Since the Close Corporations Act was promulgated in June 1984, the close corporation has become a popular form of business entity. The overriding intent of the legislation was to relieve closely held businesses of the complex requirements of the Companies Act while retaining their corporate status and a legal identity distinct from their members.

A close corporation achieves that status by filing a founding statement with the Registrar of Close Corporations. Private companies with qualifying members can be converted into close corporations. A close corporation indicates its status by the letters "CC" after its name.

Close corporations do not have share capital. Members' interests in the corporation are expressed as percentages of the total and are arrived at by agreement with the other members. A member's interest may be acquired by making a contribution to the corporation in the form of cash, property or services rendered or by purchasing an interest from an existing member. Sale of a member's interest requires the consent of the other members, failing which the member can sell his or her interest back to the corporation.

Close corporations may give financial assistance for the acquisition of members' interests, and may themselves acquire members' interests from any member. However, if the close corporation does not remain both solvent and liquid immediately after giving that assistance or acquiring that interest, the members will have personal liability to creditors prejudiced as a result.

A close corporation may be formed by at least one but not more than 10 members. The only persons qualified to become members are:

  • natural persons, including non-residents. A juristic person may not directly or indirectly hold an interest in a close corporation;
  • a trustee of a testamentary trust. The beneficiary may not be a juristic person. If the trustee is a juristic person, that juristic person may not be directly or indirectly controlled by the beneficiary. An inter vivos trust is specifically excluded from membership;
  • a trustee, administrator, executor or curator for a member who is insolvent, deceased, mentally disordered or otherwise incapable of managing his or her affairs.

Natural persons may not hold members' interests as nominees for disqualified members.

Each member stands in a fiduciary relationship to the corporation and may become liable to the corporation for losses suffered as a result of breach of faith. The members may enter into an association agreement to govern relations between them.

The close corporation is largely self-regulating, and members may lose their limited liability status by transgressing certain provisions of the Act.

Close corporations are managed by their members. There is no separate board of directors or management body. Every member is entitled to participate in the management, unless the members agree to the contrary.


For further information please contact: 

Werksmans Attorneys 

Werksmans Chambers, 22 Girton Road, Parktown, Johannesburg 2193 
or
P.O. Box 927, Johannesburg 2000 South Africa

Enquiries:        Mr Charles Butler
Telephone         27 (011) 488-0000
Telefax           27 (011) 484-3100/3200
E-Mail Address    cbutler@werksmans.co.za