The promulgation of the Companies Act No. 71 of 2008 into law on 1 May 2011 meant that no new Close Corporations could be formed. Close Corporations that were already in existence prior to 1 May 2011 are, at this stage, allowed to remain in existence. The submission of the annual return to the Companies and Intellectual Property Commission (“CIPC”) each year being the confirmation required by the CIPC that the Close Corporation remains in business.

It is, however, prudent to note that the CIPC have stated that they intend to do away with all Close Corporations in due course. Although no date has been tabled confirming this, it is however recommended that existing Close Corporations convert to Private Companies sooner rather than later in order to prevent a last-minute rush to finalise conversions.

The process of converting a Close Corporation to a Private Company is not complicated but there are various administrative issues to take note of which are summarised below.

The following documentation will need to be submitted to the CIPC in order for the conversion to be accepted and processed by the CIPC:

  • CoR18.1 form                 – Notice of conversion of a Close Corporation
  • CoR9.1 form                   – Name reservation – only necessary if a new name is required
  • CoR15.1A or B              – Memorandum of Incorporation (this can also be a Unique MOI)
  • CoR14.1                           – Notice of Incorporation (to be completed by each Incorporator)
  • CoR14.1A                        – Annexure to Notice of Incorporation (to be completed by each Incorporator)
  • Consent to Act as director (to be completed by each director)
  • Members resolution confirming the conversion
  • Statement by auditor confirming the solvency of the Close Corporation
  • Certified IDs of all Member’s.

Once the new Private Company has been registered, a new company registration number will be allocated to the Private Company by the CIPC. Inaugural minutes will need to be signed by the incorporators and new share certificates issued to the shareholders. The required company registers can then be captured as required by the Act.

To finalise the process, it is important to advise the following stakeholders (if applicable) that the entity has been converted from a Close Corporation to a Private Company:

  • Bank
  • Finance houses/Leases/Rental and maintenance agreements
  • Suppliers
  • Customers
  • Landlords
  • SARS
  • SARS Customs
  • UIF
  • Trade Unions if applicable
  • Employment contracts
  • Vehicle and any other registrations
  • Any other legal agreements

It is also important to update any reference to the old Close Corporation and old registration number on all company documents and social media platforms.

Although CIPC have not set a definite date requiring Close Corporations to convert to a Private Company, it is clear that it is their intention to do away with Close Corporations all together in the near future.

There are a number of benefits to converting a Close Corporation to a Private Company, including the fact that the new Act is designed specially for companies, which makes compliance easier.  

Should you require assistance in converting your Close Corporation to a Private Company, please contact one of RSM’s Corporate Statutory Team members and we can gladly assist.

Find out more about our Corporate Statutory services here