”) are an exception to the above rule as MOIs of NPCs must state the nature of their business, which business is restricted by nature as an NPC is incorporated for public benefit or relating to one or more cultural or social activities, or communal or group interests. It is therefore not a requirement to place the letters “RF” after an NPC’s name.

The ring-fencing terminology can be found in section 15(2)(b) of the Companies Act which states that the MOI of a company may contain any “restrictive conditions applicable to the company”. This term is unfortunately not defined by the Companies Act and to clarify the meaning of this phrase, the Companies and Intellectual Property Commission (“CIPC”) issued Practice Notice 4 of 2012, which requires that the expression “RF” should be affixed to a company’s name in all cases where –

  • either the purpose or objectives of the company are restricted or limited in the MOI;
  • the powers of the company have restrictions or limitations set within its MOI;
  • the MOI contains limitations or restrictive conditions;
  • the MOI contains any further requirements, in addition to those set out in section 16 of the Companies Act, for the amendment of any of the abovementioned restrictions or limitations;
  • the MOI imposes on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement than would ordinarily apply in terms of an unalterable provision of the Companies Act;
  • the MOI contains a prohibition on the amendment of any particular provision of the MOI; and
  • the company requires a special resolution to approve any matter not specified in section 65 (11) of the Companies Act.

Upon incorporation of a ring-fenced company, the notice of incorporation which is filed by the incorporators of a company to inform CIPC of the incorporation of a company, or a subsequent notice of amendment, notifying CIPC of an amendment to a company’s MOI, must draw attention to any such restrictive or limiting provision. In addition to this, section 13(3) of the Companies Act requires that the ring-fenced company’s notice of incorporation must include a statement drawing attention to each restrictive or limiting provision and its location in the MOI.

In terms of Section 19(5) of the Companies Act, third parties dealing with companies that display the “RF” suffix in their name and have drawn attention to the applicable restrictive or limiting provision in the notice of incorporation or subsequent notice of amendment are regarded as having notice and knowledge of such provisions.


Section 20(1) of the Companies Act further notes that where a company’s MOI limits, restricts or qualifies the purpose, powers or activities of the company –

  • no action of that company is void by reason only that the action was prohibited by a specific limitation, restriction or qualification or because of the specific limitation, restriction or qualification the directors had no authority to authorise the action by the company; and
  • in the event of a legal proceedings, excluding proceedings between the company and its shareholders, directors or prescribed officers or the shareholders and directors or prescribed officers of the company,

one cannot rely on the limitation, restriction or qualification to claim that the action contemplated in the first point is void.


Concluding remarks:

The use of ring-fenced companies is a good way to provide greater security to stakeholders and control to shareholders of companies as the directors of a company can possibly incur personal liability for breaching their fiduciary duty to act within their authority if they breach the restrictions and limitations of ring-fencing provisions.

Persons incorporating ring fenced companies must ensure that the relevant Companies Act requirements are complied with, including making the necessary disclosures to CIPC upon the incorporation and subsequent amendments of the company’s MOI and including the “RF” suffix in the company’s name (unless such company is an NPC). Doing so will ensure that third parties dealing with the ring-fenced company are regarded as having notice and knowledge of such provisions.

Additionally, directors who act outside of the powers of a ring-fenced company must note that an action of a company will not be void merely because its MOI limits, restricts or qualifies the purpose, powers or activities of the company.

VDMA’s team of experts are available to assist you and your business with any company law matters.

Published 12 July 2022