Close Corporation Changes

What you need to know

Whilst the last new Close Corporations were registered in May 2011 when the New Companies Act was introduced there are still tens of thousands of existing Close Corporations which remain active and are perfectly legitimate legal entities and continue to do business as they are still recognised by CIPC.

If your CC is still active and your annual returns are up to date you can make changes to your CC including the Name, Members, Registered Address, Financial Year End and Business Object

Good to know

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Frequently Asked Questions

Not any more.  The last new Close Corporations were registered in May 2011 when the New Companies Act was introduced.  Part of the Act ended the registration of new Close Corporations and left only one new profit company option which is a Pty (Ltd).   There are still ten of thousands of existing Close Corporations which remain active and are perfectly legitimate legal entities and continue to do business as they are still recognised by CIPC.

No, and neither do (Pty) Ltds. Only companies which have a Public Interest Score of over 300 will require an audit – this applies to both (Pty) Ltds and Close Corporations 

No, Close Corporations are far simpler administratively when compared to (Pty) Ltd.s  as they don’t have directors and shareholders and therefore are not required to have any board meetings. Close Corporations are owner managed with each owner referred to as a member and their shareholding referred to as membership which is expressed in a percentage.

Yes, the maximum number of members on a Close Corporation is 10 natural persons. This means no companies can hold a membership in a Close Corporation and subsequently Close Corporation can not be an operational business in a group companies structure. 

Yes, but with very specific conditions. The Trust’s beneficiaries must all be natural people, meaning no community or company can be a beneficiary of the Trust. The total number of beneficiaries and members of the CC together cannot be more than 10 people.

Essentially the percentage ownership of the CC may change because 100% of the membership of a CC must be held by the members at all times.   So when another person joins the Close Corporation a percentage of the Membership must go to that new Member.  This percentage will come from the other Members as 100% of the CC’s membership must be held at all times.  For example, if four people all have an equal share in a Close Corporation, they would all have 25% each. If a fifth person joins with an equal share then everyone must agree to a 20% membership for the transaction to be registered. This concept keeps many business transactions honest. 

Yes, all Close Corporations are required to have a registered accounting officer linked to the Close Corporation.  The accountant must have a practice number which is issued by their professional institute.

If your turnover is less than R50m per annum, then your filling fees with CIPC is R100. Each year you will have a window period of two months from the anniversary date of the registration of the Close Corporation to make the payment, you miss the period CIPC will penalize you with an extra penalty fee of R150 for each outstanding year. 

It depends on your personal business requirements.  Close Corporation are ideal for small businesses as their ownership and management structure is much simpler than a (Pty) Ltd.   There is no board of directors as the Close Corporations are managed directly by the members. The shareholding structure is also simpler as it is based on percentages,  100% of which must be taken up at all times.  (Pty) Ltd.s do offer more options and flexibility with regard to shareholding and have authorised share capital and not all the shares need to be issued. (Pty) Ltd.s can also offer different share types so (Pty) Ltd.s are better suited to business owners who require more options. 

No, only natural persons can be members of a Close Corporation.

The simplicity in terms of ownership, the transparency and forced agreement when new members join or old members leave. There is no board of directors which means no board meetings.

Not right now.  When the new Companies Act of 2008 became law in 2011, no new Close Corporations could be registered and the Act stated that existing CC’s would be converted within 10 years.  That does not appear to have happened.  It is however pretty straight forward to convert a CC to a Pty Ltd and currently takes about a week to process. 

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