Close Corporations (CC)

Top tip: As from 1 May 2011 (implementation date of the Companies Act 71 of 2008), no new close corporation can be registered or any conversion from a company to a close corporation allowed.  

A CC is similar to a private company. It is a legal entity with its own legal personality and perpetual succession and must register as a taxpayer in its own right. A CC has no share capital and therefore no shareholders. The owners of a CC are the members of the CC. Members have a membership interest in the CC. Members’ interest is expressed as a percentage. Membership, generally speaking, is restricted to natural persons or (from 11 January 2006) a trustee of an inter vivos trust or testamentary trust.  

A CC may not have an interest in another CC. The minimum number of members is one and the maximum number of members is 10. For income tax purposes, a CC is dealt with as if it is a company.

​Some advantages ​Some disadvantages
​Relatively easy to establish and operate. ​Number of members restricted to a maximum of 10.
​Life of the business is perpetual, that is, it continues uninterrupted as members change. ​More legal requirements than a sole proprietorship or partnership
​Members have limited liability, that is, they are generally not liable for the debt of the CC. However, certain tax liabilities do exist. One such liability is where an employer or vendor is a CC, every member and person who performs functions similar to a director of a company and/or who controls or is regularly involved in the management of the CC’s overall financial affairs, will be personally liable for employees’ tax, value-added tax, additional tax, penalty or interest for which the CC is liable, that is, where these taxes have not been paid to SARS within the prescribed period.
Transfer of ownership is easy.​
​Fewer legal requirements than a private company

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