A close corporation (CC) is a separate legal entity very similar to a private company and incorporated with CIPC under the Close Corporations Act.

• A CC is managed by its members who are also the owners thereof.
• In general membership is limited to natural persons, but a trust can also act as a member.
• There can be no shareholders.

CCs have the following advantages and disadvantages :

Advantages :

• Relatively easy to establish and operate. (NEW CC’S CAN NO LONGER BE REGISTERED).
• The existence of the business is perpetual – it continues uninterrupted as members change.
• Members have limited liability as they are generally not liable for the debt of the CC.
• Transfer of ownership is easy.
• Fewer legal requirements than a private company.

Disadvantages :

• Number of members restricted to a maximum of 10.
• More legal requirements than a sole proprietorship or partnership.
• Changing members means that you are also changing the membership interest which will result in capital gains tax.
• Since the inception of the Companies Act of 2008 it is no longer possible to register a CC.

SOURCES :

Cronje & Cronje

Business Partners