To Convert Or Not To Convert

Lorette Terry
 November 07, 2014
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Many people chose a CC and still prefer a CC because a CC gave them the advantages of a legal entity, with lower costs and simpler administration.

Virtually all the advantages that a CC had, can now also be obtained by having a private company under the new Companies Act, for example:

  • the annual return fee is the same regardless of whether you have a CC or company depending on the turnover of your business
  • small private companies do not need to be audited or produce audited financial statements
  • small private companies do not need to convene an annual general meeting (AGM)

The current Close Corporations Act, as amended, and the new Companies Act exists concurrently and CC’s will be required to comply with the provisions of both Acts, making the legal requirements more cumbersome.

It is no longer possible to register a new close corporation or CC. However, you can carry on trading under a CC that existed before 1 May 2011. But CC’s will slowly become extinct and every CC will (at some point) have to be converted into a private company ‘(Pty) Ltd’.

What does it mean to you as the member of a Close Corporation? Some also argue that there are actually more advantages to being a private company rather than a CC.

  • Compete with bigger companies in the same market.
  • Invite other parties to invest as shareholders in your business.
  • Raise more capital to grow your company.
  • Enable companies and CCs to be shareholders in your business.
  • Benefit by being regulated by a law (the new Companies Act) that is up-to-date with international best practice.
  • Administer your company electronically.
  • Ensure that the rights, duties and responsibilities of members are clearly set out.
  • Avoid disputes between members.
  • Adaptable to small, medium and large businesses.
  • Life of the business is perpetual, i.e. it continues uninterrupted as shareholders change. And: If you convert your CC before 1 May 2014, you do not have to pay fees to CIPC.

After that you will. This might not be much for one CC, but if you have many CC, it will add up. We can help you to convert a close corporation (CC) to a private company ((Pty) Ltd).

What does it cost? If you are interested, We will contact you to find out more about your specific requirements and give you a quote.

Please include the name and registration number of the CC.

How long does it take? About five days for us to create the necessary documents. It is not possible to estimate how long it will take CIPC to convert a CC once the documents have been filed with CIPC.

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