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The future of the close corporations

  • Existing close corporations can either ELECT to convert OR continue to exist; i.e. no forced conversion and doing nothing equals stay as you are; and
  • No new close corporation will be formed, neither through conversion from a company nor through new formation; thus
  • It can be expected that several shelve cc’s will be created just before the new act comes into force; BUT before you go out and register 10 new cc’s take note that;
  • In terms of the revised companies act (2008), several provisions of the Close Corporations Act, 1984 will be repealed, effectively aligning the cc laws with the new corporate governing rules / companies act (2008) rules and yes, you will nor be governed by two acts;

The Company Law rules applicable to close corporations:

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  • the criteria for names and the new voluntary procedure for the reservation of names;
  • the "disqualification" and "probation" rules for company directors will apply to "managing members";
  • certain provisions relating to annual financial statements will apply, in particular that they must be prepared within 6 months of the end of the financial year to which they relate (this was previously 9 months); and they must be (i) audited if required by regulations (still to be published) or (ii) be either audited voluntarily at the option of the corporation or independently reviewed unless exempted;
  • CC’s are given the option of opting to comply with the enhanced transparency and accountability requirements in Chapter 3 of the 2008 Act (though we doubt that any CC’s would make this election);
  • the business rescue procedure will apply to financially distressed CC’s;
  • the new definition of "control" and hence the terms "related" and "inter-related" persons as used in the 2008 Act also apply to CC’s;
  • provisions relating to the dissolution and winding-up of companies will apply to CC’s;
  • complaints, investigations and adjudication procedures before the Takeover Regulation Panel or Companies Tribunal are expressly applicable to CC’s.

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