RSM South Africa

The conversion of a Close Corporation to a Company

The conversion from a Close Corporation to a Company is envisaged in Item 2 of Schedule 2 of the Companies Act No 71 of 2008. 

The Companies Act No 71 of 2008, as amended (“the Companies Act”) forbids the registration of new Close Corporations, however existing Close Corporations may still be maintained and will exist indefinitely. Alternatively a Close Corporation may convert to a company, however a company may not be converted to a Close Corporation.

On conversion of a Close Corporation to a company:

  •  Every member of the Close Corporation must become a shareholder of the Company, however each member does not necessarily need to become a director of the company
  • Per Schedule 2, item 2 of the Companies Act, the shares to be held by the shareholders also need not be in proportion to the member’s interest held in the Close Corporation
  • The juristic person that existed prior to conversion will exist in the form of a Company
  • All assets, liabilities, rights and obligations that vested in the Close Corporation or between the Close Corporation and its member, creditors or any third party continues to exist

The conversion of a Close Corporation to a company is registered by the Companies and Intellectual Property Commission of South Africa (“the CIPC”) and the following documentation is required for submission to ensure successful registration with the CIPC:

  • Consent by the members to convert to a Company
  • Statement by the accounting officer confirming that the Close Corporation:
    • Is not in liquidation or is not in the process of liquidation
    • Is not in the process of any business rescue proceedings
    • Is not subject to a court order comparable to a business rescue plan
    • Is not subject to a compromise or any similar arrangement with any creditor
    • Will satisfy the solvency and liquidity test immediately after the conversion as set out in Section 4 of the Companies Act
  • A Form CoR18.1 – Notice to convert a Close Corporation to a Company
  • A Form CoR15.1A or CoR15.1B or a unique MOI
  • A Form CoR14.1 – Notice of Incorporation
  • A Form CoR21.1 – Notice of registered office
  • A Form CoR22 – Notice of statutory office
  • A Form CoR39 – Register of Directors
  • A Form CoR44 – Appointment of Auditors/Appointment of Company Secretary (if applicable)
  • A Form CoR25 – change of financial year end (if applicable)
  • A Form CoR9.4 – an approved name reservation (if applicable)
  • A special resolution approving the conversion
  • Certified copy of the latest CK2
  • Certified copy of the ID documents of all the directors, certified with a date not older than 3 months

In circumstances where a Trust is a member, the following documents are required and must be submitted to the CIPC along with the documents mentioned above:

  • A certified copy of the latest letter of authority
  • A certified copy of the deed of trust
  • A certified copy of a resolution of the trustees authorising a trustee to sign all documentation on behalf of the trust
  • Certified copies of all trustees’ ID documents, certified with a date not older than 3 months

It is important to use the name that the Company will be using after conversion on all the forms and it is noted that all annual returns for the Close Corporation must be filed and up to date at the time of the conversion.

Michelle Ford

Manager: Company Secretarial, Cape Town

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