Close corporation

A Close Corporation, also known as a CC, is a juristic person intended to be a much simpler structure than a company.

A Close Corporation is governed by the Close Corporations Act of 1984. The Close Corporation provides a simpler and less expensive corporate form for the single entrepreneur or a few participants. The name of a Close Corporation ends with the words "Close Corporation" or "CC".

Ownership

Participants with an ownership interest are called members. Until recently, members had to be natural persons, but now can be trusts or companies too.

No share certificates are issued. Each member's interest is defined in the Founding Statement of the Close Corporation.

Management

There are no directors in a Close Corporation. Instead, the members are in a similar position to directors of a company, with the associated fudiciary duties.

Financial reporting

There is no requirement to file audited financial statements. However, the accounting officer of the CC, who need not be a qualified chartered accountant, is responsible for preparing annual financial statements.

Requirements

The following are required of a close corporation

Register with CIPC

The Close Corporation must be registered with the Companies and Intellectual Properties Commission (CIPC)

Founding Statement

The Close Corporation must have a founding statement, also known as form CK1.

Financial seperation of member from the CC

The financial affairs of the Close Corporation is deemed seperate from that of its members. Accordingly members may not be held personally responsible for the liabilities of the CC provided all requirements have been met.

There are circumstances where a member may be found liable for the liabilities of the CC. These include:

• Reckless trading
• Failing to prepare financial statements timeously
• Failing to indicate on company correspondence that the trading entity is a close corporation