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Thread: Legal forms of diversification of a CC

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    Legal forms of diversification of a CC

    Hi,

    I own a Closed Corporation. I like this form of business because I am not registered as a Director.

    Question 1: What is the latest regulation and process to change to a "Trading As" name?
    Question 2: I want to diversify into different types of businesses - e.g Retail, Services, Import/Export. I'd like to do these as separate legal entities, but under the umbrella of the existing CC. What kind of options do I have - hopefully without needing to convert to a company?

    Thanks,
    Eldon

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    I'm no expert in this area but from what I know CCs are regulated by the old companies act so I don't think much is changed, there are many loopholes in a CC hence why they doing free changes to companies. Instead of trading as I think it's better to change the name of the CC because financial institutions don't recognise trading as anymore. I see where you are going with a holding company and it's not a bad idea in order to protect assets and minimize tax, I'm just not sure if a CC can be a holding company.
    ---There is no traffic at the extra mile---

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    Thank you, Nickolai.

    I did a bit more research. A CC may own a Company. If I do that, however, I have the additional Companie's Act requirements to meet and have to nominate the necessary Directors.

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    Hi Eldon
    There is little difference between being a member of a cc versus a director of a company. Both are charged with ultimate management and essentially have the same fiduciary duties.

    The issue of trading names is regulated by the Consumer Protection Act. If you were using a trading name for 12 months prior to the introduction of the act, you may continue to do so. If not, then you may only use the trading name if you have registered it as defensive name, and the cc is the owner of it. You do however have to state the registered name and number, as well as the resultant trading name and number.

    As you correctly point out, a cc may own all or some of the shares in a company. The cc could appoint you as the director, or anybody else for that matter, but it seems you are reluctant to be the director? Even if you divisionalised your operation, whether in a company or a cc, the divisions would not be separate legal or juristic persons, merely business units.

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    Correct me if I'm wrong but as far as I know a cc can only have members, where a company has director/s, are members and directors considered the same?

    Quote Originally Posted by CLIVE-TRIANGLE View Post
    Even if you divisionalised your operation, whether in a company or a cc, the divisions would not be separate legal or juristic persons, merely business units.
    I must say this last bit doesn't make sense to me because a company is a separate entity from a person and even when a company holds shares in another company they are two separate entities and they can opperate completely independently. Now if we imagine a person who owns 5 different companies what legislation says that they are seen as one? To me this is logical, but then again I'm not an expert on this so your criticism will be appreciated.
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    As Clive-Triangle said, there is very little difference between the member of a cc and the director of a company. Basically a member is both a director and a shareholder rolled into one. So I'm not sure why you are trying to avoid that aspect.

    Why you want to separate the trading entities will also give you the direction as to how to structure it. To obvious solutions depending on the goals are:

    1) Several new companies can be created and the cc is the shareholder in all of them. Each company is now a separate legal entity with the cc as the umbrella entity - as you described.
    2) Register several defensive names which will each become a "division" of the main cc and can be used as trading names. Here the cc is still the umbrella enitity, but each division is merely a separate brand, not a separate legal entity.

    Of course the simplest and cheapest way is to continue to only use the cc to trade for all sections, and separate them only by internal accounting reports.

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