Starting a Close Corporation: What You Need to Know

If you’re considering launching a business in South Africa, you may be familiar with the possibility of establishing a close corporation (CC). How does a CC differ from other business forms like a private corporation (PTY), though, and what exactly is a CC? In this article, we’ll examine the ins and outs of beginning a CC and respond to some frequently asked issues.

A corporate structure called a close corporation is comparable to a private company. There are a few significant distinctions between the two, though. For starters, unlike a private company, a corporation can only have a maximum of 10 members. Additionally, the Close Corporations Act of 1984 governs CCs, whereas the corporations Act of 2008 governs private corporations.

Starting a CC has the benefit of potentially being simpler and less expensive to set up than forming a private corporation. CCs are exempt from the strict registration requirements that apply to private corporations and are not required to appoint a board of directors. CCs do have some restrictions, though. For instance, they are unable to publicly offer shares or raise money through public offers. What exactly is a Close Corporation’s founding declaration? A founding statement must be submitted to the Companies and Intellectual Property Commission (CIPC) when establishing a CC. This declaration contains information about the name, registered address, members, and accounting officer of the CC. Additionally, there will be a cost for registering your CC.

A CC can indeed function as a holding corporation. A business that owns other businesses or assets is known as a holding company. There is no reason why a CC couldn’t be a holding company as well; holding corporations are frequently constituted as private firms. CCs might not be the greatest option, though, if you intend to raise money through public offers because they cannot sell shares to the general public.

In South Africa, you must go through the Companies and Intellectual Property Commission (CIPC) to register a CC or any other kind of business. The CIPC is in charge of managing the national database of registered companies and registering enterprises. You must submit the proper documentation and pay the applicable costs in order to register your business. You can complete this either in person at one of their locations or online through the CIPC’s website.

In conclusion, entrepreneurs that desire a straightforward and adaptable corporate form may find that establishing a close corporation is an excellent choice. However, it’s crucial to be aware of a CC’s restrictions and to confirm that it is the best option for your company. It’s a good idea to speak with a business attorney or accountant who can provide guidance if you’re confused whether to form a CC or a private company.