What is a Close Corporation?
Close Corporations (CCs) in South Africa represent a distinct form of business entity that had a lot of popularity among entrepreneurs, professionals, and small to medium-sized enterprises (SMEs) in the past. CIPC chose to stop registering Close Corporations owing to international pressure to conform to company standards but did not force CC owners to change to become PTY`s. Subsequently a CC is still an acceptable way of conducting business.
Unlike traditional companies, CCs offer simplified structures and regulatory requirements, and were an attractive option for entrepreneurs seeking flexibility and ease of management. With the new company laws the management of PTY`s has been reduced radically, and so new company owners can be quite happy registering a Pty(Ltd)
Can I register a Close Corporation?
No, you can no longer register a close corporation. All new company registrations must be PTY`s.
Characteristics of Close Corporations
Close Corporations possess distinct characteristics that set them apart from other business entities in South Africa:
- Limited Liability: Members of a CC enjoy limited liability, protecting their personal assets from business debts and obligations.
- Simplified Governance: CCs have fewer regulatory requirements and administrative burdens compared to public companies, allowing for streamlined decision-making processes.
- Flexibility: CCs offer flexibility in management structures and operational procedures, enabling members to tailor the entity to their specific needs and preferences.
- Confidentiality: CCs enjoy a degree of privacy and confidentiality, as their financial statements and operational details are not typically disclosed to the public.
Advantages of keeping your Close Corporation
With the new company laws, there are not too many advantages by maintaining your CC. Some of the advantages are
a) No need to print and maintain share certificates and a share register. This is because CC`s dont have shares, but percentage ownership.
b) No need for an audit. This was of course the main reason for registering CC`s in the past, however the "New Pty" SME, also does not require an audit
c) Ownership is simple and the owners and directors are really the same people.
d) Less management requirements and no need to follow strictly to an MOI
e) Changing to a PTY will mean a new company registration number. As people frequently rely on company registration numbers to indicate a proper age of the business and the length of times its been operational, it could be beneficial keeping a CC just to maintain the old registration number which gives a good indication of years operating.
Amending your Close Corporation
Amending your Close Corporation is easy with SwiftReg. Tell us what you want to change, and we will prepare the documents and apply on your behalf. One of the most common amendments is to change the Membership. Membership changes will require ID`s of all the members, both leaving and current, as well as confirmation of resigning from members that are leaving the CC.
The Future of Close Corporation
Over time, it will become rarer and rarer to find companies, still trading as a Close Corporation. Within the next few decades they will probably fade out entirely or CIPC might force all current CC`s to become PTY`s so as to reduce their processes.