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Close Corporations

The new Companies Act of 2008 came into operation on the 1st of May 2011 and replaced the Companies Act of 1973. Take note of the following important aspects:

  • No new close corporations will be registered but new companies can be registered. For more information on New Company registrations click here.
  • No company conversions to close corporations will be registered.
  • Provision has also been made for close corporations to convert to companies without any payment in terms of the New Companies Act.
  • Any future changes to a close corporation would still have to be made in terms of the Close Corporations Act for the following:
    • CC amendments (CK2/CK2A)
    • Letter for accounting officer resignations
    • Liabilities exceed assets letters
    • Annual returns

The following processes are administered in terms of the new Companies Act of 2008:

  • Name Reservations
  • Liquidations
  • Deregistration
  • Restoration – normal restorations and annual returns

Types of different Companies, Companies Act 2008

Two types of companies may be incorporated under the Act, namely non-profit companies and profit companies.

Profit companies may be incorporated under the following types:

  • Private Companies
  • Public Companies
  • Personal Liability Companies
  • State Owned Companies

Non-profit Companies (NPC)

  • A company incorporated for public benefit or other object relating to one or more cultural or social activities, or communal or group interests; and
  • The income and property of which are not distributable to its incorporators, members, directors, officers or persons related to any of them.

Private Companies (Pty) Ltd

Private companies under the new Act are prohibited to offer securities to the public and the transferability of their shares are also restricted. Private companies however, are no longer limited to 50 members as was the case under the current Companies Act.

Public Companies (Ltd)

The definition of a public company is largely unchanged. The only difference is that a public company under the new Act only requires one member for incorporation compared to the 7 members under the current companies Act.

Personal Liability Companies (Inc)

The directors and past directors (where applicable) of such companies are jointly and severally liable together with the company for any debts and liabilities arising during their periods of office.

State-Owned Companies (SOC Ltd)

A State owned company is either a company defined as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a company owned by a municipality. The majority of the provisions of a public company will apply to state-owned companies as well.

Foreign and External Companies

A foreign company is a company incorporated outside of South Africa , irrespective of whether it is a profit or non-profit company or carrying on business in South Africa or not. A foreign company is prohibited from offering securities to the South African public unless it follows the specific provisions of the companies Act, relating to offers to the public.

A foreign company is required to register as en “external company” with the CIPC if it conducts or intends to conduct business in South Africa.
The Companies Act in terms of Sect 23 lists a series of activities which will be regarded as conducting business. This list is much broader than the provision in the 1973 Companies Act relating to a “place of business” in South Africa.

   

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