The ever-changing business environment saw the discontinuance of Close Corporations (CC) as necessary in order to adapt to the prevailing economic climate.
Since the coming into effect of the new Companies Act 71 of 2008 as amended (the Act), no new Close Corporations will be registered. The existing Close Corporations registered before the coming into effect of the Act may continue indefinitely, until such time legislation is put in place to discontinue them. Further, such existing CCs registered before the Act were given a leeway to convert to companies, but companies cannot convert to CCs. In this article we will look at the process to be followed when a close corporation intends to convert to a company.
Maybe before we look at the process of conversion, how about throwing around a few advantages of converting to a company over remaining as a close corporation;
First and foremost, the number of shareholders of a company are unlimited whereas in a close corporation the number of members is limited to a maximum of 10.
Secondly, juristic persons may be shareholders in a company unlike in close corporations whereby the members may only be natural persons. This evidently has the advantage that a company stands a better chance of having more resourceful investors in the form of juristic persons who can pull and pump financial resources into the company where needs be.
Thirdly, a Close Corporation needs to have an Accounting Officer appointed whereas a company, if it qualifies under section 30(2A) may carry out its accounting obligations internally.
Here is the process of converting from a Close Corporation to a company, including the documents that will be needed.
Just like the same chameleon in a new colour, the close corporation will be converted into a company to adapt to new market conditions and stand at an advantage. Operating as a company is more of an advantage than as a close corporation.
We assist with conversions from close corporations to companies, and deal with various facets of Company Law.
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The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.
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